UNION RESOURCES LIMITEDUNION RESOURCES LIMITEDUNION RESOURCES LIMITED

MEHDIABAD ZINC PROJECT The Challenges and Opportunities

AIMM BRISBANE FEBRUARY 14TH 2006

MEHDIABAD ZINC PROJECT The Challenges and Opportunities

AIMM BRISBANE FEBRUARY 14TH 2006

UNION RESOURCES LIMITED (Union)UNION RESOURCES LIMITED (Union)UNION RESOURCES LIMITED (Union)

• Union is a single project company, focused on the giant Mehdiabad Zinc, Lead and Silver Project in Iran.

• Union is listed on the ASX, AIM and OTC Germany markets.

• Union has 750 million shares on issue.

• Nearly 50% of the shares are held by 6 majors shareholders; Lundin Mining, RAB Capital, Austex Mining, JP Morgan Noms and Bow Lane Noms, Societe Generale.

• Market Capitalisation: $A 65 million.

IRAN IS HIGHLY PROSPECTIVEIRAN IS HIGHLY PROSPECTIVEIRAN IS HIGHLY PROSPECTIVE

Roads

Borders

Train Lines

Capital

Towns

N

3002001000

km

CaspianSea

Birjand

PersianGulf

Tabriz

Zanjan

Hamadan Qum

AnarakIsfahan

Baghdad

ShahrudTehran

Meshed

Tabas

Yazd

Shiraz

ZarandKerman

Bandar Abbas

Zahedan

KhorramshahrAbadan

IRAQ

KUWAIT

TURKMENISTANA

FG

HA

NIS

TAN

PAK

ISTA

N

Mehdiabad

Angouran

MutehGolpayegan

Irankuh

Nakhalak

Qal’Eh Zari

Sar Cheshmeh

Meduk

Sungun

Base Metal/Gold Deposits

Agh-Darreh

• Most active companies: Rio Tinto and Union Resources • Six major mining projects, mostly Government owned

IRAN’S COPPER BELT IRANIRAN’’S COPPER BELT S COPPER BELT • The Copper Belt can be compared with those of the

America’s• Exploration is expected to discover more deposits

IRAN HAS TWO MAJOR ZINC DEPOSITS: IRAN HAS TWO MAJOR ZINC DEPOSITS: IRAN HAS TWO MAJOR ZINC DEPOSITS:

Roads

Borders

Train Lines

Capital

Towns

N

3002001000

km

CaspianSea

Birjand

PersianGulf

Tabriz

Zanjan

Hamadan Qum

AnarakIsfahan

Baghdad

ShahrudTehran

Meshed

Tabas

Yazd

Shiraz

ZarandKerman

Bandar Abbas

Zahedan

KhorramshahrAbadan

IRAQ

KUWAIT

TURKMENISTAN

AF

GH

AN

ISTA

NPA

KIS

TAN

Mehdiabad

Angouran

MutehGolpayegan

Irankuh

Nakhalak

Qal’Eh Zari

Sar Cheshmeh

Meduk

Sungun

Base Metal/Gold Deposits

Agh-Darreh

• Angouran: Owned by the Government • Mehdiabad: A joint venture between Government and Union

MEHDIABAD LOCATIONMEHDIABAD LOCATIONMEHDIABAD LOCATION• The Mehdiabad project is located in Central Iran • 80 kms southeast of the Provincial City of Yazd

MEHDIABAD VILLAGE MEHDIABAD VILLAGE MEHDIABAD VILLAGE • The nearest village is 20 kms from the deposit • Main industry is pistachio growing • The residents support mine development

LOCAL LANDSAT AND OUTCROP LOCAL LANDSAT AND OUTCROP LOCAL LANDSAT AND OUTCROP • The deposit occurs in a basin surrounded by mountains

and ridges and measures 2.5 kms x 1.5 kms• It outcrops on the eastern side of the basin

LOCAL LANDSAT SCENE: MEHDIABAD PROJECT AREA

East Ridge:

oxide / sulfide

Zn-Pb

Black Hill:Barite,oxide / Sulfide Zn-Pb

Calamine:

High-grade oxide & sulphide Zn-Pb

0 2.5 km

Camp

N

TA

GO

SA

EAST RIDGE OUTCROP – MVT STYLE

TA – TAFT FORMATION

GO – GOSSAN

SA – SANGESTAN FORMATION

Current Mehdiabad Resource Area

MEHDIABAD VIEW ACROSS DEPOSITMEHDIABAD VIEW ACROSS DEPOSITMEHDIABAD VIEW ACROSS DEPOSIT• From East Ridge to the mountains, west of deposit• Exploration camp is inside the deposit

MEHDIABAD DEPOSIT– Cretaceous Carbonate hostedMEHDIABAD DEPOSITMEHDIABAD DEPOSIT–– Cretaceous Cretaceous Carbonate hostedCarbonate hosted

• Cretaceous carbonate hosted deposit, located on a platformmargin.

• Migrating basinal brines have been focused by the Black Hill Fault.

• Mineralisation occurs as replacement of favourable horizons and as solution cavity and open structure in-fill.

MEHDIABAD - Geological Cross SectionMEHDIABAD MEHDIABAD -- Geological Cross SectionGeological Cross Section• The deposit is located in a broad N-S orientated half graben • East side MTV style mineralisation• West side Irish style mineralisation

MEHDIABAD - Mineralisation Styles MEHDIABAD MEHDIABAD -- Mineralisation Styles Mineralisation Styles • East side MTV style mineralisation:

Strata bound, low silver, low barite, copper absent. (Up to 78 m @ 8% Zn).

• West side Irish style mineralisation:Massive in filled controlled breccia with high barite, silver and copper averaging 0.2 %. It is cut by later stage hydrothermal event containing high lead, copper and silver. (Up to 200 m @ 5% Zn).

• Mixed Oxide: Sulphide:Overall the deposit is 75% Sulphide, 25% Non sulphide. Some sulphide sections contains zinc carbonates in the host. Zinc mineralisation often associated with manganese, which caused metallurgical challenges, now solved.

MEHDIABAD – East Ridge MEHDIABAD MEHDIABAD –– East Ridge East Ridge • Road had to be constructed up East Ridge for drilling

purposes • Getting explosives for the blasting was difficult

MEHDIABAD - Drilling StatusMEHDIABAD MEHDIABAD -- Drilling StatusDrilling StatusExploration: 34,000 metres: Radial Drilling (AUS)BFS: 18,000 metres plus: Spektra Drilling (TUR)TOTAL: 52,000 METRES

MEHDIABAD - Oxide DrillcoreMEHDIABAD MEHDIABAD -- Oxide DrillcoreOxide Drillcore

MEHDIABAD - Core Logging MEHDIABAD MEHDIABAD -- Core Logging Core Logging • Comprehensive geological, structural and geotechnical

information has been recorded from the core

MEHDIABAD - Extensive Block ModelMEHDIABAD MEHDIABAD -- Extensive Block ModelExtensive Block Model• The data recorded plus metallurgical recorded

has been compiled into a block model. • Resource estimates and pit optimization are close

to completion, from block model.

Black Hill Fault

Lower Thrust

MEHDIABAD – Section Picture 9100NMEHDIABAD MEHDIABAD –– Section Picture 9100NSection Picture 9100N

MEHDIABAD – Resource Estimate MEHDIABAD MEHDIABAD –– Resource Estimate Resource Estimate • Initial resource estimate: was made by SRK (2001), using the nearest

neighbour technique, including only 65% of the total drilling now completed.

@ 4.0% Zn cut-off

Indicated 75.2 Mt @ 7.38% Zn, 2.38% Pb and 62 g/t Ag

Inferred 142.7 Mt @ 7.10% Zn, 2.32% Pb and 46 g/t Ag

Total 217.9 Mt @ 7.20% Zn, 2.34% Pb and 51 g/t Ag

• Updated resource estimate: by H&S, using kriging techniques due to be finalised in March. It is expected that whilst the grade will be 15% less and tonnage will be 20% less.

• Over 50% of the resource will be “Indicated and Measured”, improving the confidence.

• Most of the new resource will be inside the mining pit.

MEHDIABAD – Resource PlanMEHDIABAD MEHDIABAD –– Resource PlanResource Plan

• The resource is open to both north (over 1.9 kms) and south (over 0.25 kms) additional drilling required.

• The resource covers an area of 2.5 kms by 1.5 kms (shown in green)

MEHDIABAD – Bankable Feasibility StudyMEHDIABAD MEHDIABAD –– Bankable Feasibility StudyBankable Feasibility Study

• The Exploration Phase: ( 2000-3)Outlined through drilling a world class Zn, Pb, Ag resource.

• The Bankable Feasibility Development Phase (2004-6)Being undertaken by Aker Kvaerner Australia, supported bya range of Australia and overseas consultants in 3 stages.

• First Stage BFS Report: (Nov 2004 – Feb 2005)Evaluated previous work and recommended a program to reach a bankable status. (second stage). Report just received.

• Second stage BFS report: (Mar 2005 – Feb 2006) Recommends a single development option for study in the final bankable stage due third quarter 2006.

MEHDIABAD – BFS DevelopmentMEHDIABAD MEHDIABAD –– BFS DevelopmentBFS Development• The BFS program has required close co-operation

between ex pat and Iranian experts

MEHDIABAD – Environment MEHDIABAD MEHDIABAD –– Environment Environment

• Development will incorporate world’s best environmental protection practice.

• Project will provide welcomed local employment and economic stimulus to an undeveloped region.

• The resource is in a fauna protection area, where mining is permitted, but construction of plant requires permission.

• Alternate plant site is being studied 24 kms from mine site.

• World Bank Standard Environmental Impact Assessment is in progress being conducted by Golder Associates.

MEHDIABAD – Site Layout MEHDIABAD MEHDIABAD –– Site Layout Site Layout The proposed plant site is located 24 kms from mine site

MEHDIABAD - Mine and Plant Layout MEHDIABAD MEHDIABAD -- Mine and Plant Layout Mine and Plant Layout

MEHDIABAD MEHDIABAD -- Topographical Foot PrintTopographical Foot Print

MEHDIABAD MEHDIABAD –– Three Dimensional ModelThree Dimensional Model

MEHDIABAD MEHDIABAD –– Mining Schedule Mining Schedule

Milawa Schedule

0 Mt

10 Mt

20 Mt

30 Mt

40 Mt

50 Mt

60 Mt

70 Mt

80 Mt

90 Mt

100 Mt

110 Mt

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

Period (Yr)

Ro

ck T

on

nes

Min

ed

-50

0

50

100

150

200

250

300

350

400

450

500

Cas

hfl

ow

, DC

F

Ore Tonnes Waste tonnes

DCF $M Cashflow $M

100:400kt - 6 Stages

MEHDIABAD - Waste Dump Site MEHDIABAD MEHDIABAD -- Waste Dump Site Waste Dump Site

MEHDIABAD - Oxide MetallurgyMEHDIABAD MEHDIABAD -- Oxide MetallurgyOxide MetallurgyThree programs have been carried out:

1. LAB TESTING TO DETERMINE FLOWSHEET: Extensive program of batch and continuous cycle work to determine the optimum flow sheet for the plant. (HRL)

2. VARIABILITY TESTING: Over 500 individual tests have determined the average recovery of zinc from oxide as around 65%. (HRL)This information has been included in the block model.

3. PILOT PLANT TESTING: Pilot plant testing has determined the size and type of the components required in the plant. (TR Spain)

MEHDIABAD – Trial MiningMEHDIABAD MEHDIABAD –– Trial MiningTrial Mining

Bulk samples of oxide ore were mined for the pilot plant testingBulk samples of oxide ore were mined for the pilot plant testing..

MEHDIABAD - Oxide Pilot PlantMEHDIABAD MEHDIABAD -- Oxide Pilot PlantOxide Pilot PlantPilot Plant Studies have been completed in Spain to determine the stability and robustness of the oxide circuit

MEHDIABAD - Sulphide Metallurgy MEHDIABAD MEHDIABAD -- Sulphide Metallurgy Sulphide Metallurgy

• LAB TESTING TO DETERMINE FLOWSHEET:1. Batch testing has determine the flow sheet for flotation

of the sulphide ore and the leaching of the concentrates.2. Continuous cycle and pilot testing is in progress and is

expected to be completed in next few months.

• ZINC RECOVERY VARIABILITY TESTS: Over 30 individual tests have determined the average recovery of zinc of 69%. This information has been included in the block model.

• COMMINUTION TESTWORK: Shows the ore is has a low abrasive index.

MEHDIABAD – Flow Sheet Design MEHDIABAD MEHDIABAD –– Flow Sheet Design Flow Sheet Design • From the test work program an optimum flow sheet for

the processing plant has been determined.

• A fully integrated oxide/sulphide processing plant is proposed that will process the ore and will possibly to be built in 2 stages.

• In the first stage plant 5-6 million tonnes of ore per annum will be processed to produce 250,000 tonnes of zinc metal plus 60,000 tonnes of lead and 2 million ounces of silver.

• In the second stage the plant will be expanded to 400,000 tpa zinc metal production.

MEDHIABAD - Simplified Flow Sheet MEDHIABAD MEDHIABAD -- Simplified Flow Sheet Simplified Flow Sheet

Crushing and grinding

Oxide Ore

Conventional Flotation 1.Pb/Ag concs for sale2.Zn concentrate.

Two stage Counter Current leaching of oxide ore. Leaching of Zn

concentrate

Solvent Extraction removal of contaminants

Electrowinning Zn onto cathodes

Melting and casting into ingots

Sulphide Ore

MEHDIABAD – InfrastructureMEHDIABAD MEHDIABAD –– InfrastructureInfrastructure

• Road / Rail: The Plant Site is 18 kms from rail siding on main Tehran - Bandar Abbas line.

• Power: 400 Kv transmission line is being built past Plant Site.

• Water: (a) Process water from treated effluent (b) Potable water from surface and

groundwater.

• Labor: Abundant labor located within 70 kms.

• Consumables: Available locally.

• Metal Export: Via well equipped port 400 kms by rail.

World Mine Cost Data Exchange

MEHDIABAD – Production CostsMEHDIABAD MEHDIABAD –– Production CostsProduction Costs

URL: MEHDIABAD - Industry Advantages URL: MEHDIABAD URL: MEHDIABAD -- Industry Industry Advantages Advantages

• There are few major undeveloped zinc ore bodies available at a time of strong zinc demand.

• Excellent local infrastructure and low cost energy and labour.

• Good support from Iranian Government

• 12 year tax holiday

• Expected to be a low cost producer.

• Will produce metal at the mine site avoiding costly smelting.

MEHDIABAD - The Opportunity and Challenge MEHDIABAD MEHDIABAD -- The Opportunity and The Opportunity and Challenge Challenge

WHERE TO NOW:• Over the next few months Union will have to make

a development decision.

THE OPPORTUNITY:• Mehdiabad is world class deposit and the zinc outlook good. • Union could expect a strong long term cash flow over 50

years.

THE CHALLENGE: • Funding the development capex required of around 1 billion

US.• Increased western / Islamic tensions.

MEHDIABAD – Joint Venture Structure MEHDIABAD MEHDIABAD –– Joint Venture Structure Joint Venture Structure

• A Joint Venture agreement was also signed between Government (50%) and Union and local partner Itok.(50%). 1999

• Foundation Agreement assigning the area to the Joint Venture was signed with Ministry of Mines also in 1999.

• Following successful exploration, the Joint Venture was incorporated into an Iranian Company Mehdiabad Zinc Company (MZC) in 2003.

• Following completion of the Feasibility Study Union has the opportunity to obtain a ultimate majority position, should Government elect not to contribute to the cost of the development.

MZC - Licences and Political RiskMZC MZC -- Licences and Political RiskLicences and Political Risk

• An Exploitation Licence (EL) was issued in Nov 2005, to the Government partner, approving mining for 25 years. The EL is to be transferred to MZC upon completion of the feasibility study.

• A Foreign Investment Licence has been issued to Union, fully protecting Union’s investment to date plus up to a further $US 680 million. Minimum 75% of the metal can be exported.

• Union has a political risk insurance policy in place, with an Australian Government Company, covering expropriation, forced abandonment and war damage.

MEDHIABAD - The Finance MEDHIABAD MEDHIABAD -- The Finance The Finance

• POTENTIAL SOURCES OF EQUITY FINANCE:A combination of ASX, AIM and DIX. It is possible the Iranian Government may fund part of the cost.

• POTENTIAL SOURCES OF DEBT FINANCE:1. European banking institutions that support mining projects. 2. Trade Finance (Equipment suppliers and metal traders)3. Islamic institutions 4. Iranian offshore banks 5. Iranian oil stabilization scheme loans6. Iranian internal debt to local contractors

MEDHIABAD - ConclusionMEDHIABAD MEDHIABAD -- ConclusionConclusion

• To succeed this project will need thinking from outside the normal financial square and stabilisation of international politics.

• However, if Union can harness the right support, the task is certainly not impossible.

THE GOALS:• 2006 should see the completion of the BFS and hopefully

project financing. • 2007 should see the start of development. • 2009 should see the start of a project cash flow.