Union Resources has attracted some interest of late. Clearly there are several reasons for this:
1. Resource value: Union Resource's holds a 43% stake in an offshore Namibian phosphate deposit, and a pre-feasibility study has placed a value on the project of $310mil, that's $140mil for UCL, and that's on pretty conservative parameters, particularly with respect to resource thickness and size. A larger resource might justify a larger scale of operations, so we might expect an a $500mil development instead. Depth of mining might give a great deal more upside again. So there is a lot of resource upside as a result of improving the technical merits of the project. Miners start from a conservative position. The greatest risk is actually about 3 months after they have started to mine. i.e. When they announce the first delivery of metal or product; that is the time to sell. There is only downside from there in terms of cost and market risk, and CEO risk, as a great many of them will deceive the market. ASIC doesn't care about shareholders unless more than 20,000 investors or 300 jobs are affected. Phosphate mining though is a pretty safe bet as its bulk mining.
2. Takeover potential: Minemakers Ltd (MAK.ASX) has a 14.9% stake in Union Resources. Expect a consolidation of these interests. I think we are no far off from MAK making a takeover offer for Union Resources. Mind you I think MAK will itself be taken over in future, so hang on to that script as well. I would not be surprised to see MAK use the next issue as an opportunity to acquire a lot of shares. UCL will need to fund a feasibility study. That will cost $10 million I guess, so their share is $5mil.
3. Director buying: You have the newly-appointed CEO of the company buying shares. That is always a good thing. A sign of confidence. Mind you, at this point, his investment is token. Just $25,000 worth of shares. I expect he will add to that, but maybe he will wait for a rights issue.
4. Zinc upside: UCL retains a 25% stake in the Mediahebad Zinc-lead project in Iran. I believe this is the largest undeveloped zinc project in the world, and it might stay that way for another 20 years, or their might be an overthrow of the Iran govt in the next year or 3. Who knows. Obama never said he wouldn't invade Iran. Anyway, war or revolution is good for UCL. That project is probably worth a billion, or $250mil to UCL, and much more when its in operation. Its a very attractive resource...but then I guess the Iranian govt knows that.
You can download the latest presentation by Union Resources here. The rights issue might not be too far off given the need to raise money, and the recent strength in the share price.
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