UMC - United Minerals Corporation

[Broadside]

the market's taken leave of its senses...$1 a tonne for high grade low impurity JORCed iron ore....in hindsight (and don't we all love that) $2.90 was a tad ahead of itself....sub $1?? crazy

And the resource (Railway I am talking about) WILL get bigger, refer last Friday's monster drill results.

I will hold through to production if that's what it takes to realise the value.

Pretty disappointing market though, to think where this would have been 2 years earlier in the cycle. That's life.

 

[Pat]

the market's taken leave of its senses...$1 a tonne for high grade low impurity JORCed iron ore....in hindsight (and don't we all love that) $2.90 was a tad ahead of itself....sub $1?? crazy

And the resource (Railway I am talking about) WILL get bigger, refer last Friday's monster drill results.

I will hold through to production if that's what it takes to realise the value.

Pretty disappointing market though, to think where this would have been 2 years earlier in the cycle. That's life.

No real future demand? Anyhow I'll be waiting till 40 cents or till the market recovers... Could be waiting a while huh...

 

[Broadside]

No real future demand? Anyhow I'll be waiting till 40 cents or till the market recovers... Could be waiting a while huh...

no real future demand for iron ore? that's why they paid 80% more just a few months back....I will bet on Chinese economy to continue with moderated growth....even zero growth is huge real demand for iron ore. Govt is using stimulus package --> infrastructure.

Who knows, anything is possible, even 40c, but it would be ridiculous.

 

[dontbelievethem]

Hi, I have been investing in a number of these smaller commodity plays and am getting pretty fed up with management saying one thing and then delivering something totally different. Any idea with these guys about their reliability. There are various topics about prices that could be paid for their resource, the question is if you were a buyer you could pick up as much of this as you want in the market for a fraction of suggested prices, or am I missing something??

 

[Broadside]

Hi, I have been investing in a number of these smaller commodity plays and am getting pretty fed up with management saying one thing and then delivering something totally different. Any idea with these guys about their reliability. There are various topics about prices that could be paid for their resource, the question is if you were a buyer you could pick up as much of this as you want in the market for a fraction of suggested prices, or am I missing something??

The management is conservative and then delivers, in my opinion. They didn't overhype Railway with conceptual numbers and desktop models, they drilled many holes and then targeted a 100m tonne resource. They JORCed it and it's still getting bigger. In terms of stock specifics I couldn't be happier, the resource is very high grade and low impurity. Now they say Jumbo Junction could be bigger again - we're waiting first drill results on that.

It's the macro which is hurting all iron ore stocks.

Further exploration success would of course help UMC but what is critical now is finding a route to market, really that's all that matters. That's something that goes on behind closed doors.

I don't know if that helps.

 

[Markcoinoz]

Hi, I have been investing in a number of these smaller commodity plays and am getting pretty fed up with management saying one thing and then delivering something totally different. Any idea with these guys about their reliability. There are various topics about prices that could be paid for their resource, the question is if you were a buyer you could pick up as much of this as you want in the market for a fraction of suggested prices, or am I missing something??

Hi dontbelievethem,

Firstly, as Broadside has pointed out, Management underhype and overdeliver with their announcements. They have also pointed out that they are awaiting assay results which is extremely overloaded with backlogs. That is completely out of their hands.

Something to ponder.

This was taken from another website.

Market analysts are stunned by the Sep iron ore import figure, hitting a record high of 43.03m tons. This has come against the backdrop of slack demand and weak steel market in recent months. The huge import tonnage is described as confusing and unbelievable by most analysts, reported by Beijing Business Today.

I think you will find China are playing games again as we move into the next years round of Iron Ore fiasco negotiations again.

You make a point that China could buy I/O for a fraction of the price.
If we were talking about lowgrade I/O, then i might agree.
However, Highgrade Hematite is in high demand due to its qualities of being able to blend it with lowgrade.

If you have bought UMC recently, IMO you will do very well.

Cheers markcoinoz

 

[vine]

Hi Markcoinoz,
UMC going gangbusters at the moment up 42%, I know you hold as I do and also THX. Any reasons for todays movement that you know of.
Thanks
Vine

 

[Pat]

F@#$%&*#%$@%&*@#$$!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!


If only I had the balls to buy, I can't believe this run, missed the boat again

 

[Markcoinoz]

Hi Vine,

I have no idea.

Yesterday the Bots were in action again giving UMC a hammering whilst everything else was going up.

We are due for a quarterly and also the AGM is next month.

Over the last few weeks UMC has been one of the hardest hit in the I/O sector.

Yet, it could not be justified.

Managed to pick up some more at .60 & .80 cents the other day.

News is definitely overdue.

Perhaps that could be it.

Seems a few of the D/T have jumped on board as well.

Good to see it is at least moving in the right direction.

Cheers markcoinoz

 

[vine]

It was good to see UMC run this week from .60 up to 1.05 , of course I held on and now back to .70, learning some lessons on the way not to do that again. Can anyone explain the psychology behind a run like that on no information. Is it just a case of rumor creating a run and then people buying just not to miss out. Also in the case of a run what signs can you look for that tell you to hold or sell. I hope I've explained myself OK, I just don't want to miss out next time.
Thanks for any guidance as i can't find any info on this
Thanks

 

[dontbelievethem]

Hi, the way I see it is you had a stock which has come from a high of 2.70 to a low of 50c in less than 4 months. It's underlying business is worth up to $4 if you believe some of the commentators, although I guess this number is up for debate given the changing market dynamics now. Anyhow following an 11% move in global markets on Monday it doesn't take much rumour/volume to move this thing, less than US$1mn was traded that day. I guess the market makers haven't got a clue what to do with pricing these things in periods of such volatility. The question is what is it worth now, times certainly seem to have changed and investors are scared. That said if you put a 50% haircut to the 4$ number you still get some serious upside. I will be keen to see whether management start talking their own book or not from here, I hope not. I guess the lesson in these markets is if you make 40-60% in 2 days then lock it in......actually in any market that makes sense! It's all about fear and greed.

 

[robert toms]

I hold as well...with the volatile market and uncertain Chinese demand levels,I guess the price for this one will be all over the place until there something concrete happening,eg, contracts signed ..railway commences ...or something similar.Uncertainty abounds...Hold on for the ride!

 

[PP123]

Is there anything in the pipeline to believe these shares will get back up to the former glory days of $2.50+ or was it just a hype run, and these are the true value of these shares?

 

[spectrumchaser]

Take a read of the scoping study released today.
The report is very positive given the present "bailout"
situation re iron ore stocks.

"True value" is what the market will pay !

 

[Markcoinoz]

Spectrumchaser,

theseawolfe from another forum was kind enough to post an update from Ocean Equities. I have not got the link as i normally get the report a couple of days later from Minesite.

Ocean's report
News
UMC has released the findings of its preliminary financial study investigating the economics of potential options for the development of its 64.5mt high grade bedded iron ore resource at the Railway prospect. The preliminary financial model incorporates the findings of an independent scoping study conducted by Prodetheus Limited which have been reviewed by UMC’s recently appointed Project Development Manager, Sten Soderstrom, and forms the Base Case of a 10mtpa of operation; it is a precursor to the upcoming pre-feasibility study which is expected to be complete by mid 2009.

Preliminary Financial Model Summary (mid range Base Case)1

1 Refer to UMC’s press release for greater details of the qualifications and assumptions
Total cash operating costs are expected to be ~$40/t, assuming commercially agreeable infrastructure access, with processing plant and infrastructure investment of $40/t of annual capacity (excluding capitalised pre-operating expenses), at the lower end of recent green field iron ore projects due to Railways proximity to existing operations, rail and infrastructure. Indicative net operating profit after tax, assuming a 30% decrease in contract pricing, is in the range of $333m-$596m pa with consequent Net Present Value in the range of $1.18b-$2.4b.
UMC has stated it is considering various options for funding the project, including third party equity and/or joint venture, and we believe the quality of the high grade DSO iron ore at the Railway deposit is extremely attractive to the market because of its 60%+ Fe grade and impurity levels, which appear blendable with BHPB and RIO’s neighbouring operations.

Implications
The findings of this preliminary study highlight the robust nature of UMC’s iron ore assets, applying estimates which we believe have scope for favourable revision in a pre-feasibility study and assuming no extension to mining operations beyond 7 years – ie giving no value to future exploration success or Railway’s other DSO resource other than the Bedded Iron Ore. This is in line with management’s policy of providing conservative guidance to the market. The study excludes a 20mt of detrital high grade ore which would be, in its own right, a company transforming asset for a number of UMC’s junior iron ore peers and we expect this resource to be included in UMC’s upcoming feasibility studies.

Summary of the different components of the Railway prospects inferred resource


UMC currently has cash reserves of ~$17m which we estimate will enable it (at least) to complete: a pre-feasibility study on Railway; project exploration and metallurgical programmes; environmental and hydro-geological studies; and potentially achieve a significant increase in its high grade DSO resource (dependant on resource upgrades at Railway from infill drilling and exploration success at new priority targets). By mid 2009 we believe these work programmes will be complete and negotiations for commercial offtake agreements will be well advanced.
Since UMC originally listed in late 2004 it has raised a total of ~$30m, highlighting the return which has already been achieved with the first ~$13m and the potential transformation the Company could achieve with the remaining balance.

Key Events / Valuation Triggers
Near term news flow is expected to positive dominated by the development of UMC’s iron ore projects including:
· September quarterly report - Outlining initial exploration drilling results at priority targets, including Railway East, Northern Yandi headwaters, and Jumbo Junction;
· AGM Nov 7th - for which today’s release has been prepared for a presentation at the AGM;
· Railway prospect - drilling programmes and assay results are ongoing to upgrade Railway’s resource status and potential tonnage, with particular focus on “Value in Use” criteria. Indeed the Company aims to achieve a 15-20mt Marra Mamba bedded iron ore resource from its 64.5mt inferred resource;
· Bauxite prospect - drilling programmes are now complete and assay results should be shortly available;
· new and ongoing discussions with a number of infrastructure owners in the region and further development of the ongoing pre-feasibility studies.

Cheers markcoinoz

 

[Pat]

Is there anything in the pipeline to believe these shares will get back up to the former glory days of $2.50+ or was it just a hype run

Aren't they all? Hype is what makes the money... or breaks the bank...

I may get my chance on UMC, perhaps for the last time.

 

[spectrumchaser]

Markcoinoz
Thanks for the "Ocean Equites" report,it sure does
highlight UMC have more strings to their bow than
many other IO juniors.
Will be interesting to see what the SP is in two
years time.

 

[Markcoinoz]

This is a further update from O/E care of Seawolf regarding opening up the Rail lines in the Pilbara.

News
Following Australian Federal Treasurer Wayne Swan’s trip to the Pilbara on the weekend he has officially declared the Hamersley and Robe railway lines owned by RIO, and the Goldsworthy railway line owned by BHPB, under the Trade Practices Act enacting recommendations from the National Competition Council (“NCC”).

Fortescue first launched a bid to declare the rail lines open in 2004 and today’s announcement is another significant break-through for the junior sector following the previous treasurer, Peter Costello, failing to accept a similar NCC recommendation in March 2006. Under today’s NCC recommendations iron ore juniors are able to apply for right of access for 20 years, starting November 19th 2008, and will have the right to run their own locomotives and rolling stock on existing rail lines, subject to negotiating commercial agreements. A safety network is provided to the juniors such that recourse to regulation through ACCC arbitration is available if access disputes cannot be resolved.

Meanwhile, Fortescue has confirmed the commissioning of a study assessing the viability of a second iron ore port at Dixon Island near Karratha. The port would be for the development of the company's western tenements, including Solomon, and could be fed by RIO’s rail lines once commercial terms are agreed.

Implications
The move from Wayne Swan further illustrates the increasing pressures from government and industry on the traditional incumbents, BHPB and RIO, to open up their existing rail networks and provide 3rd party access to emerging iron ore juniors. While we would expect BHPB and RIO to seek a review of the declaration (“Summary Timeline” provided below), we believe it is now only a matter of time before the juniors have access to the majors existing rail infrastructure and see the ability of the juniors to negotiate with existing infrastructure owners in the Pilbara as being significantly enhanced by today’s break-through development.

The magnitude of Swan’s announcement can be seen in BHPB and RIO’s opening share prices which collapsed ~7% at the open in London, following a flat trading day on the ASX and the announcement of the declaration of rail services only after the close of the ASX. The proposal of full rail track services, not just 3rd party haulage, has a significantly greater potential impact on the efficiencies of the incumbent’s integrated networks, key criteria to the proposed synergies of a BHPB/RIO merger (and for a junior to agree a commercial agreement with a major).

A further positive for the junior space is the Government’s conclusion that while port capacity may be some what constrained in the short term, that medium and long-term infrastructure plans for port capacity (and common user facilities for relatively small tonnage bulk commodity exporters) are sufficient not to impeded 3rd party rail access or capacity allocations.

We believe juniors who are close to existing (or future committed) rail infrastructure, with high grade deposits (suitable for blending with BHPB & RIO’s existing operations), are best positioned to negotiate near term infrastructure access or other forms of commercial agreements (eg mine gate sale, JV etc). We would expect iron ore juniors with “stranded” deposits (such as FerrAus), and potentially large scale operations (such as Brockman, UMC, and Atlas), to best benefit from today’s announcement. Additionally we would highlight that at the current share prices a number of these juniors are priced for failure or limited scale operations (with no rail access).

Summary Timeline
29th Aug’08 - NCC’s provides Australian Federal Treasurer, Wayne Swan, their final recommendations for the Hamersley, Robe and Goldsworthy railway lines.
27th Oct’08 - Swan accepted the NCC recommendation and declared the service for a period of 20 years.
19th Nov’08 - Service providers deadline for seeking a review by the Australian Competition Tribunal, if no review is sort 3rd party’s can apply for right of access from this date. We believe BHPB and RIO will seek a review under which the Australian Competition Tribunal must use its best endeavours to determine any review of the Treasurer's declaration within 4 months, although that period may be extended (as per the current review of the Mt Newman railway line).

Very good news for UMC.

Cheers markcoinoz

 

[dontbelievethem]

Hi, I was reading the reports above about costs for the projects but had a few questions on total capital required. How much will it take to get this mine running, $17mn of cash left in the bank does not strike me as enough to enable them to wait it out for a better market and nobody is going to raise any money in the near term.

The cash cost of running the mine at $40 seems quite good, but was the NPV of the project based on $180 from June, $70 currently, or another -30% for current spot prices? One thing for sure is that the price negotiations from the Chinese this year are looking like a -30% starting point and then an agreement somewhere in between. They were forced to pay spot on the way up, why not the same on the way down?

 

[saltyjones]

i would think that there are other Fe user besides china. maybe railway ore is bound for the middle east.