Resourcestocks Jan 2007 Issue
Pages 75 & 76
United Minerals'
company Maker
Most junior companies count themselves lucky if they have one potential company-making project. By Michael Weir.
Western Australia-based explorer United Minerals Corporation has two potential world-class, company-making assets that could both transform the company into a major mining house.
United Minerals has been through somewhat of a transformation in the past year. What was listed as a diamond explorer focused on WA's Kimberley region two years ago is now a company that can offer investors broad commodity exposure, including a slice of two of the world's hottest bulk commodities - iron ore and bauxite.
The geographical focus is still in WA's north, with the Kimberley and neighbouring Pilbara region now making up parts of the United Minerals portfolio.
The two flagship projects are a bauxite project in the Kimberley and an iron ore project in the Pilbara.
They are both relatively new to the portfolio but already the share market has certainly agreed with the changes.
United Minerals was trading at around 9c in December 2005 when it unveiled its bauxite plans. That news pushed the price immediately to around I5c. The more recent move into iron ore saw the share price spike again to a peak of 36c.
With the recent bouncy market the share price has settled at around 26c, but with just 97.8 million shares on issue the company carries a market value of less than $24 million, clearly highlighting the upside potential the two projects could bring.
"What we have now in the portfolio are two extremely high quality, bulk commodity projects," executive director Matthew Hogan said.
"They are both well located, have exceptional potential and each could easily be a company maker in its own right.
"We are now positioned with the right team and the money in the bank to aggressively pursue these opportunities over the next year and hopefully deliver some spectacular results to shareholders."
And United Minerals likes to look after its shareholders.
Earlier this year the company made a one-for-three options issue to existing shareholders at 2c exercisable at 20c. The issue raised more than $600,000 and means the company has almost $5 million
in the bank, enough to fund its plans for the next 18 months.
At that time, if the company continues to deliver results, there will be a swag of options due to be exercised that could pump another $8 million into United Minerals' kitty.
Chief executive Jim Richards, an experienced explorer with several discoveries to his credit, is clearly excited when talking about the company's bauxite potential.
His team of geologists and technical staff were scouring the Kimberley for diamonds last year but, unlike many explorers who had traipsed the ground previously, were not blinkered in their search and kept an eye out for other opportunities.
It was then they came across the bauxite and, seeing the potential, pegged as much ground as possible, ending up with more than 6800 square kilometres in the North Kimberley Bauxite Province.
The area's bauxite potential is already well known. The world-class Mitchell Plateau project, which hosts a resource of some 460 million tonnes, is located in the vicinity.
But there is another very important piece to this jigsaw - energy, and more specifically, gas.
The bauxite project sits in the North Kimberley where, just off the coast, lie some massive undeveloped gas fields. Inpex is proposing to develop the Ichthys gas-condensate field which hosts about 9 trillion cubic feet of gas, while Woodside Petroleum's Brecknock and other Browse Basin projects have more than 20tcf of gas and 300 million barrels of oil.
"During the course of the year United Minerals has placed increasing importance upon its bauxite project, especially as the intention of Woodside and Inpex to develop major gas fields has firmed," Richards said.
"These gas projects in the Browse Basin have world-class gas reserves and when production commences, industrial-scale energy is expected to be available to this mineral-rich area for the first time.
"It must be stressed that the development of a major gas project in the vicinity of United Minerals' bauxite project is highly significant and this is the major driver for the project.
"Such vast energy resources could open up the viability of an alumina refinery and possible aluminium smelter, thus substantially adding value to both bauxite and gas."
Richards said such a proposal was also expected to be most favourably received by both the State and Federal governments.
A major exploration program has been mapped out with the aim of proving up a world-class bauxite resource in the North Kimberley, and one capable of sustaining a stand-alone alumina refinery.
Already the company has drilled a Phase I reconnaissance program with a total of 508 holes for 3486m at the Grass Hill and-Couchman Range bauxite projects. This has shown there are significant amounts of bauxite within the UMC project areas and a number of the holes do also show some depth of bauxitic material.
Benefication would increase the potential tonnages of bauxite available and previous studies (not UMC) in the region have shown these types of bauxite ores do react well to a simple and inexpensive crushing, washing and screening procedure.
Further assay work (XRF) is currently underway on selected samples to assess the amount of Total Chemical Alumina (TCA) present. This will assist in judging the potential upside of benefication.
Furthermore, the Mitchell Plateau South Project was not able to be accessed in 2006 and is yet to be drilled.
The next 12 months should see a steady stream of results from the bauxite project and investors will be able to clearly see how the picture is building.
Iron ore is the other string in United Minerals' bow and you couldn't get a much better location than the company's newly acquired Pilbara project.
United Minerals has managed to put its foot on 263sq.km of ground right next to BHP Billiton's producing Area C mine. Bought from DFD Rhodes, the deal cost United Minerals just $200,000 cash, 5 million shares at I6c and a 1.5% production royalty.
"This is a major acquisition for the company, especially given these tenements lie in the heart of the Pilbara iron ore province," Richards said.
"Drill targets will be defined by the end of 2006 and we will move ahead to undertake clearances and to drill the best targets as soon as possible."
Richards said the key to the iron ore project was the four major items of Pilbara infrastructure that either pass over or are adjacent to the company's ground: BHP Billiton's Area C mine, Rio Tinto's railway including the West Angelas spur line, BHP Billiton's railway and the Great Northern Highway to Port Hedland.
"There is lots of iron ore in the Pilbara, but much of it is stranded, whereas we are essentially at Pilbara Central, in terms of both mines and infrastructure," Richards said.
Developing a full-scale mine may not even have to be considered.
The major miners have started showing a willingness to deal with the juniors and United Minerals' task could be as simple as proving up a resource and selling at the gate to a major.
Driving the United Minerals story is a heavyweight board of highly experienced mining professionals.
Chairman Phil Crabb is a mining veteran with a host of discoveries and mining projects to his name. Also on the board is iron ore marketing expert Mai Randall and
veteran businessman Alan Birchmore, who has wide experience in developing major projects.