Union Share Discussion Threads

[nobull] 09/10/2007 11:16

If zinc prices continue to hold up, we are, at 2 cents, probably a 3 bagger punt on regime change in Teheran, at least as far as getting to the Financing stage is concerned? Yesterday's student demonstrations at Teheran University are an interesting development. Petrol rationing, unemployment, corruption, inflation and anti-western belligerence that achieves nothing for some Iranians are all likely to speed up the end of President A's hardline approach, IMV. Roll on his departure and the transfer of the exploitation licence for the financing stage to begin.

[nobull] 26/9/2007 12:44

I expect in the next week or so a negative result to the talks to re-start the project. We will now have a 2 year arbitration battle, half way through which we can expect dilution and liquidity worries to plague the share price again, and we could be down to a 1 cent share price (Currently 1.9 Aus cents) in 1 year's time? In the event of having to drop the project we are probably owed the Aus$15m we have spent on it (it is protected under Iranian Foreign Investment Law and has been approved by the Ministry of Finance) but Iranian debts are no currency to discharge office overheads, even in Dubai. It is a terrible shame, especially for the workers formerly employed at the now idle smelter (built by the Chinese and only operated for two years) in Yazd province. Bank Melli's shares in the smelter must be almost worthless? Meanwhile, the world's largest undeveloped zinc mine must remain undeveloped, unemployment must stay high, Iran's economy must stay lopsided in terms of high dependency on oil and in terms of level controlled by Govt. (70% command economy?). The problem seems to be we are not from Venezuela, North Korea or Belarus, the price of zinc is too high (they don't want to transfer the exploitation licence) and they only want to pay equity finance suppliers debt-like finance returns (through buy-back agreements or through insisting on selling us our own ore at market prices rather than at extraction cost prices) and they feel we are responsible for their smelter going bust.

[nobull] 30/4/2007 13:47

The failure to pass the feasibility study is the Iranian Government's fault:

"the Project as a whole is considered to meet AKAU standard for a Feasibility Study with the following exceptions:

a. Granting of tenure and conditions of the Exploitation Licence.

b. Environmental approvals.

c. Water Supply

d. An indication of commitment to the Project and its stakeholders by the
Iranian Government.

These conditions are considered to be outside the commitments given by Union to
the joint venture."

None of these problems sound impossible to solve. It just requires the will of the Iranian Govt. to do so?

[nobull] 30/4/2007 08:18

It is 08:18. Where are the frigging results on AIM?

[nobull] 30/4/2007 07:35

However, it is too soon to celebrate: the de-facto investment ban on Iran is set to continue, and of course all the agreements bar the equity agreement remain cancelled until we agree a less favourable share of the profits/the ministry officials and their families have loaded up on cheap Union shares/we are found guilty of delivering the FS late and are booted out of Iran?

[nobull] 30/4/2007 07:29

Quarterly results out. Not out on AIM yet though. Capex costs dropped from 1.6bn$ to 100m$. They have closed up about 0.2 of a cent! 3.4 cents.

"Meanwhile Union is also of the view that a lower capex development would be
possible. As a result Union is currently evaluating the possibility of heap leaching both the zinc oxide ore, that makes up the top 25% of the zinc resource and also the copper oxide ore. A scoping engineering study by AKAU has indicated that the capex for a viable heap leach could be in the order of US$ 100 million and would therefore be much more financeable. Column leach tests, that simulate a heap leach in a laboratory environment, have successfully leached more than 80% zinc from representative material crushed to -6.25 mm. A flow sheet to recover zinc from the leachate has been designed and further test work on this option is in progress.
Whilst heap leaching has not been used commercially for zinc before, it has been successfully used for gold and copper extraction for some years and more recently for nickel extraction, and offers Union a viable alternative."

[nobull] 03/2/2007 09:27

From the July 2006 update document

"Base on the key assumptions the NPV at 8% discount pre tax and financing is
US$1,477 million. The IRR is 15% which is considered to be favourable for such a large project. The next step is to determine if the project is financeable."

It is not financeable. In the event there is a change of regime (and a change in attitude to the demand to stop nuclear enrichment, the fully diluted NPV per share (pre financing costs and pre tax) at an 8% discount rate using a long term zinc price of $1700 per tonne is 1,477,000,000/1,377,642,778= US$1.072.

At the current share price of 2.6 Aus cents it is intuitively obvious this is easily a 20 bagger (taxes are low in Iran, but of course the financing costs are going to be substantial, so although it should be a 30 bagger there perhaps isn't any hope of that). The only other problem with the NPV figure of $1.477 bn is what %age of ownership was assumed?

[bo doodak] 01/2/2007 16:30

Nobull, agree the potential rewards are extremely high so I try to keep an eye on it from time to time.
I researched this a fair bit a few months ago but my view is that the opportunity cost of investing here is too high given the uncertainty and the likely long timescale. So many better companies out there.
Unfortunately, I don't believe there is or was any realistic chance of raising the large finance necessary. The company must in its heart of hearts know this to be true although of course they would not say this.
From memory the only bank interested at all was France's Societe Generale.
Events in the Middle East will have to settle down over a period of at least a few years for any lender to have confidence of no future unrest during the payback period.
No chance presently with the furore over installing 3,000 centrifuges


FWIW I think this is a good example of a company who have over time been less than frank regarding their future prospects.

[nobull] 01/2/2007 10:50

Bo Doodak. Many thanks for that. I am perhaps wrong about Murdoch's departure. It was signalled well in advance? Not sacked? I failed to note the comments made in May 2006. From yesterday's quarterly results:

"In May 2006, Union announced that it was seeking to make a number of
appointments to ensure that the Company would be successful in its aim of
developing the Project. The Company has identified individuals with the
required expertise to help it achieve its aim and to fulfil the functions
provided by Geophysical and anticipates that an announcement will be made once
the outstanding issues on the purported termination of the agreements and
potential dispute in Iran, are resolved."

On a quick read of the results it looks like this project is going to end up as the subject of international arbitration. I see questions were asked about the long term zinc price used and the period over which the NPV was calculated but nobody asked about the rate of discount used. My experience of living in Iran for a year makes me think the company is right that IMIDRO had no right to cancel the agreements on the basis it did. I imagine some jobs in Iran are filled with people who have obtained them for reasons other than competence to do the job. I am sure URL/UCL will win, but not so sure as to whether Iran will respect the outcome of any judgement in favour of the company until there is a change of regime/President. I guess I've invested here for all the wrong reasons, but it would be very nice if it comes right. A 20 bagger if it comes right? Lose the lot if it doesn't? The presentation is a great comfort. Thanks.

Edit. On a more encouraging note, Shell has signed an agreement to invest a huge sum of money in Iran. Was reported in the Tehran Times, yesterday or the day before. Of course I expect the USA will not allow this, until there is change in the Iranian position.

[bo doodak] 31/1/2007 21:51

Nobull
Have a look at this recent 20:20 presentation if you've not seen it before.
I found it quite informative when I was thinking of buying. What stood out to me was Murdoch appeared to show no enthusiasm during it and gave little indication that the main issues facing Union were nearing resolution.

[nobull] 29/1/2007 22:51

13:16:45 29-Jan-2007 1.50 150,000 2,250.00 Ordinary Trade

Some brave person bought 150K today @1.5p. Not me of course.

[nobull] 29/1/2007 12:11

Not a good day. CEO has resigned (or been sacked?). Cash burn is worrying, and clearly the meeting with the Iranian minister hasn't produced any agreement on how to go forward on a win-win basis for both parties. The quarterly results are due. Sad day. I remain of the view that you don't wait 5 years to complain about a breach of an agreement, and therefore there is no valid reason for cancelling the agreements: the cancellation is all to do with the zinc price having risen too much? Future looks dire now, and clearly the sanctions against Iran for not complying with the UN's request are only going to get worse. There is already a defacto ban on large investments by Western companies in Iran. The issue now is whether an amicable agreement can be reached with the Iranians on a having a smaller project that will not attract American disapproval on account of the size of the capex requirements.

[nobull] 12/1/2007 01:11

Establishing a shia type theocracy in Iraq and Lebanon appears to be taking priority over job creation and managing the economy.



Tehran: 00:05 , 2007/01/11


Executive bodies indifferent toward job creation: official
TEHRAN, Jan. 11 (MNA) -- Despite the efforts made by the Ahmadinejad administration to create job opportunities, the executive bodies do not show any particular interest in the issue, Deputy Labor Minister Javad Farshbaf said on Wednesday.
Policymakers in general maintain that unemployment and lay-offs would be the main challenges facing the country in the course of the Fourth Five-Year Socio Economic Development Plan (2005-2010), he said.



Generally speaking, national economy is made up of four important markets: goods, services, money and capital, the official stipulated in his speech in a meeting dubbed, the National Conference on Job Creation Development. He added that a balance in the markets would lead to an efficient and productive economy, while the opposite also holds true.



Raising money in the capital markets, lack of capital management, indifference towards maintaining the employment level, population growth, meager growth in the economy insufficient to attract educated class as well as drastic drop in productivity and efficiency are the main challenges threatening the nation's economy, he further warned.

[nobull] 10/1/2007 01:54

2.2 cents: 2.3 cents so far. Raising any kind of finance for a project in Iran looks to be getting more and more difficult by the day. The American objective is to stop investment going into the oil industry to bring about economic collapse/a more conciliatory attitude on the part of the Iranian Govt, hence certain Iranian banks are not to be allowed to take deposits from US citizens?




U.S. sanctions one of Iran's largest banks
Jan 9, 2007
McClatchy Newspapers


The Bush administration turned up the heat Tuesday on Iran, barring one of its largest state-owned banks from doing business with U.S. citizens, residents, banks or businesses because of its involvement in Iran's nuclear program.

The Treasury Department Office of Foreign Assets Control's designation of Bank Sepah as a "facilitator" in Iran's nuclear program - the second such U.S. action in less than six months - will encourage banks across the globe to curtail their lending to Iran. A lending squeeze would hit Iran's vital oil sector particularly hard.

Bank Sepah, Iran's fifth-largest state bank, provided financial services to two Iranian companies that are involved in developing missiles capable of delivering weapons of mass destruction, said Stuart Levey, the Treasury Department's undersecretary for terrorism and financial intelligence.

The Iranian bank, Levey alleged, also facilitated business between Iran's main aerospace company and North Korea's chief missile-export agency.

"The financial relationship between Iran and North Korea, as represented by the business handled by Bank Sepah, is of great concern to the United States," Levey said.

North Korea already has developed nuclear weapons, but Iran says it seeks nuclear know-how only for peaceful purposes.

The Treasury Department's announcement came a day before President Bush is to announce his new plan for Iraq, and appeared to be further evidence that Bush will continue to pressure Iran rather than engaging it diplomatically, as the bipartisan Iraq Study Group recommended last year.

Secretary of State Condoleezza Rice spent more than six months trying to persuade the U.N. Security Council to adopt tough sanctions on Iran. But the council passed a weak resolution in December that had been watered down by Russia, which has extensive business interests in Iran.

A State Department official, who wasn't authorized to speak publicly and did so on the condition of anonymity, said the Bush administration planned to pursue unilateral actions that didn't require further U.N. action.

The administration "got as far as they could" via the U.N. route and the December resolution was "far from satisfactory," the official said.

Still, Levey cited the resolution Tuesday in announcing the designation of Bank Sepah. He said the resolution required governments and companies everywhere to cease doing business with Iranian companies that were tied to the controversial nuclear program.

Another State Department official, who also requested anonymity, said the U.N. resolution "does provide enough cover to do these kinds of things."

The sanction of Bank Sepah affects not only its nearly 300 branch banks within Iran but also the operations of a wholly owned subsidiary in Great Britain and Bank Sepah operations in Rome, Paris and Frankfurt, Germany. Treasury officials said Bank Sepah had assets of nearly $14 billion in 2005.

The Treasury Department designated Iran's Bank Saderat as a financier of terrorism last September, and Tuesday's action further isolates Iranian banks from the global financial community, cutting off finance sources for Iran's oil sector.

"That is the ultimate target," said Mehran Kamrava, an Iranian-born political science professor at California State University-Northridge. "It's yet another move by the U.S. government designed to . . . send a signal to the international community that the costs of doing business with Iran have increased."

It's a signal that's getting across, said Clifford Kupchan, an Iran expert for Eurasia Group, a political risk consultancy.

"What has been having an effect is increasing self-sanction by the international finance community," he said. "Major European banks have curtailed operations in Iran. Some Asian banks have become gun-shy and are starting to slow down" their investment in Iran.

The Treasury Department's designation of Bank Sepah is available online at

Treasury Undersecretary Stuart Levey's remarks Tuesday are at