Union may turn focus on Iran

Union Capital Limited, which has been focusing attention on exploration in Papua New Guinea and Queensland, is about to clinch a deal which could lead to development of a large base metals mine in Iran.

In June this year a joint venture was entered between Union Itok lnternational AG – 83 per cent owned by Union – and the Government-owned General Iranian Mining Company to develop the Mehdiabad base metal project in Central Iran.

Under the terms of the JV, the Union subsidiary and GlMCO would carry out a feasibility study and develop the world class deposit estimated to host a resource of 205 million tonnes grading at 7.7 per cent zinc, 2 per cent lead and 44 grams/tonne silver.

The deal has been welcomed by the Iranian Ministry of Mines and Metals which has requested that the shareholders of UII (Union Capital and Itok GmbH of Austria), invest directly in the project rather than via UII. A foundation agreement has been drawn up between the Iranian Ministry and Union, UII and GIMCO which is expect to be formally signed in Tehran soon.

This will give security of tenure to the partners for the development and operation of a mine and processing plant based on the deposit for twenty years. It will also allow approval by the Ministry of Economics and Finance in Iran, thereby protecting Union’s foreign investment.

Union managing director Rob Murdoch said, because the Mehdiabad JV is the first major mineral development signed in Iran, it has taken some time for officials to satisfy themselves with the way such a partnership should operate.

“Union is impressed with the way the Ministry has ensured Union’s investment is protected,” he said.

Under the new arrangement, both Union and Itok GmbH will separately contribute US$5 million to each earn a 25 per cent interest. After US$10 million has been spent by Union and Itok together, then GIMCO can elect to contribute equally or be diluted to a minimum 35 per cent position.

A review of metallurgical work conducted to date has indicated that the ore will require fine grinding below 20 microns to produce acceptable zinc and lead concentrates.

Mr Murdoch feels that it will be possible to develop the deposit with a large open pit mine and process both oxide and sulphide ore in a large integrated processing plant that will allow the lower grades to be extracted economically.

A pre-feasibility study into processing and mining options has been undertaken by independent consultants Bateman Australia.

Once the revised JV agreement has been signed, work will commence on a US$2.8 million in-fill drilling programme to upgrade the resource to reserve status and to explore possible extensions to the ore body.

This programme will lead to a formal feasibility study into the profitability of mining and processing the ore.

Subject to the result of the feasibility, the project is expected to be ready for development in about two years.

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