Union positive about Iranian zinc mine
July 31, 2006 - 7:39AM
Mining investment company Union Resources Ltd says a mine it wants to build in Iran with two joint venture partners could be the second biggest zinc metal mine in the world.
And now that it has the feasibility studies to prove the venture's economic potential, the company is about 75 per cent sure the mine will be constructed.
"It's now a question of getting the financial backing, and the chances of getting that have got to be much better than 50 per cent. It's probably got to be about 75 per cent on a conservative estimate," said Union managing director Rob Murdoch.
Economic and feasibility studies show the Mehdiabad zinc mine, which if constructed with Union will be the first ever privately financed project in the Iranian mining industry, will have an optimum plant capacity of 300,000 tonnes per annum of zinc metal and 100,000 tonnes of lead/silver concentrates.
The studies also showed the mine will be a low cost producer, Union said.
The Brisbane based company, which has already poured $10 million into the project, said cost of building the mine would be about $US1.6 billion ($A2.10 billion).
Operating costs were stated to be around $US600 ($A788.38) per tonne of zinc metal, reducing to around $US290 ($A381.05) after allowing for lead and silver credits.
Union said that with a mine life of 20 years and applying conservative estimates of the future price of zinc, lead and silver, the internal rate of return for the project would be 15 per cent.
The company's two Iranian joint venture partners are reviewing the feasibility study.
Meetings between Union and the partners are expected to commence next week regarding financial contributions and final equity ownership, Mr Murdoch said.
He said Union would hold in excess of a 40 per cent share in the mine, with it expected to increase to majority ownership as the project is developed.
"At the end of the day we think Union has an excellent chance of acquiring a majority interest in the project," Mr Murdoch said.
The Iranian government granted Union a license protecting its investment in Mehdiabad in January which permits Union to invest up to $US682 million ($A896.13 million).
Mr Murdoch confirmed on Sunday the license protected it from expropriation from any political forces in Iran.
He said Union would not make another announcement on the project until the end of August when it planned to hold a "rubber stamp" shareholder meeting.