BHP Group Limited — M&A Activity 2009

Dec 17, 2009

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ASX Release 18 December 2009 ASX Code: UMC

Scheme Booklet Released to UMC Shareholders

On 16 October 2009, United Minerals Corporation (“ UMC ”) announced that it had received a conditional offer, under which a subsidiary of BHP Billiton (“ BHP Billiton ”) proposes to acquire all of the issued shares in UMC via a board recommended scheme of arrangement (“ Scheme ”). Under the proposed Scheme, BHP Billiton will offer UMC shareholders consideration of A$1.30 cash for each UMC share they own, which values UMC at approximately A$204 million.

Another major milestone in the transaction has now been achieved, with the Federal Court of Australia making orders for the convening of the meeting of UMC shareholders to vote on the Scheme.

Scheme Booklet

The Scheme Booklet setting out information to assist UMC shareholders to decide how to vote in relation to the Scheme has been registered with the Australian Securities & Investments Commission. A copy of the Scheme Booklet is attached. Scheme Booklets are expected to be dispatched to all UMC shareholders by Thursday, 24 December 2009. A copy of the Scheme Booklet may also be found on the UMC website at www.unitedminerals.com.au.

UMC shareholders should read the entire Scheme Booklet, which sets out information about the Scheme, including the benefits and the potential disadvantages and risks, before deciding how to vote.

Independent Expert

Deloitte Corporate Finance Pty Ltd (“ Deloitte ”), the Independent Expert, has assessed the fair market value of UMC being in the range of A$0.55 to A$0.80 per UMC share. The consideration offered by BHP Billiton is well above Deloitte’s estimate of the fair market value of a UMC share.

Deloitte has accordingly concluded that the Scheme is fair and reasonable, and therefore in the best interests of UMC shareholders. Deloitte’s Independent Expert’s Report is included in Annexure 4 to the Scheme Booklet.

Scheme Meeting

The meeting of UMC shareholders to approve the Scheme (“ Scheme Meeting ”) will be held at the Duxton Hotel, Ball Room B, 1 St Georges Street, Perth, Western Australia on Thursday, 28 January 2010 from 10.00am (AWST). UMC shareholders who are registered on the UMC share register at 5.00pm (AWST) on Tuesday, 26 January 2010 may attend and vote at the Scheme Meeting.

UMC shareholders who are entitled to vote at the Scheme Meeting and wish to appoint a proxy to attend and vote on their behalf should complete and return the proxy form for the Scheme Meeting that accompanies the Scheme Booklet. All proxy voting instructions must be received no later than 10.00am (AWST) on Tuesday, 26 January 2010 in accordance with the directions set out in the proxy form.

For further information please contact:

‐ Matthew Hogan Phone (08) 9481 0911

‐ Matthew Hogan Phone (08) 9481 0911 Barry Fehlberg ‐ Phone (08) 9481 0911 Chief Executive Officer / Executive Director Executive Director Exploration (MAICD) BSC (HONS)

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C O R P O R A T I O N N L ABN 65 107 061 343

SCHE M E B O O K L E T In relation to the recommended proposal for BHP Billiton Minerals Pty Ltd ABN 93 008 694 782 to acquire all of the issued shares in United Minerals Corporation NL by Scheme of Arrangement.

The Directors of United Minerals Corporation NL unanimously recommend that, in the absence of a Superior Proposal, you vote in favour of the scheme.

This document is important and requires your immediate attention. It should be read in its entirety. If you do not understand its contents or are in doubt as to the course you should follow, you should consult your stockbroker or professional adviser.

Legal Advisers to UMC

Financial Advisers to UMC Legal Advisers to BHP Billiton Financial Advisers to BHP Billiton

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BLAKISTON & CRABB LAWYERS

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T A B L E O F C O N T E N T S

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I M P O RTA N T N O T E S A N D S TAT E M E N T S 2
I M P O RTA N T D AT E S 3
MESSAGE FROM THE CHAIRMAN OF UNITED MINERALS CORPORATION NL 4
H O W T O V O T E 5
F R E Q U E N T LY A S K E D Q U E S T I O N S A N D A N S W E R S 6
S e c t i o n 1 O V E R V I E W O F T H E S C H E M E 1 0
S e c t i o n 2 R E C O M M E N D AT I O N S O F T H E U M C B O A R D 1 1
S e c t i o n 3 B R I E F P R O F I L E O F U M C 1 8
S e c t i o n 4 I N F O R M AT I O N O N B H P B I L L I T O N 2 8
S e c t i o n 5 I M P L E M E N TAT I O N O F T H E S C H E M E 3 0
S e c t i o n 6 TA X AT I O N I M P L I C AT I O N S F O R S C H E M E PA RT I C I PA N T S 3 2
S e c t i o n 7 A D D I T I O N A L I N F O R M AT I O N 3 3
S e c t i o n 8 G L O S S A RY 3 6
A N N E X U R E S
A N N E X U R E 1 - S C H E M E O F A R R A N G E M E N T 4 0
A N N E X U R E 2 - D E E D P O L L 4 9
A N N E X U R E 3 - N O T I C E O F M E E T I N G 5 8
A N N E X U R E 4 - I N D E P E N D E N T E X P E RT ’ S R E P O RT 6 1
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I M P O R T A N T N O T E S A N D S T A T E M E N T S

Purpose of the Scheme Booklet

This Scheme Booklet explains the acquisition of UMC by BHP Billiton. In particular, it explains the effect of the Scheme between UMC and the UMC Shareholders and provides such other information in relation to the Scheme as is required by the Corporations Act, the Corporations Regulations and ASIC regulatory guides and other information which may be relevant to the decision of UMC Shareholders whether to approve the Scheme.

UMC Shareholders should read the entire Scheme Booklet before making any decisions about whether or not to vote in favour of the Scheme.

Regulatory information

This Scheme Booklet is the Explanatory Statement required under Part 5.1 of the Corporations Act between UMC and UMC Shareholders for the purposes of section 412(1) of the Corporations Act. A copy of this Scheme Booklet has been registered with ASIC in accordance with section 412(6) of the Corporations Act. In compliance with section 411(17), ASIC has been requested to provide a statement stating that it has no objection to the Scheme. Notwithstanding the making of such a statement, ASIC takes no responsibility for the contents of this Scheme Booklet.

A copy of this Scheme Booklet has been lodged with the Court to obtain an order of the Court approving the convening of the Scheme Meeting. Orders made by the Court pursuant to section 411(1) of the Corporations Act convening the Scheme Meeting to approve the Scheme do not constitute an endorsement by the Court of, or any expression of opinion on the Scheme.

A copy of this Scheme Booklet has been lodged with the ASX. The ASX takes no responsibility for the contents of this Scheme Booklet.

Responsibility for Contents

Information concerning UMC and its Related Bodies Corporate contained in this Scheme Booklet, including financial information and information regarding the intentions of the UMC Board, has been provided by UMC and is the responsibility of UMC. BHP Billiton and its advisers do not assume any responsibility for the accuracy or completeness of any information in this Scheme Booklet other than information concerning BHP Billiton and its Related Bodies Corporate, and statements made by them, in Sections 4, 7.8, 7.9 and 7.18 of this Scheme Booklet.

Information concerning BHP Billiton and its Related Bodies Corporate, and statements made by them, in Sections 4, 7.8, 7.9 and 7.18 of this Scheme Booklet, have been provided by BHP Billiton and are the responsibility of BHP Billiton. UMC and its advisers do not assume any responsibility for the accuracy or completeness of that information.

Deloitte Corporate Finance has prepared the Independent Expert’s Report in relation to the Scheme and takes responsibility for that report. ProMet Engineers Pty Ltd has prepared the Independent Technical Expert’s Report and takes responsibility for that report.

Forward-Looking Statements

This Scheme Booklet may include various statements about the future. Statements other than statements of historical fact may be forward looking statements. UMC Shareholders should note that such statements are subject to inherent risks and uncertainties in that they may be affected by a variety of known and unknown risks, variables and other factors, many of which are beyond the control of UMC. Actual

results, values, performance or achievements may differ materially from results, values, performance or achievements expressed or implied in any forward looking statement.

The statements contained within this Scheme Booklet reflect the views held as of the date of this Scheme Booklet.

None of UMC or BHP Billiton, the officers of those companies or any person named in this Scheme Booklet with their consent or any person involved in the preparation of this Scheme Booklet makes any representation or warranty (express or implied) as to the accuracy or likelihood of fulfilment of any forward-looking statement, or any results, values, performance or achievements express or implied in any forward looking statement, except to the extent required by law. UMC Shareholders should not place undue reliance on any such statement.

No Investment Advice

This Scheme Booklet does not take into account the individual circumstances or investment objectives of UMC Shareholders. Information contained in this Scheme Booklet should not be relied upon as the sole basis for any decision in relation to the proposed Scheme. UMC Shareholders are encouraged to seek their own independent financial and taxation advice before making any decision regarding their UMC Shares.

Privacy

Personal information may be collected by UMC and BHP Billiton in the process of implementing the Scheme. This information may include the name, contact details and shareholdings of UMC Shareholders and the names of individuals appointed to act as proxy or corporate representative by UMC Shareholders at the Scheme Meeting. The primary purpose for collecting this personal information is to assist UMC and BHP Billiton conduct the Scheme Meeting and implement the Scheme.

Any personal information collected may be disclosed to BHP Billiton, BHP Billiton’s and UMC’s respective share registries, advisers, print and mail service providers and Related Bodies Corporate to the extent necessary to effect the Scheme.

UMC Shareholders are entitled to inspect and obtain copies of personal information collected. UMC Shareholders should contact the Registry in the first instance if they wish to access their personal information. UMC Shareholders should inform their personal representative, proxy or attorney of these matters.

Advisers

Neither Blakiston & Crabb, UBS AG, Australia Branch, Mallesons Stephen Jaques nor Gresham Advisory Partners assume any responsibility for the accuracy or completeness of any of the information contained in this Scheme Booklet.

Glossary

Capitalised terms are defined within the Glossary contained in Section 8 of this Scheme Booklet or elsewhere in this Scheme Booklet. The documents reproduced in some of the Annexures to this Scheme Booklet each have their own defined terms which are sometimes different from those in the Glossary.

Date of Scheme Booklet

This Scheme Booklet is dated 10 December 2009.

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I M P O R T A N T D A T E S

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Announcement of the Scheme 16 October 2009
Date of this Scheme Booklet and Notice of Meeting 10 December 2009
Date and time for determining eligibility to attend and vote at Scheme Meeting 5.00pm (AWST) 26 January 2010
Latest time and date for receipt of Proxies for Scheme Meeting 10.00am (AWST) 26 January 2010
Scheme Meeting 10.00am (AWST) 28 January 2010
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If the Scheme is agreed to by UMC Shareholders

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Second Court Date - to approve the Scheme 3 February 2010
Notify ASX of intention to lodge Court order 3 February 2010
Effective Date
• the Court order is lodged with ASIC and the Scheme becomes binding 4 February 2010
• last day of trading in UMC Shares
Record Date for determining entitlements to Scheme Consideration 11 February 2010
Implementation Date – date of despatch of Scheme Consideration 18 February 2010
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• All dates following the date of the Scheme Meeting are indicative only and, among other things, are subject to all necessary approvals from the Court and other regulatory authorities.

• UMC reserves the right to vary the times and dates set out above at its discretion. Any changes to the above timetable will be announced through the ASX.

• All references to time in this Scheme Booklet are references to AWST.

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M E S S A G E F R O M T H E C H A I R M A N O F U N I T E D M I N E R A L S C O R P O R A T I O N N L

10 December 2009

Dear Shareholder

As you are aware, on 16 October 2009, the UMC Board announced it had received a conditional offer under which BHP Billiton proposed to acquire all of the issued shares in UMC via a Scheme of Arrangement.

If the Scheme is approved and implemented, UMC Shareholders will receive cash payments equal to A$1.30 for each UMC share they own. The Scheme Consideration values UMC at approximately A$202 million, assuming no exercise of UMC Options.

The UMC Board has considered the advantages and disadvantages of the Scheme and unanimously recommend that, in the absence of a Superior Proposal, you vote in favour of the Scheme at the Scheme Meeting to be held on 28 January 2010.

In recommending BHP Billiton’s offer, the UMC Board has considered the success of UMC’s exploration at the Railway Deposit in discovering a high quality resource against the difficulty in achieving a cost effective method of independent development. Despite rail in close proximity, access to established transport infrastructure continues to be an unlikely prospect in the medium term. In addition, adverse exchange rate movements and the current refusal for access to port facilities at Port Hedland, means that development options come with significant challenges and difficulties.

Over the course of 2009, UMC set up a project data room and with the assistance of UBS AG, Australia Branch, commenced discussions with interested parties to find ways to maximise the economic value of the Railway Deposit. The work involved a number of high profile mining companies, and was met with considerable interest, but none resulted in the value now offered by BHP Billiton. Going it alone was extensively modelled, but left UMC inherently exposed to significant development risks, commodity price risks and funding risks in circumstances where long term infrastructure solutions to transporting and shipping our ore have not been resolved.

The UMC Board unanimously recommends that, in the absence of a Superior Proposal, you vote in favour of the acquisition of UMC by BHP Billiton as the UMC Directors propose doing in respect of the UMC Shares they hold.

The UMC Board has commissioned Deloitte Corporate Finance to prepare the Independent Expert’s Report. Deloitte Corporate Finance has concluded that the Scheme is both fair and reasonable and is therefore in the best interests of UMC Shareholders. The full report is contained in Annexure 4.

The Scheme Booklet, including the Notice of Meeting set out in Annexure 3, contains full details of the Scheme. The Scheme Booklet provides the necessary information on the Scheme to assist you in making a decision about how to vote at the Scheme Meeting to be held on 28 January 2010 at Ball Room B, Duxton Hotel, 1 St Georges Terrace, Perth, Western Australia at 10.00am AWST.

Your vote is important and we encourage you to attend the Scheme Meeting. If you are unable to do so, you should complete the enclosed proxy form and return it as soon as possible but no later than 10.00am AWST on 26 January 2010.

On behalf of the UMC Board, I strongly recommend you read the enclosed material in full.

If you have questions about the Scheme you can forward them to info@unitedminerals.com.au or call +61 8 9481 0911. Alternatively, you should contact your financial or other professional adviser.

Yours faithfully

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Alan Birchmore Chairman

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H O W T O V O T E

Your vote is important

For the Scheme to proceed, it is necessary that the Scheme is approved by a majority in number of eligible UMC Shareholders present and voting (either in person or by proxy) at the Scheme Meeting. That majority must represent at least 75% of the total number of votes cast on the resolution at the Scheme Meeting.

The Court must also approve the Scheme. The Court has discretion whether or not to approve the Scheme even if the resolution in favour of the Scheme is passed by the requisite number of UMC Shareholders and votes cast.

Who is entitled to vote?

Subject to any voting restrictions, UMC Shareholders will be eligible to vote at the Scheme Meeting if they are registered as a UMC Shareholder as at 5.00pm AWST on 26 January 2010.

Neither BHP Billiton nor any of its associates will vote at the Scheme Meeting.

When and where is the meeting?

The Scheme Meeting will be held on 28 January, 2010 at Ball Room B, Duxton Hotel, 1 St Georges Terrace, Perth, Western Australia. The time of the Scheme Meeting is shown in the Notice of Meeting.

How to vote

To vote, UMC Shareholders should:

1. attend and vote in person at the Scheme Meeting; or

2. appoint a proxy (or attorney or representative) to vote on their behalf at the Scheme Meeting.

Voting by Proxy

The sending of any proxy form will not preclude any UMC Shareholder from attending in person and voting at the Scheme Meeting at which that UMC Shareholder is entitled to attend and vote in person. However, voting in person will preclude any proxy of that UMC Shareholder from being counted.

If the UMC Shareholder appoints two proxies and the appointment does not allocate a proportion of the UMC Shareholder’s voting rights, each proxy may exercise half the votes on a poll.

If more than one joint holder of a UMC Share tenders a vote, the vote of the holder named first in the register will be accepted to the exclusion of the other or others.

Where a person present at a meeting represents personally or by proxy, attorney or representative more than one UMC Shareholder, that person is entitled to only one vote on a show of hands despite the number of UMC Shareholders that person represents and that vote will be taken as having been cast for all the UMC Shareholders the person represents. The person must not exercise that vote in a way which would contravene any directions given to the person by the member in any instrument appointing the person as attorney or proxy.

Voting by corporate representative or attorney

If you are a corporate UMC Shareholder and wish to appoint a representative to attend the Scheme Meeting, you should ensure that your representative can provide appropriate evidence of his or her appointment.

Alternatively, you may appoint another person by power of attorney to attend the Scheme Meeting and vote on your behalf. You will need to provide appropriate evidence of the grant of the power of attorney.

To vote by proxy UMC Shareholders should complete the attached proxy form for the Scheme Meeting in accordance with the instructions on the form and return it to UMC’s Share Registry at the following address:

If sent by post: Security Transfer Registrars Pty Ltd PO Box 535 Applecross Western Australia, 6953

If sent by facsimile: +61 8 9315 2233

so as to be received no later than 48 hours prior to the Scheme Meeting.

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F R E Q U E N T LY A S K E D Q U E S T I O N S A N D A N S W E R S

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Scheme and Scheme Consideration
What will I receive if the Scheme is approved? The Scheme Consideration is A$1.30 cash per UMC Share.
What is the Scheme? The Scheme is a scheme of arrangement between UMC and Scheme Participants
under which all of the UMC Shares will be transferred to BHP Billiton in exchange
for the Scheme Consideration of A$1.30 cash per UMC Share.
A summary of the Scheme is set out in Section 1 of this Scheme Booklet and the
terms of the Scheme are set out in full in Annexure 1.
Who is entitled to the Scheme Consideration? Scheme Participants are entitled to receive the Scheme Consideration in respect
of each UMC Share they hold as at the Record Date.
If the Scheme is implemented, when will I be If the Scheme is approved by UMC Shareholders and the Court, the Scheme
paid my money? Consideration will be paid to Scheme Participants on the Implementation Date,
which is currently anticipated to be 18 February 2010.
UMC Shareholders should be aware that if the Scheme Meeting is adjourned and
the Implementation Date is delayed, payment of the Scheme Consideration will
also be delayed (but UMC Shareholders will retain ownership of their UMC Shares
until the Scheme is implemented).
If the Scheme is implemented, how will I be paid A cheque will be sent to each Scheme Participant on the Implementation Date to
my money? the registered address as shown in the Register.
Further information concerning the payment of the Scheme Consideration to
UMC Shareholders is set out in Section 7.2 of this Scheme Booklet.
What are the reasons to vote in favour of the The reasons to vote in favour of the Scheme are set out in Section 2.3 of this
Scheme? Scheme Booklet.
Are there any potential disadvantages of the Although the UMC Board recommends that you vote in favour of the Scheme (in
Scheme? the absence of a Superior Proposal), the Scheme has some potential disadvantages
that UMC Shareholders should consider when making their decision whether or
not to vote in favour of the Scheme.
These potential disadvantages are set out in Section 2.4 of this Scheme Booklet.
Independent Expert
What is the Independent Expert’s conclusion? The UMC Board engaged Deloitte Corporate Finance as Independent Expert to
provide a report on the Scheme.
The Independent Expert has concluded that the Scheme is both fair and
reasonable and is therefore in the best interests of UMC Shareholders.
The Independent Expert’s Report is included in Annexure 4 of this Scheme
Booklet.
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BHP Billiton
Who is BHP Billiton? BHP Billiton is a member of the BHP Billiton Group and a wholly-owned subsidiary
of BHP Billiton Limited. BHP Billiton heads BHP Billiton Group’s Western Australia
iron ore business.
The BHP Billiton Group is the world’s largest diversified natural resources company.
Its corporate objective is to create long-term value for shareholders through the
discovery, development and conversion of natural resources, and the provision
of innovative customer and market focused solutions. It pursues this objective
through its strategy of investing in ‘tier one’ assets that are large, low cost and long-
life to provide a balanced portfolio of export oriented commodities:
• steelmaking products: iron ore, metallurgical coal, manganese;
• non-ferrous products: copper, aluminium, nickel, diamonds; and
• energy products: petroleum, liquefied natural gas, energy coal, uranium.
As at 30 June 2009, BHP Billiton Group had a market capitalisation of
approximately US$144 billion. For the year ended 30 June 2009, the BHP Billiton
Group reported net operating cash flow of US$18.9 billion, net profit attributable
to shareholders of US$5.9 billion and revenue of US $50.2 billion. BHP Billiton
Group has approximately 99,000 employees and contractors working in more
than 100 operations in approximately 25 countries.
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Scheme Meeting
When and where will the Scheme Meeting be The Scheme Meeting will be held at Ball Room B, Duxton Hotel, 1 St Georges
held? Terrace, Perth, Western Australia on 28 January 2010 at 10.00am AWST.
Am I entitled to vote? If you are registered as an UMC Shareholder at 5.00pm AWST on 26 January
2010, you will be entitled to vote at the Scheme Meeting.
You may vote in person at the meeting, or by attorney or representative or by
completing and lodging the proxy form accompanying this Scheme Booklet.
Who is excluded from voting at the Scheme All UMC Shareholders are entitled to vote at the Scheme Meeting.
Meeting? BHP Billiton will not vote at the Scheme Meeting as it does not own any
UMC Shares.
What vote is required For the Scheme to proceed, it must be approved by:
to approve the Scheme? (a) a majority in number (more than 50%) of those UMC Shareholders
present and voting at the Scheme Meeting in person, by proxy, by
attorney or (in the case of a corporate UMC Shareholder) by a corporate
representative; and
(b) at least 75% of the total number of votes cast on the Resolution at the
Scheme Meeting by UMC Shareholders.
(the Requisite Majorities)
The Scheme cannot proceed unless it is approved by the Requisite Majorities
of UMC Shareholders.
Approval of the Court is also required.
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F R E Q U E N T LY A S K E D Q U E S T I O N S A N D A N S W E R S

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Is voting compulsory? No, voting is not compulsory. However, your vote is important. If you
cannot attend the Scheme Meeting to be held on 28 January 2010, you
are encouraged to complete and return the proxy form enclosed with this
Scheme Booklet.
For further details regarding voting and submitting your proxy form for the
Scheme Meeting, see page 5 of this Scheme Booklet.
Are any other approvals required? The Scheme must be approved by the Court in addition to being approved by
UMC Shareholders. If the Scheme is approved at the Scheme Meeting, UMC
will apply to the Court for approval of the Scheme as soon as practicable.
The Second Court Hearing for approval of the Scheme is expected to be held
on 3 February 2010 (although this may change).
Further details of the approval process are set out in Section 5.4 of this
Scheme Booklet.
Is the Scheme subject to any conditions? Completion of the Scheme is subject to a number of conditions. The key
outstanding conditions are summarised in Section 5.6 of this Scheme Booklet.
How do I vote? You may vote in person by attending the Scheme Meeting to be held on 28
January 2010 at Ball Room B, Duxton Hotel, 1 St Georges Terrace, Perth,
Western Australia at 10.00am AWST.
Alternatively, you may vote by completing and lodging the enclosed proxy
form, or by attorney, or in the case of a corporate UMC Shareholder, by a
corporate representative by 10.00am AWST 26 January 2010.
Full details of how to vote are set out in on page 5 of this Scheme Booklet.
What happens if I do not vote, or I vote against If you are an UMC Shareholder on the Record Date and the Scheme
the Scheme? is approved, your UMC Shares will be transferred under the Scheme and
you will receive the Scheme Consideration for your UMC Shares on the
Implementation Date.
This is so, even if you did not vote, or voted against the Scheme.
What happens if the Requisite Majorities do If the Scheme is not approved, you will remain a UMC Shareholder and will
not vote in favour of the Scheme? not receive the Scheme Consideration.
When will the results of the Scheme Meeting The results of the Scheme Meeting will be available shortly after the
be available? conclusion of the Scheme Meeting and will be announced to ASX
once available. The results will also be published on UMC’s website
www.unitedminerals.com.au soon after the Scheme Meeting.
Dividend
Will a dividend be paid if the Scheme is not There is no intention for UMC to pay a dividend in the foreseeable future, if the
approved? Scheme is not approved.
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Other Questions
Will I have to pay brokerage fees or stamp duty? No. You will not have to pay any brokerage or stamp duty in connection with the
Scheme or the Scheme Consideration.
What are the tax consequences of the Scheme Section 6 of this Scheme Booklet provides a description of the general
for me? Australian tax implications of the Scheme for UMC Shareholders.
You should consult with your own tax advisor regarding the consequences of
acquiring, holding or disposing of UMC Shares in light of current tax laws as
they apply to you and your particular investment circumstances.
Where can I get further information? This Scheme Booklet provides detailed information in relation to the Scheme
that all UMC Shareholders should read.
If you have any questions about the Scheme, please forward them to
info@unitedminerals.com.au or call +61 8 9481 0911. Alternatively, please
discuss your questions with your legal, financial or other professional adviser.
For additional copies of this Scheme Booklet, please visit UMC’s website at
www.unitedminerals.com.au.
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S E C T I O N 1 O V E R V I E W O F T H E S C H E M E

1.1 Background

On 16 October 2009 UMC announced that UMC and BHP Billiton signed a Merger Implementation Agreement governing how the Scheme would proceed.

BHP Billiton is offering A$1.30 for each UMC Share.

The key terms of the Merger Implementation Agreement are set out in Section 5.6.

If the Scheme is implemented, it is intended that UMC will become a wholly owned subsidiary of BHP Billiton and be delisted. For further information about BHP Billiton’s intentions for UMC, see Section 4.4.

• 1.2 Implementation of the Scheme via scheme of arrangement

• The Scheme is to be effected by a scheme of arrangement pursuant to Part 5.1 of the Corporations Act.

The consequences for UMC and the intentions of the UMC Directors for UMC if the Scheme is not approved are set out in Section 2.6.

• 1.3 Scheme

The Scheme applies to UMC Shareholders.

• UMC Shareholders will receive A$1.30 for every 1 UMC Share held. The Independent Expert has concluded that the Scheme is both fair and reasonable and is therefore in the best interests of UMC Shareholders (please refer to Annexure 4 for the full report of the Independent Expert and the basis and assumptions for this opinion).

• 1.4 Resolution to be passed at the Scheme Meeting

• The resolution to be passed at the Scheme Meeting is set out below:

• “That pursuant to and in accordance with section 411 of the Corporations Act, the scheme of arrangement proposed between UMC and the holders of its fully paid ordinary shares, designated the “Scheme”, as contained in and more particularly described in the Scheme Booklet accompanying the Notice of Scheme Meeting, is agreed to and the Board of Directors of UMC are authorised to agree to such alterations or conditions as are thought fit by the Court, and subject to approval of the Scheme by the Court, to implement the Scheme with any such alterations or conditions.”

• The resolution for the Scheme Meeting must be passed by the Requisite Majorities for implementation of the Scheme.

• 1.5 Court approval

• The Scheme will become binding on UMC and each Scheme Participant upon the Court making an order under section 411(4)(b) of the Corporations Act and that order being lodged with ASIC and becoming effective under section 411(10). Application to the Court for that order will be made as soon as possible after the Scheme Meeting has been held.

• 1.6 Effect of Scheme on holders of UMC securities

UMC Shareholders

If approved by UMC Shareholders and the Court, all UMC Shareholders who hold UMC Shares on the Record Date

will participate in the Scheme. The UMC Shareholders as at the Record Date are referred to as Scheme Participants.

Upon implementation of the Scheme, UMC Shareholders will cease to be shareholders in UMC and will receive A$1.30 for every 1 UMC Share held by them in consideration for the transfer by them of their UMC Shares to BHP Billiton, such that UMC will become a wholly owned subsidiary of BHP Billiton.

UMC Optionholders

At the date of this Scheme Booklet, UMC has 5,550,000 UMC Options on issue.

If the UMC Optionholders exercise their UMC Options and are issued with the UMC Shares prior to the Record Date, the Scheme will apply in respect of such UMC Shares.

UMC and BHP Billiton have entered into agreements with each of the UMC Optionholders under which those UMC Optionholders have agreed to transfer their UMC Options to BHP Billiton for a total consideration of A$1,988,060.

It is a condition precedent to the transfer of the UMC Options that ASX grant a waiver to ASX Listing Rule 6.23.4. ASX has granted that waiver so that the terms of the UMC Options may be amended without shareholder approval to permit the transfer of the UMC Options in accordance with the Optionholders Deeds. It is a condition of the ASX waiver that the Scheme be approved by UMC Shareholders.

The UMC Optionholders have also agreed not to exercise their UMC Options, except in circumstances where the UMC Share price exceeds A$1.30 or there is Competing Transaction.

Pursuant to the Optionholder Deeds, the UMC Optionholders have agreed to transfer their UMC Options to BHP Billiton for the consideration set out below:

• A$0.5500 for each Option with an exercise price of A$0.75 and expiry date of 31 July 201 0;

• A$0.1887 for each Option with an exercise price of A$1.25 and expiry date of 31 July 2010;

• A$0.1504 for each Option with an exercise price of A$1.45 and expiry date of 31 July 2010;

• A$0.2534 for each Option with an exercise price of A$1.75 and expiry date of 31 July 2011; and

• A$0.3154 for each Option with an exercise price of A$1.35 and expiry date of 31 July 2011.

As a result of the Optionholder Deeds, UMC is not proposing a scheme of arrangement with UMC Optionholders.

1.7 Key agreements

The key agreements to effect the Scheme are the:

• Merger Implementation Agreement;

• Deed Poll (included in Annexure 2 to this Scheme Booklet); and

• Scheme of Arrangement (included in Annexure 1 to this Scheme Booklet).

A summary of these key agreements is set out in Section 5. of this Scheme Booklet.

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S E C T I O N 2 R E C O M M E N D A T I O N S O F T H E U M C B O A R D

2.1 UMC Board’s Recommendation

The UMC Board considers that the Scheme is in the best interests of UMC Shareholders. The UMC Board therefore recommends that, in the absence of a Superior Proposal, each UMC Shareholder votes in favour of the Scheme at the Scheme Meeting.

Each UMC Director holding UMC Shares intends to vote in favour of the Scheme in the absence of a Superior Proposal.

In considering whether to vote in favour of the Scheme, the UMC Board encourages you to read the whole of this Scheme Booklet (including the Independent Expert’s Report in Annexure 4). The UMC Board also encourages you to then vote by attending the Scheme Meeting, or by appointing a proxy to vote on your behalf.

2.2 Reasons behind the recommendations of the UMC Board

• The UMC Board believes that the offer from BHP Billiton represents the most compelling value proposition for UMC Shareholders at this point in time, in the absence of a Superior Proposal.

• The Independent Expert has concluded that the Scheme is in the best interests of UMC Shareholders .

• UMC’s exploration programme in the Pilbara has been extremely successful with the discovery of the Railway Deposit, but efforts to achieve a cost effective way of commercialising this discovery have not yielded a solution which generates an acceptable valuation outcome for UMC Shareholders.

• Options explored by UMC have included a rail haulage or access agreement with infrastructure owners in the region, a “mine gate sale” and road haulage to port, all of which carry material development risk.

• An assessment of the value which could be generated by UMC independently shows that the alternative which would generate the most attractive valuation outcome requires an acceptable rail haulage agreement with either Rio Tinto Limited or the BHP Billiton Group. However, as no agreement has been forthcoming and the likelihood of achieving an acceptable outcome is considered low in the near term, this approach does not represent an attractive solution for UMC Shareholders.

• [ The value assessment made by management ] in forming their own view on the merits of independent development of the Railway Deposit is highly sensitive to a number of assumptions which are subject to a variety of risks. As such, in addition to the fact that there does not appear to be a more attractive alternative for commercialisation based on current expectations of forecast assumptions, if the risks associated with development such as iron ore price risk, exchange rate risk, exploration and development risk, port access risk (see Section 2.5 for more details) are factored into the assessment, the current alternative’s attractiveness is further diminished.

• [ Acceptance of the Scheme will allow UMC ] Shareholders to receive value now and remove the risk associated with development which includes the possibility that no infrastructure solution is likely to be obtainable in the near future.

• [ In combination, the above factors have led ] the UMC Board to conclude that the A$1.30 offer from BHP Billiton represents a compelling valuation alternative and, as such, recommend UMC Shareholders vote in favour of the Scheme.

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S E C T I O N 2 R E C O M M E N D A T I O N S O F T H E U M C B O A R D

2.3 Why UMC Shareholders should Vote in Favour of the Scheme

• [The Scheme is unanimously recommended by the UMC Board to be in the best interests ] of UMC Shareholders, in the absence of a Superior Proposal.

• [ The Independent Expert has concluded that the Scheme is in the best interests of UMC ] Shareholders.

• [ The Scheme Consideration represents a significant share price premium over the trading ] levels for UMC Shares prior to the Announcement Date.

• [ The Scheme Consideration offered provides full cash consideration and offers certain ] value for UMC Shares, eliminating any risks and uncertainties of remaining a UMC Shareholder.

• [ No Superior Proposal has emerged to date.]

• [ UMC’s Share price may fall if the Scheme is not implemented.]

• The reasons set out above are discussed below in further detail.

The Scheme is unanimously recommended by the UMC Board to be in the best interests of UMC Shareholders, in the absence of a Superior Proposal

The UMC Board believes that the Scheme is in the best interests of UMC Shareholders and unanimously recommend that UMC Shareholders vote in favour of the Scheme, in the absence of a Superior Proposal.

The UMC Board has formed its conclusion and made their recommendation based on the matters outlined in Section 2.2, the advantages outlined in this Section 2.3, the disadvantages outlined in Section 2.4 and having regard to the applicable risks (see Section 2.5 for more details).

Each UMC Director who holds UMC Shares, or on whose behalf UMC Shares are held, intends to vote those UMC Shares in favour of the Scheme, in the absence of any Superior Proposal.

The Independent Expert has concluded that the Scheme is in the best interests of UMC Shareholders

The UMC Board commissioned Deloitte Corporate Finance to prepare an Independent Expert’s Report in relation to the Scheme. The Independent Expert has concluded that the Scheme terms are in the best interests of UMC Shareholders.

The Independent Expert has assessed the fair value of a UMC Share to be in the range of A$0.55 to A$0.80 (see Figure 1). This reflects the fair market value of UMC via valuation of net assets on a going concern basis, cross checked using an industry rule of thumb and an analysis of recent share trading.

Annexure 4 of the Scheme Booklet contains a complete copy of the Independent Expert’s Report. UMC Shareholders are encouraged to read the Report in its entirety.

Figure 1

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----- Start of picture text -----

1.40 A$1.30
1.20
1.00
A$0.80
0.80
0.60 A$0.55
0.40
0.20
0.00
BHP Billiton Offer Low High
Independent Expert Valuation
$ per UMC share
----- End of picture text -----

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The Scheme Consideration represents a significant share price premium over the trading levels for UMC Shares prior to the Announcement Date

The Scheme Consideration offered by BHP Billiton eliminates any risks for UMC shareholders, provides certainty and is based on material premiums to historical market prices.

In particular, it represents a:

• 43% premium to UMC’s closing share price on Tuesday 6 October 2009, being the date at which UMC Shares were placed in trading halt following the receipt of BHP Billiton’s proposal;

• 29% premium to the one month volume weighted UMC Share price;

• 35% premium to the three month volume weighted UMC Share price; and

• 36% premium to the six month volume weighted UMC Share price.

Figure 2

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----- Start of picture text -----

1.40 BHP Billiton offer price = $1.30
1.20 $1.30
29% 35% 36%
43%
1.00
$1.01
$0.963 $0.959
$0.91
0.80
0.60
0.40
0.20
0.00
Last close One month Three month Six month Offer
on 6 Oct VWAP VWAP VWAP consideration
2009 (7 Sep to 6 Oct) (7 Jul to 6 Oct) (7 Apr to 6 Oct)
$ per UMC share
----- End of picture text -----

Source: IRESS Market Technology

Note: Please note that IRESS Market Technology has not consented to data and information attributed to it in this Scheme Booklet

The Scheme Consideration offered provides full cash consideration and offers certain value for UMC Shares, eliminating any risks and uncertainties of remaining a UMC Shareholder

The UMC Board is conscious of the importance of allowing UMC Shareholders to consider an offer for their UMC Shares which is priced at a significant share price premium over recent trading levels.

The Scheme Consideration offered to UMC Shareholders is A$1.30 in cash per UMC Share. This payment will be sent on the Implementation Date and will not incur any brokerage charges that may otherwise be payable on the sale of UMC Shares.

The BHP Billiton proposal values UMC at approximately A$202 million, assuming no exercise of UMC Options, and it offers UMC Shareholders an opportunity to remove the significant risks associated with the development of the Railway Deposit.

The certainty of the all cash Scheme Consideration should be compared against the risks and the uncertainties of remaining a UMC Shareholder. These risks include, but are not limited to:

• share market conditions;

• iron ore price risk;

• exchange rate risk;

• exploration and development risk; and

• port access risk.

For further consideration of the risks of UMC’s business activities please refer to Section 2.5.

No Superior Proposal has emerged to date

The Board has agreed to unanimously recommend BHP Billiton’s offer in the absence of a Superior Proposal. Since the Announcement Date and up to the date of this Scheme Booklet, no Superior Proposal has emerged. The UMC Board has no evidence that on the date of this Scheme Booklet a Superior Proposal is likely to be forthcoming.

The Merger Implementation Agreement restricts UMC from soliciting alternative offers or proposals or responding and negotiating with respect to a Competing Transaction. However, these restrictions do not in any way prevent or restrict a third party from proposing a Competing Transaction, and the restrictions will not apply in respect of an unsolicited Competing Transaction where the UMC Board reasonably determines that the Competing Transaction is a Superior Proposal and failing to respond would be likely to constitute a breach of fiduciary or other legal duties.

UMC’s Share price may fall if the Scheme is not implemented

If the Scheme is not implemented, there is a risk that the market value of your UMC Shares may be significantly less than the Scheme Consideration particularly in light of the lack of compelling development alternatives currently available to UMC.

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S E C T I O N 2 R E C O M M E N D A T I O N S O F T H E U M C B O A R D

2.4 Potential Disadvantages of the Scheme

• A summary of the potential disadvantages associated with the Scheme, which are explained in more detail below, are as follows:

• Scheme Participants will cease to have any interest in UMC and will not participate in any potential upside that may result from being a UMC Shareholder.

• Possibility of a Superior Proposal emerging.

• Iron ore prices may increase.

• Acquisition of UMC Shares by BHP Billiton may crystallise a CGT liability.

Although the UMC Board recommends that you vote in favour of the Scheme (in the absence of a Superior Proposal) and the Independent Expert has concluded that the Scheme is in the best interests of UMC Shareholders, the Scheme has a number of potential disadvantages that UMC Shareholders should consider with regard to their individual circumstances and make their own determination in deciding whether or not to vote in favour of the Scheme.

Scheme Participants will cease to have any interest in UMC and will not participate in any potential upside that may result from being a UMC Shareholder

If the Scheme is implemented, Scheme Participants will transfer their UMC Shares to BHP Billiton in return for Scheme Consideration of A$1.30 cash per UMC Share. Scheme Participants will cease to hold an interest in UMC and will no longer participate in any future growth opportunities for UMC.

UMC Shareholders may wish to keep an interest in UMC as a listed company because they wish to invest in a publicly listed company with the particular profile of UMC such as industry, geography and size. Implementation of the Scheme may not be attractive to UMC Shareholders who wish to retain this investment profile. However, it should be noted that there is no guarantee of growth or future earnings due to risks identified in Section 2.5.

Possibility of a Superior Proposal emerging

The UMC Board has agreed to unanimously recommend BHP Billiton’s offer, in the absence of a Superior Proposal. However, there remains the possibility that one or more third parties could make a Superior Proposal prior to the Scheme Meeting.

If the Scheme does not proceed, it is possible that an alternative acquirer or merger partner could emerge that offers greater value for UMC Shares than would be realised under the Scheme.

Iron ore prices may increase

If iron ore prices increase, your investment in UMC may be worth more than the value that would be realised under the Scheme. However, as noted within the risks identified in Section 2.5, iron ore prices have fluctuated in recent years and may continue to fluctuate significantly in the future. Therefore there is no guarantee of future price increases. A significant price increase would be required to enhance the value of UMC Shares above that of the Scheme Consideration.

Acquisition of UMC Shares by BHP Billiton may crystallise a CGT liability

If the Scheme proceeds, BHP Billiton’s Offer of A$1.30 cash per UMC Share might crystallise a CGT liability for some UMC Shareholders, which may reduce the after tax value received.

Shareholders who are Australian residents for tax purposes and who have a tax cost base of less than A$1.30 in UMC Shares will derive a capital gain equal to the difference between A$1.30 and their tax cost base. No CGT roll-over relief will be available to UMC Shareholders.

If the Scheme is not implemented, there are no tax consequences for UMC Shareholders unless they decide to dispose of their UMC Shares at a later date.

Further information about the tax consequences of the Scheme for UMC Shareholders is set out in Section 6 of this Scheme Booklet. However, Scheme Participants should seek their own professional advice regarding the individual tax consequences applicable to them.

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2.5 Risks relating to UMC’s business

a) Share market conditions

The prices at which shares trade on the ASX may rise or fall in response to a number of factors affecting the market for equities in general which are unpredictable and unrelated or disproportionate to the operating performance or the underlying performance of UMC as a listed entity. Such factors include changes in the general economic outlook, interest and inflation rates, currency exchange rates, investor sentiment and the demand and supply of capital.

Recent volatility in global commodity, foreign exchange and financial markets means there is potential for uncertainty in relation to the valuation of UMC. Continued volatility may result in uncertainties and risks regarding the likelihood and timing of UMC delivering future cash flows to UMC Shareholders which could also have an adverse impact on UMC’s Share price if the Scheme is not implemented.

The UMC Board is not able to offer any assurance about the future prospects of the UMC Share price. Nor can the UMC Board provide assurance when or if the UMC Share price might reach the proceeds UMC Shareholders will receive per UMC Share if the Scheme is implemented, in the absence of an alternative proposal or other factors that may have impacted the trading price of UMC’s Shares leading up to the Announcement Date.

b) Iron ore price risk

In the event of successful project development, UMC’s future sales revenues will be derived primarily from the sale of iron ore lumps and fines to export markets. A number of supply and demand factors, outside UMC’s control,

Figure 3

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250
200
150
100
50
0
Nov-06 Apr-07 Sep-07 Feb-08 Jul-08 Dec-08 Jun-09 Nov-09
China Import Indian Iron Ore 63% Fe (cfr China)
Price (US$/metric tonne)
----- End of picture text -----

influence contract prices negotiated between iron ore producers and customers. Iron ore prices have shown high volatility over the past 3 years, particularly following record highs in the first half of 2008 (see Figure 3). Volatile iron ore prices may have a potential adverse impact on UMC’s future sales revenues.

c) Exchange rate risk

Iron ore off-take contracts are agreed upon in US dollars, hence UMC would derive the majority of future sales revenues in US dollars. The income and expenditure of UMC are, and would be, accounted for in Australian currency. Any future Australian dollar revenues generated by UMC will be adversely impacted by a strengthening of the Australian dollar relative to the US dollar. Hence, UMC is exposed to foreign exchange rate risk, which could impact UMC’s financial position. Such currency movements are outside of the control of UMC.

d) Exploration and development risk

Mineral exploration and development inherently involves significant and irreducible financial risks. Exploration is costly and involves exacting techniques which must be applied over extended periods of time. UMC cannot foresee nor guarantee whether any further exploration activities will succeed in the discovery of a commercially viable ore deposit.

Although UMC has established significant Mineral Resources at its Railway Deposit in the central Pilbara region of Western Australia, its future value is materially dependent on the success or otherwise of the activities directed towards exploration and development of this asset. It is common in new mining operations to experience unexpected problems and delays during development, construction and mine start-ups, which delay the commencement of mineral production. Accordingly, there is no assurance that UMC’s future exploration and development activities will develop into profitable mining operations.

Risks to UMC in exploration include the uncertainties associated with projected continuity of an ore deposit, fluctuations in grades and values of the product being mined, and unforeseen operational and technical problems. Exploration may also be adversely affected or hampered by a variety of non-technical issues such as limitations on activities due to seasonal changes, industrial disputes, land claims, heritage and environmental legislation, mining legislation and many other factors beyond the control of UMC.

Source: Bloomberg (Steel Business Briefing Commodities Research)

Notes: Please note that Bloomberg has not consented to data and information attributed to it in this Scheme Booklet.

Iron ore prices are generally contract based, and hence, prices negotiated by UMC would likely be unique to the ore produced by UMC, however the China Import Indian Iron Ore price is representative of spot prices being paid in the main ports of China, which contract prices are likely to reflect at the time of negotiation.

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S E C T I O N 2 R E C O M M E N D A T I O N S O F T H E U M C B O A R D

Specifically, UMC’s single largest asset is the Railway Deposit and efforts to achieve a cost effective way of commercialising this discovery have not yielded a solution which generates an acceptable valuation outcome for UMC Shareholders. In developing the Railway Deposit, UMC will be subject to risks including geological/hydrogeological risk, financing risk, port access risk, capital and operating expenditure risk.

There is no guarantee that future exploration on land over which UMC has exploration permits and licenses will lead to a commercial discovery or, if there is such a discovery, that UMC will be able to develop it successfully.

e) Port access risk

The Port Hedland Port Authority has, up to the date of this Scheme Booklet, responded to UMC initiatives for access by indicating there is no capability to receive UMC product in the short term. The Port Hedland Port Authority has also indicated limited prospects for UMC product as new facilities are built over coming years. Were UMC to continue to pursue independent development of the Railway Deposit, the inability to secure port access to ship the ore would present a considerable risk to the economics of the development.

f) Production and other operational risks

UMC’s future operations will be subject to a number of factors that can cause material delays or changes in operating costs for varying lengths of time. Operational risks include weather conditions and natural disasters, disruption of energy supply, unexpected technical problems, unanticipated geological conditions, equipment failures and disruptions of rail infrastructure and ship loading facilities. UMC’s financial performance may also be adversely affected by long lead times, delays and price escalations in respect of required equipment, consumables and mining support services. Industrial disruptions may also result in lower than planned production or delays in delivery of the product.

Many of these risks are outside the ability of UMC management to control and may result in a materially adverse effect on UMC’s operations and financial results.

g) Environmental regulation

UMC’s exploration and development programs are subject to Australian laws and regulations regarding environmental matters, which means there are potential liability risks and thus will be subject to approval by government authorities. Development of any future iron ore resources will be dependent on the project meeting environmental and safety legislation and gaining approvals from the relevant government authorities. This may change in a manner that may require standards in addition to those now in effect, and a heightened degree of responsibility for UMC and its Directors and employees. UMC proposes to operate fully in accordance with applicable laws and conduct its programs in a responsible manner with regard to the environment.

Regulatory change by the Australian Government in response to greenhouse gas emissions may have an effect on emissions intensive industries. Specifically, the proposed Carbon Pollution Reduction Scheme (CPRS) may represent increased costs to the mining industry via cap-and-trade carbon permitting and increased energy prices. The costs associated with obligations under the CPRS may impact UMC’s future operations.

h) Security of Tenements

All tenements in which UMC may earn an interest are subject to renewal conditions or are yet to be granted, which will be at the discretion of the relevant Minister in Western Australia. The maintaining of tenements, obtaining renewals, or getting tenements granted, often depends on UMC being successful in obtaining required statutory approvals for proposed activities. There is a risk that UMC may lose title to mining tenements if conditions attached to licences are changed or not complied with.

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i) Native Title and Land Access

Both the Native Title Act 1993 (Commonwealth), related State native title legislation and aboriginal land rights and aboriginal heritage legislation may affect UMC’s ability to gain access to prospective exploration areas or obtain production titles. Compensatory obligations may be necessary in settling native title claims if lodged over any tenements acquired by UMC. The level of impact of these matters will depend, in part, on the location and status of the tenements acquired by UMC. At this stage, it is not possible to quantify the impact (if any) which these matters may have on the operations of UMC.

j) Aboriginal Sites of Significance

Commonwealth and State legislation in Australia allow for the protection of sites of significance to Aboriginal custom and tradition. UMC proposes to carry out “clearance surveys” prior to conducting any exploration work that would cause a disturbance to the land surface. UMC’s tenements may contain some such sites of significance which would need to be avoided when carrying out field programs. It is possible that such areas where sites of significance exist may contain mineralisation or an economic resource which would therefore remain unexploited.

k) General Economic Factors and Investment Risks

General economic conditions may affect inflation and interest rates, which in turn may impact upon UMC’s operating costs and financing. Other factors that may adversely affect UMC’s activities in Australia, or overseas, include changes in government policies, natural disasters, industrial disputes, and social unrest or war on a local or global scale.

2.6 Implications for UMC if Scheme does not proceed

If the Scheme does not proceed:

• UMC Shareholders will not receive the Scheme Consideration;

• the UMC Share price is likely to fall below the Scheme Consideration, subject to adjustment for market factors including the volatility of global commodity, foreign exchange and financial markets;

• while it is possible that over time the UMC Share price might improve to reach or exceed the Scheme Consideration, this is uncertain and the UMC Board is unable to provide assurance of such an occurrence;

• UMC will be subject to risks associated with the pursuit of development of the Railway Deposit including geological/hydrogeological risk, financing risk, port access risk, capital and operating expenditure risk; and

• should UMC continue to develop the Railway Deposit, there is no guarantee that UMC would be able to overcome any or all of the associated risks – in particular those in relation to transport and port.

If the Scheme is not approved or all outstanding conditions are not satisfied or waived, the Scheme will not proceed. In that case, UMC Shareholders will not receive the Scheme Consideration, UMC will continue to operate as it currently does and UMC Shares will remain listed on ASX.

If this is the case, the advantages of the Scheme as described in Section 2.3 of this Scheme Booklet will not be realised. A break fee may also be payable in the circumstances set out in Section 5.6 of this Scheme Booklet.

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S E C T I O N 3 B R I E F P R O F I L E O F U M C

100% interest in the significant and strategically well located Pilbara Iron Ore Project, comprising 263km[2] of granted tenements in the heart of the Pilbara iron ore province in Western Australia (see Figure 4).

3.1 Background and Overview

Company Overview

UMC is an Australian publicly listed (ASX 300 member) pre-development iron ore company. UMC was incorporated in November 2003 and listed on the ASX in December 2004. UMC’s current focus is exploring and developing high value bulk commodities in Western Australia, being principally iron ore in the central Pilbara region.

The tenements (E47/1429, EL47/1431 and EL47/1432) were once a part of the original Temporary Reserve TR70/3156 which dates back to the Iron Ore (Mt Goldsworthy) Agreement Act 1964. The main portion of this original Temporary Reserve is now the Area C mining lease (ML70/281SA) currently owned and being mined by the Mt Goldsworthy Joint Venture (BHP Billiton Group 85%, Itochu Minerals and Energy of Australia Pty Ltd 8%, Mitsui Iron Ore Corporation 7%). It was a condition of the Iron Ore (Mt Goldsworthy) Agreement Act 1964 that 263km[2] be relinquished when the Area C mining lease was granted. The relinquished area is held by UMC after being acquired from DFD Rhodes Pty Ltd.

UMC is the 100% owner and discoverer of the Railway Deposit in the Central Pilbara of Western Australia. This shallow open-pit high grade (greater than 60% Fe) deposit has a large central core of Direct Shipping Ore.

Highlights

• 158Mt of high quality JORC resource with very low impurity levels. The resource includes 101Mt of Indicated Resource at 60.3% Fe;

The Railway Deposit prospect was first identified in October 2007 following the initial drill program on tenement E47/1429. Widespread iron ore mineralisation had been intersected in this drilling. Further exploration drilling beneath the alluvial cover to test for concealed iron ore deposits proved to be a great success, resulting in the discovery of the very significant high grade Railway Deposit.

• simple open cut orebody with low capital and operating cost requirements;

• definitive engineering study, environmental and heritage surveys underway, scoping study complete; and

• a debt free balance sheet.

b) Location and surrounds

3.2 Operations

The Railway Deposit is located in close proximity to three railway lines and six operating mines (see Figure 5). Rio Tinto Limited has two heavy haulage iron ore railway lines within three kilometres of the prospect. The West Angelas – Hope Downs spur line traverses through the UMC

Pilbara Iron Ore Project 100%

a) History

On 4 October 2006, UMC announced it had acquired a

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Figure 4

Source: UMC

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Figure 5

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Source: UMC

tenement adjacent to the west of the Railway Deposit. The Yandicoogina spur line passes three kilometres to the north of the Railway Deposit. These two railway lines meet at the western boundary of the UMC tenement. UMC is aware of proposals by Rio Tinto Limited to twin the railway line from this junction point to the west. This will enable the Rio Tinto Limited rail system to handle additional ore.

BHP Billiton Group has a heavy haulage iron ore railway line spur servicing the Area C mine. This facility is located twenty five kilometres to the east of the Railway Deposit. UMC is also aware of a proposal by BHP Billiton Group for additional rail spurs traversing through UMC tenements at the Jumbo Junction and Railway East prospects. This will enable BHP Billiton Group to increase its capacity from the Central Pilbara mining hub.

The sealed Great Northern Highway, located fifteen kilometres east of the Railway Deposit, provides road access for ore transport to Port Hedland. Being close to Newman, the area has ready access to all the services and

materials needed to sustain both exploration and possible eventual mining operations. The project area also has abundant fresh ground water supplies.

c) Reserves and Resources

The Railway Deposit’s initial Inferred Resource estimate announced in July 2008 of 111Mt was based on 111 RC and diamond drill holes. This was updated to 122Mt in February 2009, after completing 234 RC and diamond drill holes. To the end of July 2009, the Inferred Resource had grown a further 29% to 158Mt at 58.03% Fe after an additional 391 RC and diamond holes had been drilled. The 280 additional drill holes since July 2008 represent a large increase in the geological and assay data base, enabling detailed modelling to be completed.

The Railway Deposit material has low impurities and there are few explorers or emerging producers which have the quantum or quality of ore to match the Railway Deposit, a deposit which has grown from discovery to potential for mining within two years.

Category	Tonnes	CaFe% Fe %	Al2O3%	SiO2%	P%	LOI%	Material
Indicated	100.7Mt	65.09 60.34	2.62	3.71	0.067	7.31	Bedded
Inferred	57.4Mt	59.49 53.98	4.82	7.45	0.057	9.27	Bedded + Detrital
Total	158.1Mt	63.09 58.03	3.42	5.07	0.063	8.02	Bedded + Detrital
Source: UMC	Notes:	CaFe = Fe/(100-LOI)x100
		Indicated Bedded Ore cutoff – 54% Fe
		Inferred bedded and detrital ore reported within mineralised envelope
		Tonnage fgures are for Fe% grades
		Includes Railway Deposit and adjacent Jocelyn mineralised envelope

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Figure 6
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Source: UMC
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Since drilling began in 2007, UMC has completed 923 RC and diamond drill holes totalling 65,967 metres. This drilling has established a resource base of 158Mt of high grade iron ore. This is a discovery rate of c.170,000 tonnes per drill hole.

d) Mineralisation

Iron ore mineralisation at the Railway Deposit occurs as a shallow east dipping body of high grade bedded ore with dimensions of approximately 1,500m long, 500m wide and a true thickness of up to 182m thick. The bedded ore is overlain in places by detrital ores of both high and lower grade character. These are believed to have been derived by erosion of the underlying bedded ore.

The mineralisation outcrops at the adjacent Jocelyn deposit, but is mostly buried beneath 20 to 40 metres of overburden. The Railway Deposit can be accessed by simple open pit mining methods, with data indicating a strip ratio of approximately 1.72:1 for a 5Mtpa development.

During 2009, drilling has outlined significant extensions to the Railway Deposit mineralisation, especially in the boundary zone where thick high grade bedded Fe mineralisation was discovered. Many holes have given outstanding intersections.

e) Development

Whilst UMC’s exploration programme in the Pilbara has been extremely successful with the discovery of the Railway Deposit, efforts to achieve a cost effective way of commercialising this discovery has not yielded a solution which generates an acceptable valuation outcome for UMC Shareholders.

Options to improve development economics explored by UMC have included a rail haulage or access agreement with infrastructure owners in the region, a “mine gate sale” and road haulage to port.

Whilst the agreements have not proven forthcoming, UMC has continued undertaking and has completed a number of necessary surveys, studies, permitting processes and environmental studies to further develop the Railway Deposit and its value to UMC Shareholders.

f) Exploration

UMC has 1,245km[2] of tenements and applications (5 granted exploration licenses, 12 exploration license applications and 4 mining lease applications) in the Central Pilbara region. Over fourteen separate exploration targets were identified for exploration testing on UMC’s tenements. An active program of RC drilling has been carried out during 2008 and 2009 to test exploration target areas defined by a combination of aeromagnetics, ground gravity surveys and surface mapping and sampling.

Drilling programs have been completed at Yandi Headwaters, Railway East, Fork North, Jumbo Junction, Coodawanna Flats and Mt Robinson (see Figure 6). Apart from some bedded ore at Railway East, none of the areas drilled have delivered high grade iron results that warrant detailed follow up to determine Inferred Resources at this stage. It would appear that the Railway Deposit is a unique high grade deposit within UMC’s tenements and is the stand out discovery based on the exploration work conducted by UMC.

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3.3 Corporate Structure

UMC conducts its iron ore operations through wholly-owned subsidiary United Iron Pty Ltd. The structure of the UMC group is set out diagrammatically below (see Figure 7).

3.4 Board of Directors

The UMC Board comprises the following persons:

a) Mr Alan Gordon Birchmore (Non-Executive Chairman)

Mr Birchmore was a Non-Executive Director of UMC from 2004 to 2007, rejoined UMC on 27 February 2008 and was appointed as Chairman on 15 September 2009.

Mr Birchmore has occupied senior management and board appointments of public listed companies in Australia, the UK, Europe and the US and has an extensive background in international resource management. He has experience as Managing Director of a range of Bond Corporation industrial and mining subsidiaries, Chief Executive of New York listed Bond International Gold, Director of the Argyle Joint Venture, Chairman of St Barbara Mines Limited and Chairman of Mermaid Marine Australia Ltd. He is also a former Chairman of the Albany Port Authority.

Mr Birchmore is presently the Chairman of Fremantle Ports.

b) Mr Matthew Hogan (CEO)

Mr Hogan has been an Executive Director of UMC since 2004 and Chief Executive Officer since 2007.

Mr Hogan’s prior experience was in stockbroking for 17 years, and he was closely involved in bring a number of company listings to the ASX. Previously Mr Hogan worked in the business services division of international accounting firm, Ernst & Young.

c) Mr Barry Fehlberg (Executive Director)

Mr Fehlberg was a founding Director of UMC in 2003.

Mr Fehlberg is a Geologist with over 40 years experience in the Australian and international minerals exploration industry. He has served as director of public listed exploration and mining companies since 1979. His work has resulted in the discovery and identification of a number of mineral and diamond deposits, with the Bellevue, Mt Gibson and Bullabulling gold deposits all having advanced to commercial production.

Mr Fehlberg has held no other Directorships in ASX listed companies in the past three years.

d) Mr Malcolm Randall (Non-Executive Director)

Mr Randall has extensive experience in corporate, management and marketing in the resource sector, including more than 25 years with the Rio Tinto Limited group of companies. This has included senior technical and commercial executive roles in Hamersley Iron Pty Ltd and also a Commercial Advisor to the Hope Downs Iron Ore Project. His experience has covered a diverse range of mineral activities including iron ore, base metals, diamonds, uranium, mineral sands and coal.

Mr Randall is presently the Chairman of Iron Ore Holdings Ltd and a Non-Executive Director of Thundelarra Exploration Limited, Summit Resources Limited, Matilda Zircon Ltd and Royal Resources Limited.

Mr Randall’s former Directorships in last three years include Northern Mining Limited and Olympia Resources Ltd.

Mr Hogan is presently a Non-Executive Director of Venus Resources Ltd.

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Figure 7
United Minerals Corporation NL
ABN 65 107 061 343
100% 100% 100% 100%
Australian Diamond
United Iron Pty Ltd Ozwest Holdings Pty Ltd Bauxite Australia Pty Ltd
Resources Pty Ltd
ABN 78 121 989 857 ABN 21 097 093 340 ABN 86 117 326 637
ABN 18 107 920 196
----- End of picture text -----

Source: UMC

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S E C T I O N 3 B R I E F P R O F I L E O F U M C

e) Mr David Craig (Non-Executive Director)

Mr Craig is an experienced businessman and lawyer, who has held and holds Executive and Board positions in the fields of law, financial services and the resources industry. He has experience as a partner of a major Perth law firm where he specialised in resources and commercial legal advice, followed by ten years experience in the financial services industry as a stockbroker and an executive director in a national stockbroking and investment banking company. Mr Craig then spent five years working with Woodside Petroleum Ltd in an executive position in the field of public and government affairs.

Mr Craig is presently the Chairman of Moly Mines Limited and a Non-Executive Director of ADG Global Supply Ltd and Entek Energy Ltd.

3.5 Historical Financial Information

The following selected financial data for UMC is extracted from the audited consolidated financial statements of UMC and its controlled entities for the year ended 30 June 2009.

The financial information presented in the tables below does not represent full financial statements and should therefore be read in conjunction with the relevant financial statements for the financial year ended 30 June 2009, including the description of accounting policies contained in those financial statements, notes to those financial statements and the independent audit report. The full financial statements are contained in UMC’s Annual Report 2009 which is available on UMC’s website, www.unitedminerals.com.au.

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I N C O M E S T A T E M E N T

F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 0 9

Revenue Other Income Employee benefts expense Equity based employee compensation payments Depreciation and amortisation expense Other expenses Accounting fees Audit fees Directors’ fees Write down/write off loans to subsidiaries Exploration expenditure Insurance expense Intangible asset written off Legal fees Rent expenses Recoupment of exploration expenditure Bad debts written off Loss before income tax Income tax rebate Loss from continuing operations Loss for the year Loss attributable to members of the Company Earnings per share for proft attributable to ordinary equity holders of the Company Basic loss per share Diluted loss per share	Consolidated Audited Company Audited 2009 2008 2009 2008 A$ A$ A$ A$ 878,847 566,734 878,847 566,734 2,162,926 - 2,162,926 - (1,964,234) (633,984) (764,770) (529,661) (614,401) (929,799) (614,401) (929,799) (208,405) (93,545) (50,299) (58,255) (574,341) (995,696) (574,341) (907,158) (73,598) (80,805) (73,598) (34,455) (41,678) (39,874) (41,678) (39,874) (284,203) (336,590) (284,203) (336,590) - - (10,602,666) (4,731,253) (9,010,604) (5,698,213) (3,535) (5,818) (80,935) (43,113) (80,935) (43,113) (500,000) (5,454) (500,000) - (88,524) (118,082) (88,524) (116,570) (234,948) (19,988) (234,948) (73,648) 455,411 1,572,718 455,411 410,376 - (7,007) - (7,007)
	(10,178,687) (6,862,698) (10,416,714) (6,836,091) 406,089 - 406,089 -
	(9,772,598) (6,862,698) (10,010,625) (6,836,091) (9,772,598) (6,862,698) (10,010,625) (6,836,091)
	(9,772,598) (6,862,698) (10,010,625) (6,836,091)
	Cents Cents (6.37) (6.16) (6.37) (6.16)

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S E C T I O N 3 B R I E F P R O F I L E O F U M C

B A L A N C E S H E E T

A S AT 3 0 J U N E 2 0 0 9

ASSETS CURRENT ASSETS Cash and cash equivalents Trade and other receivables Other current assets TOTAL CURRENT ASSETS NON-CURRENT ASSETS Trade and other receivables Financial assets Property, plant and equipment Other non-current assets TOTAL NON-CURRENT ASSETS TOTAL ASSETS CURRENT LIABILITIES Bank overdraft Trade and other payables Short-term provisions TOTAL CURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS EQUITY Contributed equity Shares to be issued Reserves Retained earnings TOTAL EQUITY	Consolidated Audited Company Audited 2009 2008 2009 2008 A$ A$ A$ A$ 9,873,896 17,094,169 9,873,896 17,094,167 681,248 424,462 681,248 424,462 106,055 108,986 106,055 87,396
	10,661,199 17,627,617 10,661,199 17,606,025
	191,529 178,529 56,529 56,529 2,188,853 - 2,188,855 2 719,026 501,721 206,755 211,859 1,230,168 1,649,943 100,000 600,000
	4,329,576 2,330,193 2,552,139 868,390
	14,990,775 19,957,810 13,213,338 18,474,415
	49,361 - 49,361 - 1,654,233 1,231,205 1,598,218 1,231,205 152,648 61,015 152,648 61,015
	1,856,242 1,292,220 1,800,227 1,292,220
	1,856,242 1,292,220 1,800,227 1,292,220
	13,134,533 18,665,590 11,413,111 17,182,195
	36,055,876 32,501,789 36,055,876 32,501,789 - 15,800 - 15,800 2,511,335 1,808,081 2,511,335 1,808,081 (25,432,678) (15,660,080) (27,154,100) (17,143,475)
	13,134,533 18,665,590 11,413,111 17,182,195

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C A S H F L O W S T A T E M E N T

F O R T H E Y E A R E N D E D 3 0 J U N E 2 0 0 9

CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers Interest received Receipt of research and development rebate Payments to suppliers and employees Mineral exploration expenditure Interest paid Net cash fows used in operating activities CASH FLOWS FROM INVESTING ACTIVITIES Property, plant and equipment Deposit on plant and equipment Refund (purchase) of bonds Investment in joint venture Loans to controlled entities Net cash fows used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issue of share and options Net cash fows from fnancing activities Net increase in cash and cash equivalents Cash and cash equivalents at beginning of fnancial year Cash and cash equivalents at end of fnancial year	Consolidated Audited Company Audited 2009 2008 2009 2008 A$ A$ A$ A$ 53,210 1,531,412 53,210 369,069 941,658 479,859 941,658 479,858 406,089 - 406,089 - (1,556,924) (1,216,904) (1,557,089) (1,216,902) (10,154,052) (5,390,943) (3,535) - (557) (265) (557) (265)
	(10,310,576) (4,596,841) (160,224) (368,240)
	(404,119) (413,619) (45,195) (93,827) - (21,591) - - (13,000) (62,000) - 50,000 (80,225) (49,943) - - - - (10,602,500) (4,731,927)
	(497,344) (547,153) (10,647,695) (4,775,754)
	3,538,287 14,686,084 3,538,287 14,686,084
	3,538,287 14,686,084 3,538,287 14,686,084
	(7,269,634) 9,542,090 (7,269,632) 9,542,090 17,094,169 7,552,079 17,094,167 7,552,077
	9,824,535 17,094,169 9,824,535 17,094,167

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S E C T I O N 3 B R I E F P R O F I L E O F U M C

Material changes in UMC’s balance sheet since 30 June 2009

The material changes (unaudited) to the balance sheet of UMC since 30 June 2009 (being the date of the last annual financial statements) are as follows:

a) Cashflow and cash balance

UMC had net cash outflows of A$2.83 million during the quarter ended 30 September 2009. This was a result of outflows due to exploration activities and administration expenses.

UMC’s cash balance as at 30 September 2009 was A$7.00 million.

b) Issued capital

i. CRM Announcement

On 8 September 2009, UMC announced a conditional placement to CRM for an issue of 20 million fully paid ordinary shares of UMC at an issue price of A$1.35 each, together with 2 million attaching options at an issue price of A$0.10 per option with an exercise price of A$1.35 each expiring on 30 September 2011, to raise A$27.2m before issue costs.

The completion of the placement to CRM is subject to satisfaction of the following conditions precedent:

• satisfactory outcome of due diligence by CRM on UMC;

• CRM receives approval from Australian Government under the Foreign Acquisitions and Takeovers Act 1975;

• CRM obtains various Chinese regulatory approvals; and

• signing of 3.0 million tonnes per annum iron ore sales contract for 10 years with CRM.

The conditions must be satisfied (or waived) by 7 December 2009 or such later date as the parties may agree. As at the date of this Scheme Booklet, the above conditions precedent have not been satisfied.

ii. Option Issue Announcement

Also on 8 September 2009, UMC announced a nonrenounceable rights issue of one option for every ten fully paid ordinary shares held by UMC Shareholders at the record date of 25 September 2009 at an issue price of A$0.10 per option, with an exercise price of A$1.35 each expiring on 30 September 2011, to raise A$1.5m before issue costs.

The potential effects on issued capital from the above events are not applicable as the Scheme is conditional upon:

• UMC not proceeding with the proposed issue of UMC Options; and

• the agreement between UMC and CRM announced to the ASX on 8 September 2009 not proceeding.

3.6 Issued Securities

The table below sets out the current capital structure of UMC:

MC:
Security	Number
Shares	155,112,330
Unlisted Options exercisable at A$0.75 each on or before 31/07/2010	2,150,000
Unlisted Options exercisable at A$1.25 each on or before 31/07/2010	500,000
Unlisted Options exercisable at A$1.45 each on or before 31/07/2010	350,000
Unlisted Options exercisable at A$1.75 each on or before 31/07/2011	2,350,000
Unlisted Options exercisable at A$1.35 each on or before 31/07/2011	200,000

3.7 Recent Price History of UMC Shares

The chart below shows the closing price of UMC Shares on ASX over the past 12 months:

Figure 8

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----- Start of picture text -----

1.40 8 Sep 2009��
17 Apr 2009� Agrees conditional A$27m
Assay results showing
placement and off-take
1.20 large intersection adjacentto BHP Billiton tenement agreement with CRM
boundary
1.00
0.80
0.60 21 Sep 2009�
�Mineral Resources at
Railway Deposit increased to
0.40 158Mt
�Mineral Resources at [27 Feb 2009] �Conditional cash offer 15 Oct 2009�
0.20 Railway Deposit from BHP Billiton
increased to 122Mt announced to market
0.00
Nov 08 Jan 09 Mar 09 May 09 Jul 09 Sep 09 Nov 09
UMC share price ($)
----- End of picture text -----

Source: IRESS Market Technology Note: Please note that IRESS Market Technology has not consented to data and information attributed to it in this Scheme Booklet

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Further to the information provided in the graph above, UMC Shareholders should note the following:

• the latest recorded sale price of UMC Shares before the date on which this Scheme Booklet was lodged with ASIC for registration was A$1.27;

• the highest recorded sale price of UMC Shares during the 3 months immediately before the date on which this Scheme Booklet was lodged with ASIC for registration was A$1.28 on 16 October 2009;

• the lowest recorded sale price of UMC Shares during the 3 months immediately before the date on which this Scheme Booklet was lodged with ASIC for registration was A$0.84 on 21 August 2009; and

• the latest recorded sale price of UMC Shares on the last Trading Day prior to the Announcement was A$0.91 on 6 October 2009

3.8 Operations of UMC if Scheme does not proceed

In the event that the Scheme does not proceed, UMC is unlikely to pursue development options for the Railway Deposit based on current project economics.

Within the area of the Railway Deposit is significant existing railway and mine infrastructure. Whilst the location close to rail and mining infrastructure provides UMC with an opportunity to discuss access agreements with Rio Tinto Limited, BHP Billiton Group or Fortescue Metals Group Limited regarding rail infrastructure, these negotiations have not resulted in an acceptable outcome for UMC Shareholders to date, however, should the Scheme not proceed, negotiations will continue.

In addition the Port Hedland Port Authority has, up to the date of this Scheme Book, responded to UMC initiatives for access by indicating there is no capability to receive UMC product in the short term and limited prospects for UMC product as new facilities are built over coming years.

If UMC were to continue to develop the Railway Deposit, there is no guarantee that UMC management would be able to overcome any or all of the associated risks – in particular, those in relation to transport and port. For further consideration of the risks of UMC’s business activities please refer to Section 2.5.

UMC has progressed economic production studies to investigate mining, transport and shipping options for the Railway Deposit. Studies have modelled an initial 3 million tonne-per-year open cut operation, based on a trucking operation to Port Hedland. Faced with current project economics, it would be likely that UMC would look to other corporate solutions rather than pursue independent development.

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S E C T I O N 4 I N F O R M A T I O N O N B H P B I L L I T O N

4.1 BHP Billiton

BHP Billiton is a member of the BHP Billiton Group and a wholly-owned subsidiary of BHP Billiton Limited. BHP Billiton heads BHP Billiton Group’s Western Australia iron ore business. The directors of BHP Billiton are:

Mr Stewart Hart

Mr Hart is Chief Financial Officer for the BHP Billiton Group’s iron ore business and is responsible for finance, investment evaluation, supply and information management.

Mr Hart joined BHP Limited in 1987 and has held various site and finance roles in BHP Coal Queensland. In 1993 Mr Hart was appointed Finance and Administration Manager of BHP Limited’s iron ore Newman operations where he was responsible for a wide range of services, including Engineering and Dewatering. In 1996 Mr Hart moved to Antofagasta as Finance and Administration Manager of Minera Escondida Ltda. In 2000 he joined Tarong Energy Corporation in Brisbane as Commercial Manager before he returned to the BHP Billiton Group in 2002 as LME Finance Manager Marketing in The Hague. Prior to his current appointment Mr Hart was Vice President Commercial of Western Australia Iron Ore and Hot Briquetted Iron.

Mr Hart has a Bachelor of Administration (Financial Accounting) from Griffith University, Brisbane. He is an associate member of the Australian Society of CPAs.

Mr Ian Ashby

Mr Ashby is President Iron Ore for the BHP Billiton Group and has global responsibility for the BHP Billiton Group’s iron ore business.

Mr Ashby started his career with BHP Limited in 1987 working for its gold division in Kalgoorlie before moving to its iron ore Newman operations in 1991. From 1994 until 1999 Mr Ashby worked in Chile developing and operating BHP Limited’s Escondida Oxide Project. From 2000 until the merger between BHP Limited and Billiton Plc he held responsibility for BHP Minerals’ development projects based in Melbourne. Post merger between 2001 and 2004 Mr Ashby spent time in both Chile and Houston working for the BHP Billiton Group’s base metals group where he held the positions of Project Director – Phase 4 Expansion Project, Vice President Joint Ventures and Chief Operating Officer. Mr Ashby was appointed to the position of President and Chief Operating Officer – Western Australia Iron Ore in December 2004 and to his current position in December 2006.

Mr Ashby is a Vice President of the Chamber of Minerals & Energy of Western Australia, a Board member of the Australian Mines and Metal Association and a Member of the Australian Institute of Mining and Metallurgy.

4.2 Overview of the BHP Billiton Group

The BHP Billiton Group was created through the Dual

Listed Companies (DLC) merger on 29 June 2001 of BHP Limited (now BHP Billiton Limited) and Billiton Plc (now BHP Billiton Plc). BHP Billiton Limited and BHP Billiton Plc continue to exist as separate companies but operate on a combined basis and are run by a unified management team. Shareholders in each company have equivalent economic and voting rights in the BHP Billiton Group as a whole.

The global headquarters of the BHP Billiton Group are located in Melbourne, Australia. The DLC structure maintains pre-existing primary listings on ASX (through BHP Billiton Limited) and the London Stock Exchange (through BHP Billiton Plc) along with a secondary listing on the Johannesburg Stock Exchange (through BHP Billiton Plc) and American Depository Receipts listings on the New York Stock Exchange.

The BHP Billiton Group is the world’s largest diversified natural resources company. Its corporate objective is to create long-term value for shareholders through the discovery, development and conversion of natural resources, and the provision of innovative customer and market focused solutions. It pursues this objective through its strategy of investing in ‘tier one’ assets that are large, low cost and long-life to provide a balanced portfolio of export oriented commodities:

• steelmaking products: iron ore, metallurgical coal, manganese;

• non-ferrous products: copper, aluminium, nickel, diamonds; and

• energy products: petroleum, liquefied natural gas, energy coal, uranium.

As at 30 June 2009, BHP Billiton Group had a market capitalisation of approximately US$144 billion. For the year ended 30 June 2009, BHP Billiton Group reported net operating cash flow of US$18.9 billion, net profit attributable to shareholders of US$5.9 billion and revenue of US$50.2 billion. BHP Billiton Group has approximately 99,000 employees and contractors working in more than 100 operations in approximately 25 countries.

Further information about the BHP Billiton Group can be found at www.bhpbilliton.com. In addition, information on the BHP Billiton Group can be found on ASX’s website at www.asx.com.au.

4.3 Funding Arrangements

The total amount that BHP Billiton would be required to pay for UMC Shares if BHP Billiton acquires all of the UMC Shares as at the date of this Scheme Booklet and assuming that none of the UMC Options are exercised, is A$201,646,029.

If all UMC Options that are “in the money” were exercised and UMC Shares were issued on exercise of those UMC Options prior to the Record Date, an additional amount of A$3,445,000 will need to be paid to Scheme

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Participants. If these additional UMC Shares were issued, the total amount of consideration that BHP Billiton would be required to pay to the Scheme Participants is A$205,091,029.

BHP Billiton will fund the Scheme Consideration payable to Scheme Participants by drawing down on a loan facility it has with BHP Billiton Finance. The amount available for draw down under this loan as at 12 November 2009 is in excess of A$206 million. The facility does not have any material pre-conditions to making the funds available and the facility will be available for draw down on the Implementation Date.

BHP Billiton Finance is a member of the BHP Billiton Group. Its principal business is borrowing on behalf of the BHP Billiton Group and advancing net proceeds of such borrowings to members of the BHP Billiton Group. As at 30 October 2009, BHP Billiton Finance had in excess of A$206 million available for the purpose of advancing funds to BHP Billiton under the facility and will have these funds available on the Implementation Date.

BHP Billiton is of the opinion that it has a reasonable basis for forming the view, and holds the view, that it will have sufficient funds to meet its payment obligations under the Scheme.

• 4.4 BHP Billiton’s intentions for the business, assets and employees of UMC

a) Introduction

BHP Billiton’s intentions have been formed on the basis of facts and information concerning UMC which are known to BHP Billiton as at the date of this Scheme Booklet. Final decisions on these matters will only be made by BHP Billiton in light of all material facts and circumstances at the relevant time. Accordingly, the statements set out in this Section 4.4 are statements of current intention only, which may change as new information becomes available or as circumstances change, and the statements in this Section 4.4 should be read in this context.

b) UMC to be delisted

If the Scheme is implemented, UMC will request ASX to remove UMC from its official list.

c) UMC’s operations

BHP Billiton does not intend to pursue any of UMC’s current projects other than the development of the Railway Deposit and exploration across the retained iron ore tenements. A key condition of the Scheme is that UMC restructures its operations in such a way that, on the Effective Date, UMC will have no other material assets apart from the Railway Deposit together with the relevant iron ore exploration tenements and shares and options in Phosphate Australia Limited which are subject to an escrow agreement. Once the shares and options in Phosphate Australia Limited are no longer subject to escrow, BHP Billiton intends to dispose of them.

If the Scheme is implemented, BHP Billiton intends to offer an economic interest in the iron ore assets acquired through the Scheme to its Goldsworthy Joint Venture partners Itochu Minerals and Energy of Australia Pty Ltd and Mitsui Iron Ore Corporation at a price reflecting BHP Billiton’s acquisition cost.

If the proposed iron ore production joint venture with Rio Tinto Limited proceeds, Rio Tinto Limited will be offered an economic interest in the iron ore assets under the terms of the proposed iron ore production joint venture arrangements.

As soon as practicable after the implementation of the Scheme, BHP Billiton will undertake a drilling program over the existing Railway Deposit to further prove up and define the mineralisation. The results from that program, and subsequent analysis, will determine the timing for mining the Railway Deposit.

Exploration drilling will be undertaken by BHP Billiton in other areas of the iron ore tenements acquired through the Scheme with a view to identifying new areas of mineralisation that can be commercially developed.

d) Board and management

In accordance with the Scheme, BHP Billiton’s nominees, Ian Ashby and Stewart Hart, will be appointed as UMC Directors on the Effective Date. The existing Directors of UMC will resign on the Implementation Date after the Scheme Consideration has been paid to the Scheme Participants and John Slaven (Chief Development Officer Iron Ore) will be appointed as BHP Billiton’s third nominee director at that time. BHP Billiton also intends to convert UMC to a proprietary company in due course after which John Slaven may resign as a director of UMC as there would no longer be a statutory requirement for a minimum of three directors.

Following the implementation of the Scheme, it is intended that UMC will be managed by BHP Billiton’s management team.

e) Corporate and head office functions

As one of the conditions to the Scheme is that UMC surrenders or assigns its head office lease, BHP Billiton intends that UMC’s corporate head office functions will be consolidated with those of BHP Billiton’s.

f) Employees

As one of the conditions of the Scheme is that UMC terminates the employment of its employees, UMC is not expected to have any employees after the Effective Date.

g) Other intentions

Other than as described above, if the Scheme is implemented, BHP Billiton intends to:

• i. continue the business of UMC; and

• ii. not make any major changes to the businesses of UMC or redeploy any of the fixed assets of UMC.

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S E C T I O N 5 I M P L E M E N T A T I O N O F T H E S C H E M E

5.1 Merger Implementation Agreement

On 16 October 2009 UMC announced that UMC and BHP Billiton signed a Merger Implementation Agreement governing how the Scheme would proceed. The key terms of the Merger Implementation Agreement are set out in Section 5.6 of this Scheme Booklet.

5.2 Scheme of Arrangement

The detailed terms of the Scheme are set out in the Scheme of Arrangement in Annexure 1 to this Scheme Booklet.

UMC Shareholders should read the terms of the Scheme, and in particular, the warranties which UMC Shareholders are required to give under the Scheme if it is approved.

5.3 Conditions Precedent to the Scheme

• Implementation of the Scheme is conditional upon various matters including the following:

• a) approval of the Scheme by the Requisite Majorities at the Scheme Meeting;

• b) the making of orders by the Court approving the Scheme under section 411(4)(b) of the Corporations Act; and

• c) the Scheme becoming effective by no later than the End Date.

Further conditions are listed in the summary of the Merger Implementation Agreement in Section 5.6 of this Scheme Booklet.

As at the date of this Scheme Booklet, the UMC Board is not aware of any circumstances which would cause a condition of the Scheme not to be satisfied. The UMC Board will advise Scheme Participants of the status of the conditions at the Scheme Meeting. UMC will also announce to ASX any relevant matter which affects the likelihood of a condition being satisfied or not being satisfied.

5.4 Approvals required to the Scheme

Scheme Meeting for UMC Shareholders

For the Scheme to take effect under section 411(4) of the Corporations Act, a meeting of UMC Shareholders must be held, at which the Scheme must be agreed to by a resolution passed by a majority in number of UMC Shareholders present and voting (either in person or by proxy) and representing in aggregate not less than 75% of the votes cast on the resolution at the Scheme Meeting.

The Scheme Meeting is being convened by UMC in accordance with an order of the Court pursuant to section 411(1) of the Corporations Act. The Scheme Meeting will be held on 28 January 2010 at Ball Room B, Duxton Hotel, 1 St Georges Terrace, Perth, Western Australia at 10.00am AWST.

Court approval

Once approval is obtained at the Scheme Meeting,

approval of the Court must also be obtained for the Scheme. If the Court approves the Scheme, the Scheme will become binding on UMC and each Scheme Participant upon the Court making orders under section 411(4)(b) and section 413 of the Corporations Act and those orders being lodged with ASIC and becoming effective under section 411(10). Court approval will be sought as soon as possible after the Scheme Meeting has been held.

5.5 Deed Poll

In support of its obligations under the Merger Implementation Agreement, BHP Billiton has executed the Deed Poll in favour of Scheme Participants under which it has agreed to perform its obligations under the Merger Implementation Agreement and the matters contemplated by the Scheme. A copy of the Deed Poll is included in Annexure 2 to this Scheme Booklet.

5.6 Key terms of the Merger Implementation Agreement

• A summary of the key terms of the Merger Implementation Agreement are set out below.

a) Conditions precedent

Implementation of the Scheme is subject to the satisfaction or waiver of the following conditions precedent:

• receipt of necessary government agency approvals and no court or regulatory authority taking steps to restrain or prevent the Scheme;

• UMC Shareholders and the Court approve the Scheme;

• all outstanding options to acquire UMC Shares are exercised or acquired by BHP Billiton;

• the Independent Expert concludes that the Scheme is in the best interests of UMC Shareholders;

• no Prescribed Event or Material Adverse Change occurs;

• no third party to any material agreement or instrument to which UMC or its subsidiaries are parties, exercises any of its rights under any change of control provisions in those agreements or instruments;

• net working capital of the UMC Group remains greater than nil;

• UMC enters into arrangements to give effect to the operational restructure (referred to below);

• the Merger Implementation Agreement not being terminated;

• no information arising up until 7 December 2009 which results, or would be reasonably likely to result, in a Material Adverse Change; and

• UMC complies with any obligations it has under the CRM Arrangement and has no further obligation to CRM or any other party under the CRM Arrangement (other than an obligation of confidentiality under the CRM Arrangement).

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b) Operational restructure

UMC has agreed to conduct a restructure of its operations and dispose of certain of its assets so that on the Effective Date UMC only holds the assets relating to the Railway Deposit.

A description of the assets to be disposed and an illustration of these assets both prior to and post the restructure are set out in the notes to table 11 of the Independent Expert’s Report (refer page 37 and 38 of the Independent Expert’s Report).

UMC’s wholly owned subsidiary, Bauxite is the holder of tenement application for exploration licence E80/3733. Bauxite is in the process of surrendering the application for E80/3733, following surrender, Bauxite will hold no others assets and Bauxite will be disposed of for nominal consideration.

c) Termination Rights

The Merger Implementation Agreement provides the following termination rights in addition to standard contractual termination rights:

• by either BHP Billiton or UMC, if the Scheme has not become effective before 30 April 2010;

• by BHP Billiton, if UMC Directors withdraw or adversely change their recommendation of the Scheme;

• by UMC, if a Superior Proposal arises and is recommended to be in the interests of the UMC Shareholders;

• by BHP Billiton if another person acquires more than 20% of UMC shares; and

• by either BHP Billiton or UMC if the Independent Expert opines that the Scheme is not in the best interests of UMC shareholders.

d) Exclusivity provisions

UMC has agreed that it:

• will not solicit, invite, facilitate, encourage or initiate any enquiries, negotiations or discussions in relation to a competing transaction for control of UMC;

• will not negotiate or enter into discussions with any person in relation to a competing transaction for control of UMC; and

• will promptly inform BHP Billiton if UMC receives an unsolicited approach in relation to a Competing Transaction or receives a request for, or provides, information relating to the UMC Group, which UMC has reasonable grounds to suspect may relate to a Competing Transaction.

• UMC must also disclose to BHP Billiton all material details of any Competing Transaction.

The “no talk obligation” does not apply to unsolicited bona fide Competing Transactions which the UMC Board determines that the Competing Transaction could reasonably be considered to become a Superior Proposal

and failure to respond to that Competing Transaction would be reasonably likely to constitute a breach of the board’s fiduciary or statutory obligations.

BHP Billiton has a right to match any Superior Proposal.

e) Break Fee

Break fees are payable in the following circumstances:

UMC must pay to BHP Billiton an amount equal to 1% of the aggregate of the Scheme Consideration and the consideration payable to UMC Optionholders (as set out in Section 1.6 of this Scheme Booklet) if the Scheme does not proceed because:

• on or before the End Date a Competing Transaction is announced or is open for acceptance and is reasonably capable of being completed and is more favourable to Scheme Participants than the Scheme;

• any one or more of the UMC Directors fails to recommend the Scheme or withdraws their recommendation except if such person changes their recommendation following the receipt of the report of the Independent Expert where that report states that in the opinion of the Independent Expert the Scheme is not in the best interests of UMC Shareholders (other than where a Competing Transaction has been proposed or announced before the report is issued which the Independent Expert may reasonably regard to be on more favourable terms than the Scheme);

• BHP Billiton validly terminates the Merger Implementation Agreement for a material breach of the Merger Implementation Agreement by UMC;

• UMC breaches the exclusivity provisions of the Merger Implementation Agreement and does not cease the conduct which caused the breach within one Business Day following written notice from BHP Billiton of the breach;

• a Superior Proposal is made and UMC terminates the Merger Implementation Agreement due to the Superior Proposal;

• a Prescribed Event or a Material Adverse Change occurs prior to 8.00am AWST on the Second Court Date and the Merger Implementation Agreement is then terminated; or

• BHP Billiton terminates the Merger Implementation Agreement as a result of the UMC’s failure to satisfy the condition precedent in relation to the CRM Arrangement and there has been a breach by UMC of any of its obligations under the CRM Arrangement.

BHP Billiton must pay to UMC an amount equal to 1% of the aggregate of the Scheme Consideration and the consideration payable to UMC Optionholders (as set out in Section 1.6 of this Scheme Booklet) if UMC terminates the Merger Implementation Agreement for a material breach of the Merger Implementation Agreement by BHP Billiton.

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S E C T I O N 6 T A X A T I O N I M P L I C A T I O N S F O R S C H E M E PA R T I C I PA N T S

This Section provides a broad summary of the Australian income tax and capital gains tax treatments, prevailing at the time of providing the report, for the UMC Shareholders if the Scheme proceeds.

This Section is general in nature and does not take into account the individual circumstances of each UMC Shareholder and as such should not be relied upon by any individual UMC Shareholder. All UMC Shareholders should consult their own taxation advisers regarding the taxation consequences of the proposed acquisition of UMC by way of the Scheme.

UMC Shareholders should refer to information below and obtain their own independent advice.

6.1 Australian resident shareholders

The treatment of Australian resident shareholders depends on whether UMC Shares were held on revenue account or on capital account.

(a) UMC Shares held on revenue account

Scheme Participants may hold UMC Shares on revenue account – as trading stock or otherwise as revenue assets. In relation to such UMC Shares, Scheme Participants may be required to:

• (i) include the Scheme Consideration of the UMC Shares being transferred as assessable income and claim a deduction for the cost or the stock or the change of value of stock on hand at the end of the year of income – if the UMC Shares are held as trading stock; and/or

• (ii) recognise gains and losses (broadly the difference between the Scheme Consideration and the cost of the UMC Shares) from the transfer of UMC Shares as assessable income or allowable deductions – if the UMC Shares are held as revenue assets other than trading stock.

(b) UMC Shares held on capital account

Scheme Participants may hold UMC Shares on capital account – as capital assets. Scheme Participants would be subject to capital gains tax on the transfer of such UMC Shares.

Broadly, a capital gain or a capital loss will arise depending on the difference between the Scheme Consideration and the cost of your UMC Shares including incidental costs.

Some Scheme Participants who make a capital gain may be able to reduce the amount of taxable capital gains (subject to certain conditions being satisfied – among other things you must have acquired your UMC Shares at least twelve months before the transfer). Scheme Participants who may be eligible for discount capital gains are:

used to offset any capital gains they derive in the same or subsequent years of income provided certain conditions are satisfied.

Where the Scheme Participants are those mentioned in (i) above, only half of the capital gain (initially reduced by any net capital losses prior to the application of the discount) is generally included in their assessable income.

Where the Scheme Participants are those mentioned in (ii) above, only two-thirds of the capital gain sum (initially reduced by any net capital losses prior to the application of the discount) would be included in their assessable income.

6.2 Foreign UMC Shareholders

The treatment of foreign resident shareholders depends on whether UMC Shares were held on revenue account or on capital account.

(a) UMC Shares held on revenue account

The transfer of UMC Shares held on revenue account should not be subject to tax in Australia unless certain conditions are satisfied including (but not limited to) the existence of:

• (i) a double taxation agreement between Australia and the country of residence of the relevant UMC Shareholder which deems the sale proceeds to be taxable in Australia; or

• (ii) an Australian ‘permanent establishment’ (PE) (including a fixed place of business such as an office) of the relevant UMC Shareholder to which the proceeds from the transfer of UMC Shares are ‘effectively connected’.

(b) UMC Shares held on capital account

The transfer of UMC Shares held on capital account should not be subject to CGT in Australia unless:

• (i) UMC Shares were used at any time in carrying on a business through an Australian PE of the relevant UMC Shareholder; or

• (ii) the relevant UMC Shareholder (and certain Associates of the relevant UMC Shareholder) owned 10% or more of UMC Shares at the time the UMC Shares were sold, or for at least twelve months during the twenty four months before the UMC Shares were sold; and,

50% or more of the value of the UMC Shares is represented by real property in Australia at that time (as at the date of this Scheme Booklet, 50% or more of the value of UMC Shares is not represented by real property in Australia).

6.3 GST

UMC Shareholders will not be liable for GST on the receipt of payment for UMC Shares.

• (i) individuals or trustees of a trust other than a complying superannuation entity; or

• (ii) the trustee of a complying superannuation entity.

If Scheme Participants make a capital loss, this may be

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S E C T I O N 7 A D D I T I O N A L I N F O R M A T I O N

This Section contains information required under section 412(1) of the Corporations Act and under Part 3 of Schedule 8 of the Corporations Regulations.

• 7.1 Suspension of Trading of UMC Shares and Cessation of ASX listing

If the Court approves the Scheme, it is intended that UMC will lodge the Court order with ASIC and notify ASX of the Court approval on the day the Court approves the Scheme It is expected that a suspension of trading in UMC Shares on ASX will occur from the close of business on the day the Court order is lodged with ASIC.

On a date after the Effective Date to be determined by BHP Billiton, UMC will apply for termination of official quotation of UMC Shares on ASX and apply to have itself removed from the official list of ASX.

• 7.2 Payment of Scheme Consideration

Pursuant to the terms of the Scheme, BHP Billiton must deposit the Scheme Consideration in a trust account operated by UMC.

On the Implementation Date, UMC will send UMC Shareholders a cheque for their relevant Scheme Consideration.

In the case of joint holders of UMC Shares, the Scheme Consideration will be forwarded to the holder whose name appears first on the Register on the Record Date.

7.3 Restrictions in the Constitution of UMC

There are no restrictions on the right to transfer UMC Shares in the Constitution of UMC.

7.4 Effect of Scheme on UMC creditors

The Scheme will not materially prejudice the ability of UMC to pay its creditors. UMC is solvent and trading in a normal commercial manner.

7.5 UMC Directors’ interests in UMC Securities

The following table sets out the relevant securities in UMC held by or on behalf of each UMC Director:

UMC Director	UMC Shares	UMC Options
Alan Gordon Birchmore	2,321,823	250,000
Matthew Hogan	2,500,000	1,250,000
Barry Fehlberg	7,678,769	850,000
David Craig	30,000	500,000
Malcolm Randall	1,200,000	750,000

7.6 UMC Directors’ interests in BHP Billiton securities

The following table sets out the relevant securities in BHP Billiton held by or on behalf of each UMC Director:

UMC Director	BHP Billiton Shares	BHP Billiton Options	Other BHP Billiton securities (ie: BHP Billiton Group)
Alan Gordon Birchmore	Nil	Nil	Nil
Matthew Hogan	Nil	Nil	474
Barry Fehlberg	Nil	Nil	Nil
David Craig	Nil	Nil	1,000
Malcolm Randall	Nil	Nil	1,800

• 7.7 BHP Billiton’s relevant interest in UMC securities and voting power

• As at the date of this Scheme Booklet BHP Billiton had:

• (a) no relevant interest or voting power in any of UMC Shares; and

• (b) a relevant interest in 5,550,000 UMC Options.

BHP Billiton acquired its interest in UMC Options by entering into agreements with each of the UMC Optionholders under which those UMC Optionholders have agreed to transfer their UMC Options to BHP Billiton for a total consideration of A$1,988,060. The UMC Optionholders have also agreed not to exercise their UMC Options, except in circumstances where the UMC Share price exceeds A$1.30 or there is a Competing Transaction.

• 7.8 Acquisition by BHP Billiton of UMC Shares during previous four months

Except for the consideration to be provided under the Scheme, during the period of four months before the date of this Scheme Booklet, neither BHP Billiton nor any associate of BHP Billiton has provided, or agreed to provide, consideration for any UMC Shares.

7.9 Inducing benefits given by BHP Billiton during previous four months

Except as set out in this Scheme Booklet, during the period of four months before the date of this Scheme Booklet, neither BHP Billiton nor any associate of BHP Billiton, gave, or offered to give or agreed to give a benefit to another person that is not available to all UMC Shareholders and was likely to induce the other person, or an associate of the other person, to:

• (a) vote in favour of the Scheme; or

• (b) dispose of UMC Shares.

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S E C T I O N 7 A D D I T I O N A L I N F O R M A T I O N

• 7.10 Payments or other benefits to any UMC Director, secretary or executive officer

Other than the retirement benefits payable by UMC to UMC Directors as detailed in Section 7.11, payments of consideration for the transfer of UMC Options to those UMC Directors who hold UMC Options as detailed in Section 7.5 and as set out below in this Section, no payment or other benefit will be given or made to any Director, secretary or executive officer of UMC or a Related Body Corporate of UMC for loss of, as compensation or consideration for, or otherwise in connection with, their retirement from office in UMC or in a Related Body Corporate, if the Scheme becomes effective.

The UMC constitution provides that if the Directors are called upon to perform extra services or make any special exertions on behalf of UMC or the business of UMC, then the Directors may remunerate that Director in accordance with such services or exertions. The UMC Board has agreed that the following Directors shall be remunerated as set out below for the extra exertions of those Directors in relation to the Scheme:

to the Scheme:
UMC Director	Amount
Alan Gordon Birchmore	A$19,365
David Craig	A$23,500
Malcolm Randall	A$23,500

• 7.11 Retirement benefits payable to any UMC Director, secretary or executive officer

No UMC Director, secretary or executive officer will receive any benefit in connection with the Scheme other than the Scheme Consideration allocated in accordance with the terms and conditions set out in this Scheme Booklet, payments of consideration for the transfer of UMC Options to those UMC Directors, secretary or executive officers who hold UMC Options as detailed in Section 7.5 or as otherwise set out in this Section 7.11.

It is a condition precedent to the implementation of the Scheme that UMC terminates the employment of each UMC employee, and the contracting arrangements of each contractor to UMC. As a result, the following persons will have their employment terminated and will receive the following amounts (as well as any entitlements owing, such as annual leave entitlements) as a result of the termination of their employment by UMC:

Name	Position	Payout fgure for termination of contract
Matthew Hogan	Chief Executive Offcer	A$200,400 (inclusive of superannuation), being 6 month’s notice.
Barry Fehlberg	Executive Director	A$138,200 (inclusive of superannuation), being 6 month’s notice.
Patrick Tan	Chief Financial Offcer and Company Secretary	A$33,900 (inclusive of superannuation), being 1 month’s notice.

• 7.12 Agreements or arrangements between UMC Directors

• Other than as set out in Section 7.11, there are no other agreements made between any UMC Director and any other person in connection with or conditional on the outcome of the Scheme.

• 7.13 Interests of UMC Directors in any contract with BHP Billiton

No UMC Director has an interest in any contract entered into by BHP Billiton or its Related Bodies Corporate other than holding BHP Billiton Group securities as set out in Section 7.7.

7.14 Consents

The following parties have given and have not, before the time of lodgement of this Scheme Booklet with ASIC, withdrawn their written consent to be named as follows in this Scheme Booklet and, where applicable, to the inclusion of the following information in this Scheme Booklet:

• BHP Billiton in the form and context in which it is named and inclusion of information in Sections 4, 7.8, 7.9 and 7.18;

• BHP Billiton Finance in the form and context in which it is named and inclusion of information in Section 4.3;

• UBS AG, Australia Branch as financial advisers to UMC;

• Gresham Advisory Partners as financial advisers to BHP Billiton;

• Blakiston & Crabb as legal advisers to UMC;

• Mallesons Stephen Jaques as legal advisers to BHP Billiton;

• Stantons International Pty Ltd as the auditors of UMC and to the inclusion of references to the audited accounts of UMC as at 30 June 2008 and 30 June 2009;

• Deloitte Corporate Finance as the Independent Expert and to the inclusion of its Independent Expert’s Report;

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• ProMet Engineers Pty Ltd as Independent Technical Expert and to the inclusion of its Independent Technical Expert’s Report as an annexure to the Independent Expert’s Report;

• Security Transfer Registrars Pty Ltd as the Share Registry, who has had no involvement in the preparation of any part of the Scheme Booklet other than being named as Share Registry,

nor have they authorised or caused the issue of this Scheme Booklet or make any representation regarding, and to the extent permitted by law exclude any responsibility for, any statements in or omissions from any other part of this Scheme Booklet other than to being named in the form and context in which they are named.

This Scheme Booklet includes or is accompanied by statements which are made in, or based on, statements made in documents lodged with ASIC or on UMC’s or BHP Billiton Group’s announcement platform of ASX. If you would like to receive a copy of any of these documents please contact UMC by email at info@unitedminerals.com.au or by phone on +61 8 9481 0911 and you will be sent copies free of charge.

Competent Persons statement

The information in this Scheme Booklet that relates to Exploration Results, Mineral Resources or Ore Reserves is based on information compiled by Mr Barry Fehlberg, who is a Member of The Australasian Institute of Mining and Metallurgy and is a full time employee of UMC. Mr Fehlberg has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the JORC Code. Mr Fehlberg consents to the inclusion in the Scheme Booklet of the matters based on his information in the form and context in which it appears.

The information in this Scheme Booklet that relates to Exploration Results, Mineral Resources or Ore Reserves is based on information compiled by Mr Lynn Widenbar, who is a Member of The Australasian Institute of Mining and Metallurgy and is a full time employee of Widenbar and Associates. Mr Widenbar has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the JORC Code. Mr Widenbar consents to the inclusion in the Scheme Booklet of the matters based on his information in the form and context in which it appears.

7.15 Documents available for inspection

Copies of the following documents are available for inspection at the registered office of UMC during normal business hours on any Business Day until the Record Date:

• Constitution of UMC;

• Financial statements of UMC for the financial year ending 30 June 2009; and

• 2009 UMC Annual Report.

7.16 Information Disclosed to ASX

• UMC is a “disclosing entity” under the Corporations Act and is subject to the regime of continuous disclosure and periodic reporting requirements. Specifically, as a listed company, UMC is subject to the ASX Listing Rules which require continuous disclosure to the market of any information possessed by UMC which a reasonable person would expect to have a material effect on the price or value of its shares.

All announcements made by UMC are publicly available and can be viewed at the ASX internet site www.asx.com.au.

7.17 Exemptions, waivers and modifications

ASX has granted to UMC a waiver of ASX Listing Rule 6.23.4 to the extent necessary to allow the UMC Options terms to be amended without shareholder approval under that Listing Rule so that UMC Optionholders may transfer their UMC Options.

Pursuant to clause 8305 of Schedule 8 of the Corporations Regulations, ASIC has granted its consent to allow the Independent Expert’s Report to contain a statement that the market value of the assets of UMC differ from an amount at which the value of those assets are shown in the books of UMC.

7.18 Other material information

Other than as disclosed within this Scheme Booklet, there is no other information within the knowledge any UMC Director material to the making of a decision in relation to the Scheme that has not previously been disclosed to UMC Shareholders.

Other than as disclosed within this Scheme Booklet, there is no other information known to BHP Billiton material to the making of a decision in relation to the Scheme that has not previously been disclosed to UMC Shareholders.

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S E C T I O N 8 G L O S S A R Y

Announcement Date means 16 October 2009 being the date that UMC announced that UMC and BHP Billiton had signed the Merger Implementation Agreement;

ASIC means the Australian Securities and Investments Commission;

ASX means ASX Limited ACN 008 624 691, and where the context permits, the Australian Securities Exchange operated by ASX Limited;

ASX Listing Rules means the listing rules of ASX;

AWST means Australian western standard time;

Bauxite means Bauxite Australia Pty Ltd ABN 86 117 326 637;

BHP Billiton means BHP Billiton Minerals Pty Ltd ABN 93 008 694 782;

BHP Billiton Board means the board of directors of BHP Billiton;

BHP Billiton Finance means BHP Billiton Finance Ltd ABN 82 008 519 319;

BHP Billiton Group means:

• (a) BHP Billiton Limited;

• (b) BHP Billiton Plc;

• (c) each body corporate which is controlled by BHP Billiton Limited or BHP Billiton Plc;

• (d) each body corporate which is controlled by BHP Billiton Limited and BHP Billiton Plc taking into account the aggregate percentage interests of their respective direct or indirect shareholdings in that body corporate; and

• (e) each body corporate controlling or controlled by the bodies corporate referred to in paragraphs (a) to (d),

and for the purposes of paragraphs (c) to (e) above, one body corporate “controls” another when at the relevant time it owns either directly or indirectly not less than 50% of the shares entitled to vote at general meetings of that other body corporate;

Business Day means a business day as defined in the ASX Listing Rules;

CGT means capital gains tax;

Company or UMC means United Minerals Corporation NL ACN 107 061 343;

Competing Transaction means a transaction which, if completed, would mean a person (other than BHP Billiton or any other member of the BHP Billiton Group or its or their representatives) would:

• (a) directly or indirectly, acquire an interest or relevant interest in or become the holder of:

• (i) 20% or more of the UMC Shares; or

• (ii) all or a substantial part or a material part of the business conducted by the UMC Group, provided that no arrangement or transaction giving effect (in

whole or in part) to the Condition Precedent set out in item 12 of schedule 2 of the Merger Implementation Agreement shall constitute a Competing Transaction,

• including by way of takeover bid, scheme of arrangement, capital reduction, sale of assets, sale of shares or joint venture, but not as a custodian, nominee or bare trustee;

• (b) acquire control of UMC, within the meaning of Section 50AA of the Corporations Act; or

• (c) otherwise acquire or merge (including by a reverse takeover bid or dual listed company structure) with UMC;

Corporations Act means Corporations Act 2001 (Cth);

Corporations Regulations means Corporations Regulations 2001 (Cth);

Court means the Federal Court of Australia (WA Registry);

CRM means the China Railway Materials Commercial Corp. Group;

CRM Arrangement means a conditional placement and 10 year offtake agreement as referred to in the announcement made by UMC on 8 September 2009 entitled “UMC signs groundbreaking equity/off-take agreement with one of China’s top steel buyers China Railway Materials Commercial Corp. Group” and the RIMCapital Arrangement (being an arrangement for the issue of UMC Shares to RIMCapital Limited for services rendered by RIMCapital Limited as referred to in the announcement by RIMCapital Limited on 8 September 2009);

Deed Poll means the deed poll referred to in Section 5.5 of this Scheme Booklet, a copy of which is set out in Annexure 2 of this Scheme Booklet;

Deloitte Corporate Finance or Independent Expert means Deloitte Corporate Finance Pty Ltd ACN 003 833 127;

Effective Date means the date of coming into effect, pursuant to section 411(10) of the Corporations Act, of the order of the Court made under section 411(4)(b) of the Corporations Act in relation to the Scheme, but in any event at no time before an office copy of the order of the Court is lodged with ASIC;

Encumbrance means any mortgage, lien, charge, pledge, assignment by way of security, security interest, title retention, preferential right or trust arrangement, claim, covenant, profit a prendre, easement or any other security arrangement or any other arrangement having the same effect;

End Date means 30 April 2010 or such other date as is agreed by UMC and BHP Billiton;

Fe means iron;

GST means goods and services tax;

Implementation Date means the 5th Business Day after the Record Date;

Independent Expert or Deloitte Corporate Finance means Deloitte Corporate Finance Pty Limited ACN 003 833 127;

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Independent Expert’s Report means the report prepared by the Independent Expert dated 19 November 2009 which is included in Annexure 4 to this Scheme Booklet;

Independent Technical Expert means ProMet Engineers Pty Ltd ACN 115 687 057;

Independent Technical Expert’s Report means the report prepared by the Independent Technical Expert dated 19 November 2009 which is annexed to the Independent Expert’s Report;

Indicated Resource has the meaning ascribed to that term in the JORC Code;

Inferred Resource has the meaning ascribed to that term in the JORC Code;

JORC or JORC Code means the Australasian Code for the Reporting of Exploration Results, Mineral Resources and Ore Reserves (JORC 2004 edition);

Key Tenements means Exploration Licences E47/1429, E47/1431 and E47/1432;

Material Adverse Change means the occurrence of any Specified Event (including in each case as a result of proposing or implementing the Scheme) that will or is reasonably likely to have a material adverse effect on the assets and liabilities, financial position and performance, profits and losses or prospects of UMC or any other member of the UMC Group (excluding any impact of the payment of any amount contemplated by the implementation budget set out in the Merger Implementation Agreement), including (without prejudice to the generality of the foregoing):

• (a) the termination of either or both of Exploration Licences E47/1429 or E47/1431 for any reason; and

• (b) the surrender (compulsory or otherwise) of any blocks the subject of the Key Tenements without the prior written consent of BHP Billiton,

• but, without limiting paragraphs (a) and (b), does not include:

• (c) any matter fully and fairly disclosed in writing to BHP Billiton or its representatives before the date of the Merger Implementation Agreement (including as part of the due diligence investigations carried out by BHP Billiton and its representatives in connection with the transaction contemplated by the Merger Implementation Agreement or because of disclosures made to ASX);

• (d) any matter, event or circumstance arising from change in the financial markets or economic, regulatory or business conditions affecting the mining industry in Australia and China;

• (e) any generally applicable change in laws or interpretation thereof;

• (f) any change in taxation, interest rates or general economic conditions which impact on UMC and its competitors in a similar manner;

• (g) any change in accounting policy required by law or regulation;

• (h) any change occurring directly or indirectly as a result of any matter, event or circumstance required by the Merger Implementation Agreement, the Scheme or the transactions contemplated by them, other than any change occurring directly or indirectly as a result of a breach of the Merger Implementation Agreement by UMC;

• (i) a decline in the market price of iron ore or an increase in the price of raw materials used by a party or its Related Bodies Corporate; or

• (j) any change, effect or circumstance caused by the announcement or pendency of the Merger Implementation Agreement or the transaction contemplated by the Merger Implementation Agreement, other than any change, effect or circumstance caused by a breach of the Merger Implementation Agreement by UMC;

Merger Implementation Agreement means the merger implementation agreement dated 15 October 2009 between UMC and BHP Billiton;

Mineral Resources means a concentration or occurrence of material of intrinsic economic interest in or on the Earth’s crust in such form, quality and quantity that there are reasonable prospects for eventual economic extraction (according to the JORC code);

Mt means million tonnes;

Notice of Meeting means the notice of meeting dated 17 December 2009 convening the Scheme Meeting, set out in Annexure 3 to this Scheme Booklet;

Optionholder Deeds means the optionholder deeds entered into between each UMC Optionholder, UMC and BHP Billiton pursuant to which each UMC Optionholder agreed to transfer its UMC Options to BHP Billiton for the consideration set out in Section 1.6 of this Scheme Booklet;

Permitted Encumbrances means any Encumbrance recorded on the Tenement Register (being the register maintained by the Director General of Mines pursuant to section 103F of the Mining Act 1978 (WA)) against the Key Tenements as at 15 October 2009, including the DFD Caveats (being the subject to claim caveats numbered 317012, 317013 and 317014 registered by DFD Rhodes Pty Ltd against the Key Tenements);

Prescribed Event means, except to the extent contemplated by the Merger Implementation Agreement or the Scheme, any of the events listed below provided that a Prescribed Event listed below will not occur where UMC has first consulted with BHP Billiton in relation to the event and BHP Billiton has approved the proposed event:

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S E C T I O N 8 G L O S S A R Y

• (a) UMC converts all or any of UMC Shares into a larger or smaller number of shares;

• (b) UMC resolves to reduce its share capital in any way or reclassifies, combines, splits or redeems or repurchases directly or indirectly any of its shares;

• (c) UMC:

• enters into a buy-back agreement; or

• resolves to approve the terms of a buy-back agreement under the Corporations Act;

• (d) UMC makes or declares, or announces an intention to make or declare, any distribution (whether by way of dividend, capital reduction or otherwise and whether in cash or in specie);

• (e) UMC or any of its Subsidiaries:

• issues shares (including under the terms of the CRM Arrangement);

• grants an option over, or for the issue of, its shares (including under the terms of the Rights Issue); or

• agrees to make such an issue or grant such an option,

in each case to a person outside UMC Group;

• (f) UMC or any of its Subsidiaries:

• issues securities or other instruments convertible into shares or debt securities; or

• agrees to issue securities or other instruments convertible into shares or debt securities,

in each case to a person outside the UMC Group;

• (g) UMC adopts a new constitution or modifies or repeals its constitution or a provision of it;

• (h) UMC or any of its Subsidiaries disposes, or agrees to sell or otherwise dispose, of:

• any direct or indirect interest in any of the Key Tenements; or

• the whole or a substantial part of the UMC Group’s business or property, save to the extent expressly provided in the Merger Implementation Agreement;

• (i) UMC or any of its Subsidiaries:

• acquires or disposes of;

• agrees to acquire or dispose of;

• offers, proposes, announces a bid or tenders for,

any business, assets, entity or undertaking the value of which exceeds A$50,000, save to the extent expressly provided in the Merger Implementation Agreement;

• (j) other than for the Permitted Encumbrances, UMC or any of its Subsidiaries creates, or agrees to create, any Encumbrance over the whole or a substantial part of its business or property;

• (k) UMC or any of its Subsidiaries:

• increases the remuneration of, or otherwise varies the employment arrangements with, any of its directors or employees (other than in accordance with existing arrangements and in the ordinary course or as provided for in the implementation budget set out in the Merger Implementation Agreement);

• accelerates the rights of any of its directors or employees to compensation or benefits of any kind (including under any UMC executive or employee share plans) other than as provided for in the implementation budget set out in the Merger Implementation Agreement; or

• pays any of its directors or employees a termination or retention payment, other than as provided for in the implementation budget set out in the Merger Implementation Agreement;

• (l) UMC or any of its Subsidiaries:

• enters into any contract or commitment involving revenue or expenditure of more than A$100,000 over the term of the contract or commitment;

• terminates or amends in a material manner any contract material to the conduct of the UMC Group’s business or which involves revenue or expenditure of more than A$100,000 over the term of the contract;

• waives any material third party default; or

• accepts as a settlement or compromise of a material matter (relating to an amount in excess of A$100,000) less than the full compensation due to UMC or a Subsidiary of UMC,

in each case save to the extent expressly provided in the Merger Implementation Agreement;

• (m) UMC enters into or agrees to enter into a Material Contract (being a contract or commitment requiring payments over the term of the contract in excess of A$100,000 or for a term of more than one year);

• (n) any member of the UMC Group enters into any agreement, arrangement or understanding for the sale or other disposal of iron ore or any other product in relation to any of the Key Tenements, including pursuant to the CRM Arrangement; and

• (o) UMC or any of its Subsidiaries become insolvent;

Railway Deposit means the Railway Iron Ore Deposit on the Key Tenements;

RC means reverse circulation;

Record Date means 5.00pm AWST time on the fifth Business Day following the Effective Date or such other date as UMC and BHP Billiton agree;

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Register means the register of UMC Shareholders operated by the Registry;

Registry or UMC Share Registry means Security Transfer Registrars Pty Ltd ACN 008 894 488;

Related Body Corporate has the meaning given to that term in section 50 of the Corporations Act;

Requisite Majorities means

• (a) a majority in number (more than 50%) of those UMC Shareholders present and voting at the Scheme Meeting in person, by proxy, by attorney or (in the case of a corporate UMC Shareholder) by a corporate representative; and

• (b) at least 75% of the total number of votes cast on the Resolution at the Scheme Meeting by UMC Shareholders;

Rights Issue means the pro-rata non-renounceable rights issue of up to 15,111,233 UMC Options on the basis of one UMC Option for every ten UMC Shares as contemplated by a disclosure document under section 713 of the Corporations Act entitled “Prospectus” issued by UMC and dated 10 September 2009;

Scheme and Scheme of Arrangement means the scheme of arrangement under Part 5.1 of the Corporations Act which is proposed to be entered into between UMC and UMC Shareholders, a copy of which is set out in Annexure 1 to this Scheme Booklet;

Scheme Booklet means this Scheme Booklet dated 10 December 2009;

Scheme Consideration means A$1.30 per UMC Share;

Scheme Meeting means the meeting of UMC Shareholders convened by the Court under section 411(1) of the Corporations Act;

• (c) will or is likely to occur after the date of the Merger Implementation Agreement and which has not been publicly announced prior to the date of the Merger Implementation Agreement.

Subsidiary has the meaning it has in the Corporations Act;

Superior Proposal means a Competing Transaction which the UMC Board, acting in good faith, and after taking advice from its legal and financial advisers, determines is:

• (a) reasonably capable of being completed taking into account all aspects of the Competing Transaction; and

• (b) more favourable to UMC Shareholders than the Scheme, taking into account all terms and conditions of the Competing Transaction;

UBS means UBS AG, Australia Branch;

UMC or Company means United Minerals Corporation NL ACN 107 061 343

UMC Board means the board of directors of UMC at the date of this Scheme Booklet;

UMC Constitution means the Company’s constitution;

UMC Directors means the directors of UMC from time to time;

UMC Group means UMC and each of UMC’s subsidiaries from time to time;

UMC Option means an option to acquire UMC Shares issued by the Company;

UMC Optionholder means a holder of UMC Options;

UMC Share means a fully paid ordinary shares in the capital of UMC;

UMC Shareholder means a holder of UMC Shares; and

UMC Share Registry or Registry means Security Transfer Registrars Pty Ltd ACN 008 894 488.

Scheme Participant means a UMC Shareholder registered in the Share Register at 5.00pm AWST on the Record Date;

Scheme Order means the orders of the Court under section 411 of the Corporations Act approving the Scheme;

Second Court Date means the day on which the Court makes an order pursuant to section 411(4)(b) of the Corporations Act approving the Scheme;

Security Holder means a holder of UMC Shares or Options;

Specified Events means an event, occurrence or matter that:

• (a) occurs after the date of the Merger Implementation Agreement;

• (b) occurs before the date of the Merger Implementation Agreement but is only announced or publicly disclosed after the date of the Merger Implementation Agreement; or

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Scheme of Arrangement

pursuant to section 411 of the Corporations Act 2001 (Cwlth)

between

UNITED MINERALS CORPORATION NL (ABN 65 107 061 343) of Level 14, BGC Centre, 28 The Esplanade, Perth WA 6000 (“ UMC ”)

and

EACH SCHEME PARTICIPANT

1 Definitions and Interpretation

1.1 Definitions

In this Scheme, unless the contrary intention appears or the context requires otherwise:

Aggregate Scheme Consideration means the aggregate of all the Scheme Consideration payable to Scheme Participants.

ASIC means the Australian Securities and Investments Commission.

ASX means ASX Limited (ABN 98 008 624 691) or, as the context requires, the market known as the Australian Securities Exchange operated by it.

Bidder means BHP Billiton Minerals Pty Ltd (ABN 93 008 694 782).

Bidder Deed Poll means the deed poll to be executed by Bidder in favour of Scheme Participants prior to the despatch of the Scheme Booklet, pursuant to which Bidder has covenanted to perform certain obligations under this Scheme in the form agreed between the parties to the Merger Implementation Agreement.

Business Day means a business day as defined in the Listing Rules.

CHESS has the same meaning as in the Listing Rules.

Corporations Act means the Corporations Act 2001 (Cwlth).

Court means the Federal Court of Australia or such other court of competent jurisdiction that Bidder and UMC agree in writing.

Effective means the coming into effect, under section 411(10) of the Corporations Act, of the Court order made under section 411(4)(b) of the Corporations Act in relation to the Scheme, but in any event at no time before an office copy of the order of Court is lodged with ASIC.

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Effective Date means the date on which an office copy of the Scheme Order is lodged with the ASIC.

Implementation Date means the fifth Business Day following the Record Date (or such other date as may be agreed in writing between Bidder and UMC).

Listing Rules means the listing rules of ASX.

Merger Implementation Agreement means the agreement dated on or about 15 October 2009 and entitled “Merger Implementation Agreement” between Bidder and UMC relating to the implementation of the Scheme.

Option means an option to acquire a UMC Share.

Optionholders means each person who is registered in UMC’s register of optionholders from time to time as a holder of an Option.

Record Date means 5.00pm on the fifth Business Day following the Effective Date (or such other date as may be agreed between Bidder and UMC).

Registered Address means, in relation to a UMC Shareholder, the address of that UMC Shareholder shown in the UMC Register.

Scheme means this scheme under Part 5.1 of the Corporations Act made between UMC and Scheme Participants, subject to any alterations or conditions made or required by the Court under section 411(6) of the Corporations Act and approved in writing by UMC and Bidder.

Scheme Booklet means the booklet containing the explanatory statement relating to this Scheme as required by Part 5.1 of the Corporations Act, this Scheme, and other information (including any supplementary information) relating to any or all of the above matters and distributed to UMC Shareholders.

Scheme Consideration means $1.30 per Scheme Share.

Scheme Meeting means the meeting of UMC Shareholders convened pursuant to section 411(1) of the Corporations Act to consider and, if thought fit, to approve this Scheme.

Scheme Order means the order of the Court under section 411(4)(b) of the Corporations Act approving this Scheme, with or without modification.

Scheme Participant means a person who is a UMC Shareholder as at the Record Date.

Scheme Share means a UMC Share on issue at the Record Date.

Second Court Hearing means the hearing of the application made to the Court for an order pursuant to section 411(4)(b) of the Corporations Act approving this Scheme.

UMC Register means UMC’s register of members.

UMC Share means a fully paid ordinary share in the capital of UMC.

UMC Shareholder means a person who is registered in the UMC Register as the holder of UMC Shares at a relevant point in time.

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1.2 Interpretation

In this Scheme, unless the contrary intention appears or the context requires otherwise:

• (a) words and phrases (other than those defined in clause 1.1) have the same meaning given to them in the Corporations Act;

• (b) the singular include the plural and vice versa;

• (c) each gender includes every other gender;

• (d) a reference to a clause is a reference to a clause of this Scheme;

• (e) a reference to a statute, ordinance, code or other law or rule includes regulations and other instruments under it and consolidation, amendments, re-enactments or replacement;

• (f) a reference to a document includes all amendments or supplements to, or replacements or novations of, that document;

• (g) the word “person” includes a firm, body corporate, a partnership, a joint venture, an unincorporated body or association, or any government agency;

• (h) a reference to a person includes a reference to a person’s executors, administrators, successors, substitutes (including persons taking by novation) and assigns;

• (i) the words “include”, “including”, “for example” or “such as” are not used as, nor are they to be interpreted as, words of limitation, and, when introducing an example, do not limit the meaning of the words to which the example relates to that example or examples of a similar kind;

• (j) a reference to time is a reference to the time in Perth, Western Australia;

• (k) a reference to a holder includes a joint holder; and

• (l) headings are only for the convenience and are to be disregarded in the interpretation of substantive provisions.

2 Preliminary

• 2.1 UMC

• (a) UMC is a public company incorporated in Australia and is a company limited by shares. It has its registered office at Level 14, BGC Centre, 28 The Esplanade, Perth WA 6000.

• (b) At the date of the Scheme Booklet, there were:

  • (i) 155,112,330 UMC Shares on issue; and

  • (ii) 5,550,000 Options on issue; and

At that date, there were no other UMC securities on issue.

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• (c) UMC is a company admitted to the ASX official list and UMC Shares are quoted on the ASX.

2.2 Bidder

Bidder is a proprietary company incorporated in Australia and is a company limited by shares. It is a wholly owned subsidiary of BHP Billiton Limited which is listed on the ASX. It has its registered office at 225 St Georges Terrace, Perth WA 6000.

2.3 Merger Implementation Agreement

Bidder and UMC have entered into the Merger Implementation Agreement to facilitate, among other things, the implementation of this Scheme. In particular, under the Merger Implementation Agreement:

• (a) UMC has agreed to propose and implement this Scheme; and

• (b) Bidder has agreed to comply with its obligations under this Scheme, and to assist UMC in proposing and implementing this Scheme,

in each case in accordance with the terms of the Merger Implementation Agreement.

2.4 Bidder Deed Poll

Bidder has entered into the Bidder Deed Poll in favour of the Scheme Participants pursuant to which Bidder has, among other things, covenanted to provide the Scheme Consideration in accordance with this Scheme, subject to this Scheme becoming binding on the Scheme Participants in accordance with sections 411(4), 411(6) (if applicable) and 411(10) of the Corporations Act.

3 Conditions precedent to this Scheme

3.1 Conditions precedent

The conditions precedent to this Scheme are:

• (a) (no termination of Merger Implementation Agreement or Bidder Deed Poll) neither the Merger Implementation Agreement nor the Bidder Deed Poll is terminated before the Court makes the Scheme Order;

• (b) (conditions precedent under the Merger Implementation Agreement) all of the conditions precedent set out in schedule 2 of the Merger Implementation Agreement are satisfied or waived in accordance with the Merger Implementation Agreement by the times set out in the Merger Implementation Agreement; and

• (c) (lodgement with the ASIC) the Scheme Order is lodged with ASIC.

3.2 Effect of conditions precedent

The satisfaction or waiver in accordance with the Merger Implementation Agreement of each condition precedent in clause 3.1 (other than the condition

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precedent in clause 3.1(c)) at the same time as, or before, the Court making the Scheme Order is a condition precedent to this Scheme having effect.

3.3 Certificate

Bidder and UMC must provide to the Court at the Second Court Hearing a certificate, or such other evidence as the Court requests, confirming (in respect of matters within their knowledge) whether or not the conditions precedent to this Scheme set out in clause 3.1 (other than the conditions precedent in item 4 of schedule 2 to the Merger Implementation Agreement and clause 3.1(c)) are satisfied. The certificate constitutes conclusive evidence that those conditions precedent (other than Court approval) are satisfied.

3.4 Effective Date

Subject to clause 3.5, this Scheme takes effect for all purposes on the Effective Date.

3.5 End date

This Scheme lapses and has no further force or effect if the Effective Date is not on or before 30 April 2010 (or such later date as Bidder and UMC agree in accordance with the Merger Implementation Agreement).

4 Implementation of this Scheme

4.1 Transfer of and the consideration for UMC Shares

On the Implementation Date:

• (a) in consideration for the transfer of the Scheme Shares to Bidder, Bidder must pay the Scheme Consideration for each Scheme Share held by a Scheme Participant;

• (b) all of Scheme Shares must be transferred to Bidder without the need for any further act by any Scheme Participant (other than any acts performed by UMC or its directors or officers as attorney or agent for Scheme Participants under clause 7.6); and

• (c) UMC must deliver to Bidder duly completed and executed share transfer forms (or a master share transfer form) to transfer all of the Scheme Shares to Bidder.

4.2 Satisfaction of obligation to provide the Scheme Consideration

• (a) The obligations of Bidder to provide the Scheme Consideration under clause 4.1(a) will be satisfied by:

• (i) before 11am on the Implementation Date, Bidder depositing an amount equal to the Aggregate Scheme Consideration, in cleared funds in a trust account opened and operated by UMC for that purpose, to be held on trust for the Scheme Participants, except that any interest on the amount deposited (less bank fees) shall be to Bidder’s account; and

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• (ii) on the Implementation Date, (subject to Bidder having complied with clause 4.2(a)(i)) UMC sending a cheque drawn on an Australian bank in Australian dollars to each Scheme Participant for the Scheme Consideration payable to that Scheme Participant in respect of their Scheme Shares in accordance with this Scheme by prepaid post to (subject to clause 4.4) their Registered Address.

• (b) In the event that any cheque has not been presented within three months from the Implementation Date, UMC may credit the amount payable to the relevant Scheme Participant to a separate bank account of UMC to be held until the Scheme Participant claims the amount or the amount is dealt with in accordance with unclaimed money legislation. UMC must hold the amount on trust, but any benefit accruing from that amount will be to the benefit of UMC.

• (c) To the extent there is a surplus in the amount held by UMC in the trust account referred to in clause 4.2(a)(i), that surplus may be paid by UMC to Bidder following the satisfaction of UMC’s obligations under this clause 4.2.

4.3 Registration of transfers of Scheme Shares

As soon as practicable after delivery of the completed share transfer forms (or a master share transfer form) in respect of the Scheme Shares, UMC must enter the name of Bidder in the UMC Register in respect of the Scheme Shares.

4.4 Joint holders

In the case of Scheme Shares held in joint names any cheque required to be paid to Scheme Participants by Bidder or UMC must be made payable to the joint holders and be forwarded to the holder whose name appears first in the UMC Register at the Record Date.

4.5 Payment of Scheme Consideration to related bodies corporate

Nothing in this Scheme requires Bidder to provide Scheme Consideration to Scheme Participant that is Bidder, a related body corporate of Bidder or person who holds Scheme Shares on behalf of or for the benefit of Bidder or related body corporate of Bidder.

5 Dealings in UMC Shares

5.1 Entitlement to participate

Every UMC Shareholder entered on the UMC Register as the holder of a UMC Share on the Record Date is entitled to participate in this Scheme.

5.2 Recognised dealings

For the purposes of determining who is a Scheme Participant on the Record Date, dealings in UMC Shares must only be recognised if:

• (a) in the case of dealings of the type to be effected in using CHESS, the transferee is registered in the UMC Register as holder of the relevant UMC Shares on or before the Record Date; and

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• (b) in all other cases, registrable transmission applications or transfers in registrable form in respect of those dealings are received on or before the Record Date at the place where the UMC Register is kept.

5.3 UMC’s obligation to register

UMC must register any transmission application or transfer received in accordance with clause 5.2(b) by the Record Date.

5.4 Transfer requests received after Record Date

• (a) If the Scheme becomes Effective, a holder of Scheme Shares (and any person claiming through that holder) must not dispose or purport or agree to dispose of any Scheme Shares or interest in them after the Effective Date.

• (b) UMC must not accept for registration or recognise for any purpose any transmission application or transfer in respect of UMC Shares received after the Record Date, other than a transfer to Bidder in accordance with this Scheme.

5.5 Maintaining the UMC Register

For the purpose of determining entitlements to participate in this Scheme, UMC must, until the Scheme Consideration has been provided to Scheme Participants and Bidder has been entered in the UMC Register as holder of all of the UMC Shares, maintain the UMC Register in accordance with the provisions of this clause 5 and the UMC Register in this form solely determines entitlements to the Scheme Consideration.

5.6 Statements of holding cease to have any effect

All statements of holding for UMC Shares cease to have any effect from the Record Date as documents relating to title in respect of those shares. As from the Record Date, each entry current at that date on the UMC Register ceases to be of any effect other than as evidence of entitlement to the Scheme Consideration in respect of the Scheme Shares relating to that entry.

5.7 Provision of information

UMC must procure that by 5.00pm on the fourth Business Day following the Record Date, details of the names, registered addresses and holdings of UMC Shares of every UMC Shareholder as shown in the UMC Register at the Record Date are available to Bidder in such form as Bidder may reasonably require.

6 Actions regarding quotation of UMC Shares

6.1 Suspension of trading of UMC Shares

It is expected that trading in UMC Shares on the ASX will be suspended no later than the Business Day following the day on which UMC notifies the ASX of the granting of the Scheme Order.

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6.2 Quotation of UMC Shares

On the first Business Day after the Implementation Date, UMC will apply for termination of the official quotation of UMC Shares on ASX.

7 General provisions

7.1 Lodgement of the Scheme Order with ASIC

UMC must lodge with the ASIC an office copy of the Scheme Order by 5.00pm on the first Business Day after the day on which the Court approves this Scheme at the Second Court Hearing.

7.2 Alterations or conditions

If the Court proposes to approve this Scheme subject to any alterations or conditions, UMC may by its counsel or solicitors, and with the consent of Bidder, consent on behalf of all persons concerned to any alterations or conditions.

7.3 Agreement to transfer Scheme Shares

The Scheme Participants agree to the transfer of their Scheme Shares to Bidder in accordance with the terms of this Scheme.

7.4 Scheme Shares - Free of encumbrances

• (a) To the extent permitted by law, the Scheme Shares transferred to Bidder under this Scheme must be transferred free from all mortgages, charges, liens, encumbrances and interests of third parties of any kind, whether legal or otherwise.

• (b) Each Scheme Participant is deemed to have warranted to Bidder that all their Scheme Shares (including any rights attaching to those shares) that are transferred to Bidder under this Scheme are, at the date of transfer, fully paid and free from all mortgages, charges, liens, encumbrances and interests of third parties of any kind, whether legal or otherwise, and restrictions on transfer of any kind, and that they have full power and capacity to sell and to transfer their Scheme Shares together with any rights attaching to those shares.

7.5 Beneficial ownership pending registration

Bidder is beneficially entitled to the Scheme Shares transferred to it under this Scheme pending registration by UMC of Bidder in the UMC Register as the holder of the Scheme Shares.

7.6 UMC to act on behalf of Scheme Participants

Upon the Scheme becoming Effective, each Scheme Participant, without the need for any further act, appoints UMC and any of its directors or officers (each of them severally and any two or more of them jointly) as its attorney and agent for the purpose of executing any document necessary or desirable to give effect to this UMC Scheme or taking any other act necessary to give effect to this Scheme, including a proper instrument of transfer of their Scheme Shares which may be a master transfer of all of the Scheme Shares.

Scheme of Arrangement 15 October 2009

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7.7 Further assurances

UMC must execute documents and do all things and acts necessary or expedient in order to implement this Scheme.

7.8 Authority of UMC

Each of the Scheme Participants consents to UMC doing all things necessary for or incidental to the implementation of this Scheme.

7.9 Scheme binding

This Scheme binds UMC and all Scheme Participants (including those who do not attend the Scheme Meeting to approve this Scheme or do not vote at the Scheme Meeting or vote against this Scheme at the Scheme Meeting). To the extent of inconsistency between this Scheme and UMC’s constitution, this Scheme overrides UMC’s constitution.

7.10 Notices

Where a notice, transfer, transmission application or other communication referred to in this Scheme is sent by post to UMC, it is not deemed to be received in the ordinary course of post or on a date other than the date (if any) on which it is actually received at UMC’s registered office or at UMC’s share registry.

7.11 Governing Law

The governing law of this Scheme is the law in force in Western Australia.

7.12 Fees and charges

UMC must pay all filing, application or similar fees due in relation to this Scheme.

7.13 No liability when acting in good faith

None of UMC or Bidder nor any officer of any of those companies is liable for anything done or omitted to be done in the performance of this Scheme in good faith.

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UNITED MINERALS CORPORATION NL ABN 65 107 061 343

NOTICE OF COURT ORDERED MEETING OF HOLDERS OF ORDINARY SHARES IN UNITED MINERALS CORPORATION NL (“SCHEME MEETING”)

NOTICE OF MEETING

Notice is hereby given that by an order of the Federal Court of Australia (“Court”) made on 17 December 2009 pursuant to section 411(1) of the Corporations Act 2001 (Cth) (“Corporations Act”), a meeting of the holders of ordinary shares (“UMC Shareholders”) in United Minerals Corporation NL (ABN 65 107 061 343) (“UMC”) will be held at the Ball Room B, Duxton Hotel, 1 St George’s Terrace, Perth, Western Australia on 28 January 2010 at 10.00am AWST for the purpose of transacting the business referred to in this Notice of Scheme Meeting.

The Court has directed that Alan Birchmore act as Chairperson of the Scheme Meeting (or, failing him, David Craig) and has directed the Chairman to report the result of the meeting to the Court.

Business of the Meeting

Resolution – Acquisition of UMC by BHP Billiton

To consider, and if thought fit, to pass the following resolution in accordance with section 411(4)(a)(ii) of the Corporations Act:

“That pursuant to and in accordance with section 411 of the Corporations Act, the scheme of arrangement proposed between UMC and the holders of its fully paid ordinary shares, designated the “Scheme”, as contained in and more particularly described in the Scheme Booklet accompanying the Notice of Scheme Meeting, is agreed to and the Board of Directors of UMC are authorised to agree to such alterations or conditions as are thought fit by the Court, and subject to approval of the Scheme by the Court, to implement the Scheme with any such alterations or conditions.”

By order of the Court

Patrick Tan

Company Secretary 17 December 2009

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Explanatory Notes

These notes should be read in conjunction with this Notice of Scheme Meeting.

Terms

Capitalised terms which are defined in Section 8 of the Scheme Booklet which accompanies this Notice of Scheme Meeting have the same meaning when used in this Notice of Scheme Meeting unless the context requires otherwise.

Purpose of the meeting

The purpose of the meeting is to consider and, if thought fit, to agree (with or without any modification required by the Court to which UMC and BHP Billiton Minerals Pty Ltd (“BHP Billiton”) agree) to the scheme of arrangement proposed to be made between UMC and the holders of ordinary shares in UMC (“Scheme”).

To enable you to make an informed voting decision, further information on the Scheme is set out in the Scheme Booklet accompanying this Notice of Scheme Meeting. A copy of the Scheme is set out in Annexure 1 of the Scheme Booklet and its purpose and effect are discussed throughout that document. If UMC Shareholders are in doubt as to how to vote, they should seek advice from their professional advisers prior to voting.

Majorities required

In accordance with section 411(4)(a)(ii) of the Corporations Act, the resolution contained in this Notice of Scheme Meeting must be passed by:

• a) a majority in number of the UMC Shareholders present and voting (either in person or by proxy) at the Scheme Meeting; and

• b) at least 75% of the votes cast on the resolution contained in this notice of Scheme Meeting.

Court Approval

In accordance with section 411(4)(b) of the Corporations Act, the Scheme (with or without modification) is subject to the approval of the Court, if the resolution put to this meeting is approved by the Requisite Majorities and the relevant conditions of the Scheme are satisfied or waived by the time required under the Scheme, UMC intends to apply to the Court for approval of the Scheme.

Information about voting

Please read the important information about voting which accompanies this Notice of Scheme Meeting. A proxy form is also enclosed for the use of UMC Shareholders. UMC Shareholders should carefully read the instructions for submitting a proxy form.

Voting Entitlements

Only UMC Shareholders are entitled to vote at the Scheme Meeting. In accordance with regulation 7.11.37 of the Corporations Regulations 2001, UMC determines that UMC Shares held as at 5.00pm AWST on 26 January 2010 will be taken, for the purposes of the Scheme Meeting, to be held by the persons who held them at that time.

Quorum

The constitution of UMC provides that the quorum for a members’ meeting of UMC is two members (in person or by proxy).

Voting by poll

The vote will be conducted by a poll. On a poll UMC Shareholders will be entitled to 1 vote per UMC Share.

How to vote

UMC Shareholders can vote at the Scheme Meeting in one of the following ways:

• (a) by attending the Scheme Meeting and voting in person;

• (b) by appointing an attorney to attend and vote on their behalf;

• (c) in the case of corporations, by appointing an authorised corporate representative to attend and vote on their behalf; or

• (d) by appointing a proxy to attend and vote on their behalf, using the proxy form accompanying this Notice of Scheme Meeting.

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Voting in person or by authorised corporate representative

UMC Shareholders or their authorised corporate representatives who plan to attend the Scheme Meeting are asked to arrive at the venue in good time, so that shareholdings may be checked against UMC’s share register and attendances noted without delaying the Scheme Meeting.

In order to vote in person at the Scheme Meeting, a UMC Shareholder which is a corporation may appoint an individual to act as its representative. The appointment must comply with section 250D of the Corporations Act, meaning that UMC will require a Certificate of Appointment of Corporate Representative executed in accordance with the Corporations Act. A specimen of such a Certificate may be obtained from Security Transfer Registrars Pty Ltd. The completed Certificate should be lodged with UMC’s Share Registry before the Scheme Meeting or at the registration desk on the day of the meeting.

Voting by attorney

Attorneys must provide UMC with the original or a certified copy of the power of attorney under which they have been authorised to attend and vote at the Scheme Meeting. The power of attorney appointing the attorney must be duly executed and must specify the name of the UMC Shareholder and the attorney, and also specify the meetings at which the appointment may be used. The appointment must be a standing one. The original or a certified copy of the power of attorney must be provided to UMC’s Share Registry in the same manner as proxy forms and must be received by UMC’s Share Registry by 10.00am AWST on 26 January 2010.

Voting by proxy

Instructions on how to appoint a proxy are set out on the attached proxy form.

For the appointment of a proxy to be effective, the proxy form accompanying this Notice of Scheme Meeting or a corresponding additional or replacement form obtained from UMC (together with any power of attorney or other authority under which the proxy form is signed or a copy of that power of attorney or authority certified as a true copy by statutory declaration) should be completed and received by UMC’s Share Registry by 10.00am AWST on 26 January 2010.

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United Minerals C ration NL orpo Independent expert’s report 19 November 2009

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Financial Services Guide

19 N o vember 200 9

What is a Financial Services Guide?

This F inancial Ser v ices Guide ( F SG) provide s impo r tant informat i on to assist y ou in decidin g whet h er to use any of the gener a l financial pr o duct advic e provided b y Deloitte Cor p orate Finance Pty Limited (Deloitte C orporate Fin a nce, we, us o r our) the h o lder of Australian Financi a l Services Li c ence (AFS L ) No. 241457. The conte n ts of this FS G inclu d e:

• w h o we are an d how we can be contacted

• w h at services w e are authori s ed to provid e under o u r AFSL

• h o w we (and a n y other relev a nt parties) are re m unerated in relation to an y general fin a ncial p r oduct advice w e may prov i de

• d e tails of any p o tential confl i cts of interes t

• d e tails of our d i spute resolut i on systems a n d how y o u can access them.

Information about us

We h a ve been eng a ged by United Minerals Corp o ration NL to give general f inancial pro d uct advic e in the form o f a report to be provided t o you in conn e ction with th e proposed ac q uisition of a ll the issue d shares in U n ited Mineral s Corporation NL via a sch e me of arrangement. You a r e not the par t y or parti e s who engag e d us to prepa r e this report. We are not a c ting for any p erson other t h an the party o r parti e s who engag e d us. We are r equired to gi v e you an F S G by law because our report is being pr o vided to yo u . You may c o ntact us usin g the details l o cated abov e .

Deloi t te Corporate Finance is ul t imately own e d by the A u stralian part n ership of De l oitte Touche Toh m atsu. The Au s tralian partn e rship of Del o itte Touc h e Tohmatsu a nd its relate d entities prov i de servi c es primarily i n the areas o f audit, tax, cons u lting, and fin a ncial adviso r y services. O u r direc t ors may be p a rtners in the A ustralian partn e rship of Del o itte Touche T ohmatsu.

The A ustralian par t nership of D e loitte Touch e Toh m atsu is a me m ber of Deloit t e Touche To h matsu (a S w iss Verein). A s a Swiss Ve r ein (associat i on), neith e r Deloitte To u che Tohmat s u nor any of its

Deloitte Cor p orate Finance Pty Limited ACN 003 83 3 127 AFSL 24145 7

Woodside Pl a za Level 14 240 St Geor g es Terrace Perth WA 60 0 0 GPO Box A46 Perth WA 68 3 7 Australia

DX: 206 Tel: +61 (0) 8 9365 7000 Fax: +61 (0) www.deloitte.com.au

member f irms has any liability for e a ch other’s acts or omission s . Each of the member firms is a separat e and inde p endent legal e ntity operati n g under the names “ D eloitte,” “De l oitte & Touc h e,” “Deloitte Touche T ohmatsu,” or other, related names. Serv i ces are provi d ed by the m e mber firms o r their subsidiar i es and affilia t es and not b y the Deloitte Touche T ohmatsu Ver e in.

The gene r al financial p roduct advic e in our report is provided b y Deloitte Corporate Finance and not b y the Austr a lian partners h ip of Deloitt e Touche Tohmats u , its related e n tities, or the Deloitte Tou c he Tohmats u Verein.

Associations and relationships

We do n o t have any fo r mal associat i ons or relations h ips with any e ntities that a r e issuers of financial p roducts. Ho w ever, you sh o uld note tha t we and the A ustralian part n ership of Deloitte Touche Tohmats u (and its rela t ed bodies co r porate) may f rom time to ti m e provide p r ofessional se r vices to fina n cial product i s suers in the o rdinary course of business.

What financial services are we licensed to provide?

The AFS L we hold aut h orises us to p rovide the followin g financial ser v ices to retail and wholesale clients:

• provi d e general fin a ncial produc t advice in re s pect of:

• de b entures, stocks or bonds t o be issued or pr o posed to be i ssued by a g o vernment

• in t erests in ma n aged invest m ent schemes in c luding inves t or directed p o rtfolio services

• s e curities

• deal i n a financial p roduct by arr a nging for anoth e r person to a p ply for, acq u ire, vary or dispo s e of financia l products in r espect of:

• de b entures, stocks or bonds i s sued or to be is s ued by a gov e rnment

• in t erests in ma n aged invest m ent schemes in c luding inves t or directed p o rtfolio services

• • s e curities.

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Information about the general financial product advice we provide

The financial product advice provided in our report is known as “general advice” because it does not take into account your personal objectives, financial situation or needs. You should consider whether the general advice contained in our report is appropriate for you, having regard to your own personal objectives, financial situation or needs.

If our advice is being provided to you in connection with the acquisition or potential acquisition of a financial product issued by another party, we recommend you obtain and read carefully the relevant offer document provided by the issuer of the financial product. The purpose of the offer document is to help you make an informed decision about the acquisition of a financial product.

How are we and our employees remunerated?

Our fees are usually determined on a fixed fee or time cost basis and may include reimbursement of any expenses incurred in providing the services.

Fee arrangements are agreed with the party or parties who actually engage us, and we confirm our remuneration in a written letter of engagement to the party or parties who actually engage us.

Our fee is Australian dollars (AUD)125,000 (exclusive of GST and technical expert’s fees) and will also be disclosed in the relevant offer document prepared by the issuer of the financial product. Deloitte Corporate Finance, its directors and officers, any related bodies corporate or associates and their directors and officers, do not receive any commissions or other benefits, except for the fees rendered to the party or parties who actually engage us.

All employees receive a salary. Our employees are eligible for annual salary increases and bonuses based on overall performance but do not receive any commissions or other benefits arising directly from services provided to you. The remuneration paid to our directors reflects their individual contribution to the company and covers all aspects of performance.

We do not pay commissions or provide other benefits to other parties for referring prospective clients to us.

What should you do if you have a complaint?

If you have any concerns regarding our report or service, you may wish to advise us. Our internal complaint handling process is designed to respond to your concerns promptly and equitably. All complaints must be in writing addressed to:

The Complaints Officer PO Box N250 Grosvenor Place Sydney NSW 1220 E-mail: complaints@deloitte.com.au Fax (02) 9255 8678

If you are not satisfied with the steps we have taken to resolve your complaint, you may contact the Financial Ombudsman Service (FOS). FOS provides free advice and assistance to consumers to help them resolve complaints relating to members of the financial services industry.

Complaints may be submitted to FOS at:

Financial Ombudsman Service Limited GPO Box 3 Melbourne VIC 3001 Telephone: 1300 780 808 Fax: +61 3 9613 6399 Email: info@fos.org.au Internet: http://www.fos.org.au

What compensation arrangements do we have?

We are required by the Corporations Act 2001 (Cth) to have arrangements for compensating retail clients for losses they suffer as a result of a breach of our obligations under Chapter 7 of the Corporations Act. The Australian partnership of Deloitte Touche Tohmatsu holds a professional indemnity insurance policy that covers the financial services provided by Deloitte Corporate Finance. This policy satisfies the requirements of section 912B of the Corporations Act and provides coverage of former representatives and Deloitte Corporate Finance employees in respect of financial services performed whilst they were engaged by us.

Privacy

Any personal information collected by us will be handled in accordance with our Privacy Statement, which summarises our policies and practices governing the treatment of personal information that we acquire from and about you. We do not disclose any personal information about you to other parties without your permission, except as required or permitted by law. A copy of our Privacy Statement can be downloaded from our website at www.deloitte,com.au or by contacting us using the details located on the first page of this FSG.

Deloitte: UMC independent expert’s report

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Deloitte Corpor a te Finance Pty L imited ACN 003 833 127 AFSL 241457

Woodside Pla z a Level 14 240 St Georg e s Terrace Perth WA 600 0 GPO Box A46 Perth WA 683 7 Australia

DX 206 Tel: +61 (0) 8 9365 7000 Fax: +61 (0) 8 9365 7001 www.deloitte. c om.au

The D irectors United Minerals C o rporation N L Leve l 14 28 T h e Esplanade Perth WA 6000

19 N o vember 200 9

Dear D irectors

Independent expert’s report

Introduction

On 1 6 October 20 0 9, United Mi n erals Corpor a tion NL (U M C or the Co m pany) annou n ced it had received a condi t ional offer u n der which B H P Billiton M inerals Pty L t d, a wholly o wned subsidi a ry of BHP Billiton Limite d (we r e fer to both e n tities interch a ngeably in t h is report as B HP Billiton) p roposed to a c quire all of t h e issued sha r es in U M C through a scheme of ar r angement (th e Proposed S c heme).

UM C has entered i n to a Merger Implementati o n Agreement (MIA) with BHP Billiton to implemen t the Propose d Sche m e. If the Pr o posed Sche m e is approved, holders of U MC shares ( U MC Shareholders) will re c eive cash of AUD1.30 per shar e .

UM C will become a wholly ow n ed subsidiar y of BHP Billiton and will b e delisted from the Austra l ian Securitie s Exch a nge (ASX) u p on completi o n of the Pro p osed Schem e . UMC has prepared a sch e me booklet c ontaining th e detailed terms of t h e Proposed Scheme (the S c heme Bookl e t). An overv i ew of the Pr o posed Sche m e is set out i n Secti o n 1 of our detailed report.

UM C ’s principal a s set is a 100 % interest in t h e Pilbara Iro n Ore Project w hich includ e s the Railwa y iron ore dep o sit (the R ailway Depo s it), which is l ocated on E x ploration Lic e nse (EL) 47/1429 adjacen t to Mining A r ea C, a project opera t ed by BHP B illiton in the P ilbara iron ore province i n Western Au s tralia. A ke y condition of the Proposed Sche m e is that U M C restructure s its operatio n s such that, o n the effectiv e date, UMC w ill have no a ssets or liabil i ties other tha n the Pilbara I ron Ore Proj e ct, the Unite d Iron Pty Lt d (United Iron ) tenements a n d shares and optio n s in Phosphate Australia L imited (Phos p hate Austral i a).

Memb e r of Deloitte Tou c he Tohmatsu

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Purpose of the report

Whilst an independent expert’s report in respect of the Proposed Scheme is not required to meet any statutory obligations, the directors of UMC (the Directors) have requested that Deloitte Corporate Finance Pty Limited (Deloitte) provide an independent expert’s report advising whether, in our opinion, the Proposed Scheme is in the best interests of UMC Shareholders.

This independent expert’s report has been prepared in a manner consistent with Part 3 of Schedule 8 of the Corporations Regulations 2001 (Cwlth) (Part 3) to assist UMC Shareholders in their consideration of the Proposed Scheme. We have prepared this report having regard to Part 3 and the relevant Australian Securities and Investments Commission (ASIC) Regulatory Guides.

This report is to be included in the Scheme Booklet to be sent to UMC Shareholders and has been prepared for the exclusive purpose of assisting UMC Shareholders in their consideration of the Proposed Scheme. We are not responsible to you, or anyone else, whether for our negligence or otherwise, if the report is used by any other person for any other purpose.

Basis of evaluation

Under ASIC Regulatory Guide 111 (RG 111), which provides guidance in respect of the content of expert reports, a control transaction such as the Proposed Scheme is:

• Fair, when the consideration is equal to or greater than the value of the shares subject to the Proposed Scheme. The comparison must be made assuming 100% ownership of the company, which is the subject of the Proposed Scheme

• Reasonable, if it is fair, or despite not being fair, there are sufficient reasons for UMC Shareholders to vote in favour of the Proposed Scheme, in the absence of a higher offer. Our analysis of these reasonableness factors is set out in Section 8.

To assess whether the Proposed Scheme is in the best interests of UMC Shareholders, we have adopted the test of whether the Proposed Scheme is either fair and reasonable, not fair but reasonable, or neither fair nor reasonable, as set out in RG 111.

Summary and conclusion

In our opinion the Proposed Scheme is fair and reasonable and therefore in the best interests of UMC Shareholders. In arriving at this opinion, we have had regard to the following factors:

The Proposed Scheme is fair

Set out in the table below is a comparison of our assessment of the fair market value of a UMC share with the consideration offered by BHP Billiton.

Table 1: Evaluation of fairness

	Low (AUD)	High (AUD)
Assessed fair market value of a UMC share (Section 7)	0.55	0.80
Consideration offered	1.30	1.30

Source: Deloitte analysis

Note:

1. All amounts stated in this report are in AUD unless otherwise stated and may be subject to rounding

The consideration offered by BHP Billiton is above the range of our estimate of the fair market value of a UMC share. Accordingly it is our opinion that the Proposed Scheme is fair.

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Valuation of a UMC share

We have estimated the value of UMC using the net assets on a going concern basis method. We have estimated the fair market value of UMC’s main asset, the Railway Deposit, using the discounted cash flow method, which estimates the value of the Railway Deposit by discounting its estimated future cash flows to their present value.

The discounted cash flow method requires the determination of an appropriate discount rate and the projection of future cash flows. We selected a nominal after tax discount rate in the range of 16% to 18% to discount the estimated future cash flows of the Railway Deposit to their present value. A detailed financial model (the Model) formed the basis of our estimated future cash flows and was based on:

• An indicated and inferred Joint Ore Reserves Committee (JORC) compliant mineral resource based on drilling to the end of July 2009 prepared by Widenbar & Associates Pty Ltd (Widenbar)

• Revenue, operating and capital cost assumptions. In order to assist Deloitte in assessing the reasonableness of the operating and capital cost assumptions included in the Model, ProMet Engineers Pty Limited (ProMet) was engaged to review the geological, mining, processing, operating and capital cost assumptions. ProMet engaged sub-consultants to review the geological and mining information. ProMet’s report is included in Appendix 5.

The discounted cash flow valuation of the Railway Deposit is sensitive to the development option selected, discount rate, start date, iron ore price, volume and cost assumptions and produces a very wide range of values.

In addition, we considered an analysis of recent share trading and an industry rule of thumb, namely the enterprise value (EV) per tonne of contained iron (Fe) (EV/tonne). Our assessment of the implied range of EV per tonne for the Railway Deposit was compared with EV per tonne for comparable companies and recent comparable transactions.

The Proposed Scheme is reasonable

In accordance with RG 111 an offer is reasonable if it is fair. On this basis, in our opinion the Proposed Scheme is reasonable. We have also considered the following factors in assessing the reasonableness of the Proposed Scheme:

Likely market price of UMC’s shares if the Proposed Scheme fails

The consideration of AUD1.30 per share represents a premium of 27% to the closing price of AUD1.02 on 4 September 2009 (the last trading day before UMC shares were placed in a trading halt prior to the announcement of the conditional placement to and off-take arrangement with China Railway Materials Commercial Corporation Group (CRM) on 8 September 2009 (Proposed CRM Placement)) and a premium of 41% to the closing price of AUD0.92 on 6 October 2009 (the last trading day before UMC shares were placed in a trading halt prior to the announcement of the Proposed Scheme). It also represents a 37% premium to the volume weighted average price (VWAP) of AUD0.95 for the 4 weeks up to 4 September 2009 and a 34% premium to the VWAP of AUD0.97 for the 4 weeks up to 6 October 2009.

If the Proposed Scheme does not proceed, the UMC share price is likely to reduce to pre 6 October 2009 levels. It may, however, fall even further given that this report has resulted in the disclosure of significant additional information to the market about the development options available to UMC and the significant risks that exist in trying to negotiate an economically viable development option in a reasonable timeframe.

Special value of UMC to BHP Billiton

There are three potential purchasers of the Railway Deposit that have existing infrastructure in the Pilbara and should therefore be able to realise additional value over and above the stand-alone value in UMC’s hands, namely Rio Tinto Limited (Rio Tinto), Fortescue Metals Group Ltd (FMG) and BHP Billiton. However, FMG’s rail infrastructure is approximately 110 kilometres (km) away, and the cost of extending FMG’s railway this distance would suggest that FMG would not be able to extract significant additional value if it were to purchase the Railway Deposit.

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Rio Tinto’s rail infrastructure is approximately 3kms away and BHP Billiton’s is approximately 30kms away. If Rio Tinto and BHP Billiton were currently seeking additional high grade iron ore resources, they may attribute additional value to the Railway Deposit through the combination of a lower discount rate that would be applied to reflect the lower development and financing risks and the certainty surrounding rail and port access and costs.

However, Rio Tinto has sufficient reserves and resources for its production in the foreseeable future and hence it has little need to purchase the Railway Deposit at this stage. If the Railway Deposit’s ore body did not extend into Mining Area C, the same would likely apply to BHP Billiton as it also has sufficient reserves and resources in the foreseeable future.

BHP Billiton’s rail infrastructure is approximately 30km from the Railway Deposit and the ore body of the Railway Deposit is located adjacent to Mining Area C, which is owned by the Mt Goldsworthy Joint Venture operated by BHP Billiton. The geology of the Railway Deposit strongly suggests that the high grade ore body continues into Mining Area C and therefore a portion of the resource at either side of the boundary cannot be mined due to geotechnical constraints (referred to as sterilised ore) if UMC and the Mt Goldsworthy Joint Venture mine their respective resources independently.

UMC estimates that approximately 20 million tonnes (Mt) of UMC’s ore would be sterilised and it is likely that a similar amount of the Mt Goldsworthy Joint Venture’s ore would be sterilised. The sterilised ore could only be realised through a joint development. BHP Billiton, as operator of the Mt Goldsworthy Joint Venture, is therefore the only potential acquirer of UMC able to realise the value of approximately 40Mt of high grade ore that would be sterilised, and consequently it may be able to realise significant additional value from ownership of the Railway Deposit.

In our opinion, this special value to BHP Billiton makes the acquisition of UMC attractive to BHP Billiton, despite the fact that BHP Billiton has sufficient reserves and resources for its iron ore production in the foreseeable future.

Proposed Scheme provides certainty to UMC Shareholders

The Railway Deposit is not large enough to justify a stand-alone project with its own rail and port facilities. UMC has therefore explored various other development options including rail haulage under access arrangements with infrastructure owners in the region, a mine gate sale and road haulage to Port Hedland. A brief description of the key development risks associated with these options is set out below.

• A rail haulage development option is dependent on reaching an acceptable agreement with one of the rail infrastructure owners in the region, namely Rio Tinto, BHP Billiton or FMG. The only comparable third party infrastructure access agreement in the Pilbara is the BC Iron Limited (BC Iron) agreement with FMG, under which BC Iron negotiated access to FMG’s rail infrastructure in exchange for an undisclosed access charge and 50% of BC Iron’s resource. We have included in the Model assumed access to Rio Tinto’s infrastructure because FMG’s railway is too far away and a Rio Tinto railway is closest to the Railway Deposit. However, there is significant uncertainty surrounding UMC’s ability to negotiate access to Rio Tinto’s infrastructure within a reasonable timeframe and price as both BHP Billiton and Rio Tinto’s stated policy is not to allow third party access to their infrastructure. It is expected that the current legal process (refer to section 3.3) would need to be completed and resolved in favour of open access before UMC might successfully apply for access to Rio Tinto’s infrastructure

• Both road and rail haulage options are dependent on negotiating port access. The Port Hedland Port Authority (PHPA) advised UMC in October 2009 that it has already allocated all of the currently approved 17.1 million tonne per annum (Mtpa) long term capacity at the new Utah Point public use facility. A further 50 Mtpa is expected by 2013 at the South West Creek development, 20 Mtpa of which has been earmarked for the North West Iron Ore Alliance and other junior producers, with the remaining 30 Mtpa being taken by Hancock Prospecting Pty Ltd (Hancock). Members of the North West Iron Ore Alliance collectively hope to ship 36 Mtpa by 2012 and hence it is uncertain whether UMC would be able to negotiate access to any of the South West Creek capacity. We are not aware of any other public use port facilities available or under consideration in the region. Inability to secure port access represents a significant risk to the economics and timing of the development of the Railway Deposit

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• A mine gate sale is dependent on reaching an agreement on acceptable terms with another iron ore producer in the region. The Iron Ore Holdings Ltd (Iron Ore Holdings) agreement with Rio Tinto is the only publicly announced precedent of mine gate sales in the Pilbara. The terms and timing of reaching an acceptable mine gate sale agreement are highly uncertain.

Under the terms of the Proposed CRM Placement, UMC would issue 20 million shares at AUD1.35 per share together with 2 million attaching options (at an issue price of AUD0.10, exercise price of AUD1.35 and which expire on 30 September 2011) to raise AUD27.2 million. On finalisation of the Proposed CRM Placement, a fee equal to 3% of the total placement proceeds would be payable to RIM Capital Limited through the issue of new UMC shares. One of the conditions of the placement is finalisation of a 10 year 3 Mtpa off-take arrangement on commercial terms. This transaction was agreed when UMC still expected to receive access to port capacity at Utah Point and the development option contemplated at that time was a 3 Mtpa mine development with road haulage to Utah Point. This port option is no longer available.

In our opinion, the Proposed CRM Placement would not substantially reduce the development risks highlighted above as it provides funding only and no additional development solutions.

It is hypothetically possible for UMC’s Shareholders to wait for the Mt Goldsworthy Joint Venture to reach the point at which it would strongly desire the ore from the Railway Deposit. UMC could then agree to allow BHP Billiton to mine its ore body in exchange for a “royalty” type payment. This potential option is highly theoretical and provides no certainty in terms of timing or value to UMC Shareholders.

In the absence of the Proposed Scheme, it is likely that UMC would continue pursuing the above development options, however, the probability and timing of negotiating a suitable development option are highly uncertain and it is possible that no economic solution may be found in a reasonable timeframe.

The Proposed Scheme provides certainty to UMC shareholders by removing the development, foreign exchange, iron ore pricing, environmental and regulatory risks they currently face.

Possibility of a superior proposal emerging

UMC management, with the assistance of its financial advisor, UBS AG Australia branch (UBS), has explored various alternative transactions over the past six months. Prior to the BHP Billiton proposal, the best available alternative transaction identified was the Proposed CRM Placement. The Proposed CRM Placement remains a possibility; however it remains conditional and there is no certainty that it could be completed if the Proposed Scheme fails. The Proposed CRM Placement does not enhance the prospects of negotiating a suitable development option and is therefore not considered a superior alternative to the Proposed Scheme.

We note that no superior proposals have emerged since the announcement of the Proposed Scheme. In our opinion, a superior proposal is unlikely to emerge prior to the Scheme meeting.

Opinion

In our opinion, the Proposed Scheme is fair and reasonable to UMC Shareholders. It is therefore in the best interests of UMC Shareholders. An individual shareholder’s decision in relation to the Proposed Scheme may be influenced by his or her particular circumstances. If in doubt the shareholder should consult an independent adviser.

This opinion should be read in conjunction with our detailed report which sets out our scope and findings.

Yours faithfully

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Nicki Ivory Director

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Johan Duivenvoorde Director

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Contents

Contents	Contents
Financial Services Guide		2
1	Terms of the Proposed Scheme	11
1.1	Summary	11
1.2	BHP Billiton’s intentions	11
1.3	Key conditions of the Proposed Scheme	11
2	Scope of the report	12
2.1	Purpose of the report	12
2.2	Basis of evaluation	12
2.3	Limitations and reliance on information	14
3	Iron ore industry	15
3.1	Overview	15
3.2	Products	15
3.3	Australian iron ore industry	15
3.4	Demand	16
3.5	Supply	17
3.6	Pricing	19
4	Profile of UMC	21
4.1	Company history	21
4.2	Legal structure	21
4.3	Pilbara Iron Ore Project	22
4.4	Management and personnel	23
4.5	Competitive position of UMC	24
4.6	Capital structure and shareholders	25
4.7	Share price performance	25
4.8	Financial performance	26
4.9	Financial position	27
5	Valuation methodology	28
5.1	Valuation methodologies	28
5.2	Selection of valuation methodologies	29
5.3	Appointment and role of the technical expert	29

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6	Future cash flows	30
6.1	Financial model	30
6.2	Development options	30
6.3	Key assumptions	32
7	Valuation of UMC	37
7.1	Valuation of UMC	37
7.2	Net assets on a going concern basis	37
7.3	The Railway Deposit	39
7.4	Surplus assets	43
7.5	Net debt	43
7.6	Number of shares	43
7.7	Valuation summary	44
7.8	Cross check: Industry rule of thumb	44
7.9	Cross check: Analysis of recent share trading	47
8	Evaluation and conclusion	48
8.1	Fairness	48
8.2	Reasonableness	48
Appendices
Appendix 1: Glossary		52
Appendix 2: Discount rate		55
Appendix 3: Comparable companies		62
Appendix 4: Comparable transactions		64
Appendix 5: Independent technical expert’s report		65
Appendix 6: Sources of information		93
Appendix 7: Qualifications, declarations and consents		94

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1 Terms of the Proposed Scheme

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1.1 Summary

On 16 October 2009 the Directors of UMC announced a proposal under which BHP Billiton would acquire all of the issued shares in UMC through a scheme of arrangement. UMC and BHP Billiton have entered into the MIA to implement the Proposed Scheme. UMC’s principal asset is the Pilbara Iron Ore Project located in the Pilbara region of Western Australia adjacent to Mining Area C.

BHP Billiton will offer UMC Shareholders cash consideration of AUD1.30 per share.

1.2 BHP Billiton’s intentions

BHP Billiton’s intentions are detailed in the Scheme Booklet.

1.3 Key conditions of the Proposed Scheme

The Proposed Scheme is subject to a number of conditions precedent, the most significant being:

• Receipt of necessary government agency approvals and no court or regulatory authority taking steps to prevent or restrain the Proposed Scheme

• Approval of the Proposed Scheme by UMC Shareholders and the court

• All outstanding UMC options are acquired by BHP Billiton

• The independent expert concludes that the Proposed Scheme is in the best interests of UMC Shareholders

• No “Prescribed Event” or “Material Adverse Change” occurs

• No third party to any material agreement or instrument to which UMC or its subsidiaries are parties, exercises any of its rights under a change of control provision in those agreements or instruments

• The net working capital of UMC remains greater than nil

• UMC agrees to enter into an arrangement to restructure its assets, such that on the effective date it only holds the assets relating to the Pilbara Iron Ore Project, the United Iron tenements and the shares and options in Phosphate Australia

• The MIA not being terminated

• No information arising up until 7 December 2009 which results, or would be reasonably likely to result, in a material adverse change

• UMC complies with any obligations under the arrangements entered into under the Proposed CRM Placement, and UMC not having any outstanding obligations under the Proposed CRM Placement other than confidentiality.

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2 Scope of the report

2.1 Purpose of the report

Section 411 of the Corporation Act 2001 (Section 411) regulates schemes of arrangement between companies and their shareholders. Part 3 prescribes the information to be provided to shareholders in relation to schemes of arrangement.

Whilst an independent expert’s report in respect of the Proposed Scheme is not required to meet any statutory obligations, the Directors have requested that Deloitte provide a report advising whether, in our opinion, the Proposed Scheme is in the best interests of UMC Shareholders. This report has been prepared in a manner consistent with Part 3 to assist UMC Shareholders in their consideration of the Proposed Scheme.

This report is to be included in the Scheme Booklet to be sent to UMC Shareholders and has been prepared for the exclusive purpose of assisting UMC Shareholders in their consideration of the Proposed Scheme. We are not responsible to you, or anyone else, whether for our negligence or otherwise, if the report is used by any other person for any other purpose.

2.2 Basis of evaluation

2.2.1 Guidance

Schemes of arrangement can include many different types of transactions, including being used as an alternative to a Chapter 6 takeover bid. The basis of evaluation selected by the expert must be appropriate for the nature of each specific transaction.

Section 640 of the Corporation Act 2001 (Section 640) requires an independent expert’s report in connection with a takeover offer to state whether, in the expert’s opinion, the takeover offer is fair and reasonable. Where the scheme of arrangement has the same effect as a takeover, the form of analysis used by the expert should be substantially the same as for a takeover bid, however, the opinion reached should be whether the proposed scheme is ‘in the best interests of the members of the company’. Accordingly, if an expert were to conclude that a proposal was ‘fair and reasonable’ if it was in the form of a takeover bid, the report will also be able to conclude that the proposed scheme is in the best interests of the members of the company.

In our determination as to whether the Proposed Scheme is fair and reasonable and therefore in the best interests of the members of the company, we have had regard to common market practice and RG 111 issued by ASIC in relation to the content of independent expert’s reports.

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RG 111

This regulatory guide provides guidance in relation to the content of independent expert’s reports prepared for transactions under Chapters 5, 6 and 6A of the Corporations Act, in relation to:

• Takeover bids

• Schemes of arrangement

• Compulsory acquisitions or buy-outs

• Acquisitions approved by security holders under item 7 of s611

• Selective capital reductions

• Related party transactions

• Transactions with persons in a position of influence

• Demergers and demutualisations of financial institutions

• Buy-backs.

RG 111 refers to a ‘control transaction’ as being the acquisition (or increase) of a controlling stake in a company that could be achieved, for example, by way of a takeover offer, scheme of arrangement, approval of an issue of shares using item 7 of s611, a selective capital reduction or selective buy back under Ch 2J.

In respect of control transactions, under RG 111 an offer implemented through a scheme of arrangement is:

• Fair, when the consideration is equal to or greater than the value of the shares subject to the Proposed Scheme. The comparison must be made assuming 100% ownership of the company, which is the subject of the Proposed Scheme

• Reasonable, if it is fair, or despite not being fair, there are sufficient reasons for UMC Shareholders to vote in favour of the Proposed Scheme, in the absence of a higher offer.

To assess whether the Proposed Scheme is in the best interests of UMC Shareholders, we have adopted the tests of whether the Proposed Scheme is either fair and reasonable, not fair but reasonable, or neither fair nor reasonable, as set out in RG 111.

2.2.2 Fairness

RG 111 defines an offer as being fair if the value of the offer price is equal to or greater than the value of the securities the subject of the offer. The comparison must be made assuming 100% ownership of the target company.

Accordingly we have assessed whether the Proposed Scheme is fair by comparing the value of a share in UMC with the consideration of AUD1.30 being offered by BHP Billiton.

The UMC shares have been valued at fair market value, which we have defined as the amount at which the shares would be expected to change hands between a knowledgeable willing buyer and a knowledgeable willing seller, neither of whom is under any compulsion to buy or sell. Special purchasers may be willing to pay higher prices to reduce or eliminate competition, to ensure a source of material supply or sales, or to achieve cost savings or other synergies arising on business combinations, which could only be enjoyed by the special purchaser. Our valuation of a share in UMC has not been premised on the existence of a special purchaser.

We have assessed the value of each UMC share by estimating the current value of UMC on a control basis and dividing this value by the number of shares on issue.

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2.2.3 Reasonableness

RG 111 considers an offer implemented through a scheme of arrangement in respect of a control transaction, to be reasonable if either:

• The offer is fair

• Despite not being fair, there are sufficient reasons for shareholders to vote in favour of the Proposed Scheme, in the absence of a higher offer.

In addition to determining whether the Proposed Scheme is fair, we have considered the following factors to assess the reasonableness of the Proposed Scheme:

• Likely market price of UMC shares if the Proposed Scheme fails

• Special value of UMC to BHP Billiton

• Proposed Scheme provides certainty to UMC Shareholders

• Possibility of a superior proposal emerging.

2.2.4 Individual circumstances

We have evaluated the Proposed Scheme for UMC Shareholders as a whole and have not considered the effect of the Proposed Scheme on the particular circumstances of individual shareholders. Due to their particular circumstances, individual shareholders may place a different emphasis on various aspects of the Proposed Scheme from the one adopted in this report. Accordingly, UMC Shareholders may reach different conclusions to ours on whether the Proposed Scheme is fair and reasonable and therefore in the best interests of UMC Shareholders. If in doubt shareholders should consult an independent adviser.

2.3 Limitations and reliance on information

The opinion of Deloitte is based on economic, market and other conditions prevailing at the date of this report. Such conditions can change significantly over relatively short periods of time. This report should be read in conjunction with the declarations outlined in Appendix 7.

This engagement has been conducted in accordance with professional standard APES 225 Valuation Services issued by the Accounting Professional and Ethical Standards Board Limited (APESB).

Our procedures and enquiries do not include verification work nor constitute an audit or a review engagement in accordance with standards issued by the Auditing and Assurance Standards Board (AUASB).

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3 Iron ore industry

3.1 Overview

Iron ore is found in its raw form as hematite, magnetite, goethite, limonite, itabirite, pisolite and taconite ores. Hematite and magnetite are normally used in steel making, with hematite being preferred due to its higher iron content as ore in situ. Lower grade hematite and magnetite ores generally require a greater amount of beneficiation, usually in the form of crushing, milling and liquid separation.

The majority of the world’s high grade iron ore resources (greater than 60% iron content) are hematite deposits, which either require a small amount of beneficiation or can be fed directly into blast furnaces. The majority of ore currently exported by Australia from the Pilbara region in WA is high grade hematite direct shipping ore (DSO), which only requires crushing and screening. There are also a number of large high grade hematite deposits in Brazil.

Magnetite ores are generally of a lower grade (between 25% to 40% iron content) and require beneficiation involving crushing, milling and magnetic separation. Magnetically beneficiated ore can be pelletised for use as a high grade raw material in the steel making process.

The main impurities found in naturally occurring magnetite and hematite resources are silica (SiO2), alumina (Al2O3), sulphur (S) and phosphorous (P). The level of these impurities is one of the main determinants of whether an iron ore resource is commercially viable. High levels of moisture are also considered undesirable.

The productivity of blast furnaces is affected by the chemical composition of the ore, such as iron content and levels of impurities. Steelmakers are willing to pay a premium for high grade ore with low impurities.

The geological features of each ore deposit affect mineability and production costs, which are higher where ore bodies are deeper (requiring higher stripping ratios) or where ore bodies are below the water table.

3.2 Products

There are three principal types of iron ore products – fines, lump and pellets. The demand for these products is affected by availability, price differentials and blast furnace requirements.

Although the cost of production of fines and lump ores is similar, lump ores are normally priced at a premium to fines. This is because fines must be sintered by the steel mill before they can be added to the blast furnace. Sintering improves the permeability of the furnace feed stock and prevents the loss of fines. Demand for fines has been increasing in recent years as Chinese steel mills, in particular, have invested in significant sintering and pelletising capacity.

Lump ore is generally considered to be the most desirable source of iron ore for steel production as no pre-smelter processing is required.

The level of impurities is a growing issue for steelmakers as high grade, low impurity ore resources are being depleted. Steel makers are able to reduce the average impurity of ores going into blast furnaces by blending ores with different characteristics.

3.3 Australian iron ore industry

Iron ore is mainly produced in Australia, Brazil, China and India. The main markets for iron ore are the steel producing regions of Europe, Asia and North America. Australia, Brazil and India are the major iron ore exporting countries. China uses most of its iron ore production for domestic steel production.

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The Pilbara region of Western Australia is the primary iron ore producing region in Australia. The four main types of hematite ores mined in the Pilbara are as follows:

• Brockman ore, which can be further classified as low phosphorous or high phosphorous Brockman ore

• Marra Mamba ore

• Detrital iron deposits

• Channel iron deposits, also known as pisolite, which is a mixture of hematite and goethite.

Iron ore mined in the Pilbara is shipped from three ports, Dampier, Cape Lambert and Port Hedland, predominantly to Asian customers. The Dampier and Port Hedland ports are owned by the State Government of Western Australia (State Government). Rio Tinto has operations at Dampier and Cape Lambert. Hamersley Iron Pty Ltd, a subsidiary of Rio Tinto, operates the East Intercourse and Parker Point berths and owns the port infrastructure facilities at Dampier. Robe River Iron Associates (Robe River), an unincorporated joint venture which is 53% owned by Rio Tinto, owns and operates the Cape Lambert port facilities. BHP Billiton and FMG operate out of Port Hedland and own their own port infrastructure facilities, which include berths at the port.

The State Government has acknowledged that the three existing ports will not meet the forecast demand for export facilities over the medium to long term and that an alternative port or an expansion of existing port facilities is required in the Pilbara.

Port Hedland Port Authority is currently developing the Utah Point multi-user berth at Port Hedland, which is scheduled for completion in September 2010 providing 18 Mtpa of capacity for junior mining companies in the Pilbara. This is expected to be further augmented by an additional 50 Mtpa of capacity from the South Western Creek development, scheduled for completion in 2013.

The current rail infrastructure in the Pilbara is owned and operated by Hamersley Iron, Robe River, BHP Billiton and FMG. The distance from the mines to the ports in the Pilbara requires significant investment in rail infrastructure.

FMG is currently in dispute with Rio Tinto and BHP Billiton regarding third party access to their Pilbara rail networks. In August 2008, the National Competition Council recommended that the rail services of Rio Tinto and BHP Billiton for the Robe, Hamersley and Goldsworthy railway lines be declared open to third party access. This recommendation was accepted by the Federal Treasurer in October 2008. In November 2008, Rio Tinto and BHP Billiton applied to the Australian Competition Tribunal for a review of that decision. A hearing on the matter is currently underway and a decision is expected in 2010.

A new mining project requires a range of State Government approvals including native title, heritage and environmental approvals and a mining lease approval from the State Government. A lead time of several years is generally required to obtain these approvals.

3.4 Demand

In recent years the global iron ore market has experienced rapid growth. Due to the impact of the recent global financial crisis on global construction and manufacturing activity, which is the primary user of steel, demand for steel has weakened over the first half of 2009 leading to a reduction in the demand for iron ore.

Reduced steel consumption in the United States, European Union and Japan, combined with slowing economic growth in China has created significant uncertainty surrounding the short term demand for iron ore, which is dependent on the speed of the anticipated global economic recovery.

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Medium to long term demand for iron ore is expected to strengthen, supported by government funded infrastructure development particularly in China, India and the United States and improving market sentiment increasing demand for steel intensive consumer goods. According to the Australian Bureau of Agricultural and Resource Economics (ABARE), global steel consumption is forecast to decrease from 1,347 million tonnes in 2008 to 1,223 million tonnes in 2009 before increasing to 1,302 million tonnes in 2010.

Chinese steel consumption is forecast to increase from 452 million tonnes in 2008 to 479 million tonnes in 2009 and 522 million tonnes in 2010 supported by government funded infrastructure development and subsidies for consumer goods.

The figure below shows historical and forecast global steel consumption by region.

Figure 1: Global steel consumption

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1400
Actual Forecast
1200
1000
800
600
400
200
0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
China European Union United States Japan Korea India Other
Steel Consumption (Mt)
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Source: ABARE

3.5 Supply

Global iron ore production has increased from 932 million tonnes in 2001 to 1,610 million tonnes in 2008, primarily due to the economic growth, urbanisation and industrialisation of China.

Of the total global iron ore production in 2008 of 1,610 million tonnes, 887 million tonnes was exported and the remainder used for domestic consumption.

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The figure below shows historical and forecast global iron ore exports.

Figure 2: Global iron ore exports

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1400
Actual Forecast
1200
1000
800
600
400
200
0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
China European Union United States Japan Korea India Other
Steel Consumption (Mt)
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Source: ABARE

As shown in Figure 2 above, while China and India are significant producers of iron ore, they are not significant exporters of iron ore.

Due to the low average grade of Chinese ore, this production is highly sensitive to changes in iron ore prices. Recent decreases in iron ore spot prices have resulted in significant reductions in iron ore production in China and India. As the spot price increases, higher cost production in China and India is expected to return to production.

Iron ore produced by BHP Billiton and Rio Tinto from Australia and Vale SA (Vale) from Brazil, represents the majority of seaborne traded iron ore on an international basis.

As shown in Figure 4, most of the future increase in global iron ore exports is forecast to come from Brazil and Australia. This increase is expected to be delivered primarily through significant investment in new capacity by the three largest global producers, BHP Billiton, Rio Tinto and Vale. However, due to the current volatility in global financial and commodity markets, a number of previously announced expansion plans have been delayed or cancelled. Nonetheless expansion plans are in many cases still being progressed, although at a slower pace, as iron ore producers seek to position themselves for when the growth in iron ore demand returns.

In June 2009, BHP Billiton and Rio Tinto announced a proposed iron ore production joint venture encompassing their respective Pilbara iron ore operations. Formation of the joint venture is expected to be completed in mid 2010.

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3.6 Pricing

Iron ore sold in the export market is primarily sold through long term contracts, many of which have a term of between 8 and 25 years. These contracts prescribe the volume of iron ore sold but prices are generally based on an annually negotiated benchmark price.

The benchmark price is set through separate negotiations between one of the major producers (Rio Tinto, BHP Billiton and Vale) and global steel mills. Traditionally once one of the major producers agreed a price with an individual (or consortium) steel mill, this price became the benchmark price for the next Japanese financial year (JFY) and was replicated throughout the industry. The JFY runs from 1 April to 31 March. If the price is not set by 1 April then an interim pricing level is agreed until the new benchmark price is negotiated. However, the 2009 JFY price negotiations saw a move away from the traditional system with individual producers negotiating their own price.

In May 2009, Rio Tinto settled on 2009 JFY benchmark prices with Japanese, Korean and Taiwanese customers at a 33% discount to 2008 JFY prices for fines products and a 44% discount for lump products. This was the first decrease in the negotiated benchmark iron ore price after six consecutive years of price increases.

In August 2009, FMG settled contract prices with Baoshan Iron and Steel Co. Ltd (Baosteel) and the China Iron and Steel Association at a 35% discount to 2008 JFY prices for fines products and a 50% discount for lump products.

No agreement has been reached between the major producers and the Chinese steel industry in relation to a benchmark iron ore price for JFY 2009.

The differential between the cost of shipping iron ore to China from Australia and from Brazil has decreased from around US$50/t to US$60/t at the time of 2008 price negotiations to a current level of between US$15/t and US$20/t.

Given the significant uncertainty surrounding the 2009 JFY price negotiations, there has been discussion of changes to the current benchmark pricing system. Reportedly, BHP Billiton would prefer an index system which is linked to the spot market, while Rio Tinto would prefer a hybrid system incorporating benchmark, index and spot components. Vale is reported to favour the current benchmark pricing system. Movements in the spot price are also expected to influence 2010 JFY contract price negotiations.

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The following figures set out historical prices for lump and fines products.

Figure 3: Historical fines prices

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300.0
275.0
250.0
225.0
200.0
175.0
150.0
125.0
100.0
75.0
50.0
25.0
0.0
Apr-01 Apr-02 Apr-03 Apr-04 Apr-05 Apr-06 Apr-07 Apr-08 Apr-09 Apr-10
Contract prices Spot price
Source: Bloomberg, Deloitte analysis
Figure 4: Historical lump prices
250.0
225.0
200.0
175.0
150.0
125.0
100.0
75.0
50.0
25.0
0.0
Apr-01 Apr-02 Apr-03 Apr-04 Apr-05 Apr-06 Apr-07 Apr-08 Apr-09 Apr-10
Contract prices
Iron ore price (USc/dmtu)
Iron ore price (USc/dmtu)
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Source: Bloomberg, Deloitte analysis

Figure 4: Historical lump prices

Source: Bloomberg, Deloitte analysis

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4 Profile of UMC

UMC was incorporated in November 2003 and listed on the ASX in December 2004. The company is focussed on the development of the Pilbara Iron Ore Project in the Pilbara region of Western Australia.

4.1 Company history

An overview of the company history is provided in Figure 5 below.

Figure 5: Company history

• 2003 • Incorporated as Yorkton Resources NL in November 2003 2004 • Listed on the ASX as United Kimberly Diamonds NL 2006 • Announced acquisition of iron ore tenements in the Pilbara region of Western Australia

• • Commenced exploration of iron ore tenements in the Pilbara region of Western Australia

• • Name change to United Minerals Corporation NL

• 2007 • Kimberley Bauxite / Aluminium Refinery JV signed with Norsk Hydro in which Hydro acquired a 75% interest in all UMC bauxite tenements in the Kimberley region of Western Australia

• • Announced significant iron ore discovery which is now known as the Railway Deposit

• 2008 • Announced a 111 Mt inferred resource at the Railway Deposit 2009 • Announced a conditional AUD27.2m placement to CRM • Received conditional offer from BHP Billiton to acquire all the shares under a Scheme of Arrangement

• Restructure of UMC, which involves the termination of the bauxite and alumina joint venture, surrender or withdrawal from a number of UMC’s other exploration tenements and sale of other assets apart from the Pilbara Iron Ore Project, the United Iron tenements and shares and options in Phosphate Australia

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Source: UMC
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4.2 Legal structure

Figure 6 below sets out a simplified group structure for UMC.

Figure 6: UMC group structure

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United Minerals
Corporation NL
100% 100% 100% 100%
Australian Diamond
United Iron Pty Ltd Bauxite Australia Pty Ltd Ozwest Holdings Pty Ltd Australian Diamond
Resources Pty Ltd
Source: UMC
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United Iron holds a number of tenements, which are being retained and transferred to BHP Billiton.

Bauxite Australia Pty Ltd (Bauxite Australia) has surrendered, or is in the process of surrendering, its three tenement applications for exploration licences (ELA80/3733, ELA04/1573 and ELA04/1574) and has terminated the joint venture with Hydro Aluminium AS, which included the surrender of the joint venture tenements (ELA04/1760, ELA04/1761 and E04/1562). OzWest Holdings Pty Ltd (OzWest Holdings) and Australian Diamonds Resources Pty Ltd (Australian Diamonds Resources) are both dormant companies.

4.3 Pilbara Iron Ore Project

The Pilbara Iron Ore Project is located 330km south of Port Hedland in the Pilbara region of Western Australia and was first identified in October 2007 as part of tenements EL47/1429, EL47/1431 and EL47/1432 (the Tenements) which were acquired from DFD Rhodes Pty Ltd (DFD Rhodes) in October 2006. The Railway Deposit is located on EL47/1429.

The Tenements were initially part of the original Temporary Reserve TR70/3156 dating back to the Iron Ore (Mt Goldsworthy) Agreement Act 1964, which now forms the majority of Mining Area C (owned by the Mt Goldsworthy Joint Venture). It was a condition of the Iron Ore (Mt Goldsworthy) Agreement Act 1964 that 263km[2] be relinquished by the Mt Goldsworthy Joint Venture when the Area C mining lease was granted.

As shown in the figure below, the Railway Deposit is located in close proximity to three railway lines owned by Rio Tinto and BHP Billiton and five operating mines. The Great Northern Highway is located fifteen kilometres east of the Railway Deposit and provides road access to Port Hedland.

Figure 7: Railway Deposit location

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Source: UMC
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In October 2008, UMC completed a preliminary scoping study which identified a number of potential development options for the Railway Deposit. The preferred development option selected at the time of the scoping study was based on producing lump and fines products on site and delivering the products to one of the existing producer’s transport systems. In the past year UMC has extensively explored the various alternative development options.

The Proposed CRM Placement was announced on 8 September 2009. Under the terms of this conditional placement, UMC would issue 20 million shares at AUD1.35 per share together with 2 million attaching options (at an issue price of AUD0.10, exercise price of AUD1.35 and which expire on 30 September 2011) to raise AUD27.2 million. One of the conditions of the placement is finalisation of a 10 year 3 Mtpa off-take arrangement on commercial terms. This transaction was entered into when UMC still expected to receive access to port capacity at Utah Point and hence the development option contemplated at that stage was a 3 Mtpa mine development with road haulage to Utah Point. This option is no longer available at this stage as UMC was not able to obtain access to the capacity at Utah Point.

Based on drilling conducted in 2008 and 2009, the current JORC compliant resource estimate for the Railway Deposit is shown in the table below.

Table 2: Railway Deposit resource estimate

	Tonnes	Grade	Al2O3	SiO2	P
Category	(Mt)	(Fe%)	(%)	(%)	(%)
Indicated	100.7	60.3	2.6	3.7	0.07
Inferred	57.4	54.0	4.8	7.4	0.06
Total	158.1	58.0	3.4	5.1	0.06

Source: UMC announcement dated 21 September 2009

Note: 1. ProMet have estimated the inferred resource to be 41.1Mt with an Fe grade of 55.6% based on the assessment by Widenbar

4.4 Management and personnel

The directors and key management personnel for UMC are shown in the table below.

Table 3: Directors and management

Name	Title
Alan Birchmore	Non-Executive Chairman
Matthew Hogan	Executive Director / Chief Executive Officer
Barry Fehlberg	Executive Director - Exploration
David Craig	Non-Executive Director
Malcolm Randall	Non-Executive Director
Patrick Tan	Company Secretary / Chief Financial Officer

Source: UMC

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4.5 Competitive position of UMC

Table 4 below sets out the strengths, weaknesses, opportunities and threats (SWOT) for UMC.

Table 4: SWOT analysis

• Strengths Weaknesses

• • The Pilbara Iron Ore Project is located in the • Significant capital investment required to middle of the Pilbara region of Western Australia develop the project in close proximity to existing rail and road • Dependence on third party rail, port and power infrastructure infrastructure providers

• • The company has retained 100% ownership of the • Key government and environmental approvals Railway Deposit still to be obtained

• • High grade, low impurity resource identified • The company does not have a track record as a • Further exploration potential within existing developer of projects or a producer of iron ore tenements

• Experienced management team

• Threats Opportunities

• • Major mining and environmental approval • Potential to achieve synergies and/or secure process requirements funding by partnering with major players in

• • Uncertainty over project development dependent close proximity to the Railway Deposit on securing third party funding • Forecast rebound in demand for iron ore driven

• • primarily by demand from China

• Uncertainty over the company’s ability to access third party rail and port infrastructure

• Sensitivity of the project economics to changes in iron ore prices and foreign exchange rates

Source: Deloitte analysis

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4.6 Capital structure and shareholders

As at 10 September 2009, UMC had 155,112,330 ordinary shares on issue and 5,550,000 unlisted options (the Options).

The holders of the Options have each entered into an optionholder deed (Optionholder Deed) under which the optionholders have agreed not to exercise their Options and to transfer their unlisted options to BHP Billiton for a total consideration of approximately AUD2 million. However, the holders of the Options may exercise the Options if the UMC share price exceeds AUD1.30 or there is a competing offer for UMC shares.

UMC’s top 5 shareholders as at 30 October 2009 are listed in the table below.

Table 7: Top 5 shareholders

		% of total
	Number of	shares on
Shareholders	shares (m)	issue
HSBC Custody Nominees Aust Ltd	26.7	17.2
ANZ Nominees Ltd	9.9	6.4
National Nominees Ltd	9.7	6.2
Brispot Nominees Pty Ltd	9.0	5.8
Citicorp Nominees Pty Ltd	8.6	5.5
Total	63.9	41.1

Source: UMC

The top 5 shareholders account for 41.1% of UMC’s issued share capital as at 30 October 2009. Collectively, the Directors of UMC currently hold 8.8% of the company’s issued share capital.

4.7 Share price performance

A summary of UMC’s share price performance is provided in the table below.

Table 5: UMC’s quarterly share price information

Quarter end date	High (AUD)	Low (AUD)	Last Trade (AUD)	Volume (million)
31 March 2008	1.43	0.67	1.30	41.1
30 June 2008	2.60	1.02	2.55	48.5
30 September 2008	2.70	1.07	1.11	26.7
31 December 2008	1.16	0.36	0.42	25.1
31 March 2009	0.78	0.42	0.76	19.9
30 June 2009	1.24	0.72	0.82	57.0
30 September 2009	1.10	0.82	0.89	43.1

Source: Bloomberg

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The UMC share price has been volatile over the past two years. These share price movements and trading volumes are presented graphically in the figure below.

Figure 8: UMC share price and volume

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3.00 6,000,000
2.50 5,000,000
2.00 4,000,000
1.50 3,000,000
1.00 2,000,000
0.50 1,000,000
0.00 0
Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09
Volume Price
Source: Bloomberg
Share Volume
Share Price (AUD)
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4.8 Financial performance

The audited income statements of UMC for the periods ended 30 June 2007 (FY07), 30 June 2008 (FY08) and 30 June 2009 (FY09) are summarised in the table below.

Table 6: Financial performance

	FY07	FY08	FY09
	(AUD’000)	(AUD’000)	(AUD’000)
Earnings before interest, tax,	(3,025)	(7,336)	(10,849)
depreciation and amortisation
Depreciation and amortisation	(59)	(94)	(208)
Earnings before interest and tax	(3,084)	(7,429)	(11,058)
Net interest income	283	567	879
Loss before tax	(2,802)	(6,863)	(10,179)

Source: UMC Annual Reports for the years ended 30 June 2008 and 30 June 2009

Losses increased between FY07 and FY09 due to costs associated with increased exploration activity.

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4.9 Financial position

The audited balance sheets of UMC as at 30 June 2007, 30 June 2008 and 30 June 2009 are summarised in the table below.

Table 7: Financial position

	30 June 2007	30 June 2008	30 June 2009
	(AUD’000)	(AUD’000)	(AUD’000)
Cash and cash equivalents	7,552	17,094	9,874
Trade and other receivables	74	424	681
Other current assets	17	109	106
Total current assets	7,643	17,628	10,661
Trade and other receivables	117	179	192
Financial assets	-	-	2,189
Property, plant and equipment	183	502	719
Other non-current assets	2,100	1,650	1,230
Total non-current assets	2,399	2,330	4,330
Bank overdraft	-	-	49
Trade and other payables	89	1,231	1,654
Short-term provisions	41	61	153
Total current liabilities	130	1,292	1,856
Net assets	9,912	18,666	13,135

Source: UMC Annual Report for the years ended 30 June 2008 and 30 June 2009

Financial assets relate to 5 million shares and 5 million options in Phosphate Australia.

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5 Valuation methodology

5.1 Valuation methodologies

To estimate the fair market value of the shares in UMC we have considered common market practice and the valuation methodologies recommended by RG 111, which deals with the content of independent expert’s reports. These are discussed below.

5.1.1 Market based methods

Market based methods estimate a company’s fair market value by considering the market price of transactions in its securities or the market value of comparable companies. Market based methods include:

• Capitalisation of maintainable earnings

• Analysis of a company’s recent share trading history

• Industry specific methods.

The capitalisation of maintainable earnings method estimates fair market value based on the company’s future maintainable earnings and an appropriate earnings multiple. An appropriate earnings multiple is derived from market transactions involving comparable companies. The capitalisation of maintainable earnings method is appropriate where the company’s earnings are relatively stable.

The most recent security trading history provides evidence of the fair market value of the securities in a company where they are publicly traded in an informed and liquid market.

Industry specific methods estimate market value using rules of thumb for a particular industry. Generally rules of thumb provide less persuasive evidence of the market value of a company than other valuation methods because they may not account for company specific factors.

5.1.2 Discounted cash flow methods

Discounted cash flow methods estimate market value by discounting a company’s future cash flows to a net present value. These methods are appropriate where a projection of future cash flows can be made with a reasonable degree of confidence. Discounted cash flow methods are commonly used to value early stage companies or projects with a finite life.

5.1.3 Asset based methods

Asset based methods estimate the market value of a company’s securities based on the realisable value of its identifiable net assets. Asset based methods include:

• Orderly realisation of assets method

• Liquidation of assets method

• Net assets on a going concern basis.

The orderly realisation of assets method estimates fair market value by determining the amount that would be distributed to securityholders, after payment of all liabilities including realisation costs and taxation charges that arise, assuming the company is wound up in an orderly manner.

The liquidation method is similar to the orderly realisation of assets method except the liquidation method assumes the assets are sold in a shorter time frame. Since wind up or liquidation of the company may not be contemplated, these methods in their strictest form may not necessarily be appropriate. The net assets on a going concern basis method estimates the market values of the net assets of a company but does not take account of realisation costs.

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These asset based methods ignore the possibility that the company’s value could exceed the realisable value of its assets as they ignore the value of intangible assets such as customer lists, management, supply arrangements and goodwill. Asset based methods are appropriate when companies are not profitable, a significant proportion of a company’s assets are liquid, or for asset holding companies.

5.2 Selection of valuation methodologies

We are of the opinion that the most appropriate methodology to value UMC is the discounted cash flow method due to the following factors:

• UMC’s management and UBS have prepared long term cash flow forecasts

• The Railway Deposit has a finite life and thus it is not possible to use a capitalisation of maintainable earnings approach

• UMC is at an early stage in its development

• Significant capital expenditure will be required in the near future to develop the Railway Deposit.

We have considered the implied EV/tonne compared with the EV/tonne for comparable companies and observed in recent comparable transactions to provide additional evidence of the fair market value of a share in UMC. We have also considered recent share market trading activity in UMC shares.

5.3 Appointment and role of the technical expert

ProMet were engaged to assist Deloitte to assess the reasonableness of the geological, mining, processing, operating and capital cost assumptions used by UMC’s management and UBS to develop long term cash flow forecasts for three development options being considered for the Railway Deposit. ProMet’s report is included in Appendix 5.

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6 Future cash flows

6.1 Financial model

UMC has prepared a detailed financial model for the Railway Deposit (the Model). The Model includes projections of nominal, ungeared, post tax cash flows.

We have undertaken an analysis of the cash flow projections in the Model which included:

• Analysing the Model, including limited procedures regarding mathematical accuracy (but we have neither formally reviewed nor audited the Model)

• Analysing the reasonableness of assumptions such as production profile, capital expenditure, operating costs and royalties

• Holding discussions with UMC’s management regarding the preparation of the projections and their views regarding the assumptions on which the projections are based.

ProMet was engaged to provide a technical assessment of the reasonableness of the geological, mining, processing, operating and capital cost assumptions contained in the Model. The scope of their work was controlled by Deloitte. ProMet held discussions with UMC’s management and used information supplied by UMC.

Deloitte has made adjustments to the cash flows in the Model where it was considered appropriate. These adjustments included, but were not limited to timing, costs, volumes, pricing, exchange rates and discount rates.

Our work did not constitute an audit or review of the projections in accordance with the AUASB Standards and accordingly we do not express any opinion as to the reliability of the projections or the reasonableness of the underlying assumptions. However, nothing has come to our attention as a result of our analysis that suggests that the assumptions on which the projections are based have not been prepared on a reasonable basis.

Since projections relate to the future, they may be affected by unforeseen events and they depend, in part, on the effectiveness of management’s actions in implementing the projections. Accordingly, actual results are likely to be different from those projected because events and circumstances frequently do not occur as expected, and those differences may be material.

6.2 Development options

Based on our discussions with UMC’s management, we understand that UMC has analysed and modelled a wide variety of development options for the Railway Deposit, including rail haulage under access arrangements with infrastructure owners in the region, mine gate sales and road haulage to Port Hedland. A number of development scenarios were dismissed as not being economically feasible including:

• A stand-alone project: The Railway Deposit is not large enough to justify a stand-alone project with its own rail and port facilities

• Third party access to FMG’s rail infrastructure: FMG’s rail line is located 110 km away and the cost to build a spur line to this railway would not be justified based on the size of the Railway Deposit.

We have selected the following three scenarios to represent the most likely development options for the Railway Deposit, following consultation with UMC and ProMet.

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6.2.1 Scenario 1 - 3 Mtpa Road Haul

Scenario 1 assumes that production of 3 Mtpa from the Railway Deposit will be hauled to Port Hedland by road. This scenario assumes that production commences in 2013 at an initial rate of 1 Mtpa, increasing to 2 Mtpa in 2014 and 3 Mtpa in 2015, and continuing until 2033.

Mined material will be loaded on to road trains and hauled approximately 330 km along the Great Northern Highway to common user port facilities planned for development at South West Creek in Port Hedland. This scenario assumes that UMC can obtain capacity at the proposed 50 Mtpa South West Creek development, which is expected to be completed in 2013. We note that there are significant uncertainties surrounding UMC’s ability to obtain capacity at the South West Creek development.

6.2.2 Scenario 2 - 5 Mtpa Mine Gate Sale

Scenario 2 assumes that UMC will negotiate a mine gate sale with Rio Tinto under which production is hauled via a 6km rail loop to be constructed to link to Rio Tinto’s existing rail line where the material will be sold to Rio Tinto. This scenario assumes that production commences in 2011 at an initial rate of 1 Mtpa, increasing to 3 Mtpa in 2012 and 5 Mtpa in 2013, and continuing until 2024. This scenario assumes that the mine gate sales price is based on a cost plus arrangement with Rio Tinto. We note that there is significant uncertainty surrounding the terms and timing of reaching an acceptable mine gate sale agreement.

6.2.3 Scenario 3 - 5 Mtpa Rail Haul

Scenario 3 assumes that UMC will negotiate access to third party infrastructure. The Rio Tinto railway is the closest to the Railway Deposit (3 km) compared with FMG’s railway (110 km) and BHP Billiton’s railway (30 km). Scenario 3 assumes that UMC will negotiate access to Rio Tinto’s infrastructure, which is the lowest cost of the three options. The mined material will be hauled via a 6km rail loop to be constructed to link to Rio Tinto’s existing rail line from where it will be hauled on Rio Tinto’s railway to Rio Tinto’s port infrastructure at Cape Lambert.

This scenario assumes that production will commence in 2013 at an initial rate of 1 Mtpa, increasing to 3 Mtpa in 2014 and 5 Mtpa in 2015 and continuing until 2026. This scenario assumes that UMC will pay a third party access charge to Rio Tinto for use of its rail and port facilities.

We note that there is significant uncertainty surrounding UMC’s ability to negotiate access to Rio Tinto’s infrastructure within a reasonable timeframe as both BHP Billiton and Rio Tinto’s stated policy is not to allow third party access to their infrastructure. It is expected that the current legal process (refer to section 3.3) would need to completed and resolved in favour of open access before UMC might successfully apply for access to Rio Tinto’s infrastructure.

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6.3 Key assumptions

This main assumptions underlying the Model include:

• Production volumes (Section 6.3.1)

• Iron ore prices (Section 6.3.2)

• Capital expenditure (Section 6.3.3)

• Operating costs (Section 6.3.4)

• Royalties (Section 6.3.5)

• Inflation rate, income tax and foreign exchange rate (Section 6.3.6).

6.3.1 Production

The geology of the Railway Deposit’s ore body suggests that it continues into Mining Area C and therefore, a portion of the resource at either side of the tenement boundary is sterilised if UMC and the Mt Goldsworthy Joint Venture mine their respective tenements independently. UMC have estimated that approximately 20 Mt of ore at the Railway Deposit is sterilised and hence the Model has excluded this ore from the indicated resource estimate of 100 Mt for the three development scenarios.

Accordingly, production in the Model is based on the remaining indicated resource of 80 Mt of hematite at an average grade of 60.3%. Estimated conversion and recovery factors have been applied resulting in 60 Mt of saleable product over the life of the Model for all three development scenarios.

UMC have estimated a lump and fines product ratio of 35% lump and 65% fines.

The following figure illustrates the total production of ROM material over the life of the Model under each of the three development scenarios considered.

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----- Start of picture text -----

Figure 9 : Production under each of the development scenarios (calendar years)
----- End of picture text -----

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----- Start of picture text -----

6
5
4
3
2
1
0
Scenario 1 Scenario 2 Scenario 3
Source: Model
Lump and Fines Production (Mtpa)
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6.3.2 Sales prices

Iron ore prices

UMC intends to sell any future production from the Railway Deposit under Scenarios 1 and 3 to customers in Asia under long term agreements, with prices linked to benchmarks negotiated annually by the industry.

UMC expects to sell both a lump and a fines product. Lump products are generally settled at a premium with reference to the benchmark fines price as fines must be sintered before being used in the steel making process.

In considering appropriate sale prices, we have had regard to consensus brokers’ forecasts and current market trends.

Historical contract prices and consensus brokers’ forecasts for lump and fines are shown in the graph below:

Figure 10: Historical and forecast iron ore prices (real USc/dmtu)

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----- Start of picture text -----

250.0
Actual Forecast
225.0
200.0
175.0
150.0
125.0
100.0
75.0
50.0
25.0
0.0
Apr-01 Apr-02 Apr-03 Apr-04 Apr-05 Apr-06 Apr-07 Apr-08 Apr-09 Apr-10 Apr-11 Apr-12 Apr-13 Apr-14LT
Lump Fines
Iron ore price (USc/dmtu)
----- End of picture text -----

Source: Analyst reports, Bloomberg

We have adopted a long term real iron ore price assumption of United States dollar (USD) 0.75 per dry metric tonne unit (dmtu) for fines and USD0.95 per dmtu for lump based on our consideration of the above information and considering that production in Scenarios 1 and 3 does not commence until 2013.

ProMet have advised that, based on their technical review of the quality of the indicated and inferred resource, production from the Railway Deposit would be expected to sell at the benchmark Hamersley lump and fines unit prices.

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Mine gate sales price

Scenario 2 assumes production is sold to Rio Tinto under a mine gate sale arrangement. The mine gate sales price is based on a margin per tonne over the operating costs incurred up to delivery of the mined material for sale at the mine gate. This margin also takes into consideration the transport costs involved in delivering the mined material to Rio Tinto’s railway line.

The Iron Ore Holdings agreement with Rio Tinto is the only publicly announced precedent of mine gate sales in the Pilbara. However, the terms of this agreement have not been made public. We have estimated a margin of AUD8 to AUD10 per tonne based on discussions with UMC and ProMet and after analysing the margin that can be achieved from the sale of the ore.

The average margin available is approximately AUD43 per dry tonne (before transport and port costs) and approximately AUD17 per dry tonne (after estimated arms length transport and port costs), based on UMC’s estimated mine operating costs, the lump/fines ratio and our long term price and exchange rate assumptions. Our selection of the mine gate sales margin is based on our view that the balance of negotiating power would rest with Rio Tinto, which has no clear imperative to enter into a mine gate sale and is therefore likely to demand a significant share of the available margin.

6.3.3 Capital expenditure

The capital expenditure under each of the three development scenarios, following adjustment by ProMet where appropriate, is shown in the table below.

Table 8: Capital expenditure under each development scenario (real)

			Scenario 3
	Scenario 1	Scenario 2	Third Party
	Road Haul	Mine Gate Sale	Infrastructure
	(AUDm)	(AUDm)	(AUDm)
Mine development	21.0	36.3	36.3
Non-plant EPCM	-	6.0	6.0
Owner’s costs	-	6.0	6.0
Contingency	3.2	7.5	7.5
Miscellaneous	-	1.4	1.4
Total	24.2	57.2	57.2

Source: Model, ProMet

The three development scenarios assume that mining will be performed by a contractor under a build, own and operate (BOO) contracting model, the cost of which has been included in the operating costs for the Railway Deposit (refer to Section 6.3.4).

Mine development expenditure includes the cost of additional exploration activities, haul road, bore holes, construction and pre-strip activities.

In Scenario 1 and Scenario 3 we have assumed that UMC pays an access charge to use port facilities at South West Creek and Rio Tinto’s port facilities at Cape Lambert respectively (refer to Section 6.3.4). ProMet’s estimate of the access charge is based on the infrastructure owner recovering a reasonable return on its capital invested. We understand that users of the South West Creek development may be required to make a capital contribution rather than pay an access charge, however due to the limited public information available on such capital costs, a cost per tonne access charge provided by ProMet has been adopted instead. Port access costs are not incurred in Scenario 2, as UMC sells its ore at the mine gate to Rio Tinto.

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A contingency of 15% of forecast capital expenditure has been included based on advice from ProMet.

Sustaining capital expenditure to maintain the Railway Deposit has been included in operating costs.

6.3.4 Operating costs

Operating costs consist of drill, blast, load and haul, crushing and screening, road and rail transport, contractor capital repayment, port and support costs. The breakdown of the operating costs under each of the three development scenarios over the life of the Model is shown in the table below.

Table 9: Operating costs under each development scenario (real)

			Scenario 3
	Scenario 1	Scenario 2	Third Party
	Road Haul	Mine Gate Sale	Infrastructure
	(AUD/dry t)	(AUD/dry t)	(AUD/dry t)
Mining1	11.33	11.00	11.00
Processing	5.37	2.49	2.49
Other/train load/transport	0.20	0.35	0.08
Contingency (15%)	2.53	2.04	2.04
Transport to port	36.59	-	19.29
Port costs	6.74	-	6.74
Contractor BOO cost	2.55	6.38	6.38
Administration	1.00	0.80	0.80
Total	66.31	23.06	48.82

Source: Model, ProMet

Note: 1. Mining includes drill and blast and load and haul activities

In Scenario 1 transport is assumed to be 330 km road haulage to Port Hedland at approximately AUD0.10 per km. Scenarios 2 and 3 assume rail haulage via a 6 km rail loop (on Rio Tinto’s ore cars) to Rio Tinto’s existing railway. Scenario 3 includes a rail access charge for accessing Rio Tinto’s rail infrastructure and Scenario 1 and 3 include a port access charge for use of common user port facilities at South West Creek and Rio Tinto’s port facilities at Cape Lambert respectively.

The contractor’s BOO cost includes initial site development, camp establishment and construction of the ore processing plant, stacker and reclaimer and rail loop. The ore processing plant in Scenario 1 is based on the use of 2 semi-mobile units, while under Scenario 2 and 3 a 5 Mtpa fixed processing plant will be constructed. The BOO cost in Scenario 2 and 3 includes the construction of a stacker and reclaimer to comply with an expected requirement by Rio Tinto that all trains must be loaded within a 2 hour period. The rail loop is only included in Scenarios 2 and 3. These costs are based on quotes received by UMC from three contractors.

It is assumed that the contractor’s capital costs are amortised at 12% over 10 years. At the end of year 10 it is assumed that the contactor will need to replace the capital and therefore the same annual charge has been applied over the life of the Model in each development scenario.

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6.3.5 Royalties

Royalty payments include:

• WA government iron ore royalties of 7.5% of free on board (FOB) lump revenues and 5.625% of FOB fines revenues

• Tenement royalty of 1.50% of total FOB revenues payable to DFD Rhodes

• Estimated native title royalty of 0.50% of total FOB revenues.

6.3.6 Other

The following key economic assumptions have been adopted in the valuation of the Railway Deposit:

• We have assumed an inflation rate for Australia of 2.5% based on forecasts contained in the October 2009 Economist Intelligence Unit (EIU) country forecast for Australia. This is consistent with the midpoint of the Reserve Bank of Australia (RBA) target range of 2-3% per annum.

• We have assumed the company income tax rate of 30%

• In selecting an AUD/USD foreign exchange rate profile we have considered consensus brokers’ forecasts, the October 2009 EIU country forecast for Australia as well as the AUD/USD forward curve. Our selected profile is shown in the table below:

Table 10: Foreign exchange rates

2010	2011	2012	2013	LT
AUD/USD 0.88	0.85	0.82	0.79	0.75

Source: Bloomberg, brokers’ reports, EIU October 2009 country forecast

.

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7 Valuation of UMC

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7.1 Valuation of UMC

Our assessed fair market value range of a UMC share on a control basis is AUD0.55 to AUD0.80.

We estimated the fair market value of UMC using the net assets on a going concern basis method. We have cross checked the valuation using the following methods:

• Industry rule of thumb

• An analysis of recent share trading.

These are discussed below.

7.2 Net assets on a going concern basis

The value derived using the net assets on a going concern method is determined by estimating the fair market value of the assets and liabilities.

A key condition of the Proposed Scheme is that UMC restructures its operations such that, on the effective date, UMC will have no assets other than the Railway Deposit, certain additional exploration licences and shares and options in Phosphate Australia, which are held in escrow until 1 July 2010.

A summary of our estimates of the fair market value of assets and liabilities remaining in UMC after the restructure is presented in the following table.

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Table 11: Fair market value of UMC’s assets and liabilities

			Post
		Audited	restructure	Fair market value
		30 June 2009		Low	High
	Notes	(AUD’000)	(AUD’000)	(AUD’000)	(AUD’000)
Cash and cash equivalents	1	9,874	-	-	-
Trade and other receivables	1	681	-	-	-
Prepayments	1	106	-	-	-
Total current assets		10,661	-	-	-
Trade and other receivables	1	192	135	-	-
Financial assets	2	2,189	1,900	2,000	2,000
Property, plant and equipment	3	719	-	-	-
Other non-current assets	4, 6	1,230	1,000	80,000	125,000
Total non-current assets		4,330	3,035	82,000	127,000
Bank overdraft	5	49	-	-	-
Trade and other payables	5	1,654	-	-	-
Short-term provisions	5	153	-	-	-
Total current liabilities		1,856	-	-	-
Net assets		13,135	3,035	82,000	127,000

Source: UMC Annual Report for the year ended 30 June 2009, UMC management, Deloitte valuation analysis

Notes: Based on our discussions with UMC management, we understand that:

• (1) Cash and cash equivalents, collection of trade and other receivables and any refunds of insurance prepayments will be applied to pay existing liabilities as well as all costs associated with the Proposed Scheme and operating costs to the implementation date (Implementation Costs). Any remaining cash is expected to be immaterial. Trade and other receivables include a performance bond of AUD135,000 relating to the Railway Deposit. This is included in our valuation of the Railway Deposit

• (2) Financial assets relate to shares and options over shares held in Phosphate Australia, which are held in escrow until 1 July 2010 and are to remain post restructure. Refer to section 7.4 for the valuation of these shares and options

• (3) Property, plant and equipment is intended to be sold by way of auction in an arm’s length transaction. The proceeds of sale are conservatively estimated in the MIA implementation budget to be AUD50,000 but could be higher. This estimate takes into account the cost of an auction, the cost of dismantling and removing the camp infrastructure and the illiquid resale market, particularly in the timeframe available. The proceeds will be applied to pay Implementation Costs. BHP Billiton may at their discretion retain some of the fixed assets (such as camp infrastructure), however this has not yet been agreed

• (4) Other non-current assets comprise of:

• AUD130,000 - Interest in the Bauxite Australia (25%) / Hydro Aluminium AS (75%) joint venture. Both parties have agreed to terminate the joint venture and any resulting distribution to UMC will be applied to pay Implementation Costs. All tenements held by the joint venture (ELA04/1760, ELA04/1761 and E04/1562) have been surrendered

• AUD1.1 million - Capitalised exploration and acquisition costs relating to E47/1429 (acquisition cost AUD1 million) and M80/329 (carrying value AUD100,000). E47/1429 is to remain post restructure. M80/329 (Phillips Range) is jointly held by UMC (95%) and Ragged Range Pty Ltd (5%) and is not considered to have any resale value. It will therefore be surrendered and the carrying amount will be written off

• (5) All liabilities are to be paid in cash as and when they fall due

• (6) Bauxite Australia and UMC’s dormant subsidiaries, OzWest Holdings and Australian Diamonds Resources, which are reflected at zero carrying value in the balance sheet, are to be disposed of in arm’s length transactions for no consideration as part of the restructure. Bauxite Australia has surrendered, or is in the process of surrendering, its three tenement applications for exploration licences (ELA80/3733, ELA04/1573 and ELA04/1574).

All other tenements held by United Iron, which are reflected at zero carrying value in the balance sheet, will be retained.

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Based on the net assets on a going concern method, we have assessed a fair market value on a control basis of AUD82 million to AUD127 million for UMC.

7.3 The Railway Deposit

We estimated the fair market value of UMC’s 100% interest in the Railway Deposit using the discounted cash flow methodology.

The discounted cash flow method estimates market value by discounting an asset’s future cash flows to their net present value. To value the Railway Deposit using the discounted cash flow method requires the determination of the following:

• Future cash flows

• An appropriate discount rate to be applied to the cash flows

• An estimate of the terminal value

• The value of any surplus assets

• The level of net debt outstanding.

Our considerations on each of these factors are presented below.

7.3.1 Future cash flows

The future cash flows relied on for the purpose of the valuation have been described in Section 6.

7.3.2 Discount rates

The discount rate used to equate the future cash flows to present value reflects the risk adjusted rate of return demanded by a hypothetical investor. We have selected a nominal after tax discount rate in the range of 16.0% to 18.0% to discount the future cash flows of the Railway Deposit to their present value.

In selecting this range we considered the following:

• The rates of return for comparable listed Australian iron ore companies

• The specific business and financing risks associated with the Railway Deposit including the early stage nature of the asset, development risks, port and rail access risks and financing risks

• The debt to equity ratios of comparable listed Australian iron ore companies

• A reasonable cost of debt

• An appropriate target debt to equity ratio.

A detailed consideration of these matters is provided in Appendix 2.

7.3.3 Terminal value

The Model reflects the Railway Deposit’s indicated resources at the time of this report, adjusted for estimated conversion and recovery factors. The resource excludes 20 Mt of sterilised material that lies too close to the boundary of the tenement to be mined by UMC. The Railway Deposit also has additional inferred resources of 41.1 Mt. The extent to which these inferred resources can be converted into reserves depends on the outcomes of future exploration drilling, analysis of the geology of the resources, the capacity of the plant and infrastructure and future iron ore prices. These resources therefore represent additional value for the Railway Deposit, which is not reflected in the discounted cash flow analysis.

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Due to the high levels of alumina in the additional inferred resources, which are above generally accepted industry levels, ProMet currently consider these additional resources to be unsaleable in their own right. Given potential processing technology advancements and the potential for additional resources to be identified within the Railway Deposit we have included these additional resources as a terminal value in the Model. This has been incorporated by extending the discounted cash flow analysis to model the additional tonnes based on the average free cash flow profile over the life of the Model less rehabilitation costs under each of the development scenarios.

The discounted cash flow was extended for a period of 15 years under Scenario 1 and 9 years under Scenarios 2 and 3. The average free cash flow profile assumes that the Railway Deposit is operating within sustainable levels of production, operating and capital costs, working capital and taxation.

7.3.4 Valuation summary

Our range of values for the Railway Deposit under each of the three development scenarios is summarised below.

Table 12: Summary – discounted cash flow method

			Low value	High value
			18% (AUDm)	16% (AUDm)
Scenario	1		(93)	(109)
Scenario	2	- AUD8/t	70	85
Scenario	2	– AUD10/t	98	118
Scenario	3		103	130

Source: Deloitte Analysis

Note: 1. Due to the free cash flow in each year under Scenario 1 being negative, an increase in the discount rate has the effect of increasing the net present value under this scenario.

The above values are highly sensitive to the discount rate, iron ore prices and timing assumed in the discounted cash flow valuation of the Railway Deposit.

The sensitivity of the value of the Railway Deposit under each of the three development scenarios to changes in the discount rate is summarised in the table below

Table 13: Sensitivity to changes in the discount rate (AUDm)

Discount rate	15.0%	16.0%	17.0%	18.0%	19.0%
Scenario 1	(118)	(109)	(100)	(93)	(86)
Scenario 2 - AUD8/t	94	85	77	70	63
Scenario 2 - AUD10/t	130	118	107	98	90
Scenario 3	147	130	116	103	92

Source: Deloitte Analysis

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The sensitivity of the mid-point value of the Railway Deposit to a delay in the start date of production under each of the development scenarios is summarised in the table below.

Table 14: Sensitivity to changes in the start date (AUDm)

Start date	Base	+ 1 yr	+ 2 yrs	+ 3 yrs	+ 4 yrs
Scenario 1	(100)	(85)	(74)	(65)	(56)
Scenario 2 - AUD8/t	77	69	62	56	50
Scenario 2 - AUD10/t	107	96	85	76	68
Scenario 3	116	105	93	82	73

Source: Deloitte Analysis

The sensitivity of the mid-point value of the Railway Deposit under Scenarios 1 and 3 to changes in the iron ore price is summarised in the table below.

Table 15: Sensitivity to changes in iron ore pricing assumptions (AUDm)

Iron ore pricing	- 10.0%	- 5.0%	Base	+ 5.0%	+ 10.0%
Scenario 1	(172)	(136)	(100)	(64)	(29)
Scenario 3	40	78	116	154	192

Source: Deloitte Analysis

The sensitivity of the value of the Railway Deposit under Scenario 2 to changes in the mine gate sale price is summarised in the table below.

Table 16: Sensitivity to changes in mine gate sales price (AUDm)

Mine gate sales
margin
(AUD / tonne)	6.0	8.0	10.0	12.0	14.0
Scenario 2	46	77	107	138	168

Source: Deloitte Analysis

The sensitivity of the value of the Railway Deposit under Scenario 3 to changes in the rail infrastructure access charge is summarised in the table below.

Table 17: Sensitivity to changes in the rail infrastructure access charge assumption (AUDm)

Infrastructure
access charge
(AUD / tonne)	17.29	18.29	19.29	20.29	21.29
Scenario 3	142	129	116	103	90

Source: Deloitte Analysis

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It is evident that Scenario 1 is not economically viable, even if access to South West Creek capacity can be negotiated. Scenario 3 may be viable if access to Rio Tinto’s infrastructure can be negotiated in the timeframe and at the costs we have modelled, but there are clearly significant risks attached to achieving this. It is therefore our opinion that the most viable stand-alone development option is to negotiate a mine gate sale with Rio Tinto (or BHP Billiton).

7.3.5 Proposed CRM Placement

The Proposed CRM Placement was announced on 8 September 2009 and, if it is completed, it will raise AUD27.2 million and result in a 10 year 3 Mtpa off-take agreement with CRM. A mine gate sale will no longer be possible if the Proposed CRM Placement goes ahead as the off-take agreement with CRM would preclude it.

The Proposed CRM Placement would not substantially reduce the development risks of the Railway Deposit as it provides funding only and no additional development solutions.

In our view, the only practically feasible development option available to UMC if the Proposed CRM placement proceeds is the 3 Mtpa road haulage option to the South West Creek port development. However, CRM would need to pay approximately 70% more than our assumed long term benchmark iron ore price in order to deliver a value outcome to UMC Shareholders equivalent to the Proposed Scheme i.e. a value of AUD1.30 per UMC share. This is an unlikely outcome.

We have therefore not made any adjustment to the value of the Railway Deposit to reflect the possibility of completing the Proposed CRM Placement.

7.3.6 Consideration of other purchasers

There are three potential purchasers of the Railway Deposit that have existing infrastructure in the Pilbara and should therefore be able to realise additional value over and above the stand-alone value in UMC’s hands, namely Rio Tinto, FMG and BHP Billiton. However, FMG’s rail infrastructure is approximately 110km away, and the cost of extending FMG’s railway this distance would suggest that FMG would not be able to extract significant additional value if it were to purchase the Railway Deposit.

Rio Tinto’s rail infrastructure is approximately 3kms away and BHP Billiton’s is 30kms away. If Rio Tinto and BHP Billiton were currently seeking additional high grade iron ore resources, they may attribute additional value to the Railway Deposit through the combination of a lower discount rate that would be applied to reflect the lower development and financing risks and the certainty surrounding rail and port access and costs.

However, Rio Tinto has sufficient reserves and resources for its production in the foreseeable future and hence it has little need to purchase the Railway Deposit at this stage. If the Railway Deposit’s ore body did not extend into Mining Area C, the same would likely apply to BHP Billiton as it also has sufficient reserves and resources in the foreseeable future.

It is therefore our view that there are no synergies available to multiple purchasers that should be reflected in the fair market value of UMC. There are however real synergies available for BHP Billiton due to the location of the ore body and it is our opinion that it is likely that this special value makes the current acquisition of UMC attractive to BHP Billiton.

7.3.7 Valuation summary of the Railway Deposit

Our total assessed value of the Railway Deposit is based on Scenarios 2 and 3. We have therefore assessed a value for the Railway Deposit of between AUD80 million and AUD125 million.

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7.4 Surplus assets

The restructure of UMC is one of the conditions precedent of the Proposed Scheme. The additional United Iron tenements have no material value, according to ProMet. Therefore, the only remaining surplus assets will be the 5 million shares and 5 million options in Phosphate Australia, which are held in escrow until 1 July 2010. We have valued the shares by marking them to market and applying a discount for lack of marketability of 5% to take account of the fact that the shares cannot be traded until 1 July 2010.

The 5 million Phosphate Australia options are plain vanilla American call options as they can be exercised at any time before the expiry date after the escrow period has ended. The options are escrowed until 1 July 2010, have an exercise price of AUD0.20 and an expiry date of 31 July 2012. We have used a Black-Scholes option pricing model to value these options.

Our valuation of the shares and options in Phosphate Australia is shown in the following table.

Table 18: Valuation of the shares in Phosphate Australia

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Phosphate Australia share price as at 11 November 2009 (AUD)	0.28
Number of shares held (m)	5.0
Value (AUDm)	1.4
Discount for lack of marketability (%)	5.0
Value of the shares in Phosphate Australia (AUDm)	1.3
Value of the options in Phosphate Australia (AUDm)	0.7
Total value of shares and options in Phosphate Australia (AUDm)	2.0

Source: Deloitte analysis

7.5 Net debt

The company will have no net debt following the restructure of UMC.

7.6 Number of shares

UMC had 155,112,330 shares and 5,550,000 Options on issue at the date of this report. BHP Billiton has entered into an Optionholder Deed with each of the UMC optionholders under which the optionholders have agreed not to exercise their Options and to transfer their Options to BHP Billiton for a total consideration of approximately AUD2 million. However, the holders of the Options may exercise the Options if the UMC share price exceeds AUD1.30 or there is a competing offer for UMC shares.

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7.7 Valuation summary

Our estimated value of a share in UMC on a control basis is shown in the table below.

Table 19: Control value of UMC

	Low value	High value
Value of the Railway Deposit	80	125
Phosphate Australia shares and options	2	2
Equity value (AUDm)	82	127
Number of shares	155,112,330	155,112,330
Equity value per share (AUD)	0.53	0.82

Source: Deloitte analysis

Based on the above, we have assessed an equity value range per UMC share on a control basis of between AUD0.55 and AUD0.80.

7.8 Cross check: Industry rule of thumb

Our estimated valuation range for the Railway Deposit of AUD80 million to AUD125 million implies an EV/tonne of contained Fe of AUD0.87 to AUD1.36 based on UMC’s contained Fe of 91.7 Mt at the time of this report.

We have compared the EV/tonne of contained Fe implied by our estimated valuation of UMC with the EV/tonne of contained Fe for comparable companies and transactions.

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The market valuation of listed companies provides evidence of an appropriate EV/tonne of contained Fe for UMC. The price of a listed company represents the market value of a minority equity interest in that company. We have compiled EV/tonne of contained Fe calculations for companies comparable to UMC, which are summarised in the following table.

Table 20: Comparable companies

	EV 1	Market capitalisation	Contained Fe 2	EV / tonne
Company	(AUD m)	(AUD m)	(Mt)	(AUD/t)
Aquila Resources Ltd3	1,786	1,868	369	4.8
BC Iron Ltd	71	83	48	1.5
Brockman Resources Ltd	167	267	610	0.3
FerrAus Ltd	95	110	98	1.0
Giralia Resources NL	107	174	71	1.5
Iron Ore Holdings Ltd	107	122	100	1.1
Talisman Mining Ltd	80	87	44	1.8
Average	345	387	191	1.2
Median	107	122	98	1.3
High	1,786	1,868	610	1.8
Low	71	83	44	0.3

Source: Bloomberg, Deloitte Analysis

Note:

1. EV is calculated as market capitalisation as at 2 November 2009 plus net debt (short and long term debt less cash) from the latest financial statements

2. Contained Fe is calculated as attributable share of JORC compliant resources inclusive of reserves multiplied by the grade of material

3. Aquila Resources also has significant interests in coal and manganese assets and therefore its EV/tonne is not truly comparable. Aquila Resources has been excluded from the average, median and high EV/tonne analysis on this basis

Specific details regarding the above companies are provided in Appendix 3.

The price achieved in mergers or acquisitions of comparable companies also provides evidence of an appropriate EV/tonne of contained Fe for UMC. The acquisition price of a company represents the market value of a controlling interest in that company.

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We have compiled merger and acquisition multiples for companies and assets most comparable to UMC. These companies and assets, together with the EV/tonne of contained Fe implied by the transactions, are summarised in the following table.

Table 21: Comparable transactions

				Interest
			Effective	acquired	Consideration	EV/
Company/ Asset	Acquirer	Location	date/ Status	(%)	AUDm	tonne
Hope Downs	Rio Tinto	Pilbara	01-Jul-05	50.0	4351	1.62
FMG	Leucadia	Pilbara	21-Aug-06	10.0	401	3.0
Iron Ore Holdings	ACE	Pilbara	20-Jul-07	19.9	6	1.0
Aquila3	Baosteel	Pilbara	Pending	15.0	286	5.2
FerrAus	CRM	Pilbara	Pending	12.0	13	1.1
Warwick Resources4	Atlas Iron	Pilbara	Pending	77.3	45	4.0
Average					198	2.7
Median					166	2.3
High					435	5.2
Low					6	1.0

Source: Mergermarket, company announcements

Note

1. Consideration taken as the average of the range of analyst estimates of between AUD400-465m

2. Based on non-JORC compliant resources statement

3. Aquila Resources also has significant interests in coal and manganese assets

4. Warwick Resources assets are primarily of an exploration nature

Specific details regarding the above comparable transactions are provided in Appendix 4.

In assessing the reasonableness of the implied multiples compared with the above transaction and comparable company multiples, we have also considered the following:

• The stage of development of the comparable companies or the target companies and assets

• Whether the companies have secured port access

• Those companies with mine gate sales or third party access arrangements

• The relative value of the transactions or the relative size of the comparable companies

• The quality of expected to be produced by each of the companies or assets

• The location of the relevant resources

• The timing of the transaction.

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The above analysis produces a wide range of multiples. The most relevant comparisons are the implied EVs/tonne of the non-producing members of the North West Iron Ore Alliance (Brockman Resources Limited (Brockman), FerrAus Limited (FerrAus) and BC Iron) and the implied EV/tonne of Iron Ore Holdings.

Iron Ore Holdings, which agreed a mine gate sale for 1.5 Mtpa with Rio Tinto in July 2008, has an EV/tonne of AUD1.10. BC Iron, which has negotiated third party access to FMG’s infrastructure in May 2009, has an EV/tonne of AUD1.50. Brockman has the lowest EV/tonne at AUD0.30 due to the low quality of its resource and FerrAus, which also recently announced a transaction with CRM, has an EV/tonne of AUD1.00. These implied EV/s/tonne are based on minority holding values.

An important factor to consider when comparing these companies is that, in contrast to UMC, the North West Iron Ore Alliance has been allocated 20 Mtpa at the proposed South West Creek development.

The implied EV/tonne for UMC on a control basis of AUD0.87 to AUD1.36 is within the range of observed EV/tonne values of the above comparable companies, other than Brockman.

7.9 Cross check: Analysis of recent share trading

A significant proportion of UMC’s shares were traded between 1 January 2009 and 4 September 2009, the last trading day prior to the Proposed CRM Placement (66%). This trading indicates a reasonable degree of liquidity, which supports the assumption that the share price of UMC leading up to the announcement of the Proposed CRM Placement and the Proposed Scheme represents an objective assessment of the value of UMC’s shares.

UMC’s share price ranged from AUD0.55 to AUD1.24 in the six months prior to the announcement of the Proposed CRM Placement. The share price on 4 September 2009 was AUD1.02 and the 4 week VWAP on 4 September 2009 was AUD0.95. The share price on 6 October 2009 was AUD0.92 and the 4 week VWAP on 6 October 2009 was AUD0.97.

The consideration offered under the Proposed Scheme represents an implied control premium of 37% and 34% over the 4 week VWAP on 4 September 2009 and 6 October 2009 respectively.

The UMC share price likely includes an expectation that the Railway Deposit will be acquired by BHP Billiton or Rio Tinto, or developed through a mine gate sale to one of these companies, given the proximity of the resource to their existing rail infrastructure and the quality of the ore. The share price may also include a possibility that UMC proves up additional resources on the tenements. We have not factored any such potential mineralisation into our discounted cash flow valuation of the Railway Deposit, based on comments made by UMC in the Quarterly Report for the period ending 30 September 2009 regarding limited additional potential mineralisation.

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8 Evaluation and conclusion

To assess whether the Proposed Scheme is in the best interests of UMC Shareholders, we have adopted the test of whether the Proposed Scheme is either fair and reasonable, not fair but reasonable, or neither fair nor reasonable, as set out in RG 111.

8.1 Fairness

RG 111 defines an offer implemented through a scheme of arrangement as fair, when the consideration is equal to or greater than the value of the shares subject to the Proposed Scheme. The comparison must be made assuming 100% ownership of the company, which is the subject of the Proposed Scheme.

Set out in the table below is a comparison of our assessment of the fair market value of a UMC share with the consideration offered by BHP Billiton.

Table 22: Evaluation of fairness

	Low (AUD)	High (AUD)
Assessed fair market value of a UMC share (Section 7)	0.55	0.80
Consideration offered	1.30	1.30

Source: Deloitte analysis

The consideration offered by BHP Billiton is above the range of our estimate of the fair market value of a UMC share. Accordingly it is our opinion that the Proposed Scheme is fair.

8.2 Reasonableness

In accordance with RG 111 an offer implemented through a scheme of arrangement is reasonable if it is fair. On this basis, in our opinion the Proposed Scheme is reasonable. We have also considered the following factors in assessing the reasonableness of the Proposed Scheme:

Likely market price of UMC’s shares if the Proposed Scheme fails

The consideration of AUD1.30 per share represents a premium of 27% to the closing price of AUD1.02 on 4 September 2009 (the last trading day before UMC shares were placed in a trading halt prior to the announcement of the Proposed CRM Placement on 8 September 2009) and a premium of 41% to the closing price of AUD0.92 on 6 October 2009 (the last trading day before UMC shares were placed in a trading halt prior to the announcement of the Proposed Scheme). It also represents a 37% premium to the VWAP of AUD0.95 for the 4 weeks up to 4 September 2009 and a 34% premium to the VWAP of AUD0.97 for the 4 weeks up to 6 October 2009.

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If the Proposed Scheme does not proceed, the UMC share price is likely to reduce to pre 6 October 2009 levels. It may, however, fall even further given that this report has resulted in the disclosure of significant additional information to the market about the development options available to UMC and the significant risks that exist in trying to negotiate an economically viable development option in a reasonable timeframe.

Special value of UMC to BHP Billiton

There are three potential purchasers of the Railway Deposit that have existing infrastructure in the Pilbara and should therefore be able to realise additional value over and above the stand-alone value in UMC’s hands, namely Rio Tinto, FMG and BHP Billiton. However, FMG’s rail infrastructure is approximately 110km away, and the cost of extending FMG’s railway this distance would suggest that FMG would not be able to extract significant additional value if it were to purchase the Railway Deposit.

Rio Tinto’s rail infrastructure is approximately 3kms away and BHP Billiton’s is approximately 30kms away. If Rio Tinto and BHP Billiton were currently seeking additional high grade iron ore resources, they may attribute additional value to the Railway Deposit through the combination of a lower discount rate that would be applied to reflect the lower development and financing risks and the certainty surrounding rail and port access and costs.

However, Rio Tinto has sufficient reserves and resources for its production in the foreseeable future and hence it has little need to purchase the Railway Deposit at this stage. If the Railway Deposit’s ore body did not extend into Mining Area C, the same would likely apply to BHP Billiton as it also has sufficient reserves and resources in the foreseeable future.

BHP Billiton’s rail infrastructure is approximately 30km from the Railway Deposit and the ore body of the Railway Deposit is located adjacent to Mining Area C, which is owned by the Mt Goldsworthy Joint Venture operated by BHP Billiton. The geology of the Railway Deposit strongly suggests that the high grade ore body continues into Mining Area C and therefore a portion of the resource at either side of the boundary cannot be mined due to geotechnical constraints (referred to as sterilised ore) if UMC and the Mt Goldsworthy Joint Venture mine their respective resources independently.

UMC estimates that approximately 20 Mt of UMC’s ore would be sterilised and it is likely that a similar amount of the Mt Goldsworthy Joint Venture’s ore would be sterilised. The sterilised ore could only be realised through a joint development. BHP Billiton, as operator of the Mt Goldsworthy Joint Venture, is therefore the only potential acquirer of UMC able to realise the value of approximately 40Mt of high grade ore that would be sterilised, and consequently it may be able to realise significant additional value from ownership of the Railway Deposit.

In our opinion, this special value to BHP Billiton makes the acquisition of UMC attractive to BHP Billiton, despite the fact that BHP Billiton has sufficient reserves and resources for its iron ore production in the foreseeable future.

Proposed Scheme provides certainty to UMC Shareholders

The Railway Deposit is not large enough to justify a stand-alone project with its own rail and port facilities. UMC has therefore explored various other development options including rail haulage under access arrangements with infrastructure owners in the region, a mine gate sale and road haulage to Port Hedland. A brief description of the key development risks associated with these options is set out below.

• A rail haulage development option is dependent on reaching an acceptable agreement with one of the rail infrastructure owners in the region, namely Rio Tinto, BHP Billiton or FMG. The only comparable third party infrastructure access agreement in the Pilbara is the BC Iron agreement with FMG, under which BC Iron negotiated access to FMG’s rail infrastructure in exchange for an undisclosed access charge and 50% of BC Iron’s resource. We have included in the Model assumed access to Rio Tinto’s infrastructure because FMG’s railway is too far away and a Rio Tinto railway is closest to the Railway Deposit. However, there is significant

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uncertainty surrounding UMC’s ability to negotiate access to Rio Tinto’s infrastructure within a reasonable timeframe and price as both BHP Billiton and Rio Tinto’s stated policy is not to allow third party access to their infrastructure. It is expected that the current legal process (refer to section 3.3) would need to be completed and resolved in favour of open access before UMC might successfully apply for access to Rio Tinto’s infrastructure

• Both road and rail haulage options are dependent on negotiating port access. The PHPA advised UMC in October 2009 that it has already allocated all of the currently approved 17.1 Mtpa long term capacity at the new Utah Point public use facility. A further 50 Mtpa is expected by 2013 at the South West Creek development, 20 Mtpa of which has been earmarked for the North West Iron Ore Alliance and other junior producers, with the remaining 30 Mtpa being taken by Hancock. Members of the North West Iron Ore Alliance collectively hope to ship 36 Mtpa by 2012 and hence it is uncertain whether UMC would be able to negotiate access to any of the South West Creek capacity. We are not aware of any other public use port facilities available or under consideration in the region. Inability to secure port access represents a significant risk to the economics and timing of the development of the Railway Deposit

• A mine gate sale is dependent on reaching an agreement on acceptable terms with another iron ore producer in the region. The Iron Ore Holdings agreement with Rio Tinto is the only publicly announced precedent of mine gate sales in the Pilbara. The terms and timing of reaching an acceptable mine gate sale agreement are highly uncertain.

Under the terms of the Proposed CRM Placement, UMC would issue 20 million shares at AUD1.35 per share together with 2 million attaching options (at an issue price of AUD0.10, exercise price of AUD1.35 and which expire on 30 September 2011) to raise AUD27.2 million. On finalisation of the Proposed CRM Placement, a fee equal to 3% of the total placement proceeds would be payable to RIM Capital Limited through the issue of new UMC shares. One of the conditions of the placement is finalisation of a 10 year 3 Mtpa off-take arrangement on commercial terms. This transaction was agreed when UMC still expected to receive access to port capacity at Utah Point and the development option contemplated at that time was a 3 Mtpa mine development with road haulage to Utah Point. This port option is no longer available.

In our opinion, the Proposed CRM Placement would not substantially reduce the development risks highlighted above as it provides funding only and no additional development solutions.

It is hypothetically possible for UMC’s Shareholders to wait for the Mt Goldsworthy Joint Venture to reach the point at which it would strongly desire the ore from the Railway Deposit. UMC could then agree to allow BHP Billiton to mine its ore body in exchange for a “royalty” type payment. This potential option is highly theoretical and provides no certainty in terms of timing or value to UMC Shareholders.

In the absence of the Proposed Scheme, it is likely that UMC would continue pursuing the above development options, however, the probability and timing of negotiating a suitable development option are highly uncertain and it is possible that no economic solution may be found in a reasonable timeframe.

The Proposed Scheme provides certainty to UMC shareholders by removing the development, foreign exchange, iron ore pricing, environmental and regulatory risks they currently face.

Possibility of a superior proposal emerging

UMC management, with the assistance of its financial advisor, UBS, has explored various alternative transactions over the past six months. Prior to the BHP Billiton proposal, the best available alternative transaction identified was the Proposed CRM Placement. The Proposed CRM Placement remains a possibility; however it remains conditional and there is no certainty that it could be completed if the Proposed Scheme fails. The Proposed CRM Placement does not enhance the prospects of negotiating a suitable development option and is therefore not considered a superior alternative to the Proposed Scheme.

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We note that no superior proposals have emerged since the announcement of the Proposed Scheme. In our opinion, a superior proposal is unlikely to emerge prior to the Scheme meeting.

Opinion

In our opinion, the Proposed Scheme is fair and reasonable to UMC Shareholders. It is therefore in the best interests of UMC Shareholders. An individual shareholder’s decision in relation to the Proposed Scheme may be influenced by his or her particular circumstances. If in doubt the shareholder should consult an independent adviser.

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Appendix 1: Glossary

Reference	Definition
ABARE	Australian Bureau of Agricultural and Resource Economics
ACE	Australian Capital Equity Pty Ltd
AFSL	Australian Financial Services Licence
AGSM	Australian Graduate School of Management
Al2O3	Alumina
APESB	Accounting Professional and Ethics Standards Board Limited
ASIC	Australian Securities and Investments Commission
ASX	Australian Securities Exchange
Aquila	Aquila Resources Limited
Atlas Iron	Atlas Iron Limited
AUASB	Auditing and Assurance Standards Board
AUD	Australian dollars
Australian Diamonds Resources	Australian Diamonds Resources Pty Ltd
β	beta
Baosteel	Baoshan Iron and Steel Co. Ltd
Bauxite Australia	Bauxite Australia Pty Ltd
BC Iron	BC Iron Limited
BHP Billiton	BHP Billiton Minerals Pty Ltd or BHP Billiton Limited
BOO	Build own and operate
Brockman	Brockman Resources Limited
CAPM	Capital Asset Pricing model
CRM	China Railway Materials Commercial Corporation Group
Damodaran	Aswath Damodaran
Deloitte	Deloitte Corporate Finance Pty Limited
DFD Rhodes	DFD Rhodes Pty Ltd
Directors	Directors of UMC
dmtu	Dry metric tonne unit
Domestic Index	ASX Accumulation All Ordinaries Index
DSO	Direct shipping ore
EIU	Economist Intelligence Unit
EL	Exploration License
EMRP	Equity Market Risk Premium
EV	Enterprise value
EV/tonne	EV per tonne of contained Fe
Fe	Iron
FerrAus	FerrAus Limited

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Reference	Definition
FMG	Fortescue Metals Group Ltd
FOS	Financial Ombudsmen Service
FOB	Free on board
FSG	Financial Services Guide
FY	Financial year
Giralia Resources	Giralia Resources NL
Hancock	Hancock Prospecting Pty Ltd
Implementation Costs	All costs associated with the Proposed Scheme and operating costs to the
	implementation date
Iron Ore Holdings	Iron Ore Holdings Limited
JFY	Japanese financial year
JORC	Joint Ore Reserves Committee
Kd	Cost of debt capital
Ke	Cost of equity capital
Kumba Resources	Kumba Resources Limited
km	Kilometres
Leucadia	Leucadia National Corporation
MIA	Merger Implementation Agreement
Model	Financial model used to estimate future cash flows of the Railway Deposit
Morningstar	Morningstar Inc
MSCI Index	Morgan Stanley Capital International Accumulation Index
Mt	Million tonnes
Mtpa	Million tonnes per annum
Options	Unlisted UMC options
Optionholder deed	Optionholder deed entered into between holders of the Options and BHP Billiton
OzWest Holdings	OzWest Holdings Pty Ltd
P	Phosphorus
Part 3	Part 3 of Schedule 8 of the Corporations Regulations 2001
Phosphate Australia	Phosphate Australia Limited
PHPA	Port Headland Port Authority
Pilbara Iron Ore Project	All tenements and applications held by United Iron Pty Ltd
ProMet	ProMet Engineers Pty Limited
Proposed CRM Placement	Conditional placement to and off-take arrangement with CRM
Proposed Scheme	BHP Billiton’s conditional offer to acquire all of the issued shares in UMC via a
	scheme of arrangement
Rf	Risk free rate of return
Rm	Expected return on the market portfolio
RailwayDeposit	Railwayiron ore deposit

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Reference	Definition
RBA	Reserve Bank of Australia
RG111	ASIC Regulatory Guide 111
Rio Tinto	Rio Tinto Limited
Robe River	Robe River Iron Associates
Scheme Booklet	Scheme booklet prepared by UMC containing the detailed terms of the Proposed
	Scheme
Section 411	Section 411 of the Corporations Act 2001
Section 640	Section 640 of the Corporations Act 2001
S	Sulphur
SiO2	Silica
State Government	State Government of Western Australia
Sterilised ore	The portion of the resource at either side of the boundary that cannot be mined due
	to geotechnical constraints
SWOT	Strengths, weaknesses, opportunities and threats
Talisman Mining	Talisman Mining Ltd
Tenements	Tenements EL47/1429, EL47/1431 and EL47/1432
UBS	UBS AG Australia branch
UMC Shareholders	Existing shareholders of UMC
UMC	United Minerals Corporation NL
United Iron	United Iron Pty Ltd
USD	United States dollar
Vale	Vale SA
VWAP	Volume weighted average price
WACC	Weighted average cost of capital
Warwick Resources	Warwick Resources Limited
Widenbar	Widenbar & Associates Pty Ltd

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Appendix 2: Discount rate

The discount rate used to equate the future cash flows to their present value reflects the risk adjusted rate of return demanded by a hypothetical investor for the asset or business being valued.

Selecting an appropriate discount rate is a matter of judgement having regard to relevant available market pricing data and the risks and circumstances specific to the asset or business being valued.

Whilst the discount rate is in practice normally estimated based on a fundamental ground up analysis using one of the available models for estimating the cost of capital (such as the Capital Asset Pricing Model (CAPM)), market participants often use less precise methods for determining the cost of capital such as hurdle rates or target internal rates of return and often do not distinguish between investment type or region or vary over economic cycles.

Since our definition of fair market value is premised on the estimated value that a knowledgeable willing buyer would attribute to the asset or business, our selection of an appropriate discount rate needs to consider that buyers incorporate other alternatives to the typical CAPM approach in estimating the cost of capital.

For ungeared cash flows, discount rates are determined based on the cost of an entity’s debt and equity weighted by the proportion of debt and equity used. This is commonly referred to as the weighted average cost of capital (WACC).

The WACC can be derived using the following formula:

The components of the formula are:

E D WACC = ( V * _Ke_ ) + ( _V_ _*Kd (1 − tc ) ) K _e = cost of equity capital K d = cost of debt t c = corporate tax rate E/V = proportion of enterprise funded by equity D/V = proportion of enterprise funded by debt

The adjustment of K d by (1- t c ) reflects the tax deductibility of interest payments on debt funding. The corporate tax rate has been assumed to be 30%, in line with the Australian corporate tax rate.

Cost of equity capital (K e )

The cost of equity, K e , is the rate of return that investors require to make an equity investment in a firm.

We have used the CAPM to estimate the K e for UMC. CAPM calculates the minimum rate of return that the company must earn on the equity-financed portion of its capital to leave the market price of its shares unchanged. The CAPM is the most widely accepted and used methodology for determining the cost of equity capital.

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The cost of equity capital under CAPM is determined using the following formula:

Ke = Rf + β ( Rm − Rf ) + a

The components of the formula are:

K e = required return on equity R f = the risk free rate of return Rm = the expected return on the market portfolio β = beta, the systematic risk of a stock α = specific company risk premium

Each of the components in the above equation is discussed below.

Risk free rate (R f

The risk free rate compensates the investor for the time value of money and the expected inflation rate over the investment period. The frequently adopted proxy for the risk free rate is the long-term government bond rate.

In determining Rf we have taken the trailing 5 day average for the 10-year Australian Government Bond with a zero coupon yield on 2 November 2009 of 5.7%. The 10-year bond rate is a widely used and accepted benchmark for the risk free rate in Australia. This rate represents a nominal rate and thus includes inflation.

Equity market risk premium (EMRP)

The EMRP (Rm – R f ) represents the risk associated with holding a market portfolio of investments, that is, the excess return a shareholder can expect to receive for the uncertainty of investing in equities as opposed to investing in a risk free alternative. The size of the EMRP is dictated by the risk aversion of investors – the lower (higher) an investor’s risk aversion, the smaller (larger) the equity risk premium.

The EMRP is not readily observable in the market and therefore represents an estimate based on available data. There are generally two main approaches used to estimate the EMRP, the historical approach and the prospective approach, neither of which is theoretically more correct or without limitations. The former approach relies on historical share market returns relative to the returns on a risk free security; the latter is a forward looking approach which derives an estimated EMRP based on current share market values and assumptions regarding future dividends and growth.

In evaluating the EMRP, we have considered both the historically observed and prospective estimates of EMRP.

Historical approach

The historical approach is applied by comparing the historical returns on equities against the returns on risk free assets such as Government bonds, or in some cases, Treasury bills. The historical EMRP has the benefit of being capable of estimation from reliable data; however, it is possible that historical returns achieved on stocks were different from those that were expected by investors when making investment decisions in the past and thus the use of historical market returns to estimate the EMRP would be inappropriate.

It is also likely that the EMRP is not constant over time as investors’ perceptions of the relative riskiness of investing in equities change. Investor perceptions will be influenced by several factors such as current economic conditions, inflation, interest rates and market trends. The historical risk premium assumes the EMRP is unaffected by any variation in these factors in the short to medium term.

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Historical estimates are sensitive to the following:

• The time period chosen for measuring the average

• The use of arithmetic or geometric averaging for historical data

• Selection of an appropriate benchmark risk free rate

• The impact of franking tax credits

• Exclusion or inclusion of extreme observations.

The EMRP is highly sensitive to the different choices associated with the measurement period, risk free rate and averaging approach used and as a result estimated of the EMRP can vary substantially.

We have considered the most recent studies undertaken by the Centre for Research in Finance at the Australian Graduate School of Management (AGSM), Morningstar Inc (Morningstar), ABN AMRO/London Business School and Aswath Damodaran (Damodaran). These studies generally calculate the EMRP to be in the range of 5% to 8%.

Prospective approach

The prospective approach is a forward looking approach that is current, market driven and does not rely on historical information. It attempts to estimate a forward looking premium based on either surveys or an implied premium approach.

The survey approach is based on investors, managers and academics providing their long term expectations of equity returns. Survey evidence suggests that the EMRP is generally expected to be in the range of 6% to 8%.

The implied approach is based on either expected future cash flows or observed bond default spreads and therefore changes over time as share prices, earnings, inflation and interest rates change. The implied premium may be calculated from the markets total capitalisation and the level of expected future earnings and growth.

Selected EMRP

We have considered both the historically observed EMRP and the prospective approaches as a guideline in determining the appropriate EMRP to use in this report. Australian studies on the historical risk premium approach generally indicate that the EMRP would be in the range of 5% to 8%.

Having considered the various approaches and their limitations, we consider an EMRP of 6.5% to be appropriate.

Beta estimate (β)

Description

The beta coefficient measures the systematic risk or non-diversifiable risk of a company in comparison to the market as a whole. Systematic risk, as separate from specific risk as discussed below, measures the extent to which the return on the business or investment is correlated to market returns. A beta of 1.0 indicates that an equity investor can expect to earn the market return (i.e. the risk free rate plus the EMRP) from this investment (assuming no specific risks). A beta of greater than one indicates greater market related risk than average (and therefore higher required returns), while a beta of less than one indicates less risk than average (and therefore lower required returns).

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Betas will primarily be affected by three factors which include:

• The degree of operating leverage employed by the firm in that companies with a relatively high fixed cost base will be more exposed to economic cycles and therefore have higher systematic risk compared to those with a more variable cost base

• The degree of financial leverage employed by a firm in that as additional debt is employed by a firm, equity investors will demand a higher return to compensate for the increased systematic risk associated with higher levels of debt

• Correlation of revenues and cash flows to economic cycles, in companies that are more exposed to economic cycles (such as retailers), will generally have higher levels of systemic risk (i.e. higher betas) relative to companies that are less exposed to economic cycles (such as regulated utilities).

The differences are related to the business risks associated with the industry.

The geared or equity beta can be estimated by regressing the returns of the business or investment against the returns of an index representing the market portfolio, over a reasonable time period. However, there are a number of issues that arise in measuring historical betas that can result in differences, sometimes significant, in the betas observed depending on the time period utilised, the benchmark index and the source of the beta estimate.

Market evidence

In estimating an appropriate beta for UMC we have considered the betas of listed companies that are comparable to UMC. These betas, which are presented below, have been calculated based on weekly returns, over a two year period, compared to the ASX Accumulation All Ordinaries Index (Domestic Index) and the global Morgan Stanley Capital International Accumulation Index (MSCI Index).

Table 23: Analysis of betas for listed companies with comparable operations to UMC

		Debt to	Domestic Index	Domestic Index	MSCI Index	MSCI Index
	Enterprise	enterprise
	value 1	value	Levered	Unlevered	Levered	Unlevered
Company name	(AUD million)	(%)	Beta	Beta	Beta	Beta
UMC2	148	-10	1.98	1.98	1.76	1.76
UMC3	131	-9	1.82	1.82	1.66	1.66
Aquila Resources Ltd	1,786	-11	1.85	1.85	1.70	1.70
BC Iron Ltd	71	-24	1.76	1.76	1.11	1.11
Brockman Resources Ltd	167	-45	1.35	1.35	1.44	1.44
FerrAus Ltd	95	-25	2.34	2.34	2.02	2.02
Giralia Resources NL	107	-56	1.85	1.85	1.55	1.55
Iron Ore Holdings Ltd	107	-11	1.71	1.71	1.24	1.24
Talisman Mining Ltd	80	-30	1.27	1.27	1.12	1.12
Average	345	-29	1.73	1.73	1.45	1.45
Median	107	-25	1.76	1.76	1.44	1.44
High	1,786	-11	2.34	2.34	2.02	2.02
Low	71	-56	1.27	1.27	1.11	1.11

Source: Bloomberg and Deloitte analysis

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Note:

1. Enterprise value as at 2 November 2009

2. UMC’s beta at 4 September 2009, the last trading day prior to the announcement of the Proposed CRM Placement

3. UMC’s beta at 6 October 2009, the day before UMC shares were placed in a trading halt following receipt of BHP Billiton’s proposal

4. Negative gearing arises as a consequence of cash reserves exceeding total debt

The observed beta is a function of the underlying risk of the cash flows of the company, together with the capital structure and tax position of that company. This is described as the levered beta.

The capital structure and tax position of the entities in the table above may not be the same as those of UMC. The levered beta is often adjusted for the effect of the capital structure and tax position. This adjusted beta is referred to as the unlevered beta. The unlevered beta is a reflection of the underlying risk of the pre-financing cash flows of the entity.

Selected beta (β)

In selecting an appropriate beta for UMC we have considered the following:

• The comparable companies provide a relatively broad range in terms of size, stage of project development and maturity

• The comparable companies selected are all Australian listed, liquid stocks with projects currently in their exploration or development stages

• The comparable companies have an average unlevered beta of 1.73 against the Domestic Index and 1.45 against the MSCI Index

• We consider BC Iron, FerrAus and Iron Ore Holdings to be most comparable to UMC in terms of their size, project location, challenges faced in terms of gaining access to transport and port infrastructure and the development stage of their proposed projects. The unlevered betas for these companies range between 1.71 and 2.34 against the Domestic Index and 1.11 to 2.02 against the MSCI Index

• UMC’s observed unlevered beta as at 4 September 2009 prior to the announcement of the Proposed CRM Placement was 1.98 against the Domestic Index and 1.76 against the MSCI Index. As UMC currently has no debt, UMC’s unlevered beta is the same as its levered beta

• Assuming an unlevered beta of 1.7 to 1.9, a corporate tax rate of 30% and target gearing range of 20% to 25% gives a relevered beta of 2.10 to 2.23

• This beta also reflects UMC’s current risk profile. This beta is expected to decrease in line with its risk profile as development of the Railway Deposit continues, including obtaining the required government and environmental approvals, access to transport and port facilities and securing finance.

On this basis we have selected a levered beta of 2.10 to 2.25 for UMC.

Dividend imputation

Dividends paid by Australian corporations may be franked, unfranked, or partly franked. A franked dividend is one that is paid out of company profits which have borne tax at the company rate, currently 30%. Where the shareholder is an Australian resident individual or complying superannuation fund, it will generally be entitled to a tax credit (called an imputation credit) in respect of the tax paid by the company on the profits out of which the dividend was paid. If the recipient of the dividend is another company, the dividend will give rise to a credit in that company’s franking account thereby increasing the potential of the company to pay a franked dividend at a later stage.

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We have not adjusted the cost of capital or the projected cashflows for the impact of dividend imputation due to the diverse views as to the value of imputation credits and the appropriate method that should be employed to calculate this value. Determining the value of franking credits requires an understanding of shareholders’ personal tax profiles to determine the ability of shareholders to use franking credits to offset personal income. Furthermore, the observed EMRP already includes the value that shareholders ascribe to franking credits in the market as a whole. In our view, the evidence relating to the value that the market ascribes to imputation credits is inconclusive.

Conclusion on cost of equity

Based on the above factors we arrive at a cost of equity, K e , as follows:

Table 24: Ke applied to valuation of UMC

	Input	Low	High
	Risk free rate (%)	5.7	5.7
	EMRP (%)	6.5	6.5
	Beta (relevered)	2.10	2.25
	Ke – calculated	19.4	20.3

Source: Deloitte analysis

Cost of debt capital (K d )

We have estimated UMC’s cost of debt with reference to the 10-year Australian Government Bond with a zero coupon yield on 2 November 2009 of 5.7%. We have added a premium of between 400 and 500 basis points, having reference to company debt and corporate bond spreads.

Based on this we have selected a pre-tax cost of debt of between 9.7% and 10.7% as a reasonable measure of the cost of debt for UMC.

Debt and equity mix

Selecting an appropriate gearing level for valuation purposes requires a subjective judgement having regard to the quality of the cash flows of the business and the nature of the industry.

In selecting the debt to EV ratio, we have had regard to the gearing levels of companies operating in the iron ore sector as well as the nature, timing and quality of the future cash flows of the Railway Deposit.

In recent years a number of companies operating in the iron ore sector have had a net cash position reflecting the significant levels of operating cash flows generated by producing companies and the need for developing companies to have cash reserves to fund exploration and development activities. Companies with comparable operations to UMC, specifically in the project development stage, currently have negative debt to EV ratios. This negative level of gearing is not reflective of the level of gearing that could be achievable in the long term by a company with a producing asset. Accordingly, we have adopted a debt to EV ratio range of 20% to 25%.

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Calculation of WACC

Based on the above, we have assessed the nominal post-tax WACC for UMC to be:

Table 25: WACC applied to valuation of UMC

	Low	High
Cost of equity capital	19.4	20.3
Cost of debt capital	9.7	10.7
Debt to enterprise value ratio	25.0	20.0
Tax rate (%)	30.0	30.0
WACC	16.2	17.8
Selected WACC	16.0	18.0

Source: Deloitte analysis

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Appendix 3: Comparable companies

We provide the descriptions for each of the comparable companies as follows:

Aquila

Aquila Resources Limited (Aquila) is an Australian based developing mining company focussed on producing coal operations in Queensland, iron ore projects in the Pilbara region of Western Australia and the Avontour manganese project in South Africa. Aquila is currently progressing a definitive feasibility study into the West Pilbara Iron Ore Project, which is targeting production of 30 Mtpa commencing in 2013.

In August 2009, Aquila signed a strategic cooperation agreement with Baosteel to fast track the development of Aquila’s coal, iron ore and manganese projects. Aquila also undertook a placement to Baosteel of 15% of the company’s issued capital.

BC Iron

BC Iron is an Australian based developing mining company focussed on the Nullagine Iron Ore Project in the Pilbara region of Western Australia. The company has completed a feasibility study into the development of an initial 1.5 Mtpa DSO operation targeting production in 2010.

In August 2009, BC Iron entered into a 50:50 joint venture agreement with FMG to develop the Nullagine Iron Ore Project. Under the agreement BC Iron will utilise FMG’s existing rail and port facilities.

Brockman

Brockman is a developing mining company focussing on projects in the Pilbara and Mid West region of Western Australia. The company’s main focus is the Marillana Iron Ore Project, located in the Pilbara, which is currently the subject of a definitive feasibility study for a potential 15/25 Mtpa combined hematite DSO and beneficiation feed operation.

Brockman’s other projects include the Duck Creek, West Hamersley, Mt Stuart, Mt Florance and Opthalmia iron ore projects in the Pilbara region of Western Australia and a 40% interest in the Irwin-Coglia Nickel-Cobalt Project near Laverton in Western Australia.

FerrAus

FerrAus is a developing iron ore company focussed on the East Pilbara region of Western Australia. FerrAus is focussed on the Robertson Range iron ore project 100km south east of Newman in the Pilbara region of Western Australia. FerrAus is currently completing a definitive feasibility study into the development of the Robertson Range project.

In September 2009, FerrAus announced it had entered into a strategic cooperation agreement with CRM to support financing and development of future iron ore operations. As part of the agreement FerrAus also undertook a placement to CRM of 12% of the company’s issued capital.

Giralia Resources

Giralia Resources NL (Giralia Resources) is a minerals exploration company with a wide range of early stage iron ore, uranium, gold and nickel projects located throughout Western Australia. Giralia’s main focus is the development of the Beebyn iron ore project in the Mid West region of Western Australia and the Western Creek and the Anthiby Well iron ore projects located in the Pilbara region of Western Australia.

Iron Ore Holdings

Iron Ore Holdings is a developing iron ore company focussed on the Phil’s Creek and Central Pilbara projects in the Pilbara region of Western Australia. The company has completed a definitive feasibility study on the Phil’s Creek project and is targeting first production in 2010.

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In July 2008 the company entered into a Memorandum of Understanding with Rio Tinto for an annual mine gate sale of up to 1.5 Mtpa of DSO from the Phil’s Creek project.

Talisman Mining

Talisman Mining Ltd (Talisman Mining) is a minerals exploration company with a portfolio of early stage iron ore, precious metals and base metals projects located throughout WA. The company is focussed on the development of the Wonmunna project in the Pilbara region of WA and is targeting a 2 to 5 Mtpa operation, having completed a Scoping Study in June 2009.

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Appendix 4: Comparable transactions

We provide the descriptions for each of the comparable transactions as follows:

Hope Downs JV

Hancock and Rio Tinto entered into a joint venture to develop the Hope Downs iron ore assets. The transaction was announced on 1 July 2005 and coincided with Hancock exercising its right to purchase Kumba Resources Limited’s (Kumba Resources) 49% stake in Hope Downs.

Rio Tinto provided the funding to buy out the option from Kumba Resources for AUD231million in addition to a further undisclosed amount. While Rio Tinto was not required to disclose the value of the transaction, analysts estimate total consideration for the 50% interest to be between AUD400 million and AUD465 million.

FMG

On 21 August 2006, FMG announced that Leucadia National Corporation (Leucadia) had invested AUD401 million for a 9.99% stake in the company as part of a AUD3.2 billion capital raising. Leucadia subscribed for 26.4 million shares at AUD15.20 each.

Iron Ore Holdings

On 20 July 2007, Australian Capital Equity Pty Ltd (ACE) acquired a 19.9% interest in Iron Ore Holdings, an early stage iron ore explorer with projects located in the Pilbara region of Western Australia. The offer price was AUD0.40 per share and valued the consideration at AUD 6 million.

Aquila Resources

On 28 August 2009, Baosteel agreed to acquire a 15% interest in Aquila Resources for AUD286 million. Baosteel subscribed for 43.9 million shares at AUD6.50 each.

At the time of this report, this transaction was still pending.

FerrAus

On 8 September 2009, FerrAus announced it had entered into a share subscription agreement with CRM to provide funding to assist in the development of the Robertson Range iron ore project in the Pilbara region of Western Australia. Under the agreement, CRM will acquire a 12% interest in FerrAus at a subscription price of AUD0.55 per share, valuing the consideration at AUD13 million.

At the time of this report, this transaction was still pending.

Warwick Resources

On 8 September 2009, Warwick Resources Limited (Warwick Resources) announced it has entered into a scheme of arrangement with Atlas Iron Limited (Atlas Iron), under which Atlas Iron would acquire the remaining 77.25% interest in Warwick Resources that it did not already own.

The offer of one Atlas share for every three Warwick Resources shares, values the consideration at AUD 45 million.

At the time of this report, this transaction was still pending.

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Appendix 5: Independent technical expert’s report

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UMC RAILWAY DEPOSIT PROVISION OF TECHNICAL ASSISTANCE

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DELOITTE CORPORATE FINANCE PTY LTD

THREE DEVELOPMENT SCENARIOS – 3 MTPA ROAD HAUL, 5 MTPA MINE GATE SALE AND 5 MTPA RAIL HAUL

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ACKNOWLEDGEMENT AND DISCLAIMER USE OF THIS REPORT

This report was prepared for Deloitte Corporate Finance Pty Ltd (Deloitte) by ProMet Engineers Pty Ltd ("ProMet") pursuant to the contract agreement E1588 dated 27 October 2009 between United Minerals Corporation NL (UMC or the Client) and ProMet (the Agreement) to assist Deloitte in their assessment of the value of the Railway Deposit as part of their preparation of an independent expert’s report for UMC. ProMet was assisted by AMC Consultants Pty Ltd (AMC).

The report is based in whole or in part on information and data provided to ProMet by the Client and/or third parties. ProMet represents that it exercised reasonable care in the preparation of this report and that the report complies with published industry standards for such reports, to the extent such published industry standards exist and are applicable. However, the Client agrees that, except to the extent specifically stated in writing in the Agreement, ProMet is not responsible for confirming the accuracy of information and data supplied by the Client and/or third parties and that ProMet does not attest to or assume responsibility for the accuracy of such information or data. ProMet also does not attest to or assume responsibility for the accuracy of any recommendations or opinions contained in this report or otherwise expressed by ProMet or its employees or agents, which recommendations or opinions are based in whole or in part upon such information or data.

The recommendations and opinions contained in this report assume that unknown, unforeseeable, or unavoidable events, which may adversely affect the cost, progress, scheduling or ultimate success of the Railway Deposit, will not occur.

Any discussion of legal issues contained in this report merely reflects technical analysis of ProMet and does not constitute legal opinions or the advice of legal counsel. Permission for public release has been obtained from ProMet and AMC. Any such public use of all or part of this report must include this “Acknowledgement and Disclaimer” as a prerequisite. ProMet does not make any representation or warranty, expressed or implied, as to the accuracy, reliability or completeness of those assumptions nor those statements will prove correct, nor that estimates or forecasts contained in this report will be achieved. This report contains confidential and proprietary information and is furnished to the Client solely for Deloitte’s use and publication in the Scheme Booklet to be dispatched to the Clients’ shareholders.

This report may contain economic and other assumptions or qualitative and quantitative statements concerning assets or the future performance of assets, which may or may not prove to be correct. ProMet makes no representations, guarantees, or warranties except as expressly stated herein or in the Agreement and all other representations, guarantees, or warranties, whether express or implied, are specifically disclaimed.

Except as may be expressly stated in writing in the Agreement, the use of this report or the information contained herein is at the user’s sole risk and the Client specifically agrees to release, defend, indemnify and hold ProMet, its affiliated companies, and its/their officers, directors, employees and agents harmless from any and all liability, damages, or losses of any type, including consequential and punitive damages, suffered by the Client or any third party, even if such damages or losses are contributed to or caused by the sole or concurrent fault or negligence (other then gross negligence) of ProMet, its affiliated companies, or its/their officers, directors, employees, or agents.

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EXECUTIVE SUMMARY

Technical assumptions for three development scenarios for the Railway Iron Ore Project (Railway Deposit) have been reviewed by ProMet/AMC to assist Deloitte in its valuation of the Railway Deposit. The scenarios are:

• Scenario 1 – 3 million tonne per annum (Mtpa) operation road hauled to Port Hedland (a distance of 330km).

• Scenario 2 – 5 Mtpa operation with mine gate sale where the product is sold freeon-transport (FOT) on the main line track of the buyer.

• Scenario 3 – 5 Mtpa operation railed using third party facilities (a distance of 355kms – 350 kms of third party track and 5kms of owner track).

All three scenarios depend on access to third party facilities – either rail or port – and ProMet/AMC have seen no agreements indicating these facilities have been offered.

UMC has sought quotes from three contractors and the responses received to date have been used as a basis for developing the mining, processing and delivery capital and operating costs. In addition, adjustments have been made for UMC capital requirements and contingency.

The estimated capital and operating costs developed by ProMet on the basis of UMC data and contractor quotes for each development scenario are as follows:

	3 Mtpa (Road Haul)	5 Mtpa (Mine Gate)	5 Mtpa (3rd Party)
Contractor Amortised Mining Capital $m UMC Capital $m Total Project Capital $m Operating Cost/dry tonne Including Amortised Mining Capital	$43.27 $24.15 $67.42 $66.31 FOB	$180.17 $57.20 $237.37 $23.06 FOT	$180.17 $57.20 $237.37 $48.82 FOB

FOB – Free on Board ship in the Port FOT – Free on transport on the main line of a buyer

It is concluded that while the chemical quality of the ore is acceptable at 3 Mtpa and 5 Mtpa – it will need some minor processing to reduce the ultrafines content of fines.

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TABLE OF CONTENTS

EXECUTIVE SUMMARY

1.	INTRODUCTION ................................................................................................. 1	INTRODUCTION ................................................................................................. 1
2.	GEOLOGICAL REVIEW ...................................................................................... 2
	2.1	Mining Tenements ...................................................................................... 2
	2.2	Geology ...................................................................................................... 2
	2.3	Exploration ................................................................................................. 3
	2.4	Resources .................................................................................................. 3
	2.5	Geological Conclusions .............................................................................. 4
3.	MINING PROGRAMME ....................................................................................... 5
	3.1	Mine Plans .................................................................................................. 5
		3.1.1 Prestrip ............................................................................................ 8
		3.1.2 Waste Strip Ratio ............................................................................ 8
	3.2	Contractor Submissions .............................................................................. 8
	3.3	Conclusions ................................................................................................ 9
4.	PROCESSING PLANT ...................................................................................... 10
	4.1	Quality of Products ................................................................................... 10
		4.1.1 Overall View .................................................................................. 10
		4.1.2 Grade of Products (AMDEL Report 5012) ..................................... 10
		4.1.3 Ultra Fines in Sinter Fines ............................................................. 12
		4.1.4 Removal of -38 micron Material ..................................................... 12
		4.1.5 Moisture in Products ...................................................................... 13
		4.1.6 Recovery of Additional Value from Fines ....................................... 14
	4.2	Capital Costs ............................................................................................ 14
		4.2.1 Prestrip Capital Costs – All Scenarios ........................................... 14
		4.2.2 Scenario 1 - 3 Mtpa Case – Road Haul to Port Hedland ................ 15
		4.2.3 Scenario 2 - 5 Mtpa Case – Mine Gate Sale FOT on a Site Rail
		Loop .............................................................................................. 16
		4.2.4 5 Mtpa Case – Rail on Third Party Facilities .................................. 18
	4.3	Operating Costs ........................................................................................ 20
		4.3.1 Mining Operating Costs ................................................................. 20
		4.3.2 Scenario 1 - 3 Mtpa Road Haul ..................................................... 20
		4.3.3 Scenario 2 - 5 Mtpa Mine Gate Sale .............................................. 21
		4.3.4 Scenario 3 - 5 Mtpa Third Party Access ........................................ 21
		4.3.5 Summary of Operating Costs ........................................................ 22
5.	CONCLUSION ................................................................................................... 23

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1. INTRODUCTION

United Minerals Corporation NL (UMC) has been conducting project development studies on the Railway Deposit – an exploration lease some 330 km South of Port Hedland at E47/1429/30/31 – approximately 663000mE and 7482000mN.

ProMet Engineers Pty Ltd (ProMet) has been engaged to review the technical assumptions for three potential development scenarios:

• Scenario 1 - 3 Mtpa of lump and fines with material road hauled to Port Hedland on the Great Northern Highway and nominally delivered to a Port Hedland port facility from 2013 (Utah Point or South West Creek).

• Scenario 2 - 5 Mtpa of lump and fines for sale at the mine gate for rail transport and shiploading by others. Mine gate is assumed to be where the ore is loaded on the train on the main line track of the buyer.

• Scenario 3 – 5 Mtpa of lump and fines operation based on delivering to a wharf at Port Hedland using third party rail and third party wharf. UMC has assumed no capital contribution for transport and port – all costs are encompassed in a fee per tonne.

In order to develop the costs for these scenarios UMC has obtained quotes from one contractor to provide mining, crushing and screening facilities for scenario 1 with additional quotes from an additional two contractors for scenarios 2 and 3.

AMC and ProMet have reviewed the reasonableness of the capital and operating costs, geological, mining and processing assumptions for each of the three development scenarios. Our report sets out any adjustments to the assumptions and the reasons for these adjustments.

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2. GEOLOGICAL REVIEW

The geological review included an examination of the United Iron Pty Ltd (UI - subsidiary of UMC) mining tenements; discussion with the UMC exploration manager; examination of available geological reports; independent resource models and review of regional geology.

2.1 Mining Tenements

UI holds a number of tenements including E47/1429, E47/1431 and E47/1432. These tenements have been granted and rentals paid up for the current year. Expenditure reports have been lodged and far exceed minimum requirements. These tenements are in good standing. Four Mining Leases over selected portions of the exploration licences have been applied for by UI.

Several other exploration licences have been applied for in the region but as these have yet to be granted or have only just been granted and no exploration expenditure has been incurred in respect of these tenements, we consider that their value is not assessable but is unlikely to be material in the context of the UI/UMC iron ore resource base.

2.2 Geology

This region of the Pilbara contains the classical sequence of iron bearing host rocks of the Hamersley Ranges where the Mt Newman Member of the Marra Mamba Formation is host to iron enriched bedded iron ore being mined by several companies. Overlying West Angelas Formation and underlying MacLeod and Namuldi Members may be sufficiently enriched to contribute minor amounts of ore in some locations but tend to contain higher alumina and phosphorous.

Overall, the structural picture is less complex than at Mt Newman and other major deposits, with open folding and gently dipping beds. Several faults have caused minor disruption to iron ore deposits and in some areas may have contributed to enrichment processes.

Several areas of enriched Marra Mamba have been identified within the UMC tenements but only those contained within E47/1429, the Railway Deposit and Jocelyn Prospect are considered to constitute potentially viable iron ore deposits.

Deposits of detrital mineralisation overlying and adjacent to the Marra Mamba bedded deposits contribute slightly lower grade ore to the overall resource base.

The Railway Deposit is completely blanketed by recent alluvial cover to depths ranging from 6m to in excess of 96m. Average depth of cover is in the order of 50m. Mineralisation in the Jocelyn Prospect is largely outcropping.

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2.3 Exploration

The Railway and Jocelyn deposits have been drilled by wet reverse circulation (RC) methods on an 80 x 100m grid to produce an Inferred Resource. Much of the Railway deposit has also been drilled on a 40m x 100m grid to produce an Indicated Resource. Out of a total of 391 holes drilled, results from 357 were used for the resource model. Of the total, 65 holes were diamond drilled. Samples were collected at 1m intervals.

Eight RC holes were twinned by diamond drill holes to analyse the difference between results. Sample analyses clearly showed that RC samples reported higher Fe and lower Al2O3 and SiO2 than equivalent intervals in diamond drill samples. To account for this a number of correction factors were applied to the composite data. In addition, where diamond drill results were available, RC results were omitted. A total of 22,713 samples were used to generate the resource model (Refer - Widenbar and Associates).

Water table appears to range in depth from surface from 27m to 50m.

2.4 Resources

Using a Micromine format and conventional kriging, Widenbar and Associates applied a 54%Fe cut-off for the Marra Mamba direct shipping ore (DSO) resource and a 50%Fe cut-off for detrital material.

An average in-situ density of 2.70 was used for Marra Mamba mineralisation and 2.60 for detrital mineralisation.

Widenbar calculated resources as follows:

Material	Cut- Off	Category	Million Tonnes (Mt)	Fe	CaFe	SiO2	Al2O3	P	LOI
MM DSO Jocelyn MM Detrital	54% 50% 50%	Indicated Inferred Inferred	100.7 13.5 27.6	60.3 55.4 55.8	65.1 61.1 60.8	3.7 7.2 5.5	2.6 3.4 4.9	0.07 0.06 0.06	7.3 9.3 8.2

It is concluded that because of the high alumina content only the 100.7 million tonnes (Mt) of Marra Mamba DSO is saleable at present since generally 3.0% alumina is an upper limit for most Australian iron ore contracts. Fines are 0.2% higher in alumina than the head but processing only reduces this by 0.5% - still leaving the better inferred ores above the 3.0% upper limit.

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2.5 Geological Conclusions

Our conclusions following the geological review are as follows:

• The Railway Deposit is the only potentially viable resource.

• There is a low probability of finding additional resources in UMC tenements.

• At the 50% Fe cut off grade the total resource is slightly lower in Fe than in the UMC model which showed 60.3%Fe as the average of lump and fines. To achieve the 60.3% Fe average grade the cut-off is 54%Fe and the tonnage is limited to 100 Mt of indicated ore. The 3 Mtpa and 5 Mtpa cases would be satisfied with this tonnage.

UMC have informed us that the tenement boundaries will probably sterilise nearly 20 Mt of ore on the eastern boundary in developing any practical pit shape. We consider this to be a reasonable estimate.

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3. MINING PROGRAMME

The proposed Railway Deposit is planned to be a conventional drill, blast, load and haul open pit mining operation, mined by contractors. AMC has reviewed the mining cost aspects of the three development scenarios.

This review does not address the technical aspects of mining the Railway Deposit.

UMC has provided AMC access to a data room and additional material via disc in order for AMC to conduct this review. The material includes the following:

• UMC financial models for the three development scenarios.

• Contractor cost proposals for the three development scenarios.

• Pit outlines and expected ore and waste volumes for a pit to supply 50 Mt of ore.

3.1 Mine Plans

In July 2009, UMC released an Environment Scoping Document which included a proposed whole of life mining pit outline of the Railway Deposit. Figure 3.1 shows the proposed pit outline and its’ close proximity to the eastern and southern tenement boundaries.

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Figure 3.1: Proposed Railway LOM Project Pit Outline

Since the ore body continues up to the eastern boundary of the tenement there will be an amount of ore that is sterilised. UMC has estimated approximately 20 Mt of the 100 Mt indicated resource is sterilised. This sterilised ore can only be extracted if an agreement is reached with the holder of the neighbouring tenement to mine waste material beyond the tenement boundary. There also may be a requirement for additional environmental approvals.

UMC has provided pit outlines for mining of 50 Mt of ore and has included expected ore and waste volumes for each of the pits for each option.

Figure 3.2 shows the pit outlines for the 50 Mt pit. The planned locations of the run of mine (ROM) dump and waste dump are also indicated in Figure 3.2.

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Figure 3.2: Railway Deposit 50 Mt Option Pit Outlines

Map shows planned development pits in sequence as the LOM pit is developed

Ore and waste tonnages are based on an in situ density of 2.6 t/m[3] and 2.5 t/m[3] respectively. Table 3.1 shows the ore and waste tonnages.

Table 3.1: Ore and Waste Tonnage – 50 Mt

Material	50 Mt Option
Ore Waste	52.9 91.5

UMC has advised that any mining scenarios beyond the tonnages shown in Table 3.1 are conceptual in nature but a larger pit outline has been developed for the preliminary environmental report (shown above Figure 3.2).

It is worth noting that based on the planned location of the ROM and waste dumps that the average life of mine (LOM) waste dump haul is expected to be longer than the ROM dump haul. However the waste dump haul in the initial years of mining could be shorter than that of the ROM dump haul. This aspect of dump location can be expected to result in lower than average waste

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haulage costs in the earlier years, and conversely, higher than average waste haulage costs in the later years.

UMC has advised that LOM mining schedules do not exist for any of the options and AMC has not been provided with mining sequence considerations with respect to blending requirements in order to achieve expected lump and fines grades.

In order to determine the LOM the sterilisation of 20% of the orebody suggested by UMC has been accepted and an additional factor will be applied to the remaining high quality ore to convert to a minable tonnage. A plant yield factor has been applied to this in the processing section to adjust processing costs.

There is no indication of mining bench height.

3.1.1 Prestrip

UMC has proposed that prestrip is conducted using scrapers to expose up to two years of ore through the removal of overburden material to a depth of approximately 24m.

AMC is unaware of any Pilbara based iron ore operations using scrapers for significant sub-surface prestrip material movement. UMC has not provided any data to support the feasibility of prestrip material removal by scrapers. Neighbouring iron ore mining operations deploy conventional drill, blast, load and haul mining methods for prestripping, suggesting that the use of scrapers is likely, in AMC’s view, to be impractical.

UMC have allowed for two years ore exposure but AMC considers that prestripping to expose 12 months of ore rather than two years is likely to be sufficient for the project.

3.1.2 Waste Strip Ratio

AMC has not been able to determine with certainty an expected waste stripping ratio. In budget estimates provided by contractors, one contractor has used 2:1 for the 3 Mtpa option and 1.8:1 for the 5 Mtpa option, whilst another contractor has used 1.45:1 for the 5 Mtpa option. Presumably UMC advised the contractors of these ratios. Data provided by UMC for the 5 Mtpa option indicated a strip ratio of approximately 1.72.

3.2 Contractor Submissions

Mining is planned to be performed by a contractor, and UMC has provided copies of budget estimates from three Australian based contractors. These contractors submitted budget estimates in mid 2009 for contract operations at the Railway Deposit. UMC has not provided details of the original scope of work issued to each contractor.

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There are no cost provisions for prestripping or pit dewatering in the contractor’s budget estimates. An allowance will be made in operating costs to cover pit dewatering.

The contractor submissions have been used as a basis of the mining costs adjusted to the correct tonnages and adjusted to common cost assumptions such as strip ratio and camp costs.

3.3 Conclusions

In the absence of a coherent prestripping plan for each option, AMC has estimated the area, volume and cost for prestripping for each option based on exposing 12 months of ore. These estimates are discussed further in Section 4.2.1.

Whilst AMC has not been provided with a mine plan or mining schedule for the Railway Deposit, the mining operating cost per tonne of saleable product in the financial model is considered by AMC to be representative of mining costs for this size of operation though requires some minor modifications. However, this appears to be an average LOM operating mining cost and consideration needs to given to the implication of expected lower operating mining costs during the initial stages of the project and expected higher operating mining costs towards the end of the project. Using a single price over the LOM is a reasonable approach for a scoping level study.

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4. PROCESSING PLANT

The processing plant described by UMC is a dry crushing and screening plant to deliver 5 Mtpa with the final product screening being a wet screen. This is based on the concept that the ore is likely to be highly variable in moisture since it is being mined below the water table and hence likely to lead to stickiness issues in the plant, especially at the final screen. This is slightly unusual compared to other operations in the Pilbara but many of the other operations have to slow down when treating wet ore and this would not be tenable for a long term operation.

UMC tested samples of ore at the IMO laboratories of AMDEL (AMDEL) in Perth. There is information in the AMDEL report provided that the removal of the -38micron would reduce the alumina content of the fines product and decrease the proportion of ultrafines in the product and this would be a minor addition to the wet processing plant.

It is believed that a number of alternatives to the design have also been reviewed by UMC, including replacing the jaw crusher by a sizer for some potential savings.

4.1 Quality of Products

4.1.1 Overall View

The comments on the ore quality and moisture apply to all three models. It is ProMet’s view that for the 3 Mtpa case and 5 Mtpa case that the product grade is acceptable at 60.3%Fe but that at higher production rates then the ore quality will drop depending on the life of mine with both the silica and alumina exceeding normal contract specifications.

For the lower tonnages, the alumina and phosphorus are only slightly higher than normal contracts and could be handled by blending. The main issue is the % of -150micron in fines, measured in the AMDEL testwork, which will be higher than other Australian projects. The removal of some of this fines fraction will lose 10% of the feed weight but lower alumina and could increase Fe grade by an average of 0.8% - taking the average product grade to 61.1%Fe. This will also slightly increase the % of lump of total product – by about 3% or 4% (since the % fines will reduce).

The current model has too low a moisture on the fines moisture which needs to be 8% - and it is not clear that the elevated moisture levels have been applied to the trucking rates and FOB shipping rates. The elevated moisture may not apply to mining since this is often gauged on volume rather than tonnage.

4.1.2 Grade of Products (AMDEL Report 5012)

A series of drop tests were carried out on selected samples from the ore body to simulate the impact of material damage between mine and port.

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Extract from AMDEL report

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The average of these samples was slightly higher in Fe, lower in SiO2 and Al2O3 and higher in %P than the average ore body data (see Section 2.4). Selection and removal of the highest alumina samples significantly lowered the alumina level but it is not clear how this would affect the mining plan. The product continues to show high %P - especially in fines and on average is above the target of 0.07%.

The drop method used has one flaw in that the whole of ore was dropped in testing. Normally, only the lump is dropped and the result is therefore probably slightly elevated in lump proportion due to the cushioning effect of the fines.

This data shows:

• The lump % is 37.7% to 39% (vs 35% in the model provided by UMC).

• The grade of lump and fines is higher than the average ore body with only a minor discrimination in favour of the lump material.

On the whole, the relatively low silica level, moderate alumina level and medium loss on ignition (LOI) will probably produce a desirable product with the ex LOI value being 65.5%Fe which is very similar to the ex LOI value for Hamersley Iron (HI) and Newman ores.

The data used by UMC in their model is conservative but reasonable relative to the testwork data results.

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4.1.3 Ultra Fines in Sinter Fines

The following is the sizings of the fines from the drop test.

Extract from AMDEL Report

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These show the %-150micron varying from 27.6% to 40.6%. The high values are of concern. According to contracts reported in the Japanese TEX report, the allowable fines limits do vary and some Indian ores are allowed up to 40% -150micron but Australian ores are less than this (Robe River Iron Ore Associates (RRIA) 12%, HI 28% max, Newman 28% max). The implication is that there will be some penalty for this level of fines.

4.1.4 Removal of -38 micron Material

Since a wet process is indicated then wet scrubbing to remove some of the -150 micron material may not be too difficult. Testwork has shown that if the -38 micron material is removed then there is a considerable benefit in terms of Fe grade and removal of alumina. This would entail a loss of 12.7% to 16% of the fines weight - nominally 10% of the ore from a practical point of view.

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Extract from AMDEL report

This would reduce the -150micron to below 25% to 30% and lower the alumina by approximately 0.3% - both desirable aims – for the loss of 10% of the ore.

For the purposes of a financial model it is suggested that the plant yield be defined as 90% to allow for these losses. Since the benefit of the upgrading in terms of Fe grade is variable – according to the data above - it is recommended that no allowance be included in the benefit and the ore body quality remain as indicated by UMC at 60.3%.

4.1.5 Moisture in Products

Most Fe contracts are written relative to the price in dry metric tonne units (dmtu). There is usually a statement of moisture being approximately 2%. The wet process planned will give higher moistures than this and the UMC model suggests 7% - for both lump and fines.

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No drainage data is available to assess this number and from ProMet’s experience this figure is low, especially for fines. The figure of 7% for fines moisture therefore seems, relatively low and a figure of 9% might be more prudent. The figure of 7% may be adequate for shiploading and ship transportation.

ProMet’s experience on lump is that 6% to 7% after some drainage period may be acceptable.

This moisture has an implication for:

• Road or rail haulage rates – the contractor quote does not mention moisture – but they would be expecting 2% so an allowance should be included in the haulage rate for transporting the higher moisture. Some penalty may also be applied to the FOB price to allow for the higher moisture in ship transportation (1% to 2% would be a reasonable penalty to cover extra shipping costs).

• The mining rate where 7% is also assumed for ROM ore – this may be high and since the contractors usually mine by BCM – i.e. volume - then there may be no penalty for high ore moisture.

For the operating cost development, an average value of 8% has been assumed for road or rail transport and shiploading but that process costs were developed on the basis of dry tonnes.

4.1.6 Recovery of Additional Value from Fines

There is some potential for additional recovery of Fe units from ultrafines. The brief testwork conducted so far is not adequate to indicate what that would be and so no value has been assigned to the ultrafine rejects.

4.2 Capital Costs

4.2.1 Prestrip Capital Costs – All Scenarios

From the data provided to AMC there is no coherent indication of the volume or cost of prestripping. The UMC financial model for the 3 Mtpa development scenario includes a $16M provision for initial minesite development of which prestripping is one component. The UMC financial models for the 5 Mtpa include a provision of $20M for 19 Mbcm of prestripping. There is no indication of the density of the prestrip material. Also, there is no indication of where prestrip material will be dumped.

For the purposes of this review AMC has separately estimated prestrip areas and costs for each option. These areas are based on the exposure of 12 months of ore. Volumes have been calculated using an average depth of 24m. The prestripping cost is highly dependent on the drill and blast

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requirements, material density and material hauling distance, but information on these parameters has not been provided to AMC.

Assuming that prestrip haulage distances are less than half those of the LOM haulage for waste and that blasting patterns are much wider for presumably less competent surface material, it could be assumed that total movement costs could be in the region of $4.00/bcm. Table 4.1 shows AMC’s estimated prestrip area, volume and cost for each option.

Table 4.1: AMC Estimated Prestrip Areas, Volumes and Cost

Option	Prestrip Area (ha)	Prestrip Volume (Mbcm)	Prestrip Cost Estimate ($M)
3 Mtpa 5 Mtpa	9 14	2.2 3.4	7 13

Since the values above are lower than the numbers used by UMC and the UMC numbers appear to include roads and other infrastructure then the UMC numbers of $16M, and $20M are used in the capital summary section.

There does not appear to be any provision for pit dewatering operating costs in the contractor quotes and it is not clear whether pit dewatering infrastructure is included in the capital estimates. A 15% contingency has been applied to the site operating costs to cover for dewatering and other similar costs.

4.2.2 Scenario 1 - 3 Mtpa Case – Road Haul to Port Hedland

Ore will be mined and wet processed on site, loaded on trucks and transported to Port Hedland – either to Utah Point or South West Creek – a distance of 330kms.

Contractor capital:

The contractor quote is only for 2 Mtpa when the scenario applies to 3 Mtpa. This may be due to the fact that 2 Mtpa can be achieved by a semi mobile plant while the 3 Mtpa needs the capacity of a more fixed plant. The contractor pricing seems to imply a semi mobile plant with only $4.7M allowed for the 2 Mtpa crusher compared to 5 times that for the 5 Mtpa plant.

ProMet have modified the costs in the contractor quote to handle 3 Mtpa by:

• Doubling the capital for the crushing plant– implying two mobile plants and slightly increasing the capital to be repaid.

• Increasing the camp size to 220 people for the extra road haulage crews.

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• Adjusting the camp cost to reflect the quoted price provided by a camp provider of $100,000/man.

ProMet have therefore increased the contractor capital to $43.3M (including a 15% contingency). This capital cost has been amortised at 12% over 10 years and included within operating costs at $2.55/dry tonne.

UMC capital:

UMC capital of $21M includes prestrip and resource definition costs. Prestrip has been estimated at $16M by UMC. ProMet have some queries on the prestrip volumes and assumed removal costs, but overall the number is a reasonable cost allowance. ProMet have added a 15% contingency to these costs.

Table 4.2: Capital Estimate for Scenario 1: 3 Mtpa – Road Haul

	$A million	$
Contractor capital: 220 Man Camp @ $100,000 Plant Net Contractor Capital Add 15% contingency Total Contractor Capital Ann Cost Amortised at 12% over 10 years Net Amortisation Cost ($/dry tonne)	22.00 15.63	2.55
	37.63 5.64
	43.27
	7.65
UMC capital: Prestrip, etc Resource Definition UMC Capital Add 15% contingency Total UMC capital	16.00 5.00
	21.00 3.15
	24.15
Total Project Capital	67.42

4.2.3 Scenario 2 - 5 Mtpa Case – Mine Gate Sale FOT on a Site Rail Loop

The ore will be mined and wet processed to produce the equivalent of 5Mtpa dry. The product will be stockpiled using a stacker at the mine site with a 5.5kms spur line to bring the mine gate purchasers’ trains to site. The trains will be loaded by reclaimer and UMC will pay for the haulage to the main line – the sale point being FOT main line.

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Contractor capital:

The capital cost of the 5 Mtpa processing plant has been estimated by both UMC and ProMet’s in-house scoping level estimate at $A55 to 56M for the same scope which is $48.9m excluding contingency. This has replaced the contractors estimate of the same plant which may contain second hand equipment not necessarily available to UMC.

ProMet has made the following adjustments to the contractor capital costs:

• Included capital of $64M for stackers and reclaimers as it has been assumed that trains will need to be loaded in two hours.

• Increased the cost of the rail loop based on the contractor estimate of $19.8M compared to UMC’s original estimate of $12.2M.

• Adjusted the size of the camp from a 150 man camp to a 180 man camp.

A 15% contingency has been added to the contractor costs and UMC capital to give a total of $A30.96M contingency versus only a $A13M allowance for the UMC estimate. The amount of contingency is an owner defined number but, at this level of estimate, ProMet would recommend 15%.

Of the contingency, $23.5M has been allocated to the contractor portion to give total contractor capital of $180M. This capital cost has been amortised at 12% over 10 years and included within operating costs at $6.38/dry tonne.

UMC capital:

UMC capital costs of $A49.7M includes prestrip, site infrastructure and other indirect costs estimated by UMC. ProMet have added a 15% contingency to these costs to total $57.20.

Neither estimate looks at dewatering costs - ProMet has made an allowance under operating costs for this.

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Table 4.3: Capital Estimate for Scenario 2: 5 Mtpa – Mine Gate Sale

	$A million	$
Contractor capital: Costs including Rail Loop 180 Man Camp @ $100,000 Plant Stackers Reclaimers Net Contractor Capital Add 15% Contingency Total Contractor Capital Ann Cost Amortised at 12% over 10 years Net Amortisation Cost ($ /dry tonne)	$25.77 $18.00 $48.90 $30.00 $34.00	6.38
	$156.67 $23.50
	$180.17
	$31.89
UMC capital: Mining Prestrip, etc Borefield Misc Camp Owners Costs Non Plant EPCM (rest is in Plant cost above) UMC Capital Add 15% Contingency Total UMC Capital	$11.84 $20.00 $4.50 $1.40 $6.00 $6.00
	$49.74 $7.46
	$57.20
Total Project Capital	$237.37

4.2.4 5 Mtpa Case – Rail on Third Party Facilities

The ore will be mined and wet processed to produce the equivalent of 5Mtpa dry. The product will be stockpiled using a stacker at the mine site with a 5.5kms spur line to bring the third party train to site. The trains will be loaded by reclaimer and UMC will pay for the haulage to the port and for shiploading – the sale point being FOB shipping.

The non-contractor capital costs will be the same as for Scenario 2. Total capital is $237.37M.

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Table 4.4: Estimated Capital Cost for Scenario3: 5 Mtpa – Third Party Access

	$A million	$
Contractor capital: Costs including Rail Loop 180 Man Camp @ $100,000 Plant Stackers Reclaimers Net Contractor Capital Add 15% Contingency Total Contractor Capital Ann Cost Amortised at 12% over 10 years Net Amortisation Cost ($/dry tonne)	$25.77 $18.00 $48.90 $30.00 $34.00	6.38
	$156.67 $23.50
	$180.17
	$31.89
UMC capital: Mining Prestrip, etc Borefield Misc Camp Owners Costs Non Plant EPCM (rest is in Plant cost) UMC Capital Add 15% Contingency Total UMC Capital	$11.84 $20.00 $4.50 $1.40 $6.00 $6.00
	$49.74 $7.46
	$57.20
Total Project Capital	$237.37

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4.3 Operating Costs

4.3.1 Mining Operating Costs

The UMC financial model uses a constant drill, blast, load and hauling operating cost for all options. This appears to be based on an average of the contractors proposal rates for the 5 Mtpa option. For the purposes of this analysis, ProMet has used the actual contractor quotes for the 3 Mtpa and 5 Mtpa options. The modified costs are listed below in the operating cost section of this report.

These rates appear to be an average for the life of the operation and AMC would expect the mining operating cost rates to be lower in the first years of mining where horizontal and vertical haul distances are lower than those expected in the later years of the operation. This effect has not been included in any of the contractor quotes and may be an issue for more detailed contract discussions.

AMC would expect, as is normally the case with mining contracts, that there will be claims by the contractor over and above the estimated costs. This has been allowed for in the adjustments made to capital costs.

The UMC financial model includes administration and corporate operating costs but there are no details provided. These have been increased for this analysis to a more reasonable level.

4.3.2 Scenario 1 - 3 Mtpa Road Haul

The contractor quoted price has been adjusted as follows:

• The haulage cost at $33.66/t has been assumed to be on a wet tonne basis and needs to be adjusted for moisture to give a dry tonne basis.

• The operating cost quote is for 2.1 Mtpa of feed to the crusher whereas the plant probably needs 2.2 Mtpa to allow for the yield losses – so this price should be increased by 5%.

• For the port - access to Utah Point or South West Creek has been assumed on a $6.20 fee per tonne basis. This has been assumed to be a fee per wet tonne and needs adjustment accordingly. If access is not granted to Utah Point it is assumed that the fee will be high enough to cover operating costs, management fees, port fees and amortisation of any capital contribution at any other port location in the area (such as South West Creek).

• A $1.00/dry tonne has been assumed for administration which includes the owners cost of mine planning and geological analysis. This is higher than the $0.30/t assumed by UMC as this is not considered enough to cover these costs.

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4.3.3 Scenario 2 - 5 Mtpa Mine Gate Sale

The contractor operating cost including the updated amortisation is approximately $22.26/dry tonne.

ProMet’s changes to the itemised contractor fees are:

• The contractor ore tonnage is for 5.25 Mtpa when 5.5 Mtpa is needed – adding 5% to the cost.

• There is no additional charge for train loading since this is now a reclaimer operation.

• A charge of 5c/tkm has been allowed for the cost of moving the train back to the main line.

• An administration fee of $0.80/ dry tonne has been assumed.

This gives a cost of $23.06/dry tonne FOT including administration – with the train back on the main line – effectively the point of sale.

It is not clear what discount would be allowed to the market price at the mine gate. Assuming a willing buyer at the mine gate, the buyer would have a rail cost of 5c/tkm for 350 km (excluding the rail spur) which would total $17.50/wet tonne and then $6.20/wet tonne for shiploading.

4.3.4 Scenario 3 - 5 Mtpa Third Party Access

The basic 5 Mtpa case outlined above has been used with a modification for a rail haulage cost. Stackers and reclaimers have again been used in the mining capital so the train loading time is reduced to acceptable levels for a third party – nominally two hours.

This gives the operating cost at the stockyard of $21.99/dry tonne – in this case a third party rail is assumed to the Coast and with a nominal rail cost of 5c/tkm for 355 km (including the rail spur). This would give a total of $17.75/wet tonne FIS and then $6.20/wet tonne for shiploading. To this is added the administration charge of $0.80/dry tonne. This gives an FOB cost of $48.83/dry tonne. But these figures imply access rights and access to true competitive haulage costs – which may not be possible.

Typical competitive rates are believed to be $0.045/tkm in South Australia on the main transcontinental rail.

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4.3.5 Summary of Operating Costs

The operating costs are summarised below.

Table 4.5: Operating Costs	Table 4.5: Operating Costs	Table 4.5: Operating Costs	Table 4.5: Operating Costs
Based on contractor quotes with yield and moisture allowances	3 Mtpa	5 Mtpa	5 Mtpa
	Road Haul	Mine Gate	Rail Haul
	Wet t Dry t	Wet t Dry t	Wet t Dry t
Mining Processing Other/Train Load/Transport Total Cost at Stockpile Contingency (15%) Production Cost Contractor Amortisation Total site costs Transport to Port Shiploading Cost UMC Admin Total Cost Before Royalties Cost basis	11.33 5.37 0.20 16.90 2.53	11.00 2.49 0.35 13.84 2.04	11.00 2.49 0.08 13.57 2.04
	19.43 2.55	15.88 6.38	15.61 6.38
	21.98 33.66 36.59 6.20 6.74 1.00	22.26 0.80	21.99 17.75 19.29 6.20 6.74 0.80
	66.31 FOB	23.06 FOT	48.82 FOB

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5. CONCLUSION

ProMet concludes that with some adjustments the figures developed for the three development scenarios are reasonable. The major adjustments are:

•  Contingency included in the mining section for additional contractor claims.

•  Modified camp costs based on the quote from a camp supplier.

•  Modified the original contractor 2Mtpa quote to a 3 Mtpa case by increasing the manning and doubling the process plant.

•  Left the stripping costs as defined by UMC – it is felt that the UMC volumes are too high and the prices too low – the cost is still conservative but reasonable.

•  Adjusted the cost of the 5 Mtpa crushing plant to match the UMC estimate and ProMet’s in house estimate.

•  Added stackers and reclaimers to each 5 Mtpa scenario.

In the operating costs provision has to be made for:

•  Process yield which was not fully allowed for in the contractors prices.

•  High moisture in transport and shiploading costs. This may also affect the price FOB ports because of the cost of shipping water to a customer port.

•  An increase in administration costs.

•  Added 15% contingency on production costs to cover pit dewatering and other potential pit and processing handling issues.

It is concluded that the ultrafines content of the fine ore is high and a washing plant would be needed to reduce this – which would give quality benefit in terms of alumina removal. ProMet has used a 90% process yield factor to cover this loss.

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Appendix 6: Sources of information

In preparing this report we have had access to the following principal sources of information:

• UMC Scheme Booklet Preliminary Draft dated 10 Nov 2009

• Merger Implementation Agreement between UMC and BHP Billiton dated 5 October 2009

• Annual reports for UMC for the year ending 30 June 2008 and 30 June 2009

• Annual reports for comparable companies

• Company websites for UMC, BHP Billiton and comparable companies

• Publicly available information on comparable companies and market transactions published by Bloomberg Financial markets and Mergermarket

• ProMet UMC Railway Deposit Provision of Technical Assistance to Deloitte Corporate Finance report dated 19 November 2009

• ABARE Australian Commodities report for September quarter 2009

• EIU Country Report for Australia October 2009

• Other publicly available information, media releases and brokers reports on UMC, BHP Billiton, comparable companies and the iron ore industry.

In addition, we have had discussions and correspondence with certain directors, executives, employees and advisors of UMC including Mathew Hogan, Managing Director; Barry Fehlberg, Executive Director; Patrick Tan, Chief Financial Officer and Company Secretary; Tom Fedigan, Consulting Project Development Manager and employees of UBS, UMC’s financial advisor, in relation to the above information and to current operations and prospects.

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Appendix 7: Qualifications, declarations and consents

The report has been prepared at the request of the Independent Directors of UMC and is to be included in the Scheme Booklet to be given to UMC Shareholders for approval of the Proposed Scheme in accordance with Section 411. Accordingly, it has been prepared only for the benefit of the Directors and those persons entitled to receive the Scheme Booklet in their assessment of the Proposed Scheme outlined in the report and should not be used for any other purpose. We are not responsible to you, or anyone else, whether for our negligence or otherwise, if the report is used by any other person for any other purpose. Further, recipients of this report should be aware that it has been prepared without taking account of their individual objectives, financial situation or needs. Accordingly, each recipient should consider these factors before acting on the Proposed Scheme. This engagement has been conducted in accordance with professional standard APES 225 Valuation Services issued by the APESB.

The report represents solely the expression by Deloitte of its opinion as to whether the Proposed Scheme is in the best interests of the UMC Shareholders as a whole. Deloitte consents to this report being included in the Scheme Booklet in the form and context in which it is to be included in the Scheme Booklet.

Statements and opinions contained in this report are given in good faith but, in the preparation of this report, Deloitte has relied upon the completeness of the information provided by UMC and its officers, employees, agents or advisors which Deloitte believes, on reasonable grounds, to be reliable, complete and not misleading. Deloitte does not imply, nor should it be construed, that it has carried out any form of audit or verification on the information and records supplied to us. Drafts of our report were issued to UMC management for confirmation of factual accuracy.

In recognition that Deloitte may rely on information provided by UMC and its officers, employees, agents or advisors, UMC has agreed that it will not make any claim against Deloitte to recover any loss or damage which UMC may suffer as a result of that reliance and that it will indemnify Deloitte against any liability that arises out of either Deloitte’s reliance on the information provided by UMC and its officers, employees, agents or advisors or the failure by UMC and its officers, employees, agents or advisors to provide Deloitte with any material information relating to the Proposed Scheme.

Deloitte also relies on the independent technical review report prepared by ProMet. Deloitte has received consent from ProMet for reliance in the preparation of this report.

To the extent that this report refers to prospective financial information we have considered the prospective financial information and the basis of the underlying assumptions. The procedures involved in Deloitte’s consideration of this information consisted of enquiries of UMC personnel and analytical procedures applied to the financial data. These procedures and enquiries did not include verification work nor constitute an audit or a review engagement in accordance with standards issued by the Auditing and Assurance Standards Board.

Based on these procedures and enquiries, Deloitte considers that there are reasonable grounds to believe that the prospective financial information for UMC included in this report has been prepared on a reasonable basis. In relation to the prospective financial information, actual results may be different from the prospective financial information of UMC referred to in this report since anticipated events frequently do not occur as expected and the variation may be material. The achievement of the prospective financial information is dependent on the outcome of the assumptions. Accordingly, we express no opinion as to whether the prospective financial information will be achieved.

Deloitte holds the appropriate Australian Financial Services licence to issue this report and is owned by the Australian Partnership Deloitte Touche Tohmatsu. The employees of Deloitte principally involved in the preparation of this report were Nicki Ivory, B.Com (Hons), CA, CFA, Johan Duivenvoorde B.Com, CA and AnnMarie Mahony, B.A., M.Acc.,CA. Each have many years experience in the provision of corporate financial advice, including specific advice on valuations, mergers and acquisitions, as well as the preparation of expert reports.

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Neither Deloitte, Deloitte Touche Tohmatsu, nor any partner or executive or employee thereof has any financial interest in the outcome of the proposed transaction which could be considered to affect our ability to render an unbiased opinion in this report. Deloitte will receive a fee of AUD125,000 exclusive of GST in relation to the preparation of this report. This fee is based upon time spent at our normal hourly rates and is not contingent upon the success or otherwise of the Proposed Scheme.

Consent to being named in Scheme Booklet

Deloitte Corporate Finance Pty Limited (ACN 003 833 127) of 240 St Georges Terrace, Perth WA 6000 acknowledges that:

• UMC proposes to issue a Scheme Booklet in respect of the Proposed Scheme between UMC and the holders of UMC shares

• the Scheme Booklet will be issued in hard copy and be available in electronic format

• it has previously received a copy of the draft Scheme Booklet for review

• it is named in the Scheme Booklet as the ‘independent expert’ and the Scheme Booklet includes its independent expert’s report in Annexure 4 of the Scheme Booklet.

On the basis that the Scheme Booklet is consistent in all material respects with the draft Scheme Booklet received, Deloitte Corporate Finance Pty Limited consents to it being named in the Scheme Booklet in the form and context in which it is so named, to the inclusion of its independent expert’s report in Annexure 4 of the Scheme Booklet and to all references to its independent expert’s report in the form and context in which they are included, whether the Scheme Booklet is issued in hard copy or electronic format or both.

Deloitte Corporate Finance Pty Limited has not authorised or caused the issue of the Scheme Booklet and takes no responsibility for any part of the Scheme Booklet, other than any references to its name and the independent expert’s report as included in Annexure 4.

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About Deloitte

In Australia, Deloitte has 12 offices and over 4,500 people and provides audit, tax, consulting, and financial advisory services to public and private clients across the country. Known as an employer of choice for innovative human resources programs, we are committed to helping our clients and our people excel. Deloitte's professionals are dedicated to strengthening corporate responsibility, building public trust, and making a positive impact in their communities.

For more information, please visit Deloitte’s web site at www.deloitte.com.au

Deloitte refers to one or more of Deloitte Touche Tohmatsu, a Swiss Verein, and its network of member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/au/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu and its member firms.

© Deloitte Touche Tohmatsu. December, 2009. All rights reserved.

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w w w . u n i t e d m i n e r a l s . c o m . a u

THIS DOCUMENT IS IMPORTANT. IF YOU ARE IN DOUBT AS TO HOW TO DEAL WITH IT, PLEASE CONTACT YOUR STOCK BROKER OR LICENSED PROFESSIONAL ADVISOR.

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PROXY FORM

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UNITED MINERALS CORPORATION NL

SHARE REGISTRY: Security Transfer Registrars Pty Ltd All Correspondence to: PO BOX 535, APPLECROSS WA 6953 AUSTRALIA 770 Canning Highway, APPLECROSS WA 6153 AUSTRALIA T: +61 8 9315 2333 F: +61 8 9315 2233 E: registrar@securitytransfer.com.au W: www.securitytransfer.com.au

REGISTERED OFFICE:

ABN: 65 107 061 343

Level 14, BGC Centre 28 The Esplanade Perth WA 6000

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Code: UMC Holder Number:

SECTION A: Appointment of Proxy

I/We, the above named, being registered holders of the Company and entitled to attend and vote hereby appoint:

OR

The meeting Chairperson The name of the person you are appointing (mark with an "X") (if this person is someone other than the Chairperson of the meeting).

or failing the person named, or if no person is named, the Chairperson of the Meeting, as my/our Proxy to act generally at the meeting on my/our behalf and to vote in accordance with the following directions (or if no directions have been given, as the Proxy sees fit) at the Scheme Meeting of the Company to be held at 10.00am (AWST) on Thursday 28 January 2010 at Ball Room B, Duxton Hotel, 1 St George's Terrace, Perth WA and at any adjournment of that meeting.

SECTION B: Voting Directions to your Proxy

Please mark "X" in the box to indicate your voting directions to your Proxy.

Resolution

For Against Abstain*

1. Acquisition of UMC by BHP Billiton

If no directions are given my proxy may vote as the proxy thinks fit or may abstain.

• If you mark the Abstain box for a particular item, you are directing your Proxy not to vote on your behalf on a show of hands or on a poll and your votes will not be counted in computing the required majority on a poll.

If you wish to appoint the Chairperson as your proxy and you do not wish to direct the Chairperson how to vote, please mark "X" in the box.

By marking this box, you acknowledge that the Chairperson may exercise your proxy even if he has an interest in the outcome of the resolution and votes cast by him/her other than as a proxy holder will be disregarded because of that interest. If you do not mark this box, and you have not directed your proxy how to vote, the Chair will not cast your votes on the resolution and your votes will not be counted in calculating the required majority if a poll is called on the resolution. The Chairperson of the Meeting intends to vote undirected proxies in favour of the resolution.

SECTION C: Please Sign Below

This section must be signed in accordance with the instructions overleaf to enable your directions to be implemented.

Individual or Security Holder Sole Director and Sole Company Secretary

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Reference Number:

Security Holder 2 Security Holder 3

Director Director / Company Secretary

9174287222

UMC

1

1

My/Our contact details in case of enquiries are:

NAME

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TELEPHONE NUMBER ( )

NOTES

1. Name and Address

This is the name and address on the Share Register of United Minerals Corporation NL. If this information is incorrect, please make corrections on this form. Shareholders sponsored by a broker should advise their broker of any changes. Please note that you cannot change ownership of your shares using this form.

2. Appointment of a Proxy

If you wish to appoint the Chairperson of the Meeting as your Proxy please mark "X" in the box in Section A. Please also refer to Section B of this proxy form and ensure you mark the box in that section if you wish to appoint the Chairperson as your Proxy.

If the person you wish to appoint as your Proxy is someone other than the Chairperson of the Meeting please write the name of that person in Section A. If you leave this section blank, or your named Proxy does not attend the meeting, the Chairperson of the Meeting will be your Proxy. A Proxy need not be a Shareholder of United Minerals Corporation NL.

3. Directing your Proxy how to vote

To direct the Proxy how to vote place an "X" in the appropriate box against each item in Section B. Where more than one Proxy is to be appointed and the proxies are to vote differently, then two separate forms must be used to indicate voting intentions.

4. Appointment of a Second Proxy

You are entitled to appoint up to two (2) persons as proxies to attend the meeting and vote on a poll. If you wish to appoint a second Proxy, an additional Proxy form may be obtained by telephoning the Company's share registry +61 8 9315 2333 or you may photocopy this form.

To appoint a second Proxy you must:

• (a) On each of the Proxy forms, state the percentage of your voting rights or number of securities applicable to that form. If the appointments do not specify the percentage or number of votes that each Proxy may exercise, each Proxy may exercise half of your votes; and

• (b) Return both forms in the same envelope.

5. Signing Instructions Individual: where the holding is in one name, the Shareholder must sign.

Joint Holding: where the holding is in more than one name, all of the Shareholders must sign.

Power of Attorney: to sign under Power of Attorney you must have already lodged this document with the Company's share registry. If you have not previously lodged this document for notation, please attach a certified photocopy of the Power of Attorney to this form when you return it.

Companies: where the Company has a Sole Director who is also the Sole Company Secretary, this form must be signed by that person. If the Company (pursuant to section 204A of the Corporations Act 2001) does not have a Company Secretary, a Sole Director may sign alone. Otherwise this form must be signed by a Director jointly with either another Director or Company Secretary. Please indicate the office held in the appropriate place.

If a representative of the corporation is to attend the meeting the appropriate "Certificate of Appointment of Corporate Representative" should be lodged with the Company before the meeting or at the registration desk on the day of the meeting. A form of the certificate may be obtained from the Company's share registry.

6. Lodgement of Proxy

Proxy forms (and any Power of Attorney under which it is signed) must be received by Security Transfer Registrars Pty Ltd no later than 10.00am (AWST) on Tuesday 26 January 2010, being 48 hours before the time for holding the meeting. Any Proxy form received after that time will not be valid for the scheduled meeting.

Security Transfer Registrars Pty Ltd PO BOX 535 Applecross, Western Australia 6953

Street Address: Alexandrea House, Suite 1 770 Canning Highway Applecross, Western Australia 6153

Telephone +61 8 9315 2333 Facsimile +61 8 9315 2233 Email registrar@securitytransfer.com.au

PRIVACY STATEMENT

Personal information is collected on this form by Security Transfer Registrars Pty Ltd as the registrar for securities issuers for the purpose of maintaining registers of securityholders, facilitating distribution payments and other corporate actions and communications. Your personal details may be disclosed to related bodies corporate, to external service providers such as mail and print providers, or as otherwise required or permitted by law. If you would like details of your personal information held by Security Transfer Registrars Pty Ltd or you would like to correct information that is inaccurate please contact them on the address on this form.

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