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Is control of Pilbara iron ore explorer United Minerals Corporation about to change?

Pilbara iron ore explorer United Minerals Corporation (ASX: UMC) has followed a two day trading halt, with a request for a suspension from trading, amid a statement from the company that control of the company could be about to change.

At its Railway Creek deposit iron ore Deposit in the Pilbara in Western Australia, UMC has carved out a resource of 158Mt iron at 58.03%Fe including indicated and inferred.  As well as a Direct Shipping Ore (DSO) bedded Marra Mamba ore resource of 100.7Mt at 60.3%Fe in the indicated category.

This would likely support a 3mtpa mining operation commencing in 2011/12.  Recently, UMC entered into a conditional placement agreement with one of China’s top steel buyers China Railway Materials Commercial Corp.

Under the terms of the deal, UMC agreed to a A$27.2M placement to CRM, with one of the key conditions to the placement being the finalisation of a 10‐year 3.0 million tonnes per annum off‐take agreement agreed between UMC and CRM by 7th December 2009.

However, the larger upside would likely be a larger 10mtpa open cut operation at Railway Creek, however, this is likely to have much longer timeframe, possibly 2014/15.

The deposit is located close to Rio Tinto's railway line (<3km) and <25 km from BHP Billiton's (ASX: BHP) railway line, however there is no current agreement to use either of those lines. Another option could involve trucking UMC ore 165km by road transport to the Fortescue Metal Group's (ASX: FMG) rail line using existing roads.

Current major shareholder of UMC, Thundelarra Exploration (ASX: THX) is supportive of UMC, but is likely to be a seller at the right price.

Despite the growing, high grade resource, UMC has not been afforded the valuation of some of its peers as we have contended. A potential change of control transaction would certainly change that.