YICHANG MAPLE LEAF CHEMICALS (YMC)

Spur has a 49% interest in the Yichang Maple Leaf Chemicals Ltd. joint venture ("YMC") through its wholly-owned subsidiary Spur BVI.  Spur BVI's joint venture partner in YMC is Hubei Yichang Phosphorous Chemical Co. Ltd. ("YPCC"), a state-owned enterprise of Yichang City, Hubei Province, PRC.

YMC will develop and mine the Dianziping and Shukongping phosphate deposits, located approximately 100km north-northwest of the Yichang, as well as construct  two world-scale, flexible phosphate fertilizer plants with planned production of approximately 1.2 million tonnes of phosphate fertilizer per annum.

The Dianziping and Shukongping phosphate deposits average 24% P₂O₅.  A Resource Report prepared in November 2009 by Headman Consultants of Beijing (the "Resource Report"), a firm accredited to the Central Ministry of Land and Resources, estimates the two mines to have lives of 20 years and 30 years respectively, based on mining of up to 2.0 million tonnes per annum, and a deemed combined net present value of approximately $US 52 M (RMB 353 million $US:RMB=6.8). The Resource Report is not prepared in accordance with NI43-101.  It was required for the purposes of Chinese mining laws and was prepared under the guidelines specified under these laws.

YMC Project Overview

The development of the YMC project has three components.

1. A mining operation for up to 2.0 million tonnes per annum of phosphate rock
2. A 600,000 mt/annum integrated fertilizer complex by combining YMC and YSC that will produce MAP, DAP and/or NPK
3. A duplicate of the first fertilizer complex to be constructed depending on demand.

A summarized diagram of the Project configuration is shown below.

YMC Phosphate Deposits

The Yichang phosphate district is located approximately 100 kilometers north-northwest of Yichang City, Hubei Province in central China and is directly accessible by road.  Of ten identified deposits in the district, Dianziping and Shukongping belong to the Project. 

The Dianziping and Shukongping deposits have been the subject of a feasibility study prepared by Jacob’s Engineering (2003) under NI43-101 guidelines which defined in-situ combined reserves of 75.4 million tonnes ore at 24% P₂O₅, sufficient for 20 years and 30 years respectively of operation at the planned rate of exploitation.  These in-situ tonnages were established with an ore grade cut-off of 12% P₂O₅ and an ore thickness cut-off of 1.5 meters.

A summary of the recent Resource Report prepared by Headman Consultants in November 2009 as required under China Mining Law is set out below:

Official Ministry of Land and Resources Evaluation of YMC Mines

The Yichang phosphate district has an average width of 4 km, a strike length of about 70 km, and a total area of about 300 km².

The phosphate deposits are of sedimentary origin and are contained in the Doushantuo Formation of Upper Sinian age (Upper Precambrian). The Doushantuo Formation is characterized as the oldest phosphatic sedimentary sequence in southern China, deposited about 650 to 700 million years ago.

The floor material below the relatively flat laying phosphate bed is shale and the roof material is a competent dolomite. The tabular ore bodies are elevated above the surrounding ground, and can be easily accessed through horizontal adits (or tunnels). 

The phosphate bed is divided into three distinctly different layers, with thickness ranging from 0 to 4 meters:

• The middle layer consists of a high-grade section composed of alternating bands of coarse and fine phosphorite
• The bottom layer is composed of banded phosphorite and black potassic shale
• The top layer includes alternating bands of phosphorite and dolomite.

Additional information in respect of the deposits is included in the NI-43-101 compliant Summary Report prepared by Jacobs Engineering in May 2003.

Mining Plan

YMC’s mining plan contemplates a designed mining capacity of between 1.2 to 2.0 million tones per annum depending on the type and quantity of fertilizer product to be produced from the phosphate rock.

Room-and-pillar mining will be used to extract the ore, achieving an approximate 75% extraction ratio of the in-situ reserves.

One phosphate rock seam averages 30% P2O5 and will not require beneficiation; the balance will be subject to heavy media processing at the mine site, yielding concentrated phosphate rock at a grade of 31% P₂O₅.

Sulphuric and Phosphoric Acid Production

A sulphuric acid plant will be constructed as part of the fertilizer complex.  The construction ensures that the YMC project secures its supply of sulphuric acid, which is a key element in the production of the phosphoric acid required to produce MAP and NPK fertilizers.

In addition, it is expected that the heat generated through the sulphuric acid production process will displace energy requirements which otherwise would be purchased in the form of coal and electricity.  This co-generation ability could lessen YMC’s exposure to potential seasonal electricity supply problems and reduce the need to buy coal. 

When outsourced, sulphuric acid can account for approximately 60% of phosphoric acid production costs.  With captive sulphuric acid based on purchasing elemental sulphur, the phosphoric acid production cost is reduced by approximately 25% to 30%.

To produce phosphoric acid, YMC’s phosphate rock concentrate is combined with sulphuric acid.  YMC’s phosphoric acid is combined with purchased ammonia to produce MAP, which is sprayed into a blower where it dries and forms a powder.  This can either be sold as is or further processed into NPK by combining it with purchased urea and potash (KCl).

Permitting and Licensing Requirements

Prior to commencing development at YMC, additional government approvals and permits are required. The YMC project also requires additional land both at the mine sites and for the future fertilizer complex construction.

Before any project construction starts, various licenses and permits from various government agencies, including the local Yidu, Yichang and Hubei Province governments, will be required.  Seven government departments are involved, including Departments of Environmental Protection, Department of Production Safety, Department of Urban Planning, Department of Land Management, Commercial Bureau, Administration of Industry Commission and Department of Development and Reform.