YICHANG SPUR CHEMICALS (YSC)

Spur through its wholly-owned subsidiary, Spur BVI, holds a 72.18% interest in YSC whose operations are located in Zicheng Township in the city of Yidu, Hubei Province.  In addition Spur has a 5.45% indirect interest in YSC because YMC has an 11.13% stake in YSC. YPCC is the other partner in YSC.

YSC’s assets include a 100,000 mt/annum S-NPK compound fertilizer plant and a 60,000 mt/annum phosphoric acid plant.  YMC is also in the process of constructing a flexible 200,000 mt/annum mono-ammonium phosphate (MAP) plant on behalf of YMC on the YSC plant site.

Spur and YPCC have agreed to integrate YSC's assets into the YMC project by merging YSC and YMC as soon as legally possible.  Therefore, it is expected that YSC will be merged with YMC as soon as YMC’s Registered Capital contributions are completed.

YSC - EXISTING FERTILIZER COMPLEX

The original plant was built in 1999 for approximately RMB50 million and commissioned in 2000.  The plant has its own rail spur off a national railway line and its own jetty on the Yangtze River, both facilitating low-cost access to inputs and markets.  The fertilizer complex was acquired in 2003 for a total investment of $2.57 million. At the time, it was understood that the plant would not be profitable on a stand-alone basis until a certain level of integration was achieved.

In March 2005, construction of a 60,000 mt/annum phosphoric acid plant was completed by YSC, enabling the production of phosphoric acid from purchased phosphate rock and sulphuric acid, with the longer term objective of replacing the purchased phosphate rock with the phosphate rock deposits from YMC. The phosphoric acid plant was built in six months (vs. planned nine months) at a cost of US$6.85 million.

The plant was idled in 2007 due to high costs of sulphur and potash. When operational, YSC produced two types of S-NPK’s 13-17-15 and 14-16-15 (denotes the N-P2O5-K2O content respectively).

MAP PROJECT

In August of 2007, it was decided that the YSC plant should be converted to the production of MAP, ("MAP Project") due to the high costs of both potash and sulphuric acid required in the production of NPK's.

The construction of the MAP plant commenced in early 2008.  Once constructed, the plant will produce up to 200,000 mt/annum of powdered MAP destined primarily for domestic NPK producers, up to 100,000 mt/annum of granular MAP for export and up to 100,000 mt/annum of S-NPK depending on market conditions. Construction was suspended in late August of 2008 due to the world economic crisis.  At that time the MAP Project was 3 months from commissioning.

Restarting the MAP Project is expected to require four to six months of lead time to bring the facility into commercial MAP production.