| History
Nevada Chemicals was formed as Mining Services International (MSI) in 1979 as a provider of chemical products and services to the mining industry. MSI entered the industry providing bulk mining explosives. By the late 1980's it expanded to other mining chemicals and began production of Sodium Cyanide through its Joint Venture, Cyanco, near Winnemucca, Nevada. In late 2001, MSI sold the explosives division to a Spanish company UEE and transitioned into a new company, Nevada Chemicals, Inc. (NCI) which trades on NASDAQ as NCEM. Over the years NCI has exercised a strategy to become the largest provider of sodium cyanide to the gold mining industry operating in the United States. This successful strategy is based upon providing quality products with extraordinary service to its customers through state-of-the-art facilities and proactive management. NCI/MSI has successfully developed new technology and has licensed its technology into several significant mining areas of the world including Australia, South Africa, Namibia and Chile and provided products to large coal mines in the Western United States. In 1983, NCI (as MSI) became a public company by merging with Rocky Mountain Natural Resources, a company involved in leasing oil and gas properties in the Midwest. NCI was the surviving entity and was traded on the NASDAQ small cap market as MSIX. In 1986, the gold mining industry had begun to expand with the introduction of cyanide heap leaching to recover finely disseminated gold. NCI began a project to develop, manufacture and provide sodium cyanide to the new gold mining industry in Nevada. The technology to synthesize hydrogen cyanide was licensed from Mitsubishi Gas Chemical of Japan and the critical reaction and absorption of hydrogen cyanide into caustic soda was developed by NCI. This then allowed for significantly reduced capital costs per unit of installed capacity and much greater inherent safety in the manufacture of this necessary but hazardous chemical. These developments also led to the strategy of producing a liquid product which can be used "as delivered" to the mine site. Previous applications involved the manufacture of dry, dusty briquettes of sodium cyanide which had to be stored, handled and dissolved with pH adjustments at the mine site before actual use. Construction of first production plant began in 1988 near Winnemucca, Nevada, which is the center of the gold producing area. The plant was commissioned within 18 months and production began in 1990. The "new liquid" product was introduced into the mining community with satellite communication systems to provide security and to dispatch, track and communicate with the tank truck fleet in real time. The concept employed with the manufacture and delivery of product was based on designing a facility and delivery system with redundant safety systems and simplicity. By mid 1992, Degussa joined Cyanco as our 50/50 partner. In 1995, Cyanco began to de-bottleneck the plant to service the growing demand for its products. The original plant capacity of 28 million pounds was doubled through process improvements and supercharging the plant by the addition of oxygen. In 1998, Cyanco had expanded the plant again, increasing capacity to 85 million pounds per year. These efforts were spearheaded by NCI. This expansion not only provided requisite reliability but also made the facility world scale. NCI continued to enjoy increasing incomes through 1998 from both the explosives division and Cyanco, but the price of gold in the market was trending downward into ranges which were unprofitable to the marginal gold producers, thereby reducing demand for cyanide. In general, mining and the supply of explosives had become more competitive. In 2001, NCI sold the explosives division as the market had changed dramatically with the consolidation of several global explosive companies. Over the years the explosives division had expanded with sales approaching $45 million including joint ventures with bulk and packaged products as well as services. Cyanco continues to enjoy the increasing income stream which began in early 1992. This transaction left the "New" Nevada Chemicals, Inc. with a strong balance sheet and retention of the crown jewel of its portfolio, its interest in Cyanco. In 2002, FMC Corporation, the only other manufacturer of cyanide in the West, decided to exit the sodium cyanide market as Cyanco purchased FMC's sales business and some distribution assets. Over the years Cyanco has become the largest supplier of cyanide in Nevada, remaining profitable even in the face of major mine consolidations, closures, excess cyanide capacity, increasing raw material prices and falling cyanide prices. With the exit of FMC from the market there are now two producers providing sodium cyanide to the market. This new business will improve efficiencies and allow Cyanco to run at higher throughput levels. We at Nevada Chemicals are excited as we look to the future and our position in this industry segment. The recent rise in gold prices and the renewed interest in gold mining projects bode well for our future.
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