High-quality phosphate deposits

Our phosphate deposits benefit from high levels of P₂0₅ and low levels of arsenic content, which are considered of higher quality when compared to other phosphate rocks available in the market. As such, we are assured of a relatively stable source of revenue from the sale of our high-quality phosphate rocks. In addition, we enjoy significant competitive advantage in the processing of these deposits as (i) we are familiar with the processing of these materials due to our operational history; and (ii) we are able to enjoy significant cost and production efficiencies due to our high-quality phosphate rocks which require less processing efforts.

Vertically-integrated strategy

With a view to enhance the value of our mines, we intend to continue a vertically-integrated strategy by rebuilding and/or investing in downstream processing facilities to process and refine raw phosphate rocks and to produce downstream phosphate-based chemical products. The Gongxing Facilities and our Mines, which are located approximately 45 km apart, are part of an integrated production complex that allows us to benefit from operational synergies and economies of scale.

We believe that our relatively high level of vertical integration provides us with the following advantages over our competitors:

• Raw materials price stability – We are able to control our downstream processing costs as our main raw material, phosphate rocks, is not subject to price fluctuations and volatility. This allows us to cushion our operations from the impact of fluctuations in prices of raw materials on our margins, and provide a more stable source of raw materials to our downstream processing operations.

• Raw materials quality assurance – We are able to control the quality of our raw materials for our downstream processing operations with known and desirable qualities, thereby ensuring the quality of our downstream products and costs efficiency in our operations.

• Sales flexibility – We are able to enjoy additional sales flexibility in the event where our phosphate rock production exceeds the demand for phosphate rock from our downstream processing operations. In addition, we are able to allocate our phosphate rock resources to either direct sales or to channel to downstream processing operations, depending on current market conditions.

Low production costs advantage

We believe that we currently enjoy relatively low costs of raw materials and logistics and transportation, as compared to our competitors, due to the following reasons:

• Low costs of raw material

  We are able to benefit from substantial cost saving in the production of downstream phosphate-based chemical products using phosphate rocks extracted from our mines. As part of our vertically-integrated business model, we are able to control the quality and costs of phosphate rock by operating our mines.

• Stable and reliable supply of raw materials such as electricity and natural gas

  We also benefit from a stable and reliable supply of electricity for our electricity-intensive downstream processing operations which is provided by the State Grid.

• Production efficiency

  We are able to enjoy significant cost and production efficiencies due to the use of our (i) high-quality phosphate rocks in our downstream operations, thereby requiring less processing efforts; and (ii) newly-built facilities, such as our furnaces, which we believe are technologically advanced and fully compliant with applicable regulations set by the relevant PRC authorities.

• Improved logistics and transportation

  We believe that we will be able to benefit from improved logistics and transportation, upon completion of the relevant initiatives by the PRC authorities post-Wenchuan Earthquake.

  In particular, we are also able to reduce our transportation costs given that our mines and Gongxing Facilities are located in close proximity, being approximately 45 km apart.

Established track record and reputation

We have established ourselves as reputable market player in the PRC with over 10 years of operations in phosphate rock mining and 16 years of operations in downstream phosphate processing.

We believe that we were the first to produce granular high-density STPP using technology purchased from the United States. We can produce over 10 different food and industrial-grade products. Based on our experience, granular heavy-density STPP usually commands higher commercial value than powder low-density STPP as the former has wider applications. This provides us with the flexibility to vary our product mix according to market demands to maximise gross margins. As testament to our established track record, we have obtained accreditations including (i) ISO 9001 Quality Management Standard; and (ii) ISO 14001 Environmental Management Standards, which we believe we were the first phosphate-based chemical producer in PRC to be accredited as such. We have also obtained certifications from the NSF International and KOF-K Kosher Supervision in 2005 and 2011 respectively. These organisations provide certifications as to the quality of our downstream phosphate-based chemical products.

We have also established an extensive and notable local and multi-national customer base in PRC and worldwide.

Significant growth potential in related industries

We believe that there is significant growth potential in the industries to which we supply our phosphate rocks and phosphate-based chemical products, namely in markets that are in the production of phosphate fertiliser products, animal feed and industrial phosphate chemicals.

Global fertilisers consumption is expected to grow steadily in the longer-term as farmers will use more fertilisers to boost crop yield, along with rising population. As phosphate is one of the most important macronutrients for crops and there is no perfect substitute, we expect the demand for our products to remain strong.

Strategic geographical location

We believe that the geographically advantageous location of our mines will provide us with a reliable source of supply of phosphate rock to meet our customers' demand for our products.

In addition, we believe that we have strategic access to our end customers in the PRC and that we are well-positioned to capture the market opportunities presented by increasing demand for phosphate. Phosphate is the most widely used chemical fertilisers for plants and crops, with fertilisers representing approximately 80% of annual phosphate consumption. As Sichuan Province is generally agriculturally-focused, we are able to sell our phosphate rocks and phosphate-based chemical products to manufacturers of fertilisers located in the vicinity of our operations. Our strategic proximity to these fertiliser plants provides us with a competitive edge over our competitors as we are able to provide high quality phosphate at lower costs.

We have a strong and experienced management team with proven track record

We have a strong and dedicated management team, led by our Chairman and CEO, Dr. Ong Hian Eng, which has extensive knowledge of, and experience in, the phosphate industry and provide our Group with the skills and expertise to implement its strategy.

Our Directors are supported by the our team of experienced and competent Key Executives who assist to manage the PRC operations.