Mining companies worldwide spend millions of dollars every year searching for their target of choice. For some it’s gold and silver, others choose to drill in search of rare earth metals. The list can go on and on as there are thousands of miners in search of the money buried beneath the earth. When a location with proven reserves is available, it is a find in itself.
While digging for gold and other precious metals is still the resource of choice within the industry, exploring the ''path less taken'' can often prove to be valuable. Mining for phosphate, an inorganic chemical, a salt of phosphoric acid that is constantly in demand is one of these paths. Phosphorus itself is not found free in nature because of its reactivity with air and many other oxygen-containing substances, but it is prevalent in a few locations throughout the world as phosphate rock. Some of the largest reserves globally are located in the Arab nations and select locations in China and Russia.
What makes phosphate rock so valuable is that it is a critical component in commercial use of phosphorus-based chemicals and in the production of fertilizers as phosphorus is an essential plant nutrient.
A company looking to capitalize on the increasing demand for phosphate rock is Vancouver, British Columbia-based, Sterling Ventures Group, Inc. (OTCBB: SGGV). Sterling Ventures is engaged in the exploration and development of mineral properties located in China. The Company announced yesterday that it signed two agreements on October 18, 2010 with Chenxi County Hongyu Mining Co. Ltd. and its shareholders relating to the Gaoping phosphate mine located in Chenxi County, Hunan Province, China and other phosphate resources located in Hunan.
This property holds 58.16 million tonnes of phosphate resources with a grade of 19.8% P2O5 based on a geological report estimated by Hunan Chemical Geological Exploration Institute. To date, Hongyu has paid resource fees to the Chinese government for 3.13 million tonnes of phosphate resources. There is still a lot of phosphate to be mined from this proven reserve. Hongyu controls the phosphate through a business license and a mining permit which is in effect until November 10, 2014 and covers 42.5 hectares encompassing the Property, a sedimentary phosphate type deposit. The mining permit allows initial production up to 100,000 tonnes phosphate ore per year.
Sterling has negotiated an agreement with both Hongyu Mining and its shareholders in which an investment company will be incorporated in Hong Kong that will acquire 90% of Hongyu and will be 20% owned by the Hongyu shareholders and 80% by Sterling. Once the merger is complete Hongyu will have become a Hong Kong/China joint venture company. Several financial stipulations are put forth in the agreement that must be met, but if compliance is maintained and all obligations are met by Sterling, the Company may, at any time request that the Hongyu shareholders sell their 20% interest in the investment company to Sterling for the issuance of ten million common shares of Sterling's capital stock and the shareholders must sell.
In return, Sterling agrees to put the phosphate property into production and finance the building of a phosphate processing plant on the property together with other facilities required to establish a fully-functioning mining operation to efficiently expedite the phosphorous resources.
Given the aggressiveness of Sterling and the large, proven amounts of a resource that is in demand worldwide and the possibilities that can come from the new agreements, Sterling Resources is taking one aspect of their company down the path less chosen and may profit handsomely for doing so.
