10-K

U.S. Securities and Exchange CommissionWashington, D.C. 20549

Form 10-K

(Mark One)

xANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2006

oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                to

Commission File No. 0-10634

Nevada Chemicals, Inc.
(Exact name of registrant as specified in its charter)

Utah	87-0351702
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

9149 So. Monroe Plaza Way, Suite B
Sandy, Utah 84070
(Address of principal executive offices, zip code)

Registrant’s telephone number, including area code:  (801) 984-0228

Securities registered pursuant to Section 12(b) of the Act:  None

Securities registered pursuant to Section 12(g) of the Act:

Title of class
Common Stock, $0.001 Par Value

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o  No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o  No x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x  No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. (See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (check one):

Large accelerated filer o Accelerated filer o Non-accelerated filer x

Based on the closing sales price of June 30, 2006, the aggregate market value of the Common Stock held by non-affiliates was $31,135,000 (3,542,041 shares estimated to be held by non-affiliates). Shares of the Common Stock controlled by each officer and director and by each person who may be deemed to be an affiliate of the registrant have been excluded.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.) Yes o  No x

The number of shares outstanding of the registrant’s par value $0.001 Common Stock as of March 29, 2007 was 6,983,172.

Documents Incorporated by Reference

Portions of the registrant’s Proxy Statement for the Annual Meeting of Shareholders are incorporated by reference into Part III of this Form 10-K.

Nevada Chemicals, Inc.
Annual Report on Form 10-K
Table of Contents

Part I
Item 1.	Business
Item 1A	Risk Factors
Item 1B	Unresolved Staff Comments
Item 2.	Properties
Item 3.	Legal Proceedings
Item 4.	Results of Votes of Security Holders
Part II
Item 5.	Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Item 6.	Selected Financial Data
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A.	Quantitative and Qualitative Disclosure About Market Risk
Item 8.	Financial Statements and Supplementary Data
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A.	Controls and Procedures
Item 9B.	Other Information
Part III
Item 10.	Directors, Executive Officers and Corporate Governance
Item 11.	Executive Compensation
Item 12.	Security Ownership of Certain Beneficial Owners and Management
Item 13.	Certain Relationships and Related Transactions, and Director Independence
Item 14.	Principal Accountant Fees and Services
Part IV
Item 15.	Exhibits and Financial Statement Schedules
Signatures

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PART I

Item 1.                    Business

General

Nevada Chemicals, Inc., a Utah corporation organized in 1979 (the “Company”), is engaged in the business of supplying chemicals to the gold mining industry in the western United States through its ownership in Cyanco Company (“Cyanco”).  Through its wholly owned subsidiary, Winnemucca Chemicals, Inc. (“Winnemucca Chemicals”) the Company holds a 50% interest in Cyanco, a non-corporate joint venture engaged in the manufacture and sale of liquid sodium cyanide.

In November 2001, the Company closed the sale of the assets, subsidiaries and certain joint venture interests of its explosives business (the “Explosives Business”) to Union Espanola de Explosivos S.A. and certain of its subsidiaries (“UEE”).  In connection with this transaction, the name of the Company was changed from Mining Services International Corporation to Nevada Chemicals, Inc.

The Company’s operating revenues consist mainly of earnings from Cyanco based on the equity method of accounting and management fee income from Cyanco.  In addition to income from Cyanco operations, the Company earns interest income on the Company’s cash and cash equivalents.

Cyanco Joint Venture Interest

Cyanco is a 50/50 joint venture between the Company and Degussa Corporation, a wholly owned subsidiary of Degussa GmbH, a German company.  Cyanco produces and markets liquid sodium cyanide from its Winnemucca, Nevada plant.  Cyanco services the western U.S. gold mining industry, primarily located in Nevada, selling sodium cyanide for use in leaching precious metals in mining operations.  There are principally two types of products marketed to gold mines for the leaching process: (1) a solid “briquette” sodium cyanide product that requires handling and physical dissolution before use, and (2) the type provided by Cyanco, a liquid sodium cyanide which provides for greater personal and environmental safety and comes to the mining customer ready to use.

Since the liquid product is shipped by truck from the plant to the mine site in a solution of about 30% sodium cyanide and 70% water, freight costs for liquid sodium cyanide are significant and shipping must be managed carefully, both in terms of cost and safety and environmental protection.  Cyanco has a contract for this service with an Omaha, Nebraska company that utilizes dedicated equipment specifically designed for Cyanco.  The transportation equipment includes trucks equipped with linked satellite communication systems for security purposes.

Cyanco has an annual liquid sodium cyanide production capacity of approximately 85 million pounds.

Demand for the sodium cyanide manufactured by Cyanco is dependent on the level of gold mining activity in the geographic area it services.  The level of gold mining activity is dependent to some extent on the price of gold.  Over the past five years, the market price of gold has generally increased from a low of $256 per ounce in February 2001 to as high as $725 per ounce in May 2006.  Since then, the price of gold has pulled back, but has remained above $500 per ounce.  If the price of gold continues at these higher values, the gold mining community may be induced to expand exploration and production activities.  In such event, the demand for sodium cyanide in Cyanco’s market area should remain relatively stable or possibly increase in the foreseeable future.

Competition and Purchase of FMC Sodium Cyanide Business

Cyanco historically represented one of three sources of sodium cyanide in the western United States.  The world market for briquette or dry-form sodium cyanide is dominated by E.I. DuPont Nemours (“DuPont”).  Historically, Cyanco competed with DuPont and also with FMC Corporation (“FMC”), which marketed and delivered liquid sodium cyanide in the same geographic area as Cyanco.

Effective April 1, 2002, Cyanco purchased contracts and certain distribution assets related to FMC’s sodium cyanide business.  As a result of this transaction, FMC exited the business, ending its 12-year role as a supplier of sodium cyanide to the Nevada gold mining industry.  Cyanco assumed FMC’s on-going contractual obligations under its existing sodium cyanide contracts and began supplying these customers in April 2002.  In addition to the transferred contracts, Cyanco purchased certain equipment including distribution tank trailers.

As a result of the FMC transaction, Cyanco competes primarily with DuPont to supply sodium cyanide to the Nevada gold mining industry.  The Company believes that the important competitive factors in the sodium cyanide market

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are service, quality and price.  Cyanco has had to meet competitive demands, and has been able to achieve results by being creative and service-oriented and offering competitive pricing.

Dependence on Customers

All of the Company’s sales occur within the western United States.  Since most of Cyanco’s cyanide customers are large mining companies, the number of companies it services is relatively small compared to those of a wholesale distribution or retail business.  During 2006, Cyanco had sales to two customers representing 49%, and 34% of total sales.  It should be noted that each large mining concern may have multiple operating properties within Cyanco’s operating region.  A loss of one or more customers could adversely affect future sales, and may have a material adverse effect on the Company’s results of operations.  Such a loss can occur either from the customer switching to another source or from the customer electing to close or suspend one or all of its mining operations.  However, management does not currently expect losses of customers due to mine closures based on prevailing gold prices.

Patents, Trademarks and Licenses

In March 1989, Cyanco obtained from Mitsubishi Gas Chemical Company, Inc., a Japanese corporation, in consideration for payment of a one-time license fee, a perpetual license for a process and related technical information covering the manufacture of hydrogen cyanide for use in the manufacture of liquid sodium cyanide at the Cyanco plant.  The license is a nonexclusive, nonsublicensable and nontransferable right to use the technology at the Cyanco plant, and is materially important to the plant’s operation.  The Company developed a patent issued during 2000 for the production and transportation of a “wet-cake” cyanide product which may be used by Cyanco in expanding its freight-logical market.

The Company has commenced research and development activities related to improved process efficiencies in the mining chemicals industry.

Raw Materials

Cyanco has historically not experienced significant difficulty in obtaining necessary raw materials used in the manufacture of its products.  In the present environment, raw material availability could be impacted for short periods of time, but Cyanco does not expect significant difficulty in obtaining raw materials for the longer term.  Cyanco must compete with other markets for a major portion of its raw materials (primarily ammonia, caustic soda, natural gas and electricity).  The supplies of these products have been adequate in past years to meet the needs of industrial as well as agricultural and other commercial users.  Cyanco has historically entered into long-term contracts for the transportation of natural gas to the Cyanco facility.  Cyanco has not had significant difficulty in obtaining the other necessary raw materials since there are alternative sources of supply.  Cyanco has experienced, however, wide fluctuations in the cost of raw materials, primarily driven by the cost of natural gas, which in turn impacts the price and availability of ammonia and caustic soda.  It is Cyanco’s intent wherever possible to continue to pass short-term raw material price fluctuations on to its client base in order to maintain profitability.  However, not all of the supply relationships include such cost sharing provisions.

Employees

The Company currently employs two individuals and one part-time consultant at its corporate offices.  Cyanco has 26 employees at its plant in Winnemucca, Nevada.  The Company and Cyanco consider relations with their employees to be positive.

Environmental Compliance

Cyanco is subject to federal, state and local laws regulating the protection of the environment in the handling, storage and shipment of sodium cyanide and related raw materials.  In preparation for the manufacture and sale of liquid sodium cyanide at the Cyanco plant, Cyanco incurred material capital expenditures relating to compliance with environmental laws and regulations, including expenditures required for specialty trucks and tankers and development of an emergency response plan in the event of a hazardous materials spill.  Cyanco’s processes are designed to prevent hazardous liquid discharge during the manufacture of its product.  Compliance with such laws, rules and regulations on an ongoing maintenance basis is expected to require additional capital expenditures.  Recently Cyanco has reviewed and increased security measures in light of potential terrorist activities at chemical facilities.

Cyanco and other cyanide producers, along with international mining companies, have voluntarily begun to establish a standard of performance or procedures for manufacturing, transportation and use of cyanide called the International

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Cyanide Management Code (“ICMC”).  The purpose of this code is to provide guidelines for the best available techniques to protect the environment, employees and the public.  Cyanco is a signatory to this code, and has been certified by an independent auditing process to be in compliance.

Other Governmental Regulations

Cyanco is subject to various governmental authorities with respect to transportation and handling of hazardous materials.  In addition, it is subject to OSHA’s Process Safety Management program at the Winnemucca plant.  Cyanco has implemented compliance programs, which the Company believes addresses the program objectives and guidelines.  Cyanco is regularly inspected by Nevada’s regulatory agencies to monitor compliance to Nevada’s Chemical Accident Prevention Program.

Item 1A.              Risk Factors

The business and operations of the Company, particularly through its 50% ownership in Cyanco, are subject to risks.  In addition to considering the other information in this Form 10-K, you should consider carefully the following factors in deciding whether to invest in the Company’s securities.  If any of these risks occur, or if other risks not currently anticipated or fully appreciated occur, the Company’s business and prospects could be materially adversely affected, which could have an adverse effect on the trading price for its shares.

The number of Cyanco customers is relatively small and a loss of one or more customers could aversely affect future Cyanco sales, and may have a material adverse effect on the Company’s results of operations.

All of the Company’s sales occur within the western United States.  Since most of Cyanco’s cyanide customers are large mining companies, the number of companies it services is relatively small compared to those of a wholesale distribution or retail business.  During 2006, Cyanco had sales to two customers representing 49%, and 34% of total sales.  A loss of one or more customers could adversely affect future sales, and may have a material adverse effect on the Company’s results of operations.

Price increases in energy and other raw materials could have a significant impact on Cyanco’s ability to sustain and grow earnings.

Cyanco’s manufacturing processes consume significant amounts of natural gas, electricity and other raw materials, such as ammonia and caustic soda.  The prices of energy and raw materials are subject to worldwide supply and demand as well as other factors beyond the control of Cyanco.  Although during 2006, energy costs moderated, the Company expects energy costs to remain high and volatile in the near future, which may result in further increases in Cyanco costs.  Significant variations in the cost of energy and raw materials affect Cyanco’s operating results.  When possible, Cyanco purchases raw materials through negotiated long-term contracts to minimize the impact of price fluctuations.  Success in offsetting higher raw material costs with price increases is largely influenced by competitive and economic conditions and could vary significantly depending on the market served.  Cyanco does have the ability, under certain of its contracts, to pass on increases in the cost of raw materials to its customers.  If Cyanco is not able to fully offset the effects of higher energy and raw material costs, it could have a significant impact on Cyanco’s financial results and on the Company’s equity in earnings of Cyanco.

Cyanco is subject to risks caused by the production of hazardous materials, including legal liability created by its operations.

Cyanco’s operations are subject to the hazards and risks normally incident to production of a hazardous material, any of which could result in damage to life, property, or the environment.  Cyanco may be subject to significant legal liability for any damage caused by its operations, which could be substantial.

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Changes to the extensive regulatory and environmental rules and regulations to which Cyanco is subject could have a material adverse effect on Cyanco’s future operations.

In addition to normal laws and regulations applicable to companies, Cyanco’s operations are subject to various additional laws and regulations governing the protection of the environment, production of chemicals, occupational health, waste disposal, toxic substances, and other similar matters.  New laws and regulations, amendments to existing laws and regulations, or more stringent implementation of existing laws and regulations could have a material adverse impact on Cyanco, increase costs, and cause a reduction in levels of production.  Compliance with these laws and regulations requires significant expenditures and increases the operating costs of Cyanco.  Changes in regulations and laws could adversely affect Cyanco’s operations or substantially increase the costs associated with those operations.

The Company may not be able to control the decisions and strategy of joint ventures to which it is a party.

Through its wholly owned subsidiary, Winnemucca Chemicals, Inc., the Company holds a 50% interest in Cyanco.  Because the Company shares ownership in Cyanco with another chemical company, it is subject to the risks normally associated with the conduct of joint ventures.  The existence or occurrence of one or more of the following circumstances and events could have a material adverse impact on the Company’s profitability or the viability of its interests held through the joint venture, which could have a material adverse impact on the Company’s results of operations and financial condition:

·              inability to exert influence over certain strategic decisions made in respect of joint venture operations;

·              inability of partners to meet their obligations to the joint venture or third parties; and

·              litigation between partners regarding joint venture matters.

Cyanco’s production of liquid sodium cyanide is subject to risks related to environmental liability.

The production of liquid sodium cyanide is subject to extensive federal, state and local laws, regulations, rules and ordinances relating to pollution, protection of the environment and the generation, storage, handling, transportation, treatment, disposal and remediation of hazardous substances and waste materials.  Actual or alleged violations of environmental laws or permit requirements could result in restrictions or prohibitions on plant operations, substantial civil or criminal sanctions, as well as assessment of liabilities.  The payment of related liabilities would reduce funds otherwise available and could have a material adverse effect on the Company.  Should Cyanco be unable to fund fully the cost of remedying an environmental problem, Cyanco might be required to suspend operations or enter into interim compliance measures pending completion of the required remedy, which could have a material adverse effect on the operations and business of the Company.

The business of Cyanco would be adversely affected by the loss of services or infrastructure near its production site.

Production of liquid sodium cyanide depends, to one degree or another, on adequate infrastructure.  Reliable roads, railroad lines, bridges, power sources, and water supply are important determinants which affect capital and operating costs.  A lack of such infrastructure or unusual or infrequent weather phenomena, sabotage, terrorism, government, or other interference in the maintenance or provision of such infrastructure could adversely affect Cyanco’s operations, financial condition, and results of operations.

Shortage of supplies could adversely affect Cyanco’s ability to operate.

Cyanco is dependent on various supplies and equipment to carry out its chemical production.  Cyanco may not be able to control its receipt of necessary supplies or equipment.  The shortage of such supplies, equipment and parts could have a material adverse effect on the Company’s ability to carry out its operations and therefore limit or increase the cost of production.

Cyanco requires the issuance and renewal of licenses and permits in order to conduct its operations, and failure to receive these licenses may result in delays in development or cessation of certain operations.

The operations of Cyanco require licenses and permits from various governmental authorities, and the process for obtaining licenses and permits from governmental authorities often takes an extended period of time and is subject to numerous delays and uncertainties.  Such licenses and permits are subject to change in various circumstances.  Cyanco may be unable to timely obtain or maintain in the future all necessary licenses and permits that may be required to continue

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operations that economically justify the cost.

A substantial or extended decline in gold prices would have a material adverse effect on the Company.

The profitability of Cyanco’s operations and ultimately the earnings of the Company are significantly affected by changes in the market price of gold.  Demand for liquid sodium cyanide is affected by the level of gold exploration and development, which is in turn affected by the price of gold.  Gold prices fluctuate on a daily basis and are affected by numerous factors beyond the control of the Company.  The supply and demand for gold, the level of interest rates, the rate of inflation, investment decisions by large holders of gold, including governmental entities, and changes in exchange rates can all cause significant fluctuations in gold prices.  Such external economic factors are in turn influenced by changes in international investment patterns and monetary systems and political developments.  The price of gold has fluctuated widely and future serious price declines could cause continued commercial production to be impractical.  Depending on the price of gold, cash flow from mining operations may not be sufficient to cover costs of production and capital expenditures, which may cause gold mining companies to suspend or terminate operations.  In such event, demand for Cyanco’s product would decrease.

Local, state and federal governments have begun a regulatory process that could lead to new regulations impacting the security of chemical plant locations and the transportation of hazardous chemicals.

Growing public and political attention has been placed on protecting critical infrastructure, including the chemical industry, from security threats.  Terrorist attacks and natural disasters have increased concern regarding the security of chemical production and distribution.  In addition, local, state and federal governments have begun a regulatory process that could lead to new regulations impacting the security of chemical plant locations and the transportation of hazardous chemicals, which could result in higher operating costs and interruptions in normal business operations at Cyanco.

Cyanco’s insurance may not cover the risks to which its business is exposed.

Cyanco’s business is subject to a number of risks and hazards generally, including adverse environmental conditions, industrial accidents, changes in the regulatory environment and natural phenomena such as inclement weather conditions, floods and earthquakes.  Such occurrences could result in damage to production facilities, personal injury or death, environmental damage to Cyanco’s properties or the properties of others, delays in production, monetary losses and legal liability.  Available insurance does not cover all the potential risks associated with a chemical company’s operations.  Cyanco may also be unable to maintain insurance to cover insurable risks at economically feasible premiums, and insurance coverage may not be available in the future or may not be adequate to cover any resulting loss.  As a result, Cyanco might become subject to liability for pollution or other hazards for which it is uninsured or for which it elects not to insure because of premium costs or other reasons.  Losses from these events may cause Cyanco to incur significant costs that could have a material adverse effect upon the Company’s financial condition and results of operations.

The business of Cyanco is dependent on good labor and employment relations.

Production at Cyanco’s facilities is dependent upon the efforts of employees of Cyanco.  Relationships between Cyanco and its employees may be impacted by changes in labor relations which may be introduced by, among others, employee groups, unions, and the relevant governmental authorities in whose jurisdictions Cyanco carries on business.  Adverse changes in such legislation or in the relationship between Cyanco and its employees may have a material adverse effect on Cyanco’s business, and the results of operations and financial condition of the Company.

Future changes to tax accruals or the final resolution of tax audits may adversely affect the results of operations in applicable periods.

Certain of the Company’s United States and Canadian income tax returns are currently under audit.  The ultimate outcome of these audits and the impact of the final audit results on the consolidated financial statements of the Company cannot be determined at this time.  The Company has accrued estimated amounts and has amounts on deposit for the potential outcome of these audits, but there can be no assurance that such costs will not ultimately exceed the current estimate.  The Company reviews the accrued amounts at each balance sheet date.  Any increase in the accrual or the final resolution of the amount due in excess of the accrual would reduce income in the period such determination is made.  Similarly, any decrease in the accrual or final determination that the amount due is less than the accrual would increase income in the period such determination is made.  Consequently, the Company’s results of operations for any particular period may be affected by these adjustments, unrelated to the results of the current business operations of the Company for that period, which may affect the

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price for the Company’s common shares in the trading market.

Changes in the market price of Company common shares may be unrelated to its results of operations and could have an adverse impact on the Company.

The Company’s common shares are listed on the National Association of Securities Dealers Automated Quotation system (“Nasdaq”).  The price of the Company’s common shares is likely to be significantly affected by short-term changes in the market price of gold or in its financial condition or results of operations as reflected in its quarterly earnings reports.  A drop in trading volume and general market interest in the securities of the Company may adversely affect an investor’s ability to liquidate an investment and consequently an investor’s interest in acquiring a significant stake in the Company.  A failure of the Company to meet the reporting and other obligations under U.S. securities laws or imposed by Nasdaq could result in a delisting of Company common shares.  A substantial decline in the price of Company common shares that persists for a significant period of time could cause Company common shares to be delisted from the Nasdaq, further reducing market liquidity.  As a result of any of these factors, the market price of the common shares at any given point in time may not accurately reflect the Company’s long-term value.  Securities class action litigation often has been brought against companies following periods of volatility in the market price of their securities.  The Company may in the future be the target of similar litigation, which could result in substantial costs and damages and divert management’s attention and resources.

The Company has paid dividends in the past but future dividends are not guaranteed.

The Company has paid dividends in recent history and anticipates that it will continue to do so in the future.  However, continued payment of dividends is subject to the discretion of the Company’s board of directors, after taking into account many factors, including the Company’s operating results, financial condition, and current and anticipated cash needs.  There is no guarantee that the Company will continue to pay dividends in the future.

The loss of key executives could adversely affect the Company.

The Company has a small executive management team.  In the event that the services of an executive were no longer available, the Company and its business could be adversely affected.  The Company carries key-man life insurance with respect to its chief executive officer.

The Company may be subject to litigation in the future.

Legal proceedings that could be brought against the Company or Cyanco in the future, for example, litigation based on its business activities, environmental laws, volatility in its stock price, or failure of its disclosure obligations, could have a material adverse effect on the Company’s financial condition or prospects.

Item 1B.                 Unresolved Staff Comments

This item is not applicable to the Company as it is not an accelerated filer.

Item 2.                    Properties

The Company currently leases office facilities comprised of 1,325 square feet and located at 9149 South Monroe Plaza Way, Sandy, Utah under a one-year lease agreement.

Cyanco owns its property, consisting of approximately 1,300 acres of land and manufacturing facilities near Winnemucca, Nevada.  These facilities are considered suitable, and currently provide sufficient capacity to supply Cyanco’s customers.

Item 3.                    Legal Proceedings

The Company is, from time to time, subject to legal proceedings arising out of the normal conduct of its business, which the Company believes are not material to its financial position or results of operations.

As discussed previously, Cyanco is a non-corporate joint venture owned 50 percent by Winnemucca Chemicals and 50 percent by Degussa Corporation.  The Joint Venture Agreement provides a first right of refusal to purchase the other

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partner’s interest in the event the other partner transfers its interest in the joint venture to a third party.

Effective January 1, 2003, Degussa Corporation purportedly transferred its 50% joint venture interest in Cyanco to CyPlus Corporation (CyPlus) as part of a reorganization of the world-wide mining chemicals business of Degussa GmbH.  CyPlus is an indirect, wholly-owned subsidiary of Degussa GmbH in Germany.  Degussa GmbH is also the direct parent of Degussa Corporation.

On January 5, 2004, Winnemucca Chemicals filed a complaint in Nevada State Court (the case was later removed to the United States District Court for the District of Nevada) related to Degussa Corporation’s purported transfer of its joint venture interest to CyPlus and seeking commission payments owed to Cyanco under a prior distribution agreement between Cyanco and Degussa Corporation.  Winnemucca Chemicals claims that such transfer was in violation of the Joint Venture Agreement.  The litigation seeks, among other things, to void such transfer or, alternatively, to enforce Winnemucca Chemicals’ rights under the Joint Venture Agreement arising out of the transfer.  This litigation has no impact on the operations of Cyanco.

Discovery in the lawsuit was concluded and both parties filed motions for partial summary judgment in March 2006.  On December 12, 2006, the motions were granted in part and denied in part.  In its order on the cross motions, the Court denied all of the affirmative defenses of Degussa and CyPlus with prejudice.  The Court denied with prejudice Winnemucca’s claims that it could purchase Degussa’s participating interest in Cyanco for book value and also Winnemucca’s claimed right of first refusal.  The Court held, however, that there was a transfer to a third party for purposes of the Joint Venture Agreement and that invalidation of the transfer was not the only remedy available to Winnemucca.  A Court-ordered mediation is scheduled to take place in Reno, Nevada, on April 3, 2007.

In December 2006, the matter regarding the commission payments was settled with the payment to Winnemucca by CyPlus of $128,000.

Item 4.                    Results of Votes of Security Holders

There were no matters submitted to a vote of security holders during the fourth quarter of 2006.

PART II

Item 5:  Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity    Securities

(a) Price Range of Common Stock

The common stock of the Company is currently listed on the Nasdaq National Market (“NNM”), under the symbol “NCEM.”  The following table sets forth the approximate range of high and low closing prices for the common stock of the Company during the periods indicated.  The quotations presented reflect inter-dealer prices, without retail markup, markdown, or commissions, and may not necessarily represent actual transactions in the common stock.

	Closing Prices
	High		Low
2006    First Quarter	$	7.92	$	6.62
Second Quarter	$	11.04	$	7.86
Third Quarter	$	9.82	$	7.99
Fourth Quarter	$	9.68	$	7.83
2005    First Quarter	$	6.78	$	6.05
Second Quarter	$	6.59	$	5.85
Third Quarter	$	6.93	$	6.36
Fourth Quarter	$	7.02	$	5.91

On March 21, 2007, the closing quotation for the common stock on NNM was $9.60 per share.  As reflected by the high and low prices on the foregoing table, the trading price of the Common Stock of the Company can be volatile with dramatic changes over short periods.  The trading price may reflect imbalances in the supply and demand for shares of the Company, market reaction to perceived changes in the industry to which the Company sells products and services, fluctuations in the price of gold, general economic conditions, and other factors.  Investors are cautioned that the trading price of the common stock can change dramatically based on changing market perceptions that may be unrelated to the Company

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and its activities.

(b) Approximate number of equity security holders

The approximate number of record holders of the Company’s Common Stock as of March 31, 2007 was 420, which does not include shareholders whose stock is held through securities position listings.

(c) Dividends

During 2006, the Company declared dividends of $.07 per share for the first quarter and $.08 per share for each of the second, third and fourth quarters, for an aggregate of $.31 per share, or $2,159,000.  The fourth quarter dividend of $559,000 was paid in January 2007, and is included in accounts payable and accrued expenses on the Company’s consolidated balance sheet at December 31, 2006.

During 2005, the Company declared dividends of $.06 per share for the first quarter and $.07 per share for each of the second, third and fourth quarters, for an aggregate of $.27 per share, or $1,864,000.  The fourth quarter dividend of $483,000 was paid in January 2006, and is included in accounts payable and accrued expenses on the Company’s consolidated balance sheet at December 31, 2005.

Payment of dividends is within the discretion of the Company’s Board of Directors.  There are no contractual or governance restrictions that currently limit the Company’s ability to pay dividends on the Common Stock.

(d) Securities authorized for issuance under equity compensation plans

The Company does not have any equity compensation plans that have not been approved by its shareholders.  Under the Company’s 1988 Non-Qualified Stock Option Plan (the “Option Plan”), as amended, a maximum of 1,315,130 common shares were made available for granting of options to purchase common stock.  The Option Plan, and subsequent material amendments or additions to shares under the Plan, were previously approved by the shareholders of the Company.

The following table presents information concerning the Option Plan.

Plan Category	Number of Securities to be Issued Upon Exercise of Outstanding Options	Weighted-Average Exercise Price of Outstanding Options	Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a))
	(a)	(b)	(c)
Equity compensation plans approved by security holders	105,000	$8.28	509,207

See also Note 4 to the Consolidated Financial Statements for further information regarding the Option Plan.

In April 2006, three members of the Company’s Board of Directors each exercised options to purchase 30,000 shares of the Company’s common stock at $1.21 per share, for total consideration of approximately $109,000.  One director paid $36,000 cash to exercise his options.  The other directors surrendered 4,347 and 3,887 shares of the Company’s common stock, respectively, with a combined market value of approximately $73,000 as consideration for the exercise of their options, as permitted by the underlying stock option agreement.  The shares surrendered were cancelled, with no gain or loss recorded by the Company for this transaction.  Other than the foregoing, the Company did not sell any of its equity securities during 2006.

During the fourth quarter of 2006, neither the Company nor any of its affiliates purchased any equity securities of the Company.

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Performance Graph

The following graph sets forth the cumulative total shareholder return (assuming reinvestment of dividends) to Nevada Chemicals, Inc.’s shareholders during the five-year period ended December 31, 2006, as well as an overall stock market index (Dow Jones Industrial Average) and Nevada Chemicals, Inc.’s peer group index (Nasdaq Composite Index):

Item 6.                    Selected Financial Data

The following consolidated selected financial data as of and for each of the fiscal years in the five year period ended December 31, 2006 was derived from audited consolidated financial statements of the Company and its consolidated subsidiaries.  The consolidated financial statements as of and for each of the fiscal years in the five year period were audited by Tanner LC, independent registered public accountants.  The data set forth below should be read in conjunction with the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Company’s Consolidated Financial Statements and related Notes thereto.

	Years Ended December 31,
	2006		2005		2004		2003		2002
	(In thousands except per share amounts)
Results of Operations Data:
Operating revenues and equity in earnings (1)	$	7,002	$	3,072	$	3,657	$	2,960	$	3,912
Net income	3,224		1,779		1,704		1,308		2,289
Earnings per common share - diluted	0.46		0.26		0.24		0.19		0.31
Cash dividends declared per common share	$	0.31	$	0.27	$	0.23	$	0.15	$	—
Balance Sheet Data:
Total Assets	$	25,662	$	26,137	$	27,061	$	25,306	$	24,692
Long-term debt	—		—		—		—		—
Stockholders’ equity	23,110		21,510		21,354		21,216		21,727

(1) Includes the Company’s 50% share of the operating results of Cyanco reported using the equity method of accounting.

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Item 7.                    Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

The operations reported in the consolidated statements of income for each of the three years in the period ended December 31, 2006 consist primarily of the Company’s proportionate share of the operating results from its 50% interest in Cyanco, a non-corporate joint venture engaged in the manufacture and sale of liquid sodium cyanide, management fee income from Cyanco, investment income earned on cash and cash equivalents, and corporate overhead, costs and expenses.  Since the Company does not own more than 50% of Cyanco, and has determined that other factors requiring consolidation do not exist, the financial statements of Cyanco are not consolidated with the financial statements of the Company.  Summarized financial information for Cyanco for the each of the three years in the period ended December 31, 2006 is presented in Note 6 to the Company’s consolidated financial statements.  In addition, the audited financial statements of Cyanco are included as Exhibit 99.1 to this Form 10-K.

Cyanco historically represented one of three sources of sodium cyanide for use in the mining industry in the western United States.  The world market for briquette or dry-form sodium cyanide is dominated by E.I. DuPont Nemours (“DuPont”).  Historically, Cyanco competed with DuPont and also with FMC Corporation (“FMC”), which marketed and delivered liquid sodium cyanide in the same geographic area as Cyanco.

Effective April 1, 2002, Cyanco purchased contracts and certain distribution assets related to FMC’s sodium cyanide business.  As a result of this transaction, FMC exited the business, ending its role as a supplier of sodium cyanide to the Nevada gold mining industry.  Cyanco assumed FMC’s on-going contractual obligations under its existing sodium cyanide contracts and began supplying these customers in April 2002.  As a consequence, DuPont is presently the sole competitor of Cyanco in supplying sodium cyanide to the mining industry in the western United States.

Cyanco’s business is characterized by reliance on the mining industry, competitive demands, dependence on a relatively small number of customers, fluctuating market prices for energy and raw materials, and increases in the cost of labor.  The Company believes that the important competitive factors in the sodium cyanide market are service, quality and price.  Cyanco delivers product to its customers pursuant to supply contracts, which vary in length.  Cyanco must meet competitive demands in order for its customers to renew product supply contracts as they expire, and has been able to achieve results by being creative and service-oriented and offering competitive prices.

All of Cyanco’s sales occur within the western United States.  Since most of Cyanco’s cyanide customers are large mining companies, the number of companies it services is relatively small.  During 2006, Cyanco had sales to two customers representing 49%,and 34% of total sales.  Each large mining concern may have multiple operating properties within Cyanco’s operating region.  A loss of one or more of Cyanco’s customers could adversely affect future sales, and may have a material adverse effect on the Company’s results of operations.  Such a loss can occur either from the customer switching to another source or from the customer electing to close or suspend a mining operation.  However, such losses of customers due to mine closures are not currently expected to occur, based on existing gold prices.  With higher gold prices, existing gold mining operations tend to expand and new or old mines are opened.  The reverse is true with falling gold prices.

The results of operations for the year ended December 31, 2006 have been negatively impacted by the Company accruing and expensing additional amounts related to income tax audits in the United States and in Canada, including interest charges and professional fees.

Critical Accounting Policies

The preparation of financial statements and related disclosures in conformity with U.S. generally accepted accounting principles requires management to make judgments, estimates and assumptions that affect the reported amounts in the Company’s consolidated financial statements.  The Company’s significant accounting policies are summarized in Note 1 to the Company’s consolidated financial statements and the most critical of such policies are discussed below.

·Investment in Cyanco

·Short-Term Investments

·Accounting for Income Taxes

Investment in Cyanco — As previously discussed, the Company does not own more than 50% of Cyanco, and as a

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result, the financial statements of Cyanco are not consolidated with the financial statements of the Company.  The Company accounts for its investment in Cyanco using the equity method of accounting.  Equity in earnings of Cyanco is based on the Company’s 50% ownership in Cyanco and is calculated and recognized at the end of each month.  Management fees from Cyanco are recognized monthly and are calculated as a percentage of Cyanco revenues based on the joint venture agreement.

The determination of useful lives and depreciation and amortization methods utilized by Cyanco for its property and equipment and intangible assets are considered critical accounting estimates.  Cyanco management uses its judgment to estimate the useful lives of long-lived assets, taking into consideration historical experience, engineering estimates, industry information and other factors.  Inherent in these estimates of useful lives is the assumption that periodic maintenance will be performed and there will be an appropriate level of annual capital expenditures.  Without on-going capital improvements and maintenance, productivity and cost efficiency declines and the useful lives of assets would be shorter.

Cyanco reviews its long-lived assets, including customer relationships and other intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable.  Cyanco assesses the recoverability of the long-lived assets by comparing the estimated undiscounted cash flows associated with the related asset or group of assets against their respective carrying amounts, using assumptions concerning the following factors:

·Contract price per pound of product delivered

·Projected number of pounds of product to be delivered

·Projected life of the contract, including reasonable assumptions for renewals beyond the initial contract period

·Projected costs of raw materials

·Projected reductions in cash flows for revenue sharing obligation

If the carrying amount of the asset exceeds the estimated undiscounted cash flows, the amount of impairment loss recorded in Cyanco’s statement of operations is calculated based on the excess of the carrying amount over the estimated fair value of those assets, calculated using the discounted cash flows expected during the remaining useful life.  Cyanco recorded impairment losses of $1,100,000 in the fourth quarter of 2004 and $536,000 in the second quarter of 2005 (see discussion under “Impairment of Long-Lived Assets” below.

Short-Term Investments - The Company’s current assets at December 31, 2006 were comprised primarily of cash and cash equivalents of $15,875,000.  Investments with scheduled original maturities of three months or less are recorded as cash equivalents.  Investments with scheduled original maturities of greater than three months but not greater than one year are recorded as short-term investments.  The Company had no short-term investments meeting this criterion at December 31, 2006.  Short-term investments are recorded at fair value with net unrealized gains or losses reported in stockholders’ equity.  Realized gains and losses are included in the consolidated statements of income.  Changes in market rates will affect interest earned on these instruments, and potentially the carrying value of the investments.

Deferred Income Taxes - As part of the process of preparing consolidated financial statements, the Company is required to estimate income taxes in each of the jurisdictions in which it operates.  This process involves estimating the Company’s actual current income tax exposure together with assessing temporary differences resulting from differing treatment of items for income tax and financial accounting purposes.  These temporary differences result in deferred tax assets and liabilities, the net amount of which is included in the Company’s consolidated balance sheet.  When appropriate, the Company records a valuation allowance to reduce its deferred tax assets to the amount that the Company believes is more likely than not to be realized.  Key assumptions used in estimating a valuation allowance include potential future taxable income, projected income tax rates, expiration dates of foreign and other tax credit carryforwards, anticipated results of tax audits, and ongoing prudent and feasible tax planning strategies.  As of December 31, 2006, the Company had reduced its deferred tax assets by recording a valuation allowance of $611,000.  If the Company were to determine that it would be able to realize its deferred tax assets in the future in excess of the net recorded amount, an adjustment to reduce the valuation allowance would increase income in the period such determination was made.  Similarly, should the Company determine that it would not be able to realize all or part of its net deferred tax assets in the future, an adjustment to increase the valuation allowance would be charged to income in the period such determination was made.

Certain of the Company’s United States and Canadian income tax returns are currently under audit.  The ultimate outcome of these audits and the impact of the final audit results on the consolidated financial statements of the Company cannot be determined at this time.  The Company believes that amounts accrued and included in accounts payable and accrued expenses at December 31, 2006 will be adequate for the resolution of the audits.  However, there can be no assurance that such costs will not ultimately exceed the current estimate.  The Company reviews the accrued amount at each balance sheet date.  Any increase in the accrual or the final resolution of the amount due in excess of the accrual would reduce income in the period such determination is made.  Similarly, any decrease in the accrual or final determination that the

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amount due is less than the accrual would increase income in the period such determination is made. The Company has accrued estimated amounts and has amounts on deposit for the potential outcome of these audits, but there can be no assurance that such costs will not ultimately exceed the current estimate.  Consequently, the Company’s results of operations for any particular period may be affected by these adjustments, unrelated to the results of the current business operations of the Company for that period.

Stock-Based Compensation - On January 1, 2006, the Company adopted SFAS No. 123(R), which requires the Company to measure the compensation cost of stock options and other stock-based awards to employees and directors at fair value at the grant date and recognize compensation expense over the requisite service period for awards expected to vest.  The Company’s current practice is to grant options to members of its Board of Directors that vest immediately, resulting in reporting the entire compensation expense for the options in the period that they are granted.  During the year ended December 31, 2006, the Company reported compensation expense of $270,000 for stock options issued to directors in April 2006.  The fair value of stock options is computed using the Black-Scholes valuation model, which model utilizes inputs that are subject to change over time, and includes assumptions made by the Company with respect to the volatility of the market price of the Company’s common stock, risk-free interest rates, requisite service periods, and the assumed life and vesting of stock options and stock-based awards.  As new options or stock-based awards are granted and vest, additional non-cash compensation expense will be recorded by the Company.

Results of Operations

2006 vs. 2005

The Company’s equity in the earnings of Cyanco increased $3,790,000, or 156%, to $6,218,000 in 2006 compared to $2,428,000 in 2005.  Cyanco revenues increased $9,320,000, or 22%, to $52,265,000 in 2006 compared to $42,945,000 in 2005.  Increased market prices of gold have resulted in increased mining activities in the area served by Cyanco, resulting in higher volumes of product sold.  Cyanco experienced significant increases in raw material costs in the latter part of 2005, that moderated in 2006.  Cyanco does have the ability, under certain of its contracts, to pass on increases in the cost of raw materials to its customers and the obligation to pass on decreases.  The “lag effect” inherent in this process resulted in Cyanco realizing a higher price per pound for sodium cyanide sold during the first three months of 2006.  In addition, new business during 2006 that replaced a significant contract that expired December 31, 2005 has generated higher profit margins.  Cyanco’s costs and expenses increased $1,756,000, or 5%, to $39,935,000 in 2006 compared to $38,179,000 in 2005.  Operating costs for 2005 included an impairment loss of $536,000 recorded by Cyanco.  The increase in operating costs in the current year resulted primarily from the higher volumes of product sold and the increase in the cost of certain key raw material costs compared to the first nine months of 2005.  As a result, Cyanco’s net income before taxes (on a 100% basis) increased $7,580,000, or 156%, to $12,436,000 in 2006 compared to $4,856,000 in 2005.

Management fee income from Cyanco increased $140,000, or 22%, to $784,000 in 2006 compared to $644,000 in 2005, due to the increase in Cyanco’s revenues discussed above, upon which the management fee is computed.

Investment and other income increased $279,000, or 58%, to $761,000 in 2006 compared to $482,000 in 2005.  This increase is due primarily to more favorable rates realized during the current year and due to a $128,000 payment received from CyPlus to settle a dispute over sales commissions which was included in other income.

Interest expense recorded in 2006 was $401,000, an amount representing accrued estimated interest charges over a period of several years on certain assessments related to the audits of the Company’s corporate income tax returns.  There were no similar accrued interest charges recorded in 2005.

General and administrative expenses increased $432,000, or 47%, to $1,353,000 in 2006 compared to $921,000 in 2005.  This increase is due to primarily to the non-cash, stock-based compensation expense of $270,000 resulting from the grant of directors’ stock options in April 2006 and to increases in professional fees and other expenses related to income tax audits, the dispute with the Company’s Cyanco joint venture partner, and Sarbanes – Oxley Act compliance activities.

2005 vs. 2004

The Company’s equity in the earnings of Cyanco decreased $691,000, or 22%, to $2,428,000 in 2005 compared to $3,119,000 in 2004.  The decrease in Cyanco’s earnings in 2005 was attributable to increases in operating costs and expenses, primarily the cost of raw materials, incurred by Cyanco and impairment and accelerated amortization of intangible assets.  Cyanco revenues increased $7,103,000, or 20%, to $42,945,000 in 2005 compared to $35,842,000 in 2004.  Increased

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market prices of gold resulted in increased mining activities in the area served by Cyanco, resulting in higher volumes of product sold.  Cyanco also realized a higher price per pound for sodium cyanide sold during 2005.  Cyanco’s costs and expenses increased $8,545,000, or 29%, to $38,179,000 in 2005 compared to $29,634,000 in 2004.  The increase in operating costs was primarily due to the higher volumes of product sold and the increase in the cost of certain key raw materials compared to 2004.  Cyanco does have the ability, under certain of its contracts, to pass on increases in the cost of raw materials to its customers; however, price increases to Cyanco’s customers often lag the increases in the cost of raw materials by two to four months.  Similarly, as the raw material prices decrease, Cyanco passes the decreases on to its customers with a two to four month lag.  This “lag effect” prevented Cyanco from increasing its pricing as quickly as the costs of raw materials were increasing, reducing Cyanco’s profitability in 2005.  Cyanco reported an impairment loss of $536,000 in the quarter ended June 30, 2005 (the Company’s share of the impairment loss was $268,000).  In addition, Cyanco accelerated the amortization of the intangible assets related to a terminated contract so that these assets were fully amortized by the end of the contract on December 31, 2005.  As a result, Cyanco’s net income before taxes (on a 100% basis) decreased $1,382,000, or 22%, to $4,856,000 during 2005 compared to $6,238,000 in 2004.

Management fee income from Cyanco increased $106,000, or 20%, to $644,000 in 2005 compared to $538,000 in 2004 due to the increase in Cyanco’s revenues discussed above, upon which the management fee is computed.

Investment and other income increased $289,000, or 150%, to $482,000 in 2005 compared to $193,000 in 2004.  This increase is due primarily to an increase in the average balance of cash and cash equivalents during the 2005 period and to more favorable rates realized on these balances during the 2005 year.

General and administrative expenses increased $264,000, or 40%, to $921,000 in 2005 compared to $657,000 in 2004.  This increase is due to increases in professional fees and other expenses related to income tax audits, the dispute with the Company’s Cyanco joint venture partner, the restatement of the Company’s consolidated financial statements and amended annual and quarterly reports, and Sarbanes – Oxley Act compliance activities.

Impairment of Long-Lived Assets

Cyanco did not record any impairment of its long-lived assets in 2006.  Cyanco recorded impairment losses of $536,000 and $1,100,000 in the years ended December 31, 2005 and 2004, respectively, due to a significant contract acquired from FMC expiring on December 31, 2005 and not being renewed as previously assumed.  The  Company’s share of the impairment losses reduced the Company’s equity in earnings of joint venture by $268,000 and $550,000 in the years ended December 31, 2005 and 2004, respectively.

In addition, Cyanco accelerated the amortization of the intangible assets related to the contract so that these assets were fully amortized by the end of the significant contract on December 31, 2005.  This resulted in additional amortization expense to Cyanco in 2005, resulting in a further reduction in the Company’s equity in earnings of the joint venture in 2005.

Income Taxes

The Company’s corporate income tax returns filed in Canada for the years ended December 31, 1995 through 2001 are under audit by the Canada Customs and Revenue Agency (“CCRA”).  This audit has been ongoing for the past six years without final resolution.  The first phase of the audit has been completed, and the Company has been assessed additional income taxes and interest based on positions taken by CCRA on certain matters that differ from positions taken by the Company.

The Company, based on consultation with its professional tax advisors in Canada, believes that, in most instances, the facts and circumstances support the positions taken by the Company, and has filed with CCRA formal notices of objection for each year under audit, and the audit has progressed to the appeals level.  The timing of the completion of the appeals process is currently uncertain.

Certain of the Company’s United States corporate income tax returns are currently under audit by the Internal Revenue Service (“IRS”).  The IRS has taken the position that the Company owes additional income taxes, penalties and interest where the IRS has disagreed with certain tax positions taken by the Company.  The Company has reviewed the positions taken by the IRS and, in the fourth quarter of 2006, paid those taxes for which it believed it was liable.  The Company anticipates pursuing the internal appeal process at the IRS for those positions taken by the IRS with which the Company disagrees.  The ultimate outcome of the IRS audit and the impact of the final audit results on the consolidated financial statements of the Company cannot be determined at this time.

The results of operations for year ended December 31, 2006 have been negatively impacted by the Company accruing and expensing additional amounts related to these income tax audits, including interest charges and related professional fees.  As a result, the provision for income taxes reported in the Company’s consolidated statements of income

15

for 2006 is substantially higher than amounts which would be computed by applying the statutory federal income tax rate to income before provision for income taxes.  The Company believes that amounts accrued and included in accounts payable and accrued expenses and net amounts included in income tax deposits at December 31, 2006 will be adequate for the resolution of the audits by CCRA and the IRS.  However, there can be no assurance that such costs will not ultimately exceed the current estimate.

Liquidity and Capital Resources

At December 31, 2006, the liabilities of the Company consisted of current liabilities of $1,572,000 and deferred income taxes of $980,000.  Current liabilities consisted of trade accounts payable of $69,000, dividends payable of $559,000 and accrued expenses (comprised primarily of accrued income taxes and related interest expense) of $944,000.  These current liabilities compare favorably to total current assets of $16,215,000 at December 31, 2006.  Current assets were comprised primarily of cash and cash equivalents of $15,875,000.

The Company’s current strategy is to invest cash in excess of short-term operating needs in highly liquid, variable interest rate investments with maturities of 90 days or less.  The Board of Directors of the Company is currently evaluating alternative uses for the cash of the Company, including optimizing short-term investment results without exposing the Company to high levels of market risk, diversification of the Company’s business, further investment in Cyanco, the payment of dividends to shareholders and other strategies.

Net cash used in operating activities for the year ended December 31, 2006 was $4,862,000 compared to net cash used in operating activities of $1,585,000 for the year ended December 31, 2005.  This increase in net cash used in operations is due primarily to the increased equity in earnings of Cyanco, as discussed below, increased general and administrative expenses other than stock-based compensation, as discussed above, and to payments of income taxes, including $2,300,000 paid in the fourth quarter of 2006 in connection with the audits of the Company’s income tax returns.  Because the Company accounts for its investment in Cyanco using the equity method, equity in earnings of Cyanco, a non-cash item, is eliminated from operating activities in the consolidated statements of cash flows, with cash distributions from Cyanco included in cash flows from investing activities.

Net cash provided by investing activities was $6,000,000 for the year ended December 31, 2006, consisting of distributions from Cyanco.  Net cash provided by investing activities was $4,186,000 for the year ended December 31, 2005, consisting of distributions from Cyanco of $4,000,000 and the payment of the final notes receivable balance of $186,000 from the sale of the Company’s explosives business in 2001.  The increase in Cyanco distributions in the current year is due to the increased earnings of Cyanco as discussed above.

Net cash used in financing activities was $2,047,000 for the year ended December 31, 2006, consisting of the payment of dividends of $2,083,000, offset by proceeds from the exercise of stock options of $36,000.  Net cash used in financing activities was $1,789,000 for the year ended December 31, 2005, consisting of the payment of dividends.

The Company considers its cash resources sufficient to meet the operating needs of its current level of business for the next twelve months.

The Company’s operations have not been, and are not expected to be, materially affected by inflation.

Forward Looking Statements

Within this annual report on Form 10-K, including the discussion in this Item 7, there are forward-looking statements made in an effort to inform the reader of management’s expectation of future events.  These expectations are subject to numerous factors and assumptions, any one of which could have a material effect on future results.  The factors which may impact future operating results include, but are not limited to, the outcome of tax matters with the I.R.S and Canadian tax authorities, decisions made by Cyanco’s customers as to the continuation, suspension, or termination of mining activities in the area served by Cyanco; decisions made by Cyanco’s customers with respect to the use or sourcing of sodium cyanide used in their operations; changes in world supply and demand for commodities, particularly gold; political, environmental, regulatory, economic and financial risks; major changes in technology which could affect the mining industry as a whole or which could affect sodium cyanide specifically; competition; and the continued availability of qualified technical and other professional employees of the Company and Cyanco.  Many of these risks are outside the control of the Company, and the actions taken by the Company may not be sufficient to avoid the adverse consequences of one or more of the risks.  Consequently, the actual results could differ materially from those indicated in the statements made.

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Item 7A.                 Quantitative and Qualitative Disclosures About Market Risk

A significant portion of the Company’s cash equivalents bear variable interest rates that are adjusted to market conditions.  Changes in market rates will affect interest earned on these instruments, and potentially the carrying value of the investments.  The Company does not utilize derivative instruments to offset the exposure to interest rates.  The cash equivalents and short-term investments are placed in a variety of products with different institutions.  Significant changes in interest rates could have an impact on the Company’s consolidated financial position and results of operations.  Assuming that the balance of cash and cash equivalents at December 31, 2006 of $15,875,000 was outstanding during the 2007 year, a 1% change in interest rates would result in a change of annual earnings of approximately $159,000.

The Company has no foreign operations and is currently not exposed to material risks from changes in foreign currency.

Item 8.                    Financial Statements and Supplementary Data.

The financial statements of the Company and of Cyanco required by this Item are contained in a separate section of this report.  See “Index to Consolidated Financial Statements” on Page F-1 for the consolidated financial statements of the Company included in this report, and the separate financial statements of Cyanco included as Exhibit 99.1 to this report.

The following table presents selected unaudited quarterly financial data for each of the four quarters in 2006 and 2005.  The selected quarterly financial data reflects, in the opinion of management, all adjustments necessary to fairly present the results of operations for such periods.  Results of any one or more quarters are not necessarily indicative of continuing trends.  All amounts, except per share data, are stated in thousands of dollars.

Amounts in thousands	2006								2005
(except per share data)	Q1		Q2 (1)		Q3		Q4		Q1		Q2 (2)		Q3		Q4
Revenues and equity in earnings	$	1,768	$	2,043	$	1,822	$	1,369	$	834	$	722	$	939	$	577
Net income	1,078		241		816		1,089		505		395		592		287
Earnings per common share - diluted	$	0.15	$	0.03	$	0.12	$	0.16	$	0.07	$	0.06	$	0.08	$	0.05

(1)  The results of operations for the second quarter of 2006 was negatively impacted by the Company accruing and expensing additional amounts related to ongoing income tax audits.

(2)  Equity in earnings of Cyanco for the second quarter of 2005 was reduced by a charge of $268,000 related to the impairment of certain intangible assets of Cyanco.

Item 9.                    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A.                 Controls and Procedures

Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures designed to ensure that information required to be disclosed in its reports filed under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized, and reported within the required time periods and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow for timely decisions regarding required disclosure.  In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can only provide reasonable assurance of achieving the desired control objective, and management is required to exercise its judgment in

17

evaluating the cost-benefit relationship of possible controls and procedures.

As required by Rule 13a-15(b) under the Exchange Act, management conducted an evaluation, under the supervision and with the participation of the chief executive officer and the chief financial officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of December 31, 2006.  Based on this evaluation, the chief executive officer and the chief financial officer have concluded that our disclosure controls and procedures were effective as of December 31, 2006

Change in Internal Control Over Financial Reporting

There have not been any changes in the Company’s internal controls over financial reporting identified in connection with the evaluation of disclosure controls and procedures discussed above that occurred during the quarter ended December 31, 2006 or subsequent to that date that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Item 9B.                 Other Information

None

PART III

Item 10                  Directors, Executive Officers and Corporate Governance

The information required by this Item will be contained in our 2007 Definitive Proxy Statement to be filed in connection with our 2007 annual shareholder meeting under the headings “Election of Directors” and “Executive Officers,” and is incorporated in this report by reference.

Item 11.                Executive Compensation

The information required by this Item will be contained in our 2007 Definitive Proxy Statement to be filed in connection with our 2007 annual shareholder meeting under the heading “Executive Compensation,” and is incorporated in this report by reference.

Item 12.Security Ownership of Certain Beneficial Owners and Management

The information required by this Item, other than the information regarding our equity compensation plans which is contained in Part I of this report, will be contained in our 2007 Definitive Proxy Statement to be filed in connection with our 2007 annual shareholder meeting under the heading “Security Ownership of Certain Beneficial Owners and Management,” and is incorporated in this report by reference.

Item 13.                Certain Relationships and Related Transactions, and Director Independence

There are no transactions to report under this Item for the year ended December 31, 2006.  The information with respect to director independence required by this Item will be contained in our 2007 Definitive Proxy Statement to be filed in connection with our 2007 annual shareholder meeting under the heading “Election of Directors”, and is incorporated in this report by reference.

Item 14.                 Principal Accountant Fees and Services

The information required by this Item will be contained in our 2007 Definitive Proxy Statement to be filed in connection with our 2007 annual shareholder meeting under the heading “Ratification of Selection of Independent Public Accountants,” and is incorporated in this report by reference.

PART IV

Item 15.                 Exhibits and Financial Statement Schedules

(a)        The following documents are filed as a part of this report:

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1.             The audited consolidated financial statements of the Company as of December 31, 2006 and 2005 and the years ended December 31, 2006, 2005 and 2004, including the report of independent registered public accountants required in Part II, Item 8 are included on pages F-1 to F-15.  See the Index to Consolidated Financial Statements on page F-1.

2.             The audited financial statements of Cyanco, a significant subsidiary reported on the equity method, as of December 31, 2006 and 2005 and the years ended December 31, 2006, 2005 and 2004, including the report of independent registered public accountants are included as financial statement schedules to this annual report on Form 10-K as Exhibit 99.1.

(b) Exhibits:

3.1	Articles of Amendment and Restatement of the Articles of Incorporation to restate the articles of incorporation and to reflect the name change to Nevada Chemicals, Inc. (incorporated herein by reference from Form 10-K filed by the Company for the fiscal year ended December 31, 2001).
3.2	Bylaws of the Corporation as amended May 19, 1999 (incorporated herein by reference from the Form 10-K/A filed by the Company for the fiscal year ended December 31, 2000).
4.1	1988 Nonqualified Stock Option Plan, as amended through May 19, 1999 (incorporated by reference from the Form 10-K filed by the Company for the fiscal year ended December 31, 1999).
11	Statement re Computation of Per Share Earnings (included in Note 1 to the consolidated financial statements contained in this filing).
14	Nevada Chemicals, Inc. Code of Ethics and Business Conduct (incorporated by reference from the Form 10-K filed by the Company for the fiscal year ended December 31, 2003).
21	List of Subsidiaries (included in Note 1 to the consolidated financial statements contained in this filing).
23	Consent of Independent Registered Public Accounting Firm.
31.1	Certification of Principal Executive Officer pursuant to Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Principal Financial Officer pursuant to Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.1	The financial statements as of December 31, 2006 and 2005 and for the years ended December 31, 2006, 2005 and 2004 of Cyanco, a significant subsidiary reported on the equity method, and the report of independent registered public accountants.
99.2	Press release dated March 29, 2007

(c) No financial statement schedules are listed because they are not applicable or the required information is shown in the Company’s consolidated financial statements or notes thereto.

19

SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

NEVADA CHEMICALS, INC.

/S/ John T. Day

John T. Day, President

Date: March 29, 2007

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signatures	Capacity in Which Signed	Date
/S/ Bryan Bagley	Chairman of the Board of Directors	March 29, 2007
Bryan Bagley
/S/ John T. Day	President, Chief Executive Officer	March 29, 2007
John T. Day	and Director (Principal Executive Officer)
/S/ James Solomon	Director	March 29, 2007
James Solomon
/S/ Nathan L. Wade	Director	March 29, 2007
Nathan L. Wade
/S/ M. Garfield Cook	Director	March 29, 2007
M. Garfield Cook
/S/ Dennis P. Gauger	Chief Financial Officer and Principal	March 29, 2007
Dennis P. Gauger	Accounting Officer

20

NEVADA CHEMICALS, INC. AND SUBSIDIARY

Index to Consolidated Financial Statements

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders

  of Nevada Chemicals, Inc. and Subsidiary

We have audited the consolidated balance sheets of Nevada Chemicals, Inc. and subsidiary as of December 31, 2006 and 2005, and the related consolidated statements of income, stockholders’ equity, and cash flows for the years ended December 31, 2006, 2005 and 2004.  These consolidated financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.  Accordingly, we express no such opinion.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Nevada Chemicals, Inc. and subsidiary as of December 31, 2006 and 2005, and the consolidated results of their operations and their consolidated cash flows for the years ended December 31, 2006, 2005 and 2004, in conformity with U.S. generally accepted accounting principles.

/s/ TANNER LC

Salt Lake City, Utah

March 29, 2007

F-2

NEVADA CHEMICALS, INC.AND SUBSIDIARY
Consolidated Balance Sheets

	December 31,
	2006		2005
ASSETS
Current assets:
Cash and cash equivalents	$	15,875,000	$	16,784,000
Receivables	57,000		94,000
Income tax deposits	239,000		—
Prepaid expenses	44,000		48,000
Total current assets	16,215,000		16,926,000
Investment in joint venture	9,193,000		8,975,000
Other assets	254,000		236,000
	$	25,662,000	$	26,137,000
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities — accounts payable and accrued expenses	$	1,572,000	$	3,559,000
Deferred income taxes	980,000		1,068,000
Total liabilities	2,552,000		4,627,000
Commitments and contingencies (Note 10)
Stockholders’ equity:
Common stock; $.001 par value, 500,000,000 shares authorized, 6,983,172 and 6,901,406 shares issued and outstanding	7,000		7,000
Capital in excess of par value	4,286,000		3,751,000
Retained earnings	18,817,000		17,752,000
Total stockholders’ equity	23,110,000		21,510,000
	$	25,662,000	$	26,137,000

See accompanying notes to consolidated financial statements

F-3

NEVADA CHEMICALS, INC. AND SUBSIDIARY
Consolidated Statements of Income

	Years Ended December 31,
	2006			2005		2004
Revenues and equity in earnings:
Management fee from joint venture	$	784,000		$	644,000	$	538,000
Equity in earnings of joint venture	6,218,000			2,428,000		3,119,000
Total	7,002,000			3,072,000		3,657,000
General and administrative expenses	1,353,000			921,000		657,000
Operating income	5,649,000			2,151,000		3,000,000
Other income (expense):
Investment and other income	761,000			482,000		193,000
Interest expense	(401,000		)	—		—
Total other income (expense)	360,000			482,000		193,000
Income before provision for income taxes	6,009,000			2,633,000		3,193,000
Provision for income taxes	2,785,000			854,000		1,489,000
Net income	$	3,224,000		$	1,779,000	$	1,704,000
Earnings per common share:
Basic	$	0.46		$	0.26	$	0.25
Diluted	$	0.46		$	0.26	$	0.24
Weighted average number of shares outstanding:
Basic	6,958,000			6,880,000		6,808,000
Diluted	6,961,000			6,954,000		6,968,000
Cash dividends declared per common share	$	0.31		$	0.27	$	0.23

See accompanying notes to consolidated financial statements

F-4

NEVADA CHEMICALS, INC. AND SUBSIDIARY
Consolidated Statements of Stockholders’ Equity
Years Ended December 31, 2006, 2005 and 2004

					Capital			Accumulated
	Common Stock				In Excess of Par			Other Comprehensive			Retained
	Shares		Amount		Value			Income (Loss)			Earnings			Total
Balance, January 1, 2004	6,807,919		$	7,000	$	3,512,000		$	(2,000	)	$	17,699,000		$	21,216,000
Comprehensive net income calculation:
Net income	—		—		—			—			1,704,000			1,704,000
Net unrealized gains on investments	—		—		—			2,000			—			2,000
Comprehensive income	—		—		—			—			—			1,706,000
Dividends declared	—		—		—			—			(1,566,000		)	(1,566,000		)
Purchase and retirement of treasury stock	(467	)	—		(2,000		)	—			—			(2,000		)
Balance, December 31, 2004	6,807,452		7,000		3,510,000			—			17,837,000			21,354,000
Comprehensive net income calculation:
Net income	—		—		—			—			1,779,000			1,779,000
Dividends declared	—		—		—			—			(1,864,000		)	(1,864,000		)
Exercise of stock options	93,954		—		241,000			—			—			241,000
Balance, December 31, 2005	6,901,406		7,000		3,751,000			—			17,752,000			21,510,000
Comprehensive net income calculation:
Net income	—		—		—			—			3,224,000			3,224,000
Dividends declared	—		—		—			—			(2,159,000		)	(2,159,000		)
Stock-based compensation	—		—		270,000			—			—			270,000
Exercise of stock options	81,766		—		265,000			—			—			265,000
Balance, December 31, 2006	6,983,172		$	7,000	$	4,286,000		$	—		$	18,817,000		$	23,110,000

See accompanying notes to consolidated financial statements

F-5

NEVADA CHEMICALS, INC. AND SUBSIDIARY

Consolidated Statements of Cash Flows

	Years Ended December 31,
	2006			2005			2004
Cash flows from operating activities:
Net income	$	3,224,000		$	1,779,000		$	1,704,000
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization	2,000			3,000			17,000
Stock-based compensation	270,000			—			—
Equity in earnings of joint venture	(6,218,000		)	(2,428,000		)	(3,119,000		)
Deferred income taxes	(88,000		)	(455,000		)	(694,000		)
(Increase) decrease in:
Receivables	37,000			(18,000		)	18,000
Prepaid expenses	4,000			(18,000		)	52,000
Other assets	(20,000		)	11,000			(10,000		)
Increase (decrease) in accounts payable and accrued expenses	(2,073,000		)	(459,000		)	2,243,000
Net cash provided by (used in) operating activities	(4,862,000		)	(1,585,000		)	211,000
Cash flows from investing activities:
Distributions from joint venture	6,000,000			4,000,000			5,000,000
Net sales (purchases) of short-term investments	—			—			5,616,000
Payments on notes receivable	—			186,000			221,000
Net cash provided by investing activities	6,000,000			4,186,000			10,837,000
Cash flows from financing activities:
Payment of dividends	(2,083,000		)	(1,789,000		)	(1,498,000		)
Exercise of stock options	36,000			—			—
Purchase and retirement of treasury stock	—			—			(2,000		)
Net cash used in financing activities	(2,047,000		)	(1,789,000		)	(1,500,000		)
Net increase (decrease) in cash and cash equivalents	(909,000		)	812,000			9,548,000
Cash and cash equivalents, beginning of year	16,784,000			15,972,000			6,424,000
Cash and cash equivalents, end of year	$	15,875,000		$	16,784,000		$	15,972,000

See accompanying notes to consolidated financial statements

F-6

NEVADA CHEMICALS, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

Note 1:  Organization and Significant Accounting Policies

Organization — Nevada Chemicals, Inc. (the “Company”), through its ownership in Cyanco Company (“Cyanco”), supplies chemicals to the gold mining industry in the United States.  Winnemucca Chemicals, Inc. (“Winnemucca Chemicals”), a wholly owned subsidiary of the Company, has a fifty percent interest in Cyanco, a non-corporate joint venture engaged in the manufacture and sale of liquid sodium cyanide.  The Company accounts for its investment in Cyanco using the equity method of accounting.  Summarized financial information for Cyanco is included in Note 6.

Principles of Consolidation — The consolidated financial statements include the accounts of the Company, and its consolidated subsidiary.  All significant inter-company balances and transactions have been eliminated.

Cash and Cash Equivalents — The Company considers all investments purchased with original maturities of three or fewer months to be cash equivalents.  Cash equivalents were $15,875,000 and $16,484,000 as of December 31, 2006 and 2005, respectively.  Cash was $269,000 and $300,000 as of December 31, 2006 and 2005, respectively.  The Company has $200,000 of cash that is federally insured.  All remaining amounts of cash and cash equivalents exceed federally insured limits.

Investment in Joint Venture — The Company accounts for its investment in Cyanco under the equity method of accounting.  Under the equity method of accounting, Cyanco’s accounts are not reflected within the Company’s consolidated balance sheets and consolidated statements of income; however, the Company’s share of earnings or losses of Cyanco is reflected in the caption “Equity in earnings of joint venture” in the Company’s consolidated statements of income.  The Company’s carrying value of its share of Cyanco’s joint venture capital is reflected in the caption “Investment in joint venture” in the Company’s consolidated balance sheets.

When the Company’s carrying value in an equity method joint venture is reduced to zero, no further losses are recorded in the Company’s consolidated financial statements unless the Company guarantees obligations of the joint venture or has committed additional funding.  When the joint venture subsequently reports income, the Company will not record its share of such income until it equals the amount of its share of losses not previously recognized.

Revenue Recognition — The Company’s revenues and equity in earnings consist mainly of earnings from Cyanco based on the equity method of accounting and management fees from Cyanco.  Equity in net earnings of Cyanco is based on the Company’s 50% ownership in Cyanco, and is calculated and recognized at the end of each month.  Management fee income from Cyanco is recognized monthly based on the Cyanco joint venture agreement.

Income Taxes — The Company recognizes a liability or asset for deferred tax consequences of all temporary differences between the tax bases of assets and liabilities and their reported amounts in the consolidated financial statements that will result in taxable or deductible amounts in future years when the reported amounts of the assets and liabilities are recovered or settled.  Deferred tax items mainly relate to depreciation and amortization, undistributed earnings from joint ventures which qualify under certain tax deferral treatment, and foreign income tax payments.  These deferred tax assets or liabilities are measured using the enacted tax rates that will be in effect when the differences are expected to reverse.  The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.  Deferred tax assets are reviewed periodically for recoverability, and valuation allowances are provided when it is more likely than not that some or all of the deferred tax assets may not be realized.  As of December 31, 2006, the Company had reduced its deferred tax assets by recording a valuation allowance of $611,000 (see Note 5).

Stock-Based Compensation — The Company has a stock-based employee compensation plan, which is described more fully in Note 4.  On January 1, 2006, the Company adopted Financial Accounting Standard (“SFAS”) No. 123R, Share-Based Payment, an amendment of FASB Statements 123 and 95, which requires the Company to measure the compensation cost of stock options and other stock-based awards to employees and directors at fair value at the grant date and recognize compensation expense over the requisite service period for awards expected to vest.  The Company’s current practice is to grant options to members of its Board of Directors that vest immediately, resulting in reporting the entire compensation expense for the options in the period that they are granted.

Earnings Per Common Share — The computation of basic earnings per common share is based on the weighted average number of shares outstanding during the year.

The computation of earnings per common share assuming dilution is based on the weighted average number of shares outstanding during the year plus the weighted average common stock equivalents which would arise from the exercise of stock options outstanding using the treasury stock method and the average market price per share during the year.

F-7

The shares used in the computation of the Company’s basic and diluted earnings per share are reconciled as follows:

	Years Ended December 31
	2006	2005	2004
Weighted average number of shares outstanding — basic	6,958,000	6,880,000	6,808,000
Dilutive effect of stock options	3,000	74,000	160,000
Weighted average number of shares outstanding, assuming dilution	6,961,000	6,954,000	6,968,000

Concentration of Credit Risk — Financial instruments that potentially subject the Company to concentration of credit risk consist primarily of cash and cash equivalents and receivables.

The Company maintains its cash and cash equivalents in accounts that, at times, may exceed federally insured limits or in accounts that are not insured.  The Company has not experienced material losses in such accounts, and believes it is not exposed to any significant credit risk on cash and cash equivalents.

Currently, receivables consist primarily of management fees from Cyanco.  Management does not believe significant credit risk exists for these receivables at December 31, 2006.

Cyanco’s customer base consists primarily of mining companies in the Western United States.  Since most of Cyanco’s customers are large mining companies, the number of companies it services is relatively small compared to those of a wholesale distribution or retail business.  A loss of one or more customers could adversely affect future sales, and may have a material adverse effect on Cyanco’s results of operations.  Although Cyanco is directly affected by the economic health of the mining industry, management does not believe significant credit risk exists with respect to its receivables at December 31, 2006.   In addition, Cyanco has purchase commitments with suppliers of certain raw materials covering various time periods and containing various pricing arrangements.  Management believes alternative sources of the raw materials are available in the event that the suppliers are unable to meet Cyanco’s raw material needs.

Asset Retirement Obligation-  Cyanco’s operations are subject to environmental regulations of the State of Nevada, and Cyanco is required to perform ongoing monitoring, testing and reporting activities at its manufacturing facility, the costs of which are expensed as incurred.  Cyanco has potential asset retirement obligations related to its manufacturing facility; however, Cyanco is unaware of any legal obligation requiring specific actions.  Typically, the timing of the performance of any asset retirement obligation is conditional on the facility undergoing major renovations, being demolished or sold.  However, the adoption of regulations in the future may create a duty or responsibility for Cyanco to remediate the site at any time.  Currently, Cyanco is unable to estimate the fair value of any asset retirement obligation because the range of time over which Cyanco may settle the obligation and the specific requirements for remediation are unknown.  Therefore, Cyanco has not recorded a liability for asset retirement obligations through December 31, 2006.

Use of Estimates — The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Certain of these key estimates include income taxes payable and valuation allowances against deferred income tax assets.  Differences in these estimates and actual results could be material to the Company’s financial position and results of operations.

Recent Accounting Pronouncements — The FASB has issued Financial Interpretation No. 48, Accounting for Uncertainty in Income Taxes — An Interpretation of FASB Statement No. 109 (FIN 48).  FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB Statement No. 109, Accounting for Income Taxes.  FIN 48 also prescribes a recognition threshold and measurement standard for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.  In addition, FIN 48 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.  The Company adopted FIN 48 on January 1, 2007, and the provisions of FIN 48 will be applied to all tax positions upon initial adoption of this standard.  Only tax positions that meet the more-likely-than-not recognition threshold at the effective date may be recognized or continue to be recognized upon adoption of FIN 48.  The cumulative effect of applying the provisions of FIN 48 will be reported as an adjustment to the opening balance of retained earnings for the year ending December 31, 2007.  The Company has not yet determined the financial statement impact of adopting FIN 48.

The FASB has issued SFAS Statement No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans.  This new standard will require employers to fully recognize the obligations associated with single-employer defined benefit pension, retiree healthcare and other postretirement plans in their financial statements.  The new

F-8

standard was effective as of the end of fiscal years ending after December 15, 2006 for companies with publicly traded securities.  The Company adopted SFAS No. 158 on December 31, 2006, with no material impact on the consolidated financial statements of the Company since the Company currently does not sponsor defined benefit pension or postretirement plans within the scope of the standard.

The FASB has issued SFAS Statement No. 157, Fair Value Measurements.  This new standard provides enhanced guidance for using fair value to measure assets and liabilities, and requires expanded information about the extent to which companies measure assets and liabilities at fair value, the information used to measure fair value, and the effect of fair value measurements on earnings.  The standard applies whenever other standards require (or permit) assets or liabilities to be measured at fair value.  Under the new standard, fair value refers to the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the market in which the reporting entity transacts.  The standard clarifies the principle that fair value should be based on the assumptions market participants would use when pricing the asset or liability.  The new standard is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years.  Early adoption is permitted.  The Company anticipates adopting SFAS No. 157 on January 1, 2008, but is currently unable to determine the impact of the adoption of the standard on its consolidated financial statements.

The FASB has issued SFAS Statement No. 154, Accounting Changes and Error Corrections.  This new standard replaces APB Opinion No. 20, Accounting Changes, and FASB Statement No. 3, Reporting Accounting Changes in Interim Financial Statements.  Among other changes, SFAS 154 requires that a voluntary change in accounting principle be applied retrospectively with all prior period financial statements presented on the new accounting principle, unless it is impracticable to do so.  SFAS 154 also provides that (1) a change in method of depreciating or amortizing a long-lived non-financial asset be accounted for as a change in estimate (prospectively) that was effected by a change in accounting principle, and (2) correction of errors in previously issued financial statements should be termed a “restatement.”  The new standard is effective for accounting changes and correction of errors made in fiscal years beginning after December 15, 2005.  Early adoption of this standard is permitted for accounting changes and correction of errors made in fiscal years beginning after June 1, 2005.  The adoption of SFAS No. 154 by the Company on January 1, 2006 did not have an impact on the consolidated financial statements of the Company for the year ended December 31, 2006.

In September 2006, the FASB ratified the consensus reached by the Emerging Issues Task Force (“EITF”) on EITF Issue No. 06-5, Accounting for Purchases of Life Insurance - Determining the Amount That Could Be Realized in Accordance with FASB Technical Bulletin No. 85-4, Accounting for Purchases of Life Insurance.  FASB Technical Bulletin (“FTB”) 85-4, Accounting for Purchases of Life Insurance requires that the policy holder should consider any additional amounts included in the contractual terms of the insurance policy other than the cash surrender value in determining the amount that could be realized under the insurance contract as of the date of the statement of financial position and should be reported as an asset.  In practice, this statement means that the cash value asset is reported on the statement of financial position at this realizable amount and the change in cash surrender value during the period is an adjustment in determining the income (or expense) to be recognized for the period.  The pronouncement is effective for fiscal years beginning after December 15, 2006.  The Company will adopt EITF Issue No. 06-5 on January 1, 2007, and does not expect that the guidance will have a material impact on the Company’s consolidated financial position or results of operations.

Reclassifications — Certain amounts in the prior years’ financial statements have been reclassified to conform with the current year presentation.

Note 2:  Detail of Certain Balance Sheet Accounts

	December 31,
	2006		2005
Receivables:
Related party (Note 7)	$	57,000	$	63,000
Accrued interest receivable	—		31,000
	$	57,000	$	94,000
Accounts payable and accrued expenses:
Accounts payable — trade	$	69,000	$	109,000
Income taxes payable (Notes 5 and 10)	926,000		2,950,000
Dividends payable	559,000		483,000
Other accrued expenses	18,000		17,000
	$	1,572,000	$	3,559,000

F-9

Note 3:  Stockholders’ Equity

During 2006, the Company declared dividends of $.07 per share for the first quarter and $.08 per share for each of the second, third and fourth quarters, for an aggregate of $.31 per share, or $2,159,000.  The fourth quarter dividend of $559,000 was paid in January 2007, and is included in accounts payable and accrued expenses at December 31, 2006.

During 2005, the Company declared dividends of $.06 per share for the first quarter and $.07 per share for each of the second, third and fourth quarters, for an aggregate of $.27 per share, or $1,864,000.  The fourth quarter dividend of $483,000 was paid in January 2006, and is included in accounts payable and accrued expenses at December 31, 2005.

During 2004, the Company declared dividends of $.05 per share for the first quarter and $.06 per share for each of the second, third and fourth quarters, for an aggregate of $.23 per share, or $1,566,000.  The fourth quarter dividend of $409,000 was paid in January 2005, and is included in accounts payable and accrued expenses at December 31, 2004.

In April 2006, each of the five members of the Company’s Board of Directors was granted options to purchase 21,000 shares of the Company’s common stock.  The options vested immediately, and are exercisable for a period of five years at $8.28 per share, the market price of the Company’s common stock on the date of grant.

In April 2006, three members of the Company’s Board of Directors each exercised options to purchase 30,000 shares of the Company’s common stock at $1.21 per share, for total consideration of approximately $109,000.  One director paid $36,000 cash to exercise his options.  The other directors surrendered 4,347 and 3,887 shares of the Company’s common stock, respectively, with a combined market value of approximately $73,000 as consideration for the exercise of their options, as permitted by the underlying stock option agreement.  The shares surrendered were cancelled, with no gain or loss recorded by the Company for this transaction.  The Company recorded an increase to capital in excess of par value of $229,000 in April 2006 for the estimated income tax benefit of the exercise of the stock options.

In March 2005, three members of the Company’s Board of Directors each exercised options to purchase 39,500 common shares of the Company, or a total of 118,500 shares, at an exercise price of $1.4375 per share, for total consideration of $170,000.  As permitted by the option agreements, the consideration was paid through the directors’ surrender to the Company of 8,182 shares each, or a total of 24,546 shares, with a then market value of $170,000.  The net result was an increase in the number of common shares outstanding of 93,954 shares.  The shares surrendered were cancelled, with no gain or loss recorded by the Company for this transaction.  The Company recorded an increase to capital in excess of par value of $241,000 in March 2005 for the estimated income tax benefit of the exercise of the stock options.

In November 2001, the Company’s Board of Directors authorized a stock repurchase plan that provides for the purchase of up to 500,000 shares of the Company’s currently issued and outstanding shares of common stock.  Purchases under the stock repurchase plan may be made from time to time at various prices in the open market, through block trades or otherwise.  These purchases may be made or suspended by the Company from time to time, without prior notice, based on market conditions or other factors.

During the years ended December 31, 2006 and 2005, no shares were purchased by the Company under the repurchase plan.  During the year ended December 31, 2004, the Company purchased and retired 467 shares of its common stock with a total cost basis to the Company of $2,000.

Note 4:  Stock Options and Stock-Based Compensation

Under the 1988 Non-Qualified Stock Option Plan (the Option Plan), as amended, a maximum of 1,315,130 shares were made available for granting of options to purchase common stock at prices generally not less than the fair market value of common stock at the date of grant.  Under the Option Plan, grants of non-qualified options may be made to selected officers, directors and key employees without regard to any performance measures.  The options may be immediately exercisable or may vest over time as determined by the board of directors.  However, the maximum term of an option may not exceed ten years.  Options may not be transferred except by reason of death, with certain exceptions, and termination of employment accelerates the expiration date of any outstanding options to 30 days from the date of termination.

Prior to January 1, 2006, as permitted under Statement of Financial Accounting Standards (“SFAS”) No. 123, the Company accounted for the Option Plan following the recognition and measurement principles of Accounting Principles Board (“APB”) No. 25, Accounting for Stock Issued to Employees, and related interpretations.  Accordingly, no stock-based compensation expense had been reflected in the Company’s consolidated statements of income as all options granted had an exercise price equal to or greater than the market value of the underlying common stock on the date of grant and the related number of shares granted was fixed at that time.

F-10

In December 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 123(R), Share Based Payments.  This statement revised SFAS No. 123 by eliminating the option to account for employee stock options under APB No. 25 and requires companies to measure the cost of employee services received in exchange for awards of equity instruments based on the grant-date fair value of those awards and to recognize the compensation expense over the requisite service period for the awards expected to vest.

Effective January 1, 2006, the Company adopted the fair value recognition provisions of SFAS No. 123(R) using the modified prospective application method.  Since the Company had no unvested stock options outstanding as of January 1, 2006, there was no financial statement impact for the year ended December 31, 2006 for options issued prior to January 1, 2006.  Similarly, no pro-forma footnote disclosures in accordance with SFAS No. 123 were presented for the years ended December 31, 2005 and 2004, and results of operations for the years ended December 31, 2005 and 2004 have not been restated.

The Company estimated the grant-date fair value of the options to purchase 105,000 shares issued to the members of the Company’s Board of Directors in April 2006 at $270,000 using the Black-Scholes option pricing model, and included the entire amount in general and administrative expenses for the year ended December 31, 2006.  The assumptions used in the Black-Scholes option pricing model were as follows:

Expected dividend yield	3.40	%
Expected stock price volatility	40.02	%
Risk-free interest rate	4.85	%
Expected life of options	5 years

Information regarding the Option Plan is summarized below

	Options		Weighted Average Exercise Price		Weighted Average Remaining Contract Term	Aggregate Intrinsic Value
Outstanding at January 1, 2004	208,500		$	1.34
Granted	—
Exercised	—
Forfeited	—
Outstanding at December 31, 2004	208,500		1.34
Granted	—
Exercised	(118,500	)	1.44
Forfeited	—
Outstanding at December 31, 2005	90,000		$	1.21
Granted	105,000		8.28
Exercised	(90,000	)	1.21
Forfeited	—
Outstanding at December 31, 2006, all vested and exercisable	105,000		$	8.28	4.26	$	91,000

The aggregate intrinsic value in the preceding table represents the total pretax intrinsic value, based on the Company’s closing stock price of $9.15 per share as of December 29, 2006, which would have been received by the holders of in-the-money options had the option holders exercised their options as of that date.

As of December 31, 2006, there were no non-vested options and therefore no future compensation cost related to non-vested options not yet recognized in the Company’s consolidated statements of income.

Note 5:  Income Taxes

The Company’s corporate income tax returns filed in Canada for the years ended December 31, 1995 through 2001 are under audit by the Canada Customs and Revenue Agency (“CCRA”).  This audit has been ongoing for the past six years without final resolution.  The first phase of the audit has been completed, and the Company has been assessed additional income taxes and interest based on positions taken by CCRA on certain matters that differ from positions taken by the Company.

F-11

The Company, based on consultation with its professional tax advisors in Canada, believes that, in most instances, the facts and circumstances support the positions taken by the Company, and has filed with CCRA formal notices of objection for each year under audit, and the audit has progressed to the appeals level.  The timing of the completion of the appeals process is currently uncertain.

Certain of the Company’s United States corporate income tax returns are currently under audit by the Internal Revenue Service (“IRS”).  The IRS has taken the position that the Company owes additional income taxes, penalties and interest where the IRS has disagreed with certain tax positions taken by the Company.  The Company has reviewed the positions taken by the IRS and, in the fourth quarter of 2006, paid those taxes for which it believed it was liable.  The Company anticipates pursuing the internal appeal process at the IRS for those positions taken by the IRS with which the Company disagrees.  The ultimate outcome of the IRS audit and the impact of the final audit results on the consolidated financial statements of the Company cannot be determined at this time.

The results of operations for the year ended December 31, 2006 have been negatively impacted by the Company accruing and expensing additional amounts related to these income tax audits, including interest charges.  As a result, the provision for income taxes reported in the Company’s consolidated statements of income for the year ended December 31, 2006 is substantially higher than amounts which would be computed by applying the statutory federal income tax rate to income before provision for income taxes.  The Company believes that amounts accrued and included in accounts payable and accrued expenses and net amounts included in income tax deposits at December 31, 2006 will be adequate for the resolution of the audits by CCRA and the IRS.  However, there can be no assurance that such costs will not ultimately exceed the current estimate.

The benefit (provision) for income taxes is different than amounts which would be provided by applying the statutory federal income tax rate to income from continuing operations before income taxes for the following reasons:

	Years Ended December 31,
	2006			2005			2004
Federal provision at statutory rate	$	(2,043,000	)	$	(895,000	)	$	(1,086,000	)
Life insurance and meals	(11,000		)	(9,000		)	(5,000		)
Tax exempt interest income	79,000			55,000			32,000
State income taxes	(69,000		)	—			—
Estimated income tax audit adjustments	(2,123,000		)	—			—
Change in valuation allowance	1,334,000			—			(430,000		)
Other	48,000			(5,000		)	—
	$	(2,785,000	)	$	(854,000	)	$	(1,489,000	)

The total income tax benefit (provision) consists of the following:

	Years Ended December 31,
	2006			2005			2004
Current	$	(2,873,000	)	$	(1,309,000	)	$	(2,183,000	)
Deferred	88,000			455,000			694,000
	$	(2,785,000	)	$	(854,000	)	$	(1,489,000	)

F-12

Deferred tax assets (liabilities) are comprised of the following:

	December 31,
	2006			2005
Deferred tax assets:
Foreign income taxes and credit carryforwards	$	926,000		$	2,893,000
Accrued expenses	136,000			—
Stock-based compensation	92,000			—
Other	31,000			44,000
Less valuation allowance	(611,000		)	(1,945,000		)
	574,000			992,000
Deferred tax liabilities — depreciation and amortization	(1,554,000		)	(2,060,000		)
	$	(980,000	)	$	(1,068,000	)

Due to uncertainties surrounding the realization of the benefit of certain accrued foreign income taxes, the Company is currently unable to conclude that the realization of portions of the deferred tax assets meet the “more likely than not” criterion in paragraph 17.e of SFAS No. 109.  Therefore, as of December 31, 2006, the Company had recorded a valuation allowance of $611,000 relating to the accrued foreign income taxes..

Note 6:  Significant Unconsolidated Affiliate

The Company accounts for its 50% ownership interest in Cyanco using the equity method of accounting.  Summarized financial information of Cyanco, a significant unconsolidated affiliate of the Company, is as follows:

	Years Ended December 31,
	2006		2005		2004
Results for the year:
Gross revenues	$	52,265,000	$	42,945,000	$	35,842,000
Net income	12,436,000		4,856,000		6,238,000
Company’s 50% equity in earnings	$	6,218,000	$	2,428,000	$	3,119,000
Year-end financial position:
Current assets	$	7,626,000	$	6,894,000	$	6,575,000
Non-current assets	12,326,000		13,448,000		15,609,000
Current liabilities	3,743,000		4,569,000		3,267,000
Non-current liabilities	—		—		—

Cyanco reviews its long-lived assets, including customer relationships and other intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable.  Cyanco assesses the recoverability of the long-lived assets related to customer relationships by comparing the estimated undiscounted cash flows associated with the related asset or group of assets against their respective carrying amounts, using assumptions concerning the following factors:

·Contract price per pound of product delivered

·Projected number of pounds of product to be delivered

·Projected life of the contract, including reasonable assumptions for renewals beyond the initial contract period

·Projected costs of raw materials

·Projected reductions in cash flows for revenue sharing obligation

If the carrying amount of the asset exceeds the estimated undiscounted cash flows, the amount of impairment loss recorded in Cyanco’s statement of operations is calculated based on the excess of the carrying amount over the estimated fair value of those assets, calculated using the discounted cash flows expected during the remaining useful life.

Cyanco recorded impairment losses of $536,000 and $1,100,000 in the years ended December 31, 2005 and 2004, respectively, due to a significant contract acquired from FMC expiring on December 31, 2005 and not being renewed as

F-13

previously assumed.  The  Company’s share of the impairment losses reduced the Company’s equity in earnings of joint venture by $268,000 and $550,000 for the years ended December 31, 2005 and 2004, respectively.

In addition, Cyanco accelerated the amortization of the intangible assets related to the contract so that these assets were fully amortized by the end of the contract on December 31, 2005.  This resulted in additional amortization expense to Cyanco in 2005, resulting in further reduction in the Company’s equity in earnings of the joint venture in 2005.

Note 7:  Related Party Transactions

The Company performs certain management functions for Cyanco for which it receives a fee.  Management fees totaled $784,000, $644,000, and $538,000 for 2006, 2005 and 2004, respectively.

At December 31, 2006 and 2005, the Company had receivables of $57,000 and $63,000, respectively, due from Cyanco.

Note 8:  Profit Sharing Plan

The Company has a defined contribution profit sharing plan, which is qualified under Section 401 (K) of the Internal Revenue Code.  The plan provides retirement benefits for employees meeting minimum age and service requirements.  Participants may contribute a percentage of their gross wages, subject to certain limitations.  The plan provides for discretionary matching contributions, as determined by the board of directors, to be made by the Company.  The discretionary amount contributed to the plan by the Company was $6,000, $7,000, and $6,000 for 2006, 2005 and 2004, respectively.

Note 9:  Fair Value of Financial Instruments

The Company’s financial instruments consist of cash and cash equivalents, receivables, and accounts payable.  The carrying amount of these financial instruments approximates fair value because of the short-term nature of these items.

Note 10:  Commitments and Contingencies

Foreign Income Taxes — The Company’s corporate income tax returns filed in Canada for the years ended December 31, 1995 through 2001 are under audit by the Canada Customs and Revenue Agency (“CCRA”).  This audit has been ongoing for the past six years without final resolution.  The first phase of the audit has been completed, and the Company has been assessed additional income taxes based on positions taken by CCRA on certain matters that differ from positions taken by the Company.

The Company, based on consultation with its professional tax advisors in Canada, believes that, in most instances, the facts and circumstances support the positions taken by the Company, and has filed with CCRA formal notices of objection for each year under audit, and the audit has progressed to the appeals level.  The timing of the completion of the appeals process is currently uncertain.

The Company believes that amounts accrued and included in accounts payable and accrued expenses at December 31, 2006 will be adequate for the resolution of the audit by CCRA.  However, there can be no assurance that such costs will not ultimately exceed the current estimate.

United States Income Taxes - Certain of the Company’s United States corporate income tax returns are currently under audit by the Internal Revenue Service (“IRS”).  The IRS has taken the position that the Company owes additional income taxes, penalties and interest where the IRS has disagreed with certain tax positions taken by the Company.  The Company has reviewed the position taken by the IRS and, in the fourth quarter of 2006, paid those taxes for which it believes it may be liable.  The Company has filed with the IRS a formal protest and request for appeals for those positions taken by the IRS with which the Company disagrees.  The ultimate outcome of the IRS appeals process and the impact of the final audit results on the consolidated financial statements of the Company cannot be determined at this time.

Litigation — The Company is subject from time-to-time to legal proceedings arising out of the normal conduct of its business, which the Company believes will not materially affect its financial position or results of operations.

As discussed previously, Cyanco is a non-corporate joint venture owned 50 percent by Winnemucca Chemicals and 50 percent by Degussa Corporation.  The Joint Venture Agreement provides that each joint venture partner has a first right of refusal to purchase the other partner’s interest in the event the other partner transfers its interest in the joint venture to a third party.

F-14

Effective January 1, 2003, Degussa Corporation purportedly transferred its 50% joint venture interest in Cyanco to CyPlus Corporation (CyPlus) as part of a reorganization of the world-wide mining chemicals business of Degussa GmbH.  CyPlus is an indirect, wholly-owned subsidiary of Degussa GmbH in Germany.  Degussa GmbH is also the direct parent of Degussa Corporation.

On January 5, 2004, Winnemucca Chemicals filed a complaint in Nevada State Court (the case was later removed to the United States District Court for the District of Nevada) related to Degussa Corporation’s purported transfer of its joint venture interest to CyPlus and seeking commission payments owed to Cyanco under a prior distribution agreement between Cyanco and Degussa.  Winnemucca Chemicals claims that such transfer was in violation of the Joint Venture Agreement.  The litigation seeks, among other things, to void such transfer or, alternatively, to enforce Winnemucca Chemicals’ rights under the Joint Venture Agreement arising out of the transfer.  This litigation has no impact on the operations of the Cyanco.

Discovery in the lawsuit was concluded and both parties filed motions for partial summary judgment in March 2006.  On December 12, 2006, the motions were granted in part and denied in part.  In its order on the cross motions, the Court denied all of the affirmative defenses of Degussa and CyPlus with prejudice.  The Court denied with prejudice Winnemucca’s claims that it could purchase Degussa’s participating interest in Cyanco for book value and also Winnemucca’s claimed right of first refusal.  The Court held, however, that there was a transfer to a third party for purposes of the Joint Venture Agreement and that invalidation of the transfer was not the only remedy available to Winnemucca. .  A Court-ordered mediation is scheduled to take place in Reno, Nevada, on April 3, 2007.

In December 2006, the matter regarding the commission payments was settled with the payment to Winnemucca by CyPlus of $128,000, which amount is included in investment and other income in the consolidated statement of income for the year ended December 31, 2006.

Note 11:  Supplemental Consolidated Statements of Cash Flows Information

Amounts paid for income taxes were $5,330,000, $1,881,000, and $153,000 in 2006, 2005 and 2004, respectively.  The Company paid no interest in 2005, 2004 and 2003.

During 2006:

·The Company declared a dividend in December, which was paid in January 2007, increasing accounts payable and accrued expenses and reducing retained earnings by $559,000.

·The Company decreased accounts payable and accrued expenses and increased capital in excess of par value by $229,000 for the tax benefit of stock options that were exercised during the year.

·The Company increased accounts payable and accrued expenses and increased income tax deposits by $239,000 to reclassify net income tax amounts on deposit.

During 2005:

·The Company declared a dividend in December, which was paid in January 2006, increasing accounts payable and accrued expenses and reducing retained earnings by $483,000.

·The Company decreased accounts payable and accrued expenses and increased capital in excess of par value by $241,000 for the tax benefit of stock options that were exercised during the year.

During 2004:

·The Company declared a dividend in December, which was paid in January 2005, increasing accounts payable and accrued expenses and reducing retained earnings by $409,000.

F-15

EX-23

Exhibit 23

Consent of Independent Registered Public Accounting Firm

Nevada Chemicals,  Inc.

We consent to the incorporation by reference in Registration Statement No. 333-30733 of Nevada Chemicals, Inc. on Form S-8 of our report dated March 29, 2007, appearing in this Form 10-K of Nevada Chemicals, Inc. for the year ended December 31, 2006.  We also consent to the reference to us under the headings “Experts” in such Registration Statement.

/s/TANNER LC

Salt Lake City, Utah

March 29, 2007

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO RULE 13a – 15(e) OF THE

SECURITIES EXCHANGE ACT OF 1934, AS AMENDED,

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, John T. Day, certify that:

1.             I have reviewed this annual report on Form 10-K of Nevada Chemicals, Inc.;

2.             Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3.             Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4.             The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a)           designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

(b)           evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this annual report based on such evaluation; and

(c)           disclosed in this annual report any change in the registrant’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.             The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)           all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)           any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

March 29, 2007	/s/ John T. Day
(Date)	John T. Day
	President (principal executive officer)

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO RULE 13a — 15(e) OF THE

SECURITIES EXCHANGE ACT OF 1934, AS AMENDED,

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Dennis P. Gauger, certify that:

1.             I have reviewed this annual report on Form 10-K of Nevada Chemicals, Inc.;

2.             Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3.             Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4.             The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a)           designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

(b)           evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this annual report based on such evaluation; and

(c)           disclosed in this annual report any change in the registrant’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.             The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)           all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)           any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

March 29, 2007	/s/ Dennis P. Gauger
(Date)	Dennis P. Gauger
	Chief Financial Officer (principal
	financial and accounting officer)

EX-32.1

Exhibit 32.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES - OXLEY ACT OF 2002

In connection with the annual report of Nevada Chemicals Inc. (the “Company”) on Form 10-K for the year ended December 31, 2006, John T. Day hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes - Oxley Act of 2002, that to the best of his knowledge:

1.The annual report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and

2.The information contained in the annual report fairly presents, in all material respects, the financial condition and results of operations of the Company.

March 29, 2007	/s/ John T. Day
(Date)	John T. Day
	President (principal executive officer)

EX-32.2

Exhibit 32.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES - OXLEY ACT OF 2002

In connection with the annual report of Nevada Chemicals, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2005, Dennis P. Gauger hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes - Oxley Act of 2002, that to the best of his knowledge:

3.The annual report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and

4.The information contained in the annual report fairly presents, in all material respects, the financial condition and results of operations of the Company.

March 29, 2007	/s/ Dennis P. Gauger
(Date)	Dennis P. Gauger
	Chief Financial Officer (principal
	financial and accounting officer)

EX-99.1

Exhibit 99.1

CYANCO COMPANY

Financial Statements

As of December 31, 2006 and 2005

and for the Years Ended December 31, 2006, 2005 and 2004

Together With Report of Independent

Registered Public Accounting Firm

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Joint Venture Participants

  of Cyanco Company

We have audited the accompanying balance sheets of Cyanco Company as of December 31, 2006 and 2005, and the related statements of income, joint venture capital, and cash flows for the years ended December 31, 2006, 2005 and 2004.  These financial statements are the responsibility of Cyanco Company’s management.  Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the Standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Cyanco Company as of December 31, 2006 and 2005, and the results of its operations and its cash flows for the years ended December 31, 2006, 2005 and 2004, in conformity with accounting principles generally accepted in the United States of America.

/s/ Tanner LC

Salt Lake City, Utah

March 19, 2007

CYANCO COMPANY

Balance Sheets

	December 31,
	2006		2005
Assets
Current assets:
Cash and cash equivalents	$	1,947,000	$	1,971,000
Accounts receivable, net	3,811,000		3,105,000
Inventories	1,499,000		1,708,000
Prepaid expenses	369,000		110,000
Total current assets	7,626,000		6,894,000
Property and equipment, net	11,768,000		12,039,000
Intangible assets, net	389,000		1,245,000
Other assets	169,000		164,000
	$	19,952,000	$	20,342,000
Liabilities and Joint Venture Capital
Current liabilities:
Accounts payable	$	2,919,000	$	3,749,000
Accounts payable — related parties	177,000		163,000
Accrued liabilities	647,000		657,000
Total current liabilities	3,743,000		4,569,000
Commitments and contingencies
Joint venture capital	16,209,000		15,773,000
	$	19,952,000	$	20,342,000

See accompanying notes to financial statements.

1

CYANCO COMPANY

Statements of Income

	Years Ended December 31,
	2006		2005		2004
Revenues:
Sales, net	$	52,265,000	$	42,945,000	$	35,842,000
Other	106,000		90,000		30,000
Total revenues	52,371,000		43,035,000		35,872,000
Costs and expenses:
Cost of sales	36,452,000		34,402,000		25,907,000
Selling, general and administrative	3,473,000		3,217,000		2,627,000
Impairment of intangible assets	—		536,000		1,100,000
Research and development	10,000		24,000		—
Total costs and expenses	39,935,000		38,179,000		29,634,000
Net income	$	12,436,000	$	4,856,000	$	6,238,000

See accompanying notes to financial statements.

2

CYANCO COMPANY

Statements of Joint Venture Capital

Years Ended December 31, 2006, 2005 and 2004

	Winnemucca Chemicals, Inc.			CyPlus Corporation (Note 1)			Total
Balance, January 1, 2004	$	12,491,000		$	10,188,000		$	22,679,000
Distributions	(5,000,000		)	(5,000,000		)	(10,000,000		)
Net income	3,119,000			3,119,000			6,238,000
Balance, December 31, 2004	10,610,000			8,307,000			18,917,000
Distributions	(4,000,000		)	(4,000,000		)	(8,000,000		)
Net income	2,428,000			2,428,000			4,856,000
Balance, December 31, 2005	9,038,000			6,735,000			15,773,000
Distributions	(6,000,000		)	(6,000,000		)	(12,000,000		)
Net income	6,218,000			6,218,000			12,436,000
Balance, December 31, 2006	$	9,256,000		$	6,953,000		$	16,209,000

See accompanying notes to financial statements.

3

CYANCO COMPANY

Statements of Cash Flows

	Years Ended December 31,
	2006			2005			2004
Cash flows from operating activities:
Net income	$	12,436,000		$	4,856,000		$	6,238,000
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	3,086,000			2,865,000			2,244,000
Impairment of intangible assets	—			536,000			1,100,000
Bad debt expense	—			—			120,000
Other non-cash (income) expense	(17,000		)	19,000			—
Decrease (increase) in:
Accounts receivable	(706,000		)	(439,000		)	1,446,000
Inventories	209,000			(535,000		)	(205,000		)
Prepaid expenses	(259,000		)	6,000			(12,000		)
Other assets	(5,000		)	(164,000		)	—
Increase (decrease) in accounts payable and accrued liabilities	(1,371,000		)	641,000			(80,000		)
Net cash provided by operating activities	13,373,000			7,785,000			10,851,000
Cash flows from investing activities:
Purchase of property and equipment	(1,444,000		)	(429,000		)	(171,000		)
Proceeds from sale of property and equipment	47,000			—			—
Net cash used in investing activities	(1,397,000		)	(429,000		)	(171,000		)
Cash flows from financing activities:
Distributions to joint venture partners	(12,000,000		)	(8,000,000		)	(10,000,000		)
Net increase (decrease) in cash and cash equivalents	(24,000		)	(644,000		)	680,000
Cash and cash equivalents, beginning of year	1,971,000			2,615,000			1,935,000
Cash and cash equivalents, end of year	$	1,947,000		$	1,971,000		$	2,615,000

See accompanying notes to financial statements.

4

CYANCO COMPANY

Notes to Financial Statements

Years Ended December 31, 2006, 2005 and 2004

Note 1:  Organization and Significant Accounting Policies

Organization and Litigation Between Joint Venture Partners — Cyanco Company (the “Company”) is a non-corporate joint venture that has been owned 50 percent by Winnemucca Chemicals, Inc. (Winnemucca Chemicals) and 50 percent by Degussa Corporation (Degussa).  The Company is the owner and operator of a liquid sodium cyanide manufacturing facility located in Humboldt County, Nevada, and operates within the mining industry.

The Joint Venture Agreement provides that each joint venture partner has a first right of refusal to purchase the other partner’s interest in the event the other partner transfers its interest in the joint venture to a third party.

Effective January 1, 2003, Degussa transferred its 50% joint venture interest in the Company to CyPlus Corporation (CyPlus) as part of a reorganization of the world-wide mining chemicals business of Degussa GmbH.  CyPlus is an indirect, wholly-owned subsidiary of Degussa GmbH in Germany.  Degussa GmbH is also the direct parent of Degussa.

On January 5, 2004, Winnemucca Chemicals filed a complaint in Nevada State Court (the case was later removed to the United States District Court for the District of Nevada) primarily related to Degussa’s transfer of its joint venture interest to CyPlus.  Winnemucca Chemicals claims that such transfer was in violation of the Joint Venture Agreement.  The litigation seeks, among other things, to void such transfer or, alternatively, to enforce Winnemucca Chemicals’ rights under the Joint Venture Agreement arising out of the transfer.

In the litigation, Degussa and CyPlus assert that Degussa’s transfer of its interest in Cyanco was not a transfer to a “third party” and therefore is not a violation of the Joint Venture Agreement.

Discovery in the lawsuit was concluded and both parties filed motions for partial summary judgment in March 2006.  On December 12, 2006, the motions were granted in part and denied in part.  In its order on the cross motions, the Court denied all of the affirmative defenses of Degussa and CyPlus with prejudice.  The Court denied with prejudice Winnemucca’s claims that it could purchase Degussa’s participating interest in Cyanco for book value and also Winnemucca’s claimed right of first refusal.  The Court held, however, that there was a transfer to a third party for purposes of the Joint Venture Agreement and that invalidation of the transfer was not the only remedy available to Winnemucca.  A Court-ordered mediation is scheduled to take place in Reno, Nevada, on April 3, 2007.

Nothing in these financial statements or the notes thereto shall be construed to compromise any claim or defense of any party to the litigation.  To date, the litigation between the joint venture partners has not had a significant impact on the operations of the Company.

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In December 2006, the matter regarding the commission payments was settled with the payment to Winnemucca Chemicals by CyPlus of $128,000.

Cash Equivalents — For purposes of the financial statements, cash and cash equivalents includes all cash and short-term investments with original maturities to the Company of three months or less.

Accounts Receivable — Trade receivables are carried at original invoice amount less an estimate made for doubtful accounts based on a review of all outstanding amounts on a monthly basis.  Management determines the allowance for doubtful accounts by identifying potential troubled accounts and by using historical experience and future expectations applied to an aging of accounts.  Trade receivables are written off when deemed uncollectible.  Recoveries of trade receivables previously written off are recorded when received.

Inventories — Inventories are recorded at the lower of cost or market, cost being determined on a first in, first out (FIFO) method.

Property and Equipment — Property and equipment are recorded at cost, less accumulated depreciation.  Depreciation of property and equipment, other than the sodium cyanide plant, is computed using the straight-line method over the estimated useful lives of the assets.  Depreciation of the sodium cyanide plant is computed using the units-of-production method.  Expenditures for maintenance and repairs are expensed when incurred and betterments are capitalized.  Gains and losses on the sale of property and equipment are included in current operations.

Intangible Assets — Intangible assets include the license of certain technology used in the manufacturing plant, certain costs incurred in connection with the construction of the manufacturing plant, customer relationships, and other intangible assets purchased in the 2002 asset acquisition (Note 2).  The license of technology and the costs related to the manufacturing plant are amortized using the units-of-production method.  The purchased intangible assets are being amortized using the straight-line method over estimated useful lives of 5 to 10 years.

Revenue Recognition — Revenue for sales of product is recognized when a valid purchase order has been received, product has been shipped, the selling price is fixed or determinable, and collection is reasonably assured.

Income Taxes — The joint venture is not subject to income taxes since all income tax effects are passed through to the joint venture partners.

Concentrations — Financial instruments that potentially subject the Company to concentration of credit risk consist primarily of trade receivables.  In the normal course of

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business, the Company provides credit terms to its customers.  Prior to August 2002, the Company had a distribution agreement with Degussa (see Note 7), which required Degussa to indemnify the Company against any credit risk from receivables.  The Company has historically not experienced losses on receivables and believes no significant credit risk exists for receivables at December 31, 2006.

The Company maintains its cash in bank deposit accounts, which, at times, may exceed federally insured limits.  As of December 31, 2006, the Company had approximately $1,842,000 in excess of the insured limit.  The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash and cash equivalents.

The Company’s customer base consists primarily of mining companies in the Western United States.  Although the Company is directly affected by the economic health of the mining industry, management does not believe significant credit risk exists at December 31, 2006.

The Company has purchase commitments with suppliers of certain raw materials covering various time periods and containing various pricing arrangements.  The Company believes alternative sources of the raw materials are available in the event that the suppliers are unable to meet the Company’s raw material needs.

Impairment of Long-Lived Assets - The Company reviews its long-lived assets, including intangible assets, for impairment through an analysis of undiscounted future cash flows whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable.  If it is determined that an impairment loss has occurred based on expected cash flows, such loss is recognized in the statement of income.

Research and Development — The Company expenses research and development costs as incurred.

Use of Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.  Certain of these key estimates include the allowance for doubtful accounts and the realization of carrying values and useful lives of long-lived tangible and intangible assets.  Differences in these estimates and actual results could be material to the Company’s financial position and results of operations.

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Reclassifications — Certain amounts in the prior years’ financial statements have been reclassified to conform with the current year presentation.

Note 2:  Acquisition

On April 1, 2002, the Company acquired certain assets of a chemical company’s sodium cyanide business for an aggregate consideration not to exceed $5,900,000, but not less than $4,900,000 consisting of $4,000,000 in cash with an additional $900,000 to $1,900,000 as contingent consideration based on a defined annual revenue sharing calculation through December 31, 2006.  The Company allocated $4,500,000 of the $4,900,000 minimum purchase price to customer relationships and other intangible assets and the remaining $400,000 to property and equipment.

The Company recorded a liability for the minimum revenue sharing amount at December 31, 2002, $342,000 as the estimated current amount and $558,000 as the estimated long-term portion.

Through December 31, 2006, the Company paid a total of $1,228,000 of the liability related to revenues from 2002 through 2005.  At December 31, 2006 and 2005, accrued liabilities include a revenue sharing payable of $159,000 and $266,000, respectively.  With the payment of the revenue sharing payable of $266,000 at December 31, 2005, the minimum sharing obligation of $900,000 was satisfied.

Revenue sharing obligations in excess of the minimum revenue sharing amount of $900,000 are recorded as additional acquisition cost of the customer relationships.  During 2006 and 2005, the revenue sharing amounts of $159,000 and $266,000, respectively, were added to the carrying amount of the customer relationships, and are subject to the Company’s amortization policy and impairment tests for this intangible asset.

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Note 3:  Detail of Certain Balance Sheet Accounts

	December 31,
	2006			2005
Accounts receivable, net:
Accounts receivable - trade	$	3,893,000		$	3,173,000
Accounts receivable - employees	38,000			52,000
Allowance for doubtful accounts	(120,000		)	(120,000		)
	$	3,811,000		$	3,105,000

	December 31,
	2006		2005
Inventories:
Raw materials	$	1,229,000	$	1,251,000
Finished goods	270,000		457,000
	$	1,499,000	$	1,708,000
Accrued liabilities:
Revenue sharing payable (Note 2)	$	65,000	$	266,000
Sales tax payable	260,000		276,000
Accrued wages	64,000		59,000
Other	164,000		56,000
	$	553,000	$	657,000

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Note 4:  Property and Equipment

Property and equipment consist of the following:

	December 31,
	2006			2005
Plant	$	26,221,000		$	25,981,000
Machinery and equipment	2,638,000			2,113,000
Land	519,000			519,000
Vehicles	357,000			381,000
Office equipment and fixtures	357,000			334,000
Construction in progress	1,299,000			383,000
	31,391,000			29,711,000
Less accumulated depreciation and Amortization	(19,623,000		)	(17,672,000		)
	$	11,768,000		$	12,039,000

Depreciation expense was $2,071,000, $1,866,000 and $1,727,000 in 2006, 2005 and 2004, respectively.

Note 5:  Intangible Assets

Identifiable intangible assets subject to amortization at December 31 were as follows:

	2006
	Gross Carrying Value		Accumulated Amortization			Net Carrying Value
Customer relationships and other	$	3,122,000	$	(2,987,000	)	$	135,000
License	559,000		(404,000		)	155,000
Plant setup costs	352,000		(253,000		)	99,000
	$	4,033,000	$	(3,644,000	)	$	389,000

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	2005
	Gross Carrying Value		Accumulated Amortization			Net Carrying Value
Customer relationships and other	$	2,963,000	$	(2,037,000	)	$	926,000
License	559,000		(364,000		)	195,000
Plant setup costs	352,000		(228,000		)	124,000
	$	3,874,000	$	(2,629,000	)	$	1,245,000

Amortization expense for identifiable intangible assets was $1,015,000, $999,000 and $517,000 in 2006, 2005 and 2004, respectively.

The Company has completed ongoing impairment analyses of its intangible assets, including the customer relationships acquired in 2002 (Note 2), using projected discounted cash flows.  In June 2005, the Company was informed that a significant customer whose relationship was acquired 2002 would not renew its contract beyond 2005.  The Company had received earlier indications of this contract termination, and recorded impairment losses of $536,000 and $1,100,000 for the years ended December 31, 2005 and 2004, respectively.

In addition, the Company accelerated the amortization of the intangible assets related to this contract so that these assets were fully amortized by the end of the contract on December 31, 2005.  This has resulted in additional amortization expense to the Company in 2005 compared to prior years.

The estimated future annual amortization expense for identifiable intangible assets is as follows:

2007	$	200,000
2008	65,000
2009	65,000
2010	59,000
	$	389,000

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Note 6:  Related Party Transactions

Related party transactions consist of the following:

	Years Ended December 31,
	2006		2005		2004
Sales to a joint venture partner (see Note 7)	$	—	$	—	$	7,083,000
Amounts receivable from joint venture partners or their affiliates	$	4,000	$	6,000	$	8,000
Management fees, cost reimbursements, and other fees paid to the joint venture partners or their affiliates, included in general and administrative expenses	$	1,676,000	$	1,468,000	$	1,522,000
Purchases of goods and services from joint venture partners or their affiliates included in:
cost of sales	$	92,000	$	1,000	$	1,000
Research and development expense	$	—	$	11,000	$	—
Additions to property and equipment	$	29,000	$	10,000	$	29,000
Amounts payable to joint venture partners or their affiliates	$	177,000	$	163,000	$	97,000

Note 7:  Distribution Agreement

The Company had an agreement with Degussa that provided for Degussa to act as the exclusive (with certain exceptions) distributor of the Company’s products.  The agreement had not been formally renewed after August 2002, which was its scheduled expiration date.  Degussa functioned as the distributor of the Company’s products through December 31, 2002, and CyPlus functioned as the distributor from January 1, 2003 through March 19, 2004.  On March 20, 2004, the Company began to perform internally the sales, marketing and distribution functions previously performed by Degussa and CyPlus.

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Note 8:  Profit Sharing Plan

The Company participates in a multi-employer defined contribution profit sharing plan with Nevada Chemicals, Inc., the parent company of Winnemucca Chemicals, which qualifies under Section 401 (K) of the Internal Revenue Code.  The plan provides retirement benefits for employees meeting minimum age and service requirements.  Participants may contribute up to 20 percent of their gross wages, subject to certain limitations.  The Company made contributions to the plan of $34,000, $35,000, and $32,000 during 2006, 2005, and 2004, respectively.

Note 9:  Supplemental Statement of Cash Flows Information

During the year ended December 31, 2006, the Company purchased property and equipment by incurring accounts payable of $386,000.

During the year ended December 31, 2006, intangible assets and accrued expenses increased by $159,000 due to the 2006 revenue sharing obligation.

During the year ended December 31, 2005, the Company purchased property and equipment by incurring accounts payable of $395,000.

During the year ended December 31, 2005, intangible assets and accrued expenses increased by $266,000 due to the 2005 revenue sharing obligation.

The Company did not pay cash for income taxes or interest during the years ended December 31, 2006, 2005 and 2004.

Note 10:  Fair Value of Financial Instruments

The Company’s financial instruments consist of cash, receivables and payables.  The carrying amount of cash, receivables and payables approximates fair value because of the short-term nature of these items.

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Note 11:  Long-Term Agreements

The Company has contracts with two suppliers of liquid caustic soda that will provide for 100% of the Company’s requirements at specified prices.  The agreements terminate on December 31, 2007 (with an option to renew on a year-by-year basis) and December 31, 2008.

The Company has an agreement with a transportation company to deliver all the Company’s product.  The agreement has an agreed-upon fee structure and terminates in January 2011.

Note 12:  Major Customers

During 2006, the Company had sales to two customers representing 49% and 34% of total sales.  During 2005, the Company had sales to three customers representing 43%, 37% and 11% of total sales.  During 2004, the Company had sales to three customers representing 39%, 36% and 12% of total sales.

Note 13:  Standby Letter of Credit

During 2005, the Company entered into an irrevocable standby letter of credit agreement with a bank.  The letter of credit guarantees the Company’s performance to a third party vendor, and allows the beneficiary to draw on the letter of credit up to an aggregate amount of $160,000.  The letter of credit matures on February 5, 2008, and is secured by a certificate of deposit included in other assets, which had a balance of $169,000 and $164,000 at December 31, 2006 and 2005, respectively.

Note 14.  Recent Accounting Pronouncements

In March 2005, the FASB issued Financial Interpretation No. 47, Accounting for Conditional Asset Retirement Obligations, an Interpretation of FASB Statement No. 143 (FIN 47).  Asset retirement obligations are legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and/or normal operation of a long-lived asset, except for certain obligations of lessees.  FIN 47 clarifies that liabilities associated with asset retirement obligations whose timing and settlement method are conditional on future events should be recorded at fair value as soon as fair value is reasonably estimable.  FIN 47 was effective for the Company as of December 31, 2005, and has potential applicability to the Company.  The Company’s operations are subject to environmental regulations of the State of Nevada, and the

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Company is required to perform ongoing monitoring, testing and reporting activities at its manufacturing facility, the costs of which are expensed as incurred.  The Company has potential asset retirement obligations related to its manufacturing facility; however, the Company is unaware of any legal obligation requiring specific actions.  Typically, the timing of the performance of any asset retirement obligation is conditional on the facility undergoing major renovations, being demolished or sold.  However, the adoption of regulations in the future may create a duty or responsibility for the Company to remediate the site at any time.  Currently, the Company is unable to estimate the fair value of any asset retirement obligation because the range of time over which the Company may settle the obligation and the specific requirements for remediation are unknown.  Therefore, the Company has not recorded a liability for asset retirement obligations through December 31, 2006, resulting in no impact from the adoption of FIN 47on the financial statements of the Company for the years ended December 31, 2006 and 2005.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value, and expands disclosure requirements regarding fair value measurement.  Where applicable, this statement simplifies and codifies fair value related guidance previously issued within United States of America generally accepted accounting principles.  SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years.  The Company is currently reviewing SFAS 157 and has not yet determined the impact that the adoption of SFAS 157 will have on its results of operations or financial condition.

In June 2006, the FASB reached consensus on Emerging Issues Task Force (“EITF”) No. 06-3, “How Taxes Collected from Customers and Remitted to Governmental Authorities Should be Presented in the Income Statement” (“ EITF 06-3”). The scope of EITF 06-3 includes any tax assessed by a governmental authority that is directly imposed on a revenue-producing transaction between a seller and a customer and may include, but is not limited to, sales, use, value added, and excise taxes. The Task Force affirmed its conclusion that entities should present these taxes in the income statement on either a gross or a net basis, based on their accounting policy, which should be disclosed pursuant to Accounting Principles Board Opinion (“APB”) No. 22, “Disclosure of Accounting Policies”. If those taxes are significant, and are presented on a gross basis, the amounts of those taxes should be disclosed. The consensus on EITF 06-3 will be effective for interim and annual reporting periods beginning after December 15, 2006. The Company generally record tax-assessed revenue transactions on a net basis in the statements of income and therefore, the Company does not anticipate that EITF 06-3 will have a material effect on the Company’s financial position, operating results or cash flows.

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EX-99.2

Exhibit 99.2

Nevada Chemicals, Inc.

News Release

FOR IMMEDIATE RELEASE: MARCH 29, 2007

CONTACT:           John T. Day, President/CEO

Nevada Chemicals, Inc.

801-984-0228

Nevada Chemicals, Inc. Announces 2006 Results

SALT LAKE CITY: UTAH - John T. Day, President and Chief Executive Officer of Nevada Chemicals, Inc. (NASDAQ/NMS:NCEM), today announced that for the year ended December 31, 2006, the Company had net income of $3,224,000, or $0.46 per share, or an 81% increase compared to net income in 2005 of $1,779,000, or $0.26 per share.  Total revenues and equity in earnings increased to $7,002,000 in 2006, an increase of 128% over 2005.

The business activities of the Company for 2006 include a management contract with, and a 50% ownership interest in, Cyanco, through a wholly owned subsidiary, Winnemucca Chemicals, Inc.  Net income from 2005 to 2006 increased 81% due primarily to Cyanco’s increased sales, lower raw material prices coupled with the catch-up of the pricing lag effect for Cyanco customers and increased earnings on the Company’s short-term investments.  The increase in net income from these sources was partially offset by increases in income tax accruals related to ongoing income tax audits, general and administrative expenses due in large part to increased legal and accounting fees and stock-based compensation resulting from a new accounting pronouncement requiring the expensing of the value of stock options issued during the year.

During 2006, Nevada Chemicals, Inc. announced quarterly dividends of $0.07 per share in the first quarter, increasing to $0.08 per share each quarter thereafter, for a total of $0.31 per share or $2,159,000 in dividends to shareholders of record, which represents 67% of net income.  The dividend for the 4th quarter was paid in January 2007.  At December 31, 2006, the Company’s balance sheet was strong, with no long-term debt, and cash and cash equivalents totaling nearly $16 million.

Day said that he is encouraged by the increase in the price of gold during the last several years, and he anticipates that the higher gold prices will continue to translate into greater mining activity.  Day said, “However, the continued recent volatility in the price of key raw materials, in particular those related to energy, including natural gas, ammonia, caustic soda, and electricity, do affect the cost of Cyanco products. Fortunately, most of the sales contracts have cost escalators/de-escalators to protect Cyanco as well as the customer.”

The Board of Directors of Nevada Chemicals, Inc. has fixed the close of business on Monday, March 26, 2007 as the record date for the purpose of determining shareholders entitled to receive Notice of its Annual Meeting of Shareholders.  The Annual Meeting of Shareholders of Nevada Chemicals, Inc. is currently scheduled for Thursday, May 3, 2007 at the Hampton Inn in Sandy, Utah, 10690 South Holiday Park Drive, at 2:00 p.m. local time.

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Nevada Chemicals, Inc., through its 50% ownership in Cyanco, a chemical producer of sodium cyanide located in Winnemucca, Nevada, is the premier producer of cyanide for the gold mining industry in the western United States.

NEVADA CHEMICALS, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

AND BALANCE SHEET DATA

	Years Ended December 31,
	2006		2005
Revenues and equity in earnings	$	7,002,000	$	3,072,000
Net Income	$	3,224,000	$	1,779,000
Net Income per Common Share, Diluted	$	0.46	$	0.26
Total Assets	$	25,662,000	$	26,137,000
Stockholders’ Equity	$	23,110,000	$	21,510,000
Weighted Average Common Shares Outstanding - Diluted	6,961,000		6,954,000
Common Shares Issued and Outstanding at Year End	6,983,172		6,901,406

Note: The foregoing contains “forward-looking” statements that are pursuant to the safe harbor provisions of the Private Securities Reform Act of 1995.  Editors and investors are cautioned that forward-looking statements involve risks and uncertainties that may affect the Company’s business prospects and performance.  These include, but are not limited to, economic, competitive, governmental, technological and other factors discussed in the Company’s reports to shareholders and periodic filings with the Securities and Exchange Commission, which are incorporated herein by this reference.

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