SecProbe.io

<DOCUMENT>
<TYPE>CORRESP
<SEQUENCE>1
<FILENAME>filename1.txt
<TEXT>
Nevada Chemicals, Inc.

August 15, 2005

Ms. Nili Shah
Branch Chief
Division of Corporation Finance
United States Securities and Exchange Commission
Washington, D.C. 20549

Re:      Nevada Chemicals, Inc.
         Form 10-K for the year ended December 31, 2004
         Filed March 18, 2005
         File No. 0-10634

Dear Ms. Shah:

         Nevada Chemicals, Inc. (the "Company") has received your comment letter
dated August 2, 2005, and we respectfully submit our responses to the comments.

                 Form 10-K for the Year Ended December 31, 2004

Financial Statements
--------------------

Note 7. Income Taxes, page F-13
-------------------------------

         1. We have reviewed your response to prior comment 1 in our letter
dated June 22, 2005. Please confirm in writing our discussions conducted on July
29, 2005 regarding the timing and nature of information related to the ongoing
audits, as well as the uncertainties communicated to you by the IRS with respect
to the realization of your foreign tax credits. Please also confirm our
discussions as to why you expect to realize a portion of the deferred tax asset
associated with your foreign tax credits in 2005 and how this portion differs
from the remainder for which you maintain a full valuation allowance.

         Company Response: On July 29, 2005, Dennis P. Gauger, Chief Financial
Officer of the Company, Mark Erickson, audit engagement partner from Tanner LC,
and Nili Shah and Jenn Do from the Division of Corporation Finance of the
Securities and Exchange Commission conducted a telephone conference and
discussed the timing and nature of the circumstances related to the ongoing
audits of the Company's corporate income tax returns by the Canada Customs and
Revenue Agency ("CCRA") and the United States Internal Revenue Service ("IRS").
The following summarized the information provided to the staff:

  Nevada Chemicals, Inc. 9149 South Monroe Plaza Way, Suite B, Sandy, UT 84070
                       (801) 984-0228 Fax (801) 984-0231

<PAGE>

         The Company's corporate income tax returns filed in Canada for the
years ended December 31, 1995 through 2001 are under audit by CCRA. This audit
has been ongoing for the past four to five 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 has requested that the audit be moved
to the appeals level. The timing of the commencement and ultimate completion of
the appeals process is currently uncertain.

         The Company believes the amounts that it has accrued and included in
its consolidated financial statements under accounts payable and accrued
expenses at December 31, 2004 and at June 30, 2005 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. During 2005, to the date
of this letter, the Company has made payments to CCRA totaling $562,000 related
to the audit assessments.

         The Company elected to claim foreign tax credits on its United States
income tax returns based on the Canadian income tax amounts accrued for
resolution of the audit by CCRA. Deferred tax assets relating to carryforward
amounts of these credits were estimated and disclosed in the notes to the
Company's consolidated financial statements. Of the foreign tax credit
carryforwards of $1,273,000 reported at December 31, 2004, all of which relate
to Canadian income tax amounts accrued for resolution of the audit by CCRA,
$294,000 were scheduled to expire this year and $979,000 were scheduled to
expire in 2006. Due to uncertainties surrounding the realization of these
foreign tax credits, including the final results of the audit by CCRA,
resolution of the ability of the Company to claim the accrued obligations as
foreign tax credits (see the discussion of the IRS audit below), and the
expiration dates of the credit carryforwards, the Company was unable to conclude
that the realization of the deferred tax assets met the "more likely than not"
criterion in paragraph 17.e of SFAS No. 109. Therefore, through June 30, 2005,
the Company recorded a valuation allowance equal to 100% of the deferred tax
assets resulting from foreign tax credits.

         During 2005, the IRS commenced an audit of the United States corporate
income tax returns of the Company for the years ended December 31, 2001 through
2003. These audits have not been completed as of the date of this letter;
however, discussions with the IRS indicate that foreign tax credit carryforwards
reported on these returns relating to Canadian income tax amounts accrued for
resolution of the audit by CCRA may not be allowed by the IRS until the payments
are actually made to CCRA.

         As discussed above, the Company has paid $562,000 to CCRA during 2005.
As a result of these payments, the Company realized a portion of the deferred
tax asset sufficient to offset all United States federal income taxes for the
three months and six months ended June 30, 2005. During the remainder of 2005
and subsequent periods, the Company will realize further portions of the
deferred tax asset associated with the foreign tax credit carryforwards to the
extent that it makes payments to CCRA, or in the event the IRS agrees with the
Company's position on the use of accrued foreign tax credit carryforwards. Until
such time, the Company intends to continue to maintain a valuation allowance
against the deferred tax assets.

                                       2
<PAGE>

Cyanco Company Financial Statements

Note 2. Acquisition, page 7
---------------------------

2. We have reviewed your response to prior comment 3 in our letter dated June
22, 2005. We have the following comments:

         o    We note, in your response, that a significant customer notified
              you in January 2005 that it may not extend its supply contract
              with Cyanco beyond 2005. However, in your discounted cash flow
              analysis, you assumed that Cyanco would supply a portion of the
              customer's product through 2006. Please confirm in writing our
              discussion conducted on July 29, 2005 regarding the nature and
              timing of the communications with this customer, as well as the
              reasons for your assumption at December 31, 2004 and March 31,
              2005 that this customer would continue some sourcing of Cyanco
              product into 2006, until you received notice to the contrary in
              June 2005. As part of your response, please confirm our discussion
              regarding the timing and implication of the closure of one of your
              competitor's raw material sources on your discounted cash flow
              analysis in measuring the fair value of the customer related
              intangible at December 31, 2004 and March 31, 2005.

         o    In future filings, please revise your proposed disclosure to
              indicate the reasons for your belief in January 2005 that the
              customer would buy a portion of Cyanco product through the end of
              2006. Please show us what these disclosures will look like.

         o    Please be advised that the change from using the straight-line
              amortization method to units-of production amortization method is
              a change in accounting principle, not a change in estimate. See
              paragraph 9 of APB 20. In future filings, please ensure that you
              comply with the disclosure requirements in paragraphs 17 and 19 of
              APB 20 related to your change in principle. If the impact is
              material, please also include a preferability letter as Exhibit
              18, pursuant to Item 601 of Regulation S-K.

         o    In future filings, disclose in MD&A the impact that the loss of
              this customer will have on your equity in earnings and net income
              for 2005.

         Company Response - In January 2005, Cyanco became aware that a
significant customer was having discussions with a competitor of Cyanco
regarding the purchase of sodium cyanide and might not extend its product supply
contract with Cyanco for 100% of its requirements beyond December 31, 2005, the
end of the current supply contract. Prior projections and impairment analysis
prepared through the quarter ended September 30, 2004 had assumed the contract
would be renewed for an additional three years, and that Cyanco would continue
to supply 100 % of this customer's requirements through 2008.

         Cyanco completed an impairment analysis of its intangible assets as of
December 31, 2004 using projected discounted cash flows from the acquired
customer relationships, with factors adjusted for these events of January 2005
and assuming Cyanco would supply a portion of the customer's product through
2008. The result was an impairment loss recorded by Cyanco in the fourth quarter
of 2004 of $1,100,000. The Company's share of the impairment loss reduced the
Company's equity in earnings of joint venture by $550,000 in the fourth quarter
and year ended December 31, 2004.

                                       3
<PAGE>

         The reasons that Cyanco assumed it would supply a portion of the
customer's product through 2008 included the following:

         o    Discussions with the customer regarding renewal of the contract
              beyond 2005 for all or part of its supply needs, primarily
              conducted by the sales and marketing manager of Cyanco with local
              personnel of the customer, were ongoing from January into June
              2005.

         o    In early 2005, the Texas-based facility that supplied a
              significant portion of the competitor's product announced a
              temporary shut down of the facility. Subsequently, the facility
              announced that it would terminate all supply contracts for sodium
              cyanide. Cyanco believed that the termination of this source of
              product to the competitor could have a material negative impact on
              the competitor's ability to supply product to its Nevada customers
              in 2005 and subsequent years and would raise customer concerns
              about the ability of the competitor to fully supply the customer's
              sodium cyanide requirements. As a result, the impairment analysis
              of Cyanco's intangible assets as of December 31, 2004 reasonably
              assumed that the customer would continue to purchase some product
              after 2005 from Cyanco (the impairment analysis at December 31,
              2004 assumed 50% of the customer's needs) to ensure that
              sufficient product would be available.

         Cyanco was not aware of any negative changes to the assumptions
underlying the December 31, 2004 impairment analysis until June 2005, when
Cyanco was informed that the customer would not renew the contract beyond 2005
for any of its requirements. Cyanco completed an impairment analysis of its
intangible assets as of June 30, 2005 using projected discounted cash flows,
eliminating all projected future cash flows from this customer subsequent to
2005. The result was an impairment loss recorded by Cyanco in the second quarter
of 2005 of $536,000.

         In accordance with SFAS No. 144, Cyanco's impairment analysis included
a review of the amortization method and period related to the remaining carrying
value of its intangible assets at June 30, 2005. We concur that a change from
using the straight-line amortization method to units-of-production amortization
would be a change in accounting principle, not a change in estimate. The intent
of Cyanco was to effect a change in estimate with regards to its amortization of
the remaining carrying value of its customer related intangible assets through a
change in the estimated remaining useful life of the customer related intangible
assets, which we believe is a change in estimate as discussed in paragraphs 10
and 11 of APB 20. Cyanco will continue to use the straight-line amortization
method. Beginning July 1, 2005, Cyanco will calculate the amortization of the
carrying value of the customer relationships using the straight-line method over
the revised estimated economic lives of the remaining FMC contracts. This change
in estimate will result in estimated future amortization expense for intangible
assets as follows:

                  Six months ending December 31, 2005         $ 586,000
                  Years ending December 31:
                              2006                              507,000
                              2007                              295,000
                                                         ---------------

                                                            $ 1,388,000
                                                         ===============

         This revised projected future amortization schedule will be included in
the notes to the financial statements of Cyanco in future annual filings.

                                       4
<PAGE>

         In future filings, we will expand disclosure in Management's Discussion
and Analysis of Financial Condition and Results of Operations ("MD&A") to
address the impact of the loss of this significant customer on the Company's
equity in earnings of Cyanco and on the net income of the Company.

         Since the acquisition of the customer relationships from FMC in 2002,
sales to this customer have accounted for 10-13% of Cyanco's total sales. Cyanco
must replace these sales after 2005 with sales to new or existing customers or
Cyanco's sales subsequent to 2005 will decrease accordingly. Since Cyanco will
continue to supply the customer at current contract levels through the end of
2005, there will be no impact on the Company's equity in earnings of Cyanco and
on the net income of the Company for 2005. The Company does not believe that the
loss of this customer will have a material negative impact on the Company's
equity in earnings of Cyanco and on net income reported by the Company in years
subsequent to 2005 since a lower margin is currently realized on sales to this
customer compared to other customers of Cyanco.

         We will expand our footnote disclosure and MD&A discussions in our
Quarterly Report on Form 10-Q for the quarter ended June 30, 2005 to disclose
the uncertainties surrounding our significant assumptions on impairment and
deferred tax valuation allowance matters. Attached as Exhibit A to this letter
are excerpts from our June 30, 2005 Form 10-Q that contain these revised and
expanded disclosures.

         In connection with responding to your comments above, we provide the
following statement from the Company acknowledging that:

         o    The Company is responsible for the adequacy and accuracy of the
              disclosures in our filings;

         o    Staff comments or changes to disclosure in response to staff
              comments do not foreclose the Commission from taking any action
              with respect to the filing; and

         o    The Company may not assert staff comments as a defense in any
              proceeding initiated by the Commission under the federal
              securities laws of the United States.

         Please contact me directly at (801) 984-0228 should you have questions