Aurasource (OTC BB:ARAO)

On February 15, 2012, we entered into an agreement with Gulf Coast Holdings, LLC (“GCH”) to reserve export ready 1 million tons of 64% Fe higher content iron ore and 13 million 45% grade lower content iron ore, and 2 million tons of manganese ore. We agreed to issue 16 million shares of our common stock to GCH or assigns (“Mineral Deposit Shares”). The Mineral Deposit Shares shall vest and be delivered as follows; 5 million immediately, 11 million upon the successful completion of the first customer order of total revenue over $5 million. Success shall be defined as customer acceptance of order and final payment. To the extent a successful order does not occur the unvested Mineral Deposit Shares shall be returned to our treasury and cancelled. GCH has the right to designate two board members who we mutually agree to. A copy of the Mineral Reserve Agreement is attached to this Current Report on Form 8-K as Exhibit 10.1 and is incorporated herein by reference.

 

On February 15, 2012, we entered into an agreement with Gulf Coast Mining Group, LLC (“GCM”) to purchase (i) higher content iron ore, lower content iron ore and manganese ore (collectively, the "Minerals") which will be delivered loose in bulk modified FOB. A copy of the Agreement to Purchase Minerals is attached to this Current Report on Form 8-K as Exhibit 10.2 and is incorporated herein by reference.

 

On February 15, 2012, we entered into an agreement with Gulf Coast Holdings, LLC (“GCH”) appointing GCH as the exclusive North American licensee for use and exploitation of our technology as relates to applications involving precious metals in exchange for royalty payments of five percent of gross revenues. A copy of the Exclusive License Agreement is attached to this Current Report on Form 8-K as Exhibit 10.3 and is incorporated herein by reference.

 

Dear Shareholders,
 
We would like to catch you up on the activities happening at AuraSource in 2010.  Management is excited about a number of developments that occurred during 2010 calendar year.  Currently, we are focusing on development of our clean energy technology applications.  Specifically, we continue to develop and refine our AuraFuel and AuraCoal processes.
 
AuraFuel utilizes a low temperature catalytic process to convert oil shale, asphalt shale and low-ranking coal to hydrocarbon clean fuel products in a highly efficient manner.  We license parts of this process from China Chemical Economic Cooperation Center which is a Chinese governmental division leading China’s energy and environmental research and development.
 
AuraCoal is patent pending technology designed to remove sulfur and ash from coal pre-combustion. This reduces energy costs and helps eliminate harmful emissions. This proprietary clean coal technology produces an ultrafine coal water mixture, which contains only trace amounts of sulfur and ash and constitutes an alternative to oil or natural gas. AuraCoal can be delivered via pipeline in a non-volatile state. The conversion to an AuraCoal system is designed to deliver immediate and substantive reductions in harmful particle emissions as well as savings in transportation, processing and safety costs.
 
Developments in Calendar 2010
 
AuraFuel
 
In January, we entered into an agreement to utilize 50 acres of reclaimed sea in the Port of Qinzhou China to use for the construction of our first AuraFuel plant.  The Port of Qinzhou is a major deepwater port for coal imported from Vietnam, Indonesia and other southeastern locations. Petrochemical and energy industry contributes 56% of total local government revenue and are prime candidates to utilize our products.
 
In March, we formed Qinzhou Kai Yu Yuan New Energy Co., Ltd., a joint venture between AuraSource and Kaiyuyuan Mineral Investment Group (“KMIG”) to build the first AuraFuel plant. KMIG provided the funding for this plant.  AuraSource is providing the project management expertise and license for the AuraFuel process. 
 
In April, we broke ground at the site for the construction of the first AuraFuel plant. The first phase calls for reinforcing the foundation due to the land being newly reclaimed from the sea.
 
In May, we obtained approval from the Environmental Protection Agency to build the AuraFuel plant.
 
In August, we contracted with China Shandong Metallurgical Engineering Corp. as Engineering Procurement Construction (“EPC”) general contractor which will provide a turnkey solution under an initial operation service contract. 
 
In October, the U.S. Bureau of Land Management announced that it has taken a key step to awarding AuraSource, Inc., Exxon Mobil Corp and Natural Soda Holdings Inc. oil shale Research, Development and Demonstration land leases in Colorado and Utah. If successful, this would allow us to test the feasibility of various oil shale recovery technologies on public lands in the two states.
  
 
AuraCoal

This year AuraSource formed AuraSource Qinzhou Co. Ltd., a wholly owned subsidiary in China (“Qinzhou”) to acquire Hydrocarbon Clean Fuel (“HCF”) technologies, performing research and development related to HCF technology and products based on this technology, licensing HCF technology to third parties and selling services and products derived from this technology in China.
 
In March, we filed four patent applications relating to this process with the China Patent and Trademark Office.
 
In July, we entered into an agreement to supply China Power Investment Corp 170,000 tons of AuraCoal per year to their facility in Qinzhou
 
In August, we acquired half the intellectual property rights related to ultrafine grinding technology from Beijing Pengchuang Technology Development Co., Ltd.. They developed a highly efficient and low energy consumption grinding technology, which utilizes fluid shock waves to make ultrafine particles. This technology can be applied to the coal water slurry, solid lubricant and other material grinding processes. We plan to utilize the particle grinding technology in our AuraCoal Qinzhou production line, as well as license it to others in non-related industries.
 
In August, we entered into a letter of intent with Air Liquide China to establish joint project for a 500,000 ton AuraCoal Gasification plant.
 
In November, we filed a patent application with the China Patent and Trademark Office related to technologies associated with a shock wave grinding apparatus.  This apparatus generates a shock wave when pressurizing (5-30Mpa) a slurry as it passes through the grinding chamber. The shock wave carries a large amount of energy and it creates strong shear, collision and cavitation effects which cause particles in the slurry to reduce to an ultrafine size. As a result, the coal water slurry is pulverized and its fluidity is improved. Under certain conditions, this shock wave apparatus can also be used to accelerate chemical reaction process involving fluid materials in other industrial applications.
 
Going forward
 
We are currently conducting operations in China through our wholly owned subsidiary, AuraSource Qinzhou Co. Ltd., a WFOE. We plan to continue to enhance our intellectual property portfolio related to HCF technology.  We also plan to explore opportunities to sell services and products related to and licenses for our HCF technology, and to possibly acquire additional HCF-related technology.
 
Currently, our goals for 2011 and moving forward include:
 
AuraFuel –
 
•   Complete construction of AuraFuel Qinzhou facility and work with joint venture partners to target additional locations in the Gulf of Tonkin Region.

 
•   Become premier environmentally friendly alternative feedstock to the petrochemical industry.

AuraCoal –
 
•   Start and complete AuraCoal Qinzhou facilities in 2011 and increase capacity by working with regional governments and local industries to identify new facility locations.

 
•   Become leading provider of cleaner cost effective alternative fuels for industrial boiler applications with higher environmental standards.

 
Expand into US –
 
•   Leverage expertise from China to expand into the United States addressing untapped and underutilized fuel resources.

 
•   Selectively pursue opportunities to acquire oil shale properties, install AuraFuel facilities, and identify dormant coal properties on east coast for AuraCoal facilities.

 
The above-described matters are not the only goals of management in 2011 and future years.  Additionally, although management believes the above stated goals are achievable, management’s assessment concerning the viability of these objectives is based on currently available information and a variety of assumptions. Based on further work and information and i the event management’s current assumptions prove to be inaccurate, we may determine that the above stated goals are unrealistic or unachievable or we may change our strategy and focus on pursuing other objectives.

On September 30, 2010, the Company completed a private placement offering to certain institutional and accredited investors pursuant to which the Company sold an aggregate of 400,000 shares of the Company’s common stock resulting in gross proceeds of $500,000 to the Company. The Company intends to use proceeds of the offering for working capital and to develop an AuraCoal plant in the Gulf of Tonkin Economic and Development Area which utilizes low-grade coal and semi-coke to produce a coal –water slurry that can be used to heat industrial boilers (a process used for 40 years). Patent pending process removes ash and sulfur from coal on a pre-combustion basis, providing significant cost savings and higher environmental compliance for end-users than other coal-water slurry alternatives.. The Company has no material relationship with any of the institutional and accredited investors participating in the private placement offering other than in respect of the Subscription Agreements.

Aurasource gears up for China:

We believe our HCF technology, AuraCoaltm, will be the next generation of hydrocarbon clean fuel technology. It involves grinding coal into very fine particles, mixing it with water and selected chemicals to make a slurry mixture and using a proprietary biological treatment of the coal slurry mixture to reduce heavy minerals, such as sulfur. We believe such slurry mixture will have sufficient fluidity to move through pipelines, process delivery piping and burner injection nozzles. Our goal is to demonstrate to power plants and similar users that our HCF technology can convert their plants to use the technology at a lower cost than any current alternative. Given sufficient capital and development of our HCF technology, we plan to market it to plants in China and the United States with the objective of having a beta demonstration site in each country.

Appears to be targeting the:

Clean coal sector:

AuraCoal is patent pending technology designed to remove sulfur and ash from coal pre-combustion. This reduces energy costs and helps to eliminate harmful emissions. This proprietary clean coal technology produces a coal water mixture, which contains only trace amounts of sulfur and ash and constitutes a superb alternative to oil or natural gas. AuraCoal can be delivered via pipeline in a non-volatile state. The conversion to an AuraCoal system is designed to deliver immediate and substantive reductions in harmful particle emissions as well as savings in transportation, processing and safety costs. AuraSource plans to construct its pilot plant in mid 2010 and distribute the coal based clean industrial fuel produced by this proprietary new generation of clean coal technology in 2011.

hydrocarbon clean fuel sector:

AuraSource has also licensed another proprietary hydrocarbon clean fuel technology, AuraFuelTM, which utilizes a low temperature catalytic process to convert oil shale, asphalt shale and low-ranking coal to hydrocarbon clean fuel products in a highly efficient manner. This technology was developed by EERI, a Chinese government owned energy research institute. The Chinese government along with an international technical firm validated the technology. EERI patented the technology and the production process. AuraSource licensed this technology for Guangxi province of China and the United States. We are currently developing our own intellectual property associated with this technology. AuraSource is partnering with three Chinese companies to start construction on a pilot plant by mid 2010 with production starting in 2011. In the United States, we are currently in our planning stages and pursuing a suitable site on public or private lands to start a pilot plant in 2011.

Note: ARAO generates no revenues. Revenues will be dependent upon the execution of its strategy which will require capital.

The Company is seeking 3/31/2011 While we believe we have sufficient cash resources for the next twelve months, in order to meet our business goals we will need to seek additional funding or enter into strategic partnerships.