Investor outlook regarding gold and gold mining moved away from the negative posture prevalent in 1985. Caution remains; however, interest has increased and interest in gold mining is an important factor in our development. Economist, mining consultants and financial practitioners both domestic and international are struggling to interpret higher and stable gold prices while oil prices have fallen and the dollar declined.
What does this mean for our Company?
Perhaps at long last we can implement the two courses of action needed to exploit the latent potential of our holdings: attracting working capital and establishing a liquid marketplace for our stock. It is crucial for our company to attract money to expand our exploration and development programs. This need is significantly different from companies who seek money to retire debt or just carry on operations. Our company is under no threat due to inadequate resources to maintain the present level of operations indefinitely.
Since its incorporation in 1911, the company has never "floated" a stock offering. It actively mined gold until the 1960's, at which time a proposal to sell stock was submitted to the California Commission of Corporations for approval. It was subsequently withdrawn. The decision to seek investors in our company presumes that any dilution to present shareholders will be offset by the value gained from expanding the scope of operations.
What does the coming year hold forth?
We anticipate lessee stability throughout 1986. While gold production royalties under the lease most likely will fall below the minimum payment of $120,000 (or 10% of production), gold production is only one measurement of worth. The lessee has recaptured the accessibility of 800vertical feet of the mine formerly submerged in water. It has expanded the database by means of surveying and underground core drilling. Also numerous above ground repairs have been implemented. Much of the so called "dead work" associated with mining has been completed. Except for reconditioning the mill, the property is poised for an expanded exploration program underground.
You will notice that our current financial statistics are highlighted in this report. The statements as of April 30, 1986, which are reproduced in their entirety in the appendix, are appreciably different from the year-end audit report.
Also please note the addition of two new Directors. See Directors Profile. Charles Brown and Richard Sorlein will add experience in corporate management, financing and mine development to the seasoned Board of Directors.
On January 26, 1986, arsonist set fire to our corporate office building, formerly the school in Alleghany. The loss was substantial. Many of the files were salvaged, but a number of current and historical records were destroyed as well as irreplaceable maps. It has been a destabilizing experience. Our financial loss was mitigated via a negotiated settlement with the insurance carrier concluded early April.
In addition to the extraordinary income from the fire loss, minimum annual royalty fees doubled in 1986 to $120,000, paid quarterly. We have budgeted an adequate cash reserve should any disruption in the minimum royalty payments occur.
Our company continues to wrestle with the concepts of an Original Sixteen to One Private Placement offering and expansion of work on our other mining claims. Management is refining its plan to raise working capital to fund Phase One of a two-part Exploration and Development Program.
Other mining companies have expressed an interest in our holdings; however, no discussions are currently underway.
Most letters from corporate presidents to shareholders cast a glowing report with optimism for the future. So why should I be any different, especially since I recognize that we are climbing a ladder towards our goal of profit, capital appreciation, and dividends.
Very sincerely yours
M. Meister Miller