SILVER LIES IN VEINS, AND GOLD WHERE THEY FIND IT," is an old saying. Until John Livermore and J. Alan Coope undertook and succeeded in creating an economic formula turning "no see um" gold into bullion, the world's gold supply grew through specific gold rushes, forced labor in communistic countries, isolated mining districts, and deep exploration of the reef deposits found in Southern Africa. Aside from general principles, each mineral locality presents certain characteristics peculiar to itself, an axiom shareholders as well as miners must recognize.
Geological history determined by prior mining is a valuable bridge between theory and fact. No gold miner or gold investor can afford to be grouped with charlatans, or classed with cheap retailers of empirical opinions. As in all professions "facts" rather than theories should be made the guiding star. Results rather than projections should be considered as evidence.
Our underground high-grade gold mines in Alleghany, California present very unique situations within the industry. There are many ways to recount last year. I hope you spend some time reviewing the facts provided in this report. The charts, financial statements and narrative reflect the peculiar nature of our mines.
Last year was not a banner year for us. Gold production was higher than 1996, yet revenue failed to cover expenses. Footage was up, yet the historical averages of ounces of gold per foot of vein mined was low. Tons of material milled increased, yet the grade was less than our estimates. Stock prices slowly fell until December when OAU hit the floor along with the rest of the gold stocks.
The most successful operators in mining enterprises are those who have acquired a large acquaintance with the details of the work. The same can be said for those shareholders most successful in mining enterprisers. Owners, such as yourselves, should expect and demand factual accounting of mining as well as numbers on a balance sheet and income statement. I encourage you to continue your research in our company and offer you Appendix A in the back, a never before published report by Raymond Wittkopp, a registered geologist. Also the enclosed colored map which details the 1997 year may at first be confusing, yet it portrays our mining activities the past year. As always I am pleased to answer any of your questions.
The 10 KSB, filed with the Securities and Exchange Commission, is reproduced in its entirety. You can quickly see that our cash and inventory accounts are dwindling. I have chosen to borrow money instead of crushing our remaining exceptional gold specimens in order to fund current mining. Today is a difficult time for all gold mining, and ours is no exception. Our underground headings look great. Our miners are working diligently. Even though it may be necessary to further cut expenses and scale down our mining. Debt or dilution through the issuance of treasury stock, however, is my preference.
For a long term outlook I remain confident with my investment in our company. The history of the mine, the geological inferences that may cautiously be projected and the conditions underground in the work place support my confidence. While the price of gold and the costs of mining influence our financial success, just finding the precious metal will always be our most serious challenge. Hope to see you at the annual meeting on June 20.
Very truly yours,
Michael M. Miller