You are receiving a shortened annual report this year for the second time in the past twenty-five years. This decision was made to conserve our limited supply of cash. As always we will have open discussions at the meeting in Alleghany. Please call me, write or e-mail for additional information about the company and our plans or other questions you have.
Mining and Financial Results
Our assets are all in tact but our liabilities have increased since last year. The underground workings are being maintained while I am addressing the most urgent obstacle blocking gold production….working capital.
Last year’s production was the lowest since we took back the lease on the Sixteen to One mine and began operations. It was so bad that even I cannot believe the results. We basically emphasized two underground targets during 2007: rehabilitation of the 1000 foot level and short-term gold targets. Both failed. Gold production was less than 100 ounces. We followed a speckled trail of spotty gold, which never wired into a typical and expected Sixteen to One pocket.
Geologically speaking, we are blessed with volumes of historical data to interpret and rely on for finding gold. Gold, which is the best indicator of a high-grade pocket, was scattered in and around the quartz on the northern 800 foot level. Remember, we are not prospectors who test supposed discoveries of valuable minerals. Our venerable company is one of the few actual American gold producers. We just ran out of time to continue the exploration.
Our main underground mining investment was clearing the blockage on the 1000- foot level north of the Tightner Shaft. The goal was to reach the known productive areas in the vicinity of the Red Star mine. We need access, a reasonable highway to move men and materials, to attack the targets previously identified and produce gold. I was very disappointed at the progress. Time and money were running out, so I pulled the crew out of the heading and repositioned them to find gold. The gold continued to elude us. Lay off notices were given in November, and we began a maintenance program, which is still in place today.
Working Capital Solutions
Three solutions on how to proceed were carefully considered: selling our mines, selling treasury stock and selling the gold collection, which was the best choice. You may or may not have the opportunity to see some of the 100-piece collection at this year’s annual meeting. I hope not because I want it sold by then. A gold mine without a grubstake is like a sailboat without wind or a racecar without gas. Once our sails and tanks are full, I expect to successfully implement the following: mine gold, reactivate the public market for stock trading, build a gold detector designed specifically for our vein system, become debt free and have some fun.
On the bright side the gold market continues moving in positive directions. The demand for Sixteen to One quartz and gold is very strong. Most of the people I talk with believe monetary upheaval will get worse. If so, your position in this real gold producing company should bring you financial gain and some peace. I placed some big bets on this mine, company and other Gold Sector findings and remain very confident in the ultimate rewards are worth the gray hairs.
Michael Miller, President
May 26, 2008