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Clips from Alleghany

       

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 By SCOOP

01/22/2007  12:53PM

Draft received from a recent interviewer of Michael Miller that may appear in a yet to be identified publication. January 22, 2007. Part One


Q: More stories about gold are appearing as gold increased in value last year. Are we in another new American gold rush?

A: I wouldn’t call it a new rush but there is definitely an upturn in interest. The mother of all historical gold rushes took place in California between 1848 and 1852. In modern times the current interest is a continuation of “the rush” unleashed on December 31, 1974, when gold was economically freed from government suppression. Today the general public has yet to participate even though we see more references to gold than a few years ago.

Q: How do you follow the gold markets?

A: I keep up with gold and other natural resources thanks to magazines, newsletters and newspapers, web sites or articles on the Internet, friends or acquaintances in the various industries and other sources. I enjoy reviewing company reports and SEC filings. My interest goes beyond what should be required of a president in the natural resource industry. I’m curious. My macro- economic belief is that our natural resources contribute to the liberties and freedoms the entire world cherishes. There are potential global impacts, significance for Americans and important local consequences that touch many people.

Q: While it seems simple, the realm of gold has a complex history. What single advice pops into your head to offer someone outside the gold market wanting to get in?


A: The rules are the same whether its gold or technology: go into gold with an open mind and teach yourself through study. I started that way thirty-two years ago. My family background, formal education and life-long experiences make me a risk taker but a careful one. Emotion gets in the way sometimes. The counterpoint to risk is reward. The ability to evaluate these two components is crucial with today’s gold investment options. Whether it is an investment in time, energy or money, a formula may be constructed to analyze various choices and opportunities. There are unfamiliar terms in gold mining with unclear definitions to deal with. You want a quick single concept to embrace: ponder the downside risk and upside potential.

Q: Why have you devoted thirty years to the mines in Alleghany?

The relevance of mining, natural resources and gold to our present and future well-being makes me a Sixteen to One bull. I recognized the potential quickly back in 1974. Our experiences continue to confirm my early impressions. I don’t want to go into a lot of history now; however what has taken place in Alleghany and the Sierra Nevada Mountain range is awesome. It sometimes takes my breath away just to have an interest in keeping this culture alive. While economic growth (stock appreciation) is an important goal, so is acquiring physical gold as a personal possession. This opportunity really puts Original Sixteen to One Mine in a very special and small category of gold stocks. The little guy, like me and others, has a chance to participate in something exciting.

Q: In reading your history you seem to always have plans that require money but you rarely actually go outside to get it. Why?

A: We prefer to finance our growth and development by mining gold. The Company’s fortunes turn in a single shift, so as long as we are breaking rock, fortune may tap us on the shoulders. Other reasons are more pragmatic. In order to declare a gold dividend the division of ownership must be manageable. It is. The more shares outstanding, the more difficult to divide excess gold into a meaningful amount. I monitor our gold inventory, cash flow and daily underground mining progress to quantify the risk/reward scenario. In conversations with Ian Haley, the mine manager, and the crew I gain a sense of production and what is ahead of us. My actions are to push it, in other words “risk evaluation” is a constant part of the job. It changes almost daily. Last week on the 1000 foot-level, we found a gold showing in the down-dip side of the vein. We slabbed the rock. It revealed a very nice display of gold, more than first look. Now we have the choice of proceeding with the level rehabilitation or interrupting that heading and sink on the gold. Each has a risk and each has a reward. No one knows but right below us less than a week away could be enough gold to finance our Red Star project from this production.

Q: You mentioned unfamiliar mining terms earlier. Give us some common ones and some that may be unfamiliar or poorly defined.

A: I used the term “down-dip” in describing where we found gold on the 1000-foot level. First, the dip is the angle that a bed, stratum or in this case a vein is inclined from the horizontal. Down-dip tells the direction of the incline. Its opposite would be up-dip, although this term may not be used throughout the mining industry. Mining districts develop their own terms over time, so there can be confusion of meanings even between experienced miners. For the non-miner who is trying to get a grip on evaluating gold companies, the first concept they must deal with is reserves. The Alleghany Mining District is very fortunate because the gold deposit cannot be qualified or quantified using a reserve projection. The investor today is barraged with reports about proven reserves, probable reserves, possible reserves, inferred reserves and a resource. Whew! Believe me, these terms are not interchangeable but many exploration companies as well as others lump them together. I think it is done to fuel great expectations for those seeking a play in the gold industry.


Q: Why should individuals or other entities be interested in the Sixteen to One operation and give some examples?

A: An important fact in evaluating the likelihood and meaning of meeting the two goals (stock appreciation and gold distribution) is the number of outstanding shares. This is a very important statistic for comparing all corporations. On December 31,2003, there were 12,867,250 shares issued and outstanding. The number remained the same on December 31, 2004 and December 31, 2005. Dilution was nil. The upcoming December 31, 2006, number increased by 118,204 to 12,890,204 shares issued and outstanding. This small increase was due to a stock conversion for debt, money owed a shareholder who helped purchase the Gold Crown mine in 2005, directors’ fees and a long overdue account payable. For a company that has been financially handicapped, it avoided dilution just to keep the operation going. We are not fueling our operation by selling stock. We are one of very few small gold companies that actually mines gold for its cash flow.

Q: Is a gold dividend a fluff concept or for real?

A: It is for real. One of our past directors, Lee Erdahl, was a director of Ranchers Exploration and Development Corp and became its president after the untimely death of Maxie L. Anderson. Mr. Anderson paid a gold and silver dividend. It may be the first declared in kind dividend by a public corporation. I find it an inspiring accomplishment. As of today, a gold dividend of a quarter ounce per 1000 shares would require 3,250 ounces of disposable gold. This is a realistic number for the Company to meet.

Another requirement necessary to declare a dividend is the company must be debt free. Ours was debt free for half of the 1990’s. It was debt free by mining and selling gold, not by selling stock. It also paid a $0.05 per share dividend in 1995, the first dividend in thirty-five years. For most of its corporate life the owners were generously compensated with an annual dividend and the company was debt free and met its annual cash demands. Tax laws were different but with an “in kind- pro rata distribution”, the onus of double taxation will not be a factor in distributing profit. A goal of a gold dividend is for real.
 By SCOOP

01/09/2007  10:10PM

Scoop met and talked with each of the Sixteen crew today in the mine, down the mine, up the mine, in the shops, around the surface and through the office. Whew! David has processed about forty ounces of sawdust from the rock saws. Looked like he was also preparing some merchandise for mailing. Kyle commented how Fed Ex and UPS arrived at the same time with packages: parts for a gas tester, drill parts and some strange red thing. Rae was having computer problems so was working on various projects including the copy machine. The copy machine repairman came. Felix the newest stray office cat attacked his leg (friendly like) and bit through a wire on the copier. Fortunately the guy liked cats. Felix was very entertaining. Do maintenance contracts cover cat bites?

Ian was running the hoist for a daylong repair in the 49 winze near the 1300 station. Britt and Ernie were in the winze with some timbering materials. Chico and Matt were helping on the 1000 level while they waited for smoke to clear in their round. They are mining for gold south of the Tightner Shaft. Good luck, boys. Reid was working on the phone communication. First found him on the 800 level. Later heard him phone check at the north face on the 1000 level. Reception wasn’t very good but he will fix the problem. A miner was running a 12B-mucking machine at the cave in on the 1000 level. Joe was hauling the waste with the 1 ½ ton trammer. The support guys (Aaron and Wade) will put a slick sheet down for a second car to use. The outside man was welding to get another trammer ready. The mine has six locomotives. He just fixed Mike’s tailgate, which had been falling off recently. Found Mike crawling up a raise from the 1000 level to the 600 level. Traveled with him out the 600 level way north and back to the 800 station where the pumps were discharging an impressive amount of water. Glad you asked.
 By Rick

01/09/2007  8:37PM

Hey Scoop, give us some news, eh? We're wilting out here!
 By martin newkom

01/09/2007  8:14AM

I do not believe Richard Holman
to be a relative of Joe Holman
as I was told that no relative
of Joe worked at the Sixteen.
 By John Yuma

12/27/2006  8:39AM

Martin:
Was Joe Holman any relation to Richard Holman of Sonora, Calif. who worked for a short time at the 16:1 mine? Richard was a very interesting person and had some really good stories to tell. He owned the foundary in Sonora and was a friend of John Hiezer who also had many good 16:1 stories.
 By martin newkom

12/24/2006  2:00PM

As our British brothers say:
"Good Show" in 2007!!
 By martin newkom

12/24/2006  1:57PM

For Yuma's Info. I do know a
family in GV named Kuhwarth.
Not from Alleghany though. A
Kuhwarth son is married to the
daughter of Joe Holman who was
a dynamite man in the Empire
mine years ago. I do know of
two ladies living in Yuba City
and Penn Valley who were born
in Alleghany.
 By SCOOP

12/23/2006  11:38PM

Mr. Miller confided in Scoop, who gets to edit his ramblings. He is moving towards the Red Star mine. Management has verified gold along the strike from Rainbow mine to Sixteen to One mine, to Tightner mine. The previous company employed crew quit in 1965. Its OME loan dried up, as did the miners. The Red Star was their last target for survival as an operating mine. Mike believes that a pocket is deposited in the ground the crew will be exploring or developing. He has data that leads him to estimate the range of $5,000,000 to 10,000,000 (spot bullion value) as highly likely.

His “reserves” (quartz and gold previously mined) are being cashed into money to meet the approximate $90,000 monthly burn figure. Management has about five weeks of reserves to cover expenses. It’s too much math for Scoop, but the situation is: if no more gold is found in five weeks, the company can meet payroll. The future looks pretty good. Five weeks of working capital! Five weeks generated by the gold already in the bank, a value which is more valuable than reserves. Will five weeks be long enough to break into a high grade gold pocket?

On Friday the reported advancement along the 1000 foot level was thirty feet for the day. At a burn rate of $90,000 in a twenty-day month, a day costs $4,500 or $150 a foot.

Scoop’s take on current affairs:
1. the target and the pursuit are well justified.
2. everything else related to company affairs are very positive.
 By Maverick

12/23/2006  5:44PM

Hey, Mike, Rae, David, Kyle, Ian, and all the rest of you incredible hold outs from the Golden days of Gold.
Here's to 2007 and another 1,000 ounce pocket! May the good Gold Gremlins be with you.
In the meantime have a great New Year celebration but take it esy on the new couple at Caseys. I might even get up there to add to the confusion!
 By smithsgold

12/23/2006  8:43AM

Wishing everyone at the Sixteen to One a Very Merry Christmas.
Would Love to hear about Mike's last Trip to The Brown Bear Mine some of his pasted trips have been let's say Entertaining.

Jeff Smith
 By mnewkom

12/22/2006  9:10PM

No, I didn't know anyone there.
My grandma talked about some
families there. one that comes
up is O'Donnell. My grandpa
had frequent card and checker
games with H.L. Johnson. A
relative of My grandpa's
brother's wife had a lot to do
with building the H.L. Johnson
house in the town.
 By John Yuma

12/22/2006  7:07PM

Martin:
Did you know any of the Kuhfeld or Wyllie family?
 By martin newkom

12/21/2006  2:07PM

In January, 1907 my mom Dorothy
Armstrong, living in Alleghany
with her folks and sister, Helen turned One Year Old.
In those days the town was
snowed in when big snow came.
Dorothy's dad and his brother,
John owned and ran the general
store there then.
 By SCOOP

12/19/2006  5:55PM

Three job applicants started the required forty-hour MSHA training program for new miners. The company has three certified instructors: Ian Haley, Ernie Locatelli and Michael Miller. Yesterday Mike gave the introduction including miners’ rights and a historical presentation of the mining industry, the company, the mine and the law. He took them to the mine where Ernie took over. Ian will work with them later in the week.

One of the guys bailed the first day. Underground mining in Alleghany was not for him. It is better to know what you are getting into for both the new miner and the company. Every new miner has a training cost. Ten of the seventeen men interviewed had potential for joining the training program. For one reason or another, Ian and Mike cut down to three. One of the issues was the time of year, winter and all that goes with it. Housing was another factor.

The 1000-foot level is progressing. Gold is showing in two locations. Ian picked a solid heavy chunk about the size of a pumpkin seed from the right rib next to the hanging wall. Metal detector (MD) signals have been found in four other spots. The plan is to push the rehab forward to the 1064 winze but the bank account may alter the plan.
 By El Dorado

12/15/2006  4:36PM

To all the folks at the mine. I thank you for all your dedicated work producing the most beautifull gold in the world. Your outstanding product has allowed me to create some fantastic heirloom jewelry. I am a very small scale jeweler, but without your gold, I would not be able to do what I do.
Merry Christmas to all of you and a prosperous New Year.
Steve Wandt, Natural Gold Jewelery
 By SCOOP

12/15/2006  8:41AM

Heavy rain mixed with hail this morning. Rain all week. Hear it is going to turn into snow this weekend.

The slab for the floor in the new dry is curing. Looks good. A couple men are continuing with the plumbing etc. The lack of a dry has resulted in the miners using the new office space at the lower shop as a makeshift dry. So getting the dry built will not only provide a dry but it will free up the much needed office space.

The underground crew continues with re-hab on the 1,000 foot level.

The weekly safety meeting was held yesterday morning. The topic was welding, cylinder safety etc. The safety meeting provides a forum for the workers to share any safety concerns they have or near misses(excellent learning tools) in addition to the instruction that takes place. Follow-up on the previous weeks "old business" is an important part of the safety program.

Mike made a visit to the Brown Bear Mine in Trinity County this week. Maybe he will tell us about his trip?
 By SCOOP

12/09/2006  3:21PM

A long time project could wait no more. When the operation abandoned the upper mine office and change room, the miners lost the “dry”. That’s the place where they hang their underground clothes and change from street clothes to miners’ digs. A new dry has been under construction but looking for gold has been the priority. This week the dry became the focus. Miners worked to pour a concrete floor, so the 1000 foot level had no action for a couple of days. They did get rounds off in the area were gold should be. Heard a little was found. One more wall needs to be built and then with a good heater the guys will have a place to change. There is always more to do than break quartz.
 By SCOOP

11/27/2006  3:00PM

Impressive, you guys guessed it! The new target is a large block of virgin ground North of the Tightner Shaft on the 1,000 foot level. Historically there was good production above this area around the 600 level. Our geologist Raymond Wittkopp has given it a "thumbs up". Mike and Ian are hopeful. Rehab work is underway to open the area.

Snow in Alleghany. With the exception of a middle of the night storm on the 12th this is the first real snow of the season requiring plowing of the roads. There is 6 to 8 inches in Alleghany and more on top of the hill. It has been snowing on and off all day.

A recent "help wanted" add in the Marysville paper has prompted over 30 calls. Our last add in the Grass Valley paper resulted in only four applicants. The plan is to start interviews next week and hopefully hire two or three new hands. Miners are a rare breed. Finding them and keeping them is more of a challenge now than it has ever been. A substantial investment is made everytime a new hire is brought in. Inexperienced workers require even more of an investment (40 hours of training) making it imperative that we hire men who can make the cut over the long term. Wish us luck as we go "fishing" again.

Thanks to "Tanky" for the recent contributions. Ernie hasn't read them yet to let us know who you are (and your registration didn't help either).

Ernie is our full time safety rep. these days.
 By martin newkom

11/23/2006  1:03PM

If you have a strike north of
the "T" shaft h.l. johnson
will roll over where he is.
Best of luck!!
 By Rick

11/22/2006  7:45PM

Mighty fine, as they say.

Now, if I had a hunch (besides the one I wear as a perpetual testament to my posture), I'd guess and bet that the new target has something to do with roundy rocks, overhead in an intersect with the old Blue.

Or...(and maybe the same)...

Second guess is that this target is one that makes the heart race, somewhere north of the T-shaft.

Best guess is that you guys most likely have a collective twinkle in your eyes.

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PO Box 909
Alleghany, California 95910
 

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