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Correspondence from the President of OAU

       

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 By Michael Miller

02/01/2002  4:17PM

The following is an overview of a letter to Original Sixteen to One Mine, Inc., sent on December 27, 2001, from the United States Securities and Exchange Commission after they reviewed the quarterly and annual filings with the commission.

The letter addresses Form 10-K for the year ended December 31, 2000, and Form 10-Q for the three quarters filed in 2001. The Commission reviewed these filings, made comments and also requested revision to the documents.

Some of the requests, in summary, are:

1. To discuss how often we make the mine available to third parties for research and development.
2. Provide further details on the advanced metal detection technology and who is developing it, expected timetable and how it will affect our operating results.
3. Directive to delete mitigating language from our risk factors. For example, delete the amount of gold that has been recovered since 1992 and the statement that management believes substantial gold still exists from “Lack of Proven Reserves”.
4. Disclosure as to whether any of the mine’s employees are covered by a collective bargaining agreement. And a statement as to whether we consider our relationship with our employees to be satisfactory.
5. To separately list the cost of vehicles purchased.

Specific “Engineering Comments” are detailed below:

“As you do not have a ‘reserve,’ you must be in the ‘exploration stage,’ as defined by Industry Guide 7(a)(1) and (a)(4)(I) respectively. Exploration stage companies are those issuers engaged in the search for mineral deposits. Remove all references in the document that use the terms ‘miners’, ‘mining’ or ‘mining operations,’ or any term that can imply mineral production, such as ‘operations.’ The term ‘mine’ should be replaced by ‘exploration property,’ and the term ‘mining’ replaced with ‘exploration.’”

“Under SEC Industry Guide 7, the term ‘ores’ or ‘orebody’ are treated the same as the term ‘reserve’. In that you have no ‘reserves’ you may not use the term ‘ore’ to describe the mineralized material you are testing. You may not use the term ‘ore’ in the financial statements, please revise the appropriate section.”

“Because you are in the exploration stage, you need a sub-section that describes the risks associated with the fact that you do not have an assured supply of gold, as you do not have a reserve. Disclose that although the company has found a significant number of pods or concentration of gold-bearing material, there is no assurance that a commercially viable ore body (a reserve) exists in your properties until further exploration work is done in the abandoned mine workings and other exploration areas. Disclose that because you do not have any reserves, you have no idea how long you will be able to produce any gold or provide gold specimens from your properties.”

“Expand upon your discussion of the change in administration at MSHA and how this has negatively impacted your operations. Also, discuss in detail what you mean when you state that you disagree with the agency’s position and how you have challenged that position.”

“Disclose the business conducted by Rocketdyne. Also, briefly explain that ‘pulsed Waterfront Sensor, interfermetric sensor systems development and multi-wavelength probe laser fabrication’ are (as stated in the biography of Sandor Holly).”

________________________

I read the letter several times and have deeply contemplated its origin. It seemed like a request… or, is it a demand that a long-standing use of words cease meaning what they mean because someone (the letter’s originator) ordered it so. My letter in response to the Securities Exchange Commission’s “requests” is as follows:


January 18, 2002

Securities Exchange Commission
Attn: H.Roger Schwall
Washington, D.C. 20549

RE: A thirty-eight point letter dated December 27, 2001

Dear Mr. Schwall:

We are completing year-end inventory and accounting activities to close out 2001 and prepare for our annual audit. We have a small staff so with regard to an answer for a time to respond in full, I estimate 45 to 60 days. However, some items can be addressed now and some depend on discussions with Roger Baer. I have placed two phone calls to Mr. Baer and anxiously await his response.

My overall analysis of the comments contained in the December 27, 2001, letter is that they will not achieve your desired results as stated in the second paragraph. Our company is the oldest US gold mining operator; however the mineral deposit is unlike most that are mined today. One must step outside the comfortable box of “industry guides” to get a sense or understanding of OAU. I have tried to relate this to shareholders or others over the past eighteen years. (For example, I am unable to respond to #7 without speculation beyond what I consider reasonable. How does a so-called penny stock stay in business for 100 years?) What is the rationale that OAU has a risk worth explaining because it is a “penny stock”? What actually is a penny stock?

For #6: It is important for a reader to know past production both since 1992 and longer. Historical data is a vital part of understanding our company. I cannot delete that management believes substantial gold still exists because it is a valid and correct statement. It is documented with over 100 years of publication.

#5: Collective bargaining is not a practice of OAU or our industry. There are many examples of things, practices or events that do not occur with this company. It seems non-productive and rather silly to list things that do not apply. If collective bargaining were a practice, I would comment about it.

#4 & 3: Over the years I have mentioned research and technology as an activity of ours. I have also referenced specific programs as they occurred. As stated, “the company makes its mine available to third parties for the purposes of researching and developing new detection technology". To realize any participation from scientists or technological companies will come from them. OAU is not actively driving this subject.

#8: We will eliminate the risk in future filings; however does this insignificant change warrant an amendment?

#9: This disclosure has been pretty clear to regulations and readers for years. I can think of possibly including a conclusion in future filings: “Therefore, while the company believes its inventory is understated, it conforms to accounting standards.”

#12: The reprehensible behavior of MSHA created irreparable damage. When the miners fail to advance their headings because of regulatory interference, especially when the behavior is outside of the law, that work will never be regained. Are you sure that the issues you raise in this number belong in a 10-K? The potential of OAU seeking damages is real but as of today is not solid enough to report.

#38: We do not capitalize mining related costs. They are expensed.

#20: Do you truly believe that our company needs to further identify Rocketdyne? Also it is wavefront sensor not waterfront. Compared to most company filings, OAU has greater details about its directors than do the majority I have read.

In general housekeeping your letter is addressed to Mr. Cosgrove. I do not know anyone by that name. I appreciate the assistance to improve our filings and will look into the other issues with our auditors. Again your proposal to eliminate the use of “mine” or “miner” remains to be further explained by Roger Baer.


Sincerely yours,

Michael M. Miller
President/C.E.O.
 By Michael Miller

02/01/2002  3:32PM

Posted in "latest news" is the notice of the Water Board Hearing. I will file for acceptance as a designated person as Michael M. Miller, an individual. If you ever had anything to say or any thoughts about having an audiance with a state board, here is your chance to get the time to speak.
 By Michael Miller

09/21/2001  3:52PM

For those of you who follow the day-to-day issues of the 16:1 that cross my desk, I thought it might be enlightening to share some of the correspondence that I send. The following letter was sent to Senator Tim Leslie and Assemblyman Sam Aanestad. As always, I welcome your comments.

September 21, 2001

My employer, Original Sixteen to One Mine, Inc., has been conducting its business in California since 1911. The ownership of our properties dates back to the late 1850’s. Over the past 100 years, we have employed thousands of Californians, paid millions of dollars to the local, state and federal governments and purchased millions of dollars of supplies. This has been accomplished by mining gold and managing our natural resources. Our productivity directly contributes to the assets and wealth of our state and our country.

Today, we are the largest non-governmental employer in small Sierra County as a result of the ruthless decimation of the timber industry. Some of us are referring to the wholesale slaughter of the culture of rural America and specifically the upstanding occupations of men and women who produce the fundamental materials that our citizens use as “rural cleansing”. Sounds un-American, doesn’t it?

Various state agencies either knowingly or unwittingly act in support of rural cleansing. This has been in motion for some time. My purpose today is not to discuss the merits or disservice to the public welfare by ridding the backcountry of people. I am writing you specifically because agents in the water resources bureaucracy told me directly that what they were doing in Alleghany resulted from you and our state legislatures. I ask you if this is true and if so, explain the rationale and legality of it.

Here is the situation: The division that oversees water rights was recently funded by the state legislature to go into the field and cancel existing water rights. Is this true and if so, please provide me with the legislative acts or other authorization to do this.

We have maintained our water rights for over 100 years without problems. I enclose the letter I received last month from water resources, which unilaterally proclaims it is diminishing our water rights. What governmental arrogance! I also enclose my reply.

Now, without provocation, I am forced to spend our limited financial and work time resources to defend an existing right. This is costly and to the detriment of our employees, community and shareholders. We are financially damaged by the state’s action against us and seek your involvement.

Instead of our state agents relentlessly assaulting our business with questionable paper work, the self-perpetuating collection of fees and outright interference in our difficult work of surviving and making each payroll, tax recipient government employees should be offering positive assistance. It has become a sad reflection on our American way of life that the majority of current state financed monitoring or regulating activities conflict with the long established American way of life.

You should be proud that Original Sixteen to One Mine is in your district. All California legislators should be proud that this small California company has become the oldest United State’s gold mining corporation. This operation has protected its heritage and the wonderful region in the high Sierra Nevada called home. For the hard working miner, the patient owners, the local economy and all whose spirits have been uplifted by purchasing or renewing the products of this company, I seek your help and understanding to clarify the directives of those you oversee. It is a senseless exercise to allow the current practice of the water board’s actions towards legitimate water rights holders to continue.

Sincerely yours,
Michael M. Miller
President, Director and C.E.O.

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