Yes, it's been a long time since the last newsletter. But that's only because we've been busy. Those of you who've been with us for years know these newsletters have always appeared at irregular intervals, but I understand that some newer shareholders have become nervous by the wait. So - more regular newsletter in the future. And now to business.
1500 LEVEL — CLEAR AT LAST
The 1500 level, gateway to the Red Star, has been blocked by debris and muck since 1965 when the mine was shut down. Clearing it has been one of our main priorities. That task is now complete, utilities are installed, and we will be working in the Red Star for the next three months. Back in the 1960's the Red Star was the hot new northern ore shoot, but the fixed price of gold made it impracticable to mine. Company records from that time showed speckled gold for 120 feet along the vein. We have now verified this data, which is important because speckled gold is like the tail of a comet - a loose concentration of particles leading to the dense mass. The dense mass in the Sixteen to One is our high-grade gold, which is found in 5,000 ounces to 20,000 ounces or more pockets. We have rehired a geologist to map the Red Star and will begin mining it this month. We also are looking forward to exploring this promising area with our new technology.
2400 LEVEL — ALMOST DRY
Although pumping problems caused water higher than we would have liked, on March 25, 1993, we touched bottom on the 2400 level for the first time in 40 years. An ABC news crew from Sacramento will broadcast a three-minute segment across the Was Coast sometime this spring. If we get notice in time, we'll let you know when to watch and if not, we'll offer videotapes of the program at our cost.
Our initial foray showed that the old workings are open, except for one pile of debris, and we discovered gold in five locations, mining about ten ounces just as we walked about. The 2400 level has transformed from an unknown prospect into a major mining priority for 1993.
PROGRESS REPORT ON NEW TECHNOLOGIES
As many of you know, since our unexpected success with handheld metal detectors, we've been using the mine as a laboratory to test gold detection technologies. Two companies recently spent time with us underground, and tests from both systems look promising.
Geonics is an East Coast firm specializing in ground penetrating radar, which identifies geologic anomalies in a neutral field using wavelength measurements. This makes sense for us because the great majority of the Sixteen to One is pure quartz - a neutral field - and gold should show up as an anomaly.
Those of you who saw the Discovery Channel's special on the Sixteen to One saw what the Geonics system looks like and a bit of the way it works.1 Although high tech, it is compact, consisting of a portable computer with a large monitor and an antenna and receiver in a box small enough to be carried by two miners. Analysis of the wavelength data is processed and graphically displayed underground immediately, another feature that appeals to us. In its several days underground, Geonics identified several targets that look great on paper (actually, on a computer screen). We will drill and blast the identified areas to see how the projections match reality over the balance of the year.
A four-man crew from Rim Tech, a Denver based company specializing in state of the art radio imaging, spent last week at the mine. The Rim Tech system is very sensitive (for example, we had to break up our track and some ventilation pipes so that the radio wouldn't pick it up) and is expected to yield an extensive and precise map of possible targets.
Rim Tech has a proven track record in identifying "structure" in coal mines, an accomplishment relevant to us because "structure" (relationship of gold veins to the wall rock) is what defines gold deposits at the Sixteen to One. Time Tech identified a number of "anomalies" in the quartz, and is now back at headquarters plotting the field readings on an underground map. As soon as we get the report, we'll start mining the identified areas.
FIRST QUARTER FINANCIAL RESULTS
Financial statements for the first quarter of 1993 are attached. The $265,389 in gold sales covered not only the cost of mining gold, but the ongoing costs of two essential but non-cash generating projects — clearing the 1500 level and de-watering the 2400 level. Between December 31, 1993 and March 31,1993, our current liabilities decreased from $57,961 to $8,957. We started the second quarter with $65,903 in cash and $369,705 in inventory.
Please let us know if you would like a copy of our year-end audited 10-K and first quarter 10-Q.
UPCOMING SHAREHOLDERS' MEETING
Our annual shareholders' meeting will be held in Alleghany on June 12, 1993. After the business meeting, underground tours will be conducted for shareholders and their guest. The notice and proxy statement will be heading your way in a couple of weeks.
Michael M. Miller