As of December 31, 1991, the Company's liquidity was significantly impaired; however, subsequent to year-end, major events have occurred that substantially improved the liquidity of the Company.
What changed our status so dramatically? The best of all possible news for a gold mine - a gold strike that began on January 14, 1992, and shows no signs of ending in the near future.
On January 14, 1992, in an unusual experiment, the Company began using metal detectors as an underground location tool. Management was originally skeptical, since metal detectors are not commonly used in underground gold mines. Three months later, after finding some gold every day, and striking 150 to 300 ounce bonanzas on at least six days, we are glad to acknowledge an important new technology for the mine.
As opposed to the dismal situation reflected in the year-end financials, when the Company was out of money and there was substantial doubt as to the Company's ability to continue as a going concern, we have improved our cash resources significantly. We have used some of the cash resources to retire a $53,000 tax bill assume from a former lease holder, to re-hire five of the miners laid off last October, and to buy a sophisticated computer software program that will enable us to track and project gold finds along the vein. Not surprisingly, we have also purchased eight metal detectors.
The Sixteen to One is now debt free, solvent, and profitable, and expects to remain so.1 We have a new policy, set by the Board of Directors at the March meeting, of holding $200,000 in reserve, both in cash and in gold. We have negotiated the purchase of the mill from Royal Gold for $42,500, so our assets will include that facility as well as mining equipment, a complex and valuable computer system, and most important of all - 26 miles of tunnels through five and a half miles of claims along the vein that has historically been one of the richest in Western America.
Our future looks bright. We need no major acquisitions to carry on our present program, which represents a significant cut in overhead from previous efforts at the Sixteen to One. The reliability to date of gold recovery using metal detectors has allowed us to meet our short term financing needs without soliciting outside investment, and to postpone a planned public offering until fall or later. Both these results benefit current shareholders, whose ownership remains undiluted.
To date we have only used metal detectors to locate exposed gold, or gold found within inches of the surface. Because we can produce in this fashion with pared down crews and with far les expenditure of dynamite, drilling and mucking time, we are currently running a very low cost operation. Consequently the recent drop in the price of gold is not of concern to us, and we expect to make a comfortable profit even if that price drops further.
Only twenty percent of the mine has been explored with the new technology, and we look forward to further gold production as we continue our survey. We also plan to test a type of metal detector that is claimed to detect gold as deep as ten feet. While we are currently skeptical, our recent experience has made us more than usually ready to experiment with new technologies.
Development work is the key to keeping the mine alive, and our long term plans for the Sixteen to One call for extensive development along the vein. Geologic mapping and analysis suggests that with development of the South/Central, Red Star/Osceola and South Fork/Bald Mountain areas the mine could yield 20,000 ounces of gold per year for a period of decades. Creating tunnels and air access to those areas is a major enterprise, calling for four to six million dollars. On of the company's main priorities in the next year will be to raise the money for this development, either through further investment or by increased gold production at the mine.
Michael M. Miller