Dear Fellow Shareholders:
Winter is knocking at the portals of the mines in Alleghany. Our crew has been hustling to complete the surface work necessary to sustain an underground mining operation this winter. Most work is completed and I anticipate a minimal amount of inconvenience due to winter rains and snow. By January 5, 1987, or sooner, the crew will be working underground improving the access to our Red Star Mine.
The Red Star Mine has been one of the most elusive gold targets in the Alleghany Mining District. The Red Star Mine lies in the central portion of the claims held by the Company in the Alleghany Mining District. This property was previously owned by the Tightner Mining Company and was merged into Original Sixteen to One Mine, Incorporated on August 30, 1977. The Red Star vein was discovered by gravel miners from the Eureka or 'Never Sweat' tunnel in the early days of gravel mining. The implication of this discovery was not fully realized at that time. In 1907, a Denver based group financed the re-opening of the Eureka tunnel. Subsequent development of the quartz ledge produced about 10,000 ounces of gold. Another short Winze was sunk 600 feet from the first one. It is reported to have produced approximately 3,000 ounces of gold. The operations were suddenly abandoned due to large amounts of ground water, swelling bedrock, and a lack of equipment to handle it.
In 1919, the Alleghany Mining Company initiated an exploration program, but failed to connect with the area of the two Winzes. A faulty survey and the later collapse of the Eureka tunnel made it virtually impossible to locate the target. Subsequent investigation determined that the only economical way to explore and develop this rich prospect is via the Osceola tunnel. Roger W. Gannett, of the United States Geological Survey Department, called the Osceola property the "banner piece of ground in the Alleghany section."
In 1942, an agreement was made between Tightner Mines Company and Yellowjacket Consolidated Gold Mines, Ltd. ("Yellowjacket") to work the Red Star Mine. Yellowjacket had been working a group of claims contiguous to Red Star known as the Osceola group. On October 8, 1942, all work ceased because of War Production Order L-208, which limited operations in most gold mines. The restrictions were removed July 1, 1945. After World War II, two targets were set for further development by Yellowjacket:
A. The extension of the Tightner vein in Red Star ground, known as "Red Star South"
B. The area of the upper Red Star workings discovered during the drift mining, but lost over subsequent years, known as "Red Star North"
Development commenced on target (A) because of the Tightner's closer proximity and greater predictability than the more distant ore shoots in Red Star North. Over the following five years, tunnels were driven and Winzes sunk. The Tightner vein was found in place and high-grade ore was immediately located. The new workings warranted construction of a mill on the Osceola mining property in 1952. In 1954, Yellowjacket closed the mine due to the increasing cost of development without an increase in the price of gold.
In 1961, Tightner Mines Co. regained control of the Red Star property. The Original Sixteen to One Mine, Incorporated formed a 2/3 - 1/3 partnership with Messrs. Fred Searls, B.M. Baruch and General Lucius Clay to develop the extension of the upper Tightner levels into Red Star ground. Records indicate that gold was found but not in sufficient quantities to warrant further development at he prevailing gold price ($35 per troy ounce).
By 1964, Original Sixteen to One Mine, Incorporated had acquired control of the Tightner Mines Company. In that same year, with the assistance of a federal government loan issued by the Office of Mineral Exploration ("OME"), the Company executed a plan to continue the 1500 level into Red Star South. This work verified the ore zone and produced high-grade gold and mill rock. The distance and problem of handling the ore, combined with the static price of gold based upon 1934 prices "forced the Company to abandon all mining in December 1965, even though gold was in sight. OME records have been gathered to verify the scope of this work. These records document that 120 feet of vein, 20 to 30 inches thick, contain coarse gold. The Company knows of no work undertaken since then to extract gold from this discovery.
The Osceola group of claims was reactivated in 1956, by a new company called Endurance Mining Company ("EMC"). EMC commenced development of target (B), described above, in the Red Star workings with a crew of two miners and one surface maintenance person. One of these two miners confirmed that they refurbished the main access, drifted along the vein and spent time stoping on a high-grade area along the tunnel. In addition, this miner indicated that the mill did not operate. Ayres states that the Osceola level was extended for 500 feet in the direction of the Red Star North. Estimated distance from that point to the first Winze of the Red Star North is 900 feet, and 1500 feet to the second Winze. In 1975, Michael M. Miller leased the Osceola group of claims and began its rehabilitation. Five portals were opened and maps were prepared showing the condition of the underground workings. Toads were improved and three-phase electrical power was reinstalled. Mill equipment was repaired, water quality permits were obtained and the mill was operated in 1979 and1981.
On October 10, 1986, the Board of Directors met and approved a plan to take over the Osceola leasehold interests under the Permit Agreement in return for future payments to Mr. Miller based upon the production of gold.
On October 15, 1986 the final Private Placement Memorandum was prepared for release. The document offers investors in California, Pennsylvania and Connecticut 250,000 shares of Common Stock at $2.00 per share. The minimum purchase is 7500 shares, although the Company has reserved the right to accept sales of smaller amounts. The Corporation did not require offering existing shareholders a first right of refusal to future stock offerings. While we cannot nor will not advertise the availability of stock for sale, we will consider sales to existing stockholders who wish to increase or maintain their percentage ownership in the Company.
I am asking you do something for me. Think about what we have in this company. Think about how you became a shareholder. Think about what value those shares represent. Think about the facts and opinions you now have and then reflect for a moment about what this means in connection with global events and global investments.
Our Company has completed its first offering to raise working capital in its history…money necessary to allow us to once again become a primary gold producer. To do this we are selling about 11% of the Company for half a million dollars. We contemplate no further stock dilutions.
M. Meister Miller