"If you don't look the facts in the face, they have a way of stabbing you in the back."
There remains no doubt that the current spot price for gold is affecting the gold producers. Some companies have closed operations or slashed their work forces. Mergers, such as the AMAX/Kinross merger, are another way for companies to cut costs and increase production. Even though our 1997 gold production exceeded the 1996 year, revenues from sales were less than expenses, resulting in about a $.09 per share loss. Tough times are with us again.
This quarter (January-March 1998) the crew and equipment have been working at capacity, moving a vast amount of rock. Our active headings have become even more aggressive since completing the installation of a new hoist in the `83 winze. Production below the 2200 foot level, accessed by the '83 winze, more than doubled.
Our two headings north of the main winze remain active, where we tenaciously pursue an attractive vein. Two miners are rehabilitating the 1700 foot level, which strikes north towards the abandoned Tightner Shaft. This legendary shaft, driven in the 1920s, is the deepest working in the Alleghany Mining District. Once this level is in good working condition, we will evaluate the costs associated with dewatering the remaining three lowest levels of the mine. Access for this will be through the refurbished 1700 foot level. During the work the crew has mined about $50,000 of gold.
A cross-cut on the 1500 foot level finally intersected a suspected vein this February. We made the decision to keep this questionable heading going forward. This is a long shot, but its potential in tonnage and gold keeps us mining.
New to you is our work in the Rainbow Mine. The Rainbow is one of the earliest quartz mines in California. Our company purchased it in 1943. Yet even with past roduction exceeding 109,000 ounces of gold, it remained a distant prospect for us. By December, 1997, however, a rogue crew has produced 100 ounces of high-grade gold below an area of former production. Due to specifics of the location, we turned this roguish heading into another active one. A head frame above the vertical shaft was built and the mine was brought into MSHA federal compliance. Drilling the vein began March 6, 1998.
The ore pile benched at the mill is about gone. Milling throughout our 100-year history is a love/hate activity. An article published in Economic Geology in 1947 reported, ``The Sixteen to One high-grade is richer than any other for which I have seen comparable data. The recorded tonnage mined from the vein through 1942 is 608,012 + tons with an estimated yield of 749,179 + oz of gold, of which hand sorted high-grade constitutes 164 + tons producing 548,759 + ounces." Read those numbers again. Ours is a premier high-grade deposit. Between September 10, 1997, and February 15, 1998, the mill processed 3,817 tons of ore, yielding 500.64 fine troy ounces (fozt). The grade was .1312 fozt. The grade is below our historical averages. We suspect that by using metal detectors to locate and sack the high-grade ore, the grade will consistently be lower than in the past.
Conditions of the marketplace have made it difficult on the price of a share of stock. After slowly sliding to the $3.50 level during 1997, the price declined quickly when one or several shareholders sold out. With our underground development, mill renovations and more, the fundamental value of OAU is greater than when the share price was $5.00 or more. People most intimate with the company have been buyers, not sellers.
The annual shareholder meeting is June 20, 1998. Make your plans early and join us in Alleghany. Each year we have added to the activities. Look for a mule or donkey hauling ore cars at the Rainbow this year.