Original Sixteen to One Mine, Inc.

Newsletter # 40 - September 1998

Dear Shareholders,


My cousin, a longtime shareholder, left me a message yesterday. He asked, ``The share price dropped. It seems low. Is this a good time to buy?" I have not returned his call, but my desire to answer his question forces me to review my unfinished letters to you and get something in the mail quickly. How can I tell him my opinion about the current price of our stock and its basis without telling all shareholders?


Tracking the price of shares of OAU is a lesser concern to me than keeping the mine open and a cadre of hardrock miners breaking quartz in our productive headings. While we continue to struggle throughout the year, the crew has mined gold from five headings: the Rainbow; the 26-105 Stope*, the 400 Foot Level, the 250 Foot Level, the 1500N Footwall Drift. Sadly, none of these areas yielded a substantial concentration or pocket. Our second quarter production was 722.62 fine troy ounces (fozt). Revenue was $294,562 and expenses were $606,484 resulting in a $311,922 loss. July and August production is up, totaling 1,004.54 fozt. Monthly costs have decreased but our operation remains in financial peril. We currently have 39 full time and four part time employees, a decrease from a high of 54 about a year ago.


In April 1998, due to a cash shortage the directors voted and participated in a plan to raise working capital. As announced and reported in the second quarter SEC filing for 1998, ``To alleviate the continuing drain on cash, the Company during the second quarter sold approximately $300,000 of one year notes due May 1, 1999, which bear interest of 10% per annum and are convertible into unregistered shares of its common stock at $1.75 per share. The terms of the transaction were negotiated with a significant shareholder, who is not a Director, in an arms length transaction. Following his commitment to purchase $100,000 of such notes, other purchases were made by some, but not all of the Directors. All purchasers are accredited investors. Terms were finalized in a conference call during May 1998. The Directors ratified the $300,000 of outstanding notes and unanimously approved the following resolution:


As of August 29, 1998, a total of $304,000 in notes have been issued to directors and accredited shareholders. The balance remains available.


* Stope: A free form underground excavation that follows the directions of the ore.


The following items are contained in the 10-QSB which was filed August 12, 1998. You may find it at our web site, www.origsix.com, along with pictures and descriptions of some gold specimens.


"The general environment for gold mining companies remains poor due to low spot prices and a lack of interest with speculators or traders. While the price of gold and the costs of mining influence the Company's financial success, locating concentrations or pockets of gold are the Company's most serious challenges.


"Modest amounts of gold were found in July in an unexplored and untested area of the mine, referred to as the 1500 Football Drift. The area is noteworthy due to the size and mineral character of the vein and the hundreds of feet of virgin quartz above and below the discovery.


"During 1997, a total of 225,400 shares of stock were traded on the Pacific Exchange. In July 1998, shares traded totaled 158,200. On July 15, a sale of 69,200 shares triggered a drop in price from $1.81 per share to $1.00 per share. On July 28, the stock closed at $2.00. The Company is not aware of any internal circumstances contributing to the seller's desire to liquidate the position."


I later learned that a fund manager dumped 60,000 shares with one market order. The brokerage firm found an illiquid market (no buyers) and purchased the block for $60,000 and gradually sold it into the market. No significant or insignificant event changed at the mine or within the Company to provoke the action by the fund manager.


Recent Stock Transactions


On August 3, 1998, stock shares closed at $2.0625. Between August 4 and September 2, 22,600 shares traded and the stock closed at $.9375. About $30,000 exchanged hands. On August 3, our net market capitalization was $7,289,009. (Note: Net capitalization is a stock market term determined by multiplying the shares outstanding by the price of the stock. OAU has 3,534,065 shares outstanding.) On September 2, our net market capitalization was $3,313,186, a difference slightly under $4 million. In other words the sale of $30,000 cut the market value of our company in half.. I find the above a bizarre combination of facts which belie the outcome.


So, now I can answer my cousin. ``Rick, OAU shares are cheap. Now you know the condition of the Company and what drove the price down.. Buy whatever you can afford. Even in today's market our mine, assets and Company seem worth more than $15 million to me. Put your shares away. We continue to find gold. OAU is also a great hedge or insurance to protect your other assets. There are many ideas on how or why our industry wide depression exists. Do some more research. Tell your friends about our Company. You may be doing them a great favor. One last thought: we may be facing harder financial times; we may be forced to reduce our operation. Chicken Little may be right; if so, ponder what effect it will have on our gold mine, Company and price of our depressed stock."


Sincerely yours,


Michael Miller

2022 Original Sixteen to One Mine, Inc.