The Year in Review
1992 was the year our long-held dreams for independent production of gold by the Company at the Sixteen to One came true. We started mining gold underground with hand-held metal detectors in January 1992, and were rewarded with our first profitable year since the terrible fire in the Tightner Shaft in 1954.
Because the new method of gold production allows us to locate gold deposits before we drill and blast, it entails far less expense than traditional modes of gold production and recovery. As a result, we showed a profit of $441,591 in 1992
We also retired a $43,000 tax bill assumed from a former lessee; re-hired laid off crews; bought a computer program to track gold finds along the vein and project possible extensions; acquired our own gold mill and other equipment; increased our inventory of gold; and set a policy of maintaining at least $200,000 in cash or gold bullion at all times.
Our non-financial achievements since the last annual report include completion of two projects that have been priorities for years. The first was the clearing of the 1500 level, gateway to the Red Star area of the mine. The 1500 level had been blocked by muck and debris since the mine was shut down in 1965 until we cleared it this spring. Our initial exploration of the area has verified company records showing speckled gold along the vein, and we expect great finds from this promising ore zone.
The second project was the de-watering of the 2400 level. On March 25, 1993, wearing hip boots and waders, we touched bottom on this level for the first time in 40 years. We have since been able to pump it dry and have found enough gold to know that this is a valuable target for mining. Completing its' rehabilitation and getting it ready to mine are major priorities for the next six months.
Our success with hand-held metal detectors inspired us to test other gold location technologies in the mine. Although the Discovery Channel's program on the Sixteen to One dubbed us "probably the highest tech goldmine in the world", none of the systems we tested before last month were able to pinpoint gold targets with sufficient accuracy to justify drilling and blasting. Two of the most recent trials have encouraged us to follow up the tests with actual mining programs. We may be using 21st century technology in the mine before long. See Newsletter no. 26 for details.
THE YEAR TO COME
The Sixteen to One Mine has a spectacular past of gold production. Our new access to the Red Star gives us, for the first time since 1965, the opportunity to mine one of our main targets - an area with potential for strikes of 5,000 to 20,000 ounces of gold.
Creating that opportunity has not been without cost. We have devoted 50% of available crew power since July to clearing debris; putting in air, electric, and water lines; and laying track. In order to complete these projects - non cash producing in the short term, but vital to our long-term goals of reaching consistently high profits - we had to forfeit some immediate gold production. Accordingly, during the last two quarters of 1992 and the first of 1993, we devoted just enough time toward production work to keep our bills paid, our plans on track and our newly mandated reserve in place.
Rehabilitation and clearing other target areas of the mine are still an important priority, but we are now able, for the first time since taking over the mine as owner-operators in June of 1991, to give the Red Star the attention it has been waiting for. Approximately one third of our crew, kind of cornily dubbed the "Eureka Team", started mining the Red Star this week. This is and always has been a risky business, with no guarantees, but we expect to see a big strike in the Red Star within the next year.
In the meantime, another third of the crew still pounds away at the 2400 level, finishing rehabilitation work and getting ready for active mining. We do not expect any significant production fro this part of the mine for the next six months.
The final third of the crew continues to mine hot spots in the old workings. These should produce sufficient gold to pay our bills and provide us with a slight cushion. We're not expecting any spectacular finds from these areas, but you never know.
Starting in June, we will add one member to the crew to mine the target areas identified by the Rimtech and Geonics gold detection technologies.
IMPLICATIONS FOR SHAREHOLDERS
In the June 1986 President's Message, I identified a ladder of goals for the Sixteen to One: profits, capital appreciation, and payment of dividends. It has taken a long time, but in 1992 we finally achieved two out of three of those goals. The third remains an important priority.
We believe the best way to return to the Original Sixteen to One, Inc.'s venerable history of dividend payment is to go forward with our plans for development and re-animation of the mine's great ore zones. For the first time in our modern history, we are actually starting to mine these areas - the risks inherent in this business seem balanced with the practical prospect of great reward.
I hope you'll have the interest and patience to stay along for this, the best part of the ride.
Michael M. Miller