In contrast to the flamboyance of 1993, 1994 was a year of quiet vital work in the mine and widespread exploration of activities outside the mine. Most of our energy in the mine this year has been devoted to a major development project—the sinking of the 2483 Winze. A Winze is the vertical shaft in the mine that allows us to make working levels. Without it there is no access to the gold.
IN THE MINE
THE 2843 WINZE PROJECT
After the 1993 calendar year the Company had an accumulated gold inventory of $2,264,888. We had a number of choices for using this money. We decided that the best was to sink a winze in the heart of the mine to bring currently blocked but potentially lucrative areas into play. Completion of this winze will allow us to create two new horizontal work levels: one at 2600 feet and the other at 2800 feet. These tunnels will cross through the indicated channel-way for the ore solutions laid down in the Cretaceous era, the source of Sixteen to One gold. The upside potential for ounces of gold is greater here than in any of the current accessible areas of the mine, as I discussed at length in last year's annual report. We should be mining the proposed 2600 level by our June 24 annual shareholders' meeting.
Last year I estimated we would be reaping the rewards from this development in late 1994 and 1995. It has been a longer than anticipated project for several reasons. First, we broadened the intended plan to build the winze for the long-term as well as the short. Steel reinforcement was chosen over wood and the width of the winze was increased. The workmanship is first class. The crew has done an excellent job in construction, yet it took some trial and error to gain the footage we anticipated. Currently, we average twelve feet per week. The hole is down 152 feet as of May 15.
The second factor that slowed us down was California's extraordinary 1994 - 1995 winter. Two major natural interruptions cost us six weeks of sinking. The electrical power was out for five days in March due to a heavy snowstorm. The weather also got us by dumping over 155 inches of rain so far this season. The cone of water that had been pulled down by pumping over the past years built up and the inflow of water about equaled our discharge capabilities. While these events slowed our progress, their effects are easily curable. We are now wetter and wiser.
SMALL BLOCK MINING
We completed the first phase of mining the Red Star, a favorite target in the northern part of the mine. Mining this area has produced 1,000 ounces of gold since our last annual report. The Underhand Stope (an underground excavation that follows the dimensions of an ore body) was developed about 25 feet below the 1500 level and produced 700 ounces of beautiful crystalline gold. The gold continued but the method of mining became impractical because of the limits of equipment used to hoist ore. The last 300 ounces were mined above the level. For those of you who saw the March 1, 1995 NBC special featuring the Company, the gold found on the day of filming came from this area. This remains a big mining target for the future.
Another target, accessing a backfilled old stope, is almost completed. This area has never been tested with our metal detectors. The stope is in the central productive part of the mine between the 1900 level and the 1700 level. The two-man crew is close to completing the rock removal, and metal detecting will begin as soon as possible.
We continue to raise up on the vein from the 1900 level south. This crew recovered a small amount of gold this month and will continue to mine the area. The remaining miners not working in the winze are doing necessary maintenance chores throughout the mine.
OUTSIDE THE MINE
COLLECTORS' GOLD AND JEWELRY SALES
While Sixteen to One gold has been exhibited in museums and held by collectors for a century, the traditional emphasis of the Company has been on straightforward bullion sales. One of our goals for 1994 was the development of gold and jewelry sales. We cast about in many directions to gauge various marketing programs for our quartz and gold.
We are exploring production ideas with jewelers and artisans in Northern California, Las Angeles, Colorado, New York and Maine. We have talked with half a dozen worldwide distributors and are investigating avenues for wholesale, retail and mail-order sales.
One of the successes in this area was the Butterfield auction held on December 15 in San Francisco and Los Angeles. The show of gold on display was spectacular and gave the Company excellent exposure to a new world of people. We had 195 items for sale and 95 sold. The Whopper, the sphere and the one-of-a-kind specimens, both natural and carved, priced over $4,000 did not generate their minimum bids. The catalog is a work of art itself and continues to be a valuable reference guide for collectors.
During the 1994-95 year the Com0pany paid down the note on the purchase of the Brown Bear Mine in Trinity County, California with $150,000 cash payments. The final payment of $100,000 is due in September. Combining the 1,000,000 ounces produced to date from the Sixteen to One vein and the 500,000 ounces of gold from the Brown Bear, our Company holds mines that have produced $575,000,000 of gold over their history. The Brown Bear potential is enormous but has taken a back seat to the producing Sixteen to One. Our geologist and mine engineer have spent time on the Brown Bear surveying, testing surface dumps, collection data and improving the maps. Our first choice is developing the mine ourselves; however, if our cash flow does not allow it, we will consider joint ventures as a possible method of financing an underground mine development plan.
Expanding our shareholder base has been an ongoing goal. We now have 603 shareholders, up 63 from last year. There are an additional 100 to 150 shareholders holding shares in street name, which makes them difficult for us to track. During 1994 I tested the prospects for listing on the American S\tock Exchange (ASE) in New York. The ASE suggested we consider its Emerging Market Listing, which we are doing.
PLANS FOR THE COMING YEAR
By this time next year we will have the two new levels established. We hope to recover substantial gold from these areas. When cash reserves allow it, we will attack other areas including the Red Star and the five targets identified with metal detectors in the 2400 level. Do you remember the story about the football size chunk of gold that fell into the water below the 2400 level? We will determine the veracity of that story before this year's annual meeting. I will let you know whether it is fact or fiction.
On behalf of the twenty-nine full time employees and the board of directors, thank you for your support during our year of quiet organization and development. Next year…next year…who knows for sure what to expect. Mining for Sixteen to One gold has always been like that.
Michael M. Miller