I am writing to you from a stope about a mile inside the mine and a thousand feet below the surface. Almost a third of you have become shareholders in the past two years; so let me introduce you to the Sixteen to One. The rich concentration of high-grade gold in the Sixteen to One vein system distinguishes us from the rest of the gold mining industry and allows us to pursue a low volume, high yield style of underground mining that is environmentally friendly.(1) Join our miners on a tour of this stope at the annual shareholders' meeting.
This has been another good year, our fourth consecutive year of profit since the company took control of our mining operations in 1991. During the 1995 calendar year we produced 6, 505 ounces of gold for a net profit of $732,124 or $.21 per share. Most of the gold came from the 1700 foot level when miners sacked 5,044 ounces between July 19th and 24th. The company also continued to expand its production and sales of jewelry. While 1995 jewelry sales accounted for only six percent of total revenue, the growth in jewelry sales was over 300 percent.
There is a lot of excitement and unpredictability in high-grade gold mining. This last year stands out, however, as a year when we were able to set goals and meet them. Major accomplishments for the year include issuance of a special dividend, expansion of our investor base, major development of the mine and continued profitable production.(2)
The Sixteen to One vein system has produced more than $400 million in gold (over one million ounces). Although the mine has been developed in some parts to 3000 feet down the dip of the veins, more generally, mining in the Sixteen to One has only reached 2400 feet, and in some portions, 1500 feet or less. Analysis of geological data together with historical records and our experience over the last four years strongly suggests the existence of continued gold deposits in the undeveloped area of the mine.(3)
Our major focus for last year was development of the mine by sinking the 2483 Winze and excavating working levels at 2600 and 2800 feet. The 2600 foot level now extends 60 feet north and 290 feet south. We have also excavated another vertical connection in addition to the Winze between the 2400 and 2600 foot levels. This creates access for utilities, a look at the quartz vein and a second exit for the miners in case of an emergency.
We had originally planned to cut the lowest level at 2800 feet but have chosen instead to begin drifting north and south at the same elevation as the existing 2700 foot level on the Tightner Shaft. This will give us an earlier look at the ore zone as well as improve access and ventilation for the central area of the mine when the two levels meet.
During the course of last year's development work, we discovered gold in five locations along the vein of the 2600 foot level, verifying our assumption that gold exists in the area being opened up by the Winze. We will begin mining along this level later this month.
In last year's message, I identified the expansion of our investor base as continuing goal and noted an increase of 11 percent (540 to 603 shareholders). This year our shareholder base increased more than 20 percent from 603 to 749. These figures do not include shares held in street name, which we estimate to be over 100.
One of the major accomplishments of the 1995/96 year was the achievement of a long held goal of a dividend payment to shareholders. On August 8, 1995, a special dividend of $.05 per share was declared. Payment of dividends remains an important company goal.
We have been considering a dual listing on the American Stock Exchange (ASE) in addition to our listing on the Pacific Stock Exchange for several years. When we approached the ASE two years ago, it suggested we consider its Emerging Market Listing. I did not feel the program met our needs. With this year's audited financials, we reached the ASE threshold requirements of asset and profit amounts for a listing on the regular exchange.
The final payment for the Brown Bear gold mine in Trinity County was made in 1995. Plans for the coming year include initiating on-site development of the mine as production from the Sixteen to One allows.
In 1991 the Sixteen to One created gold mining history with the innovative use of metal detectors underground. The search for advancement in depth penetration has continued. The military's thrust for underground metal detection capabilities and the need to eradicate the menace of buried land mines internationally is driving an advancement in this technology. We are working with three companies to apply their discoveries to our needs. The mine has been designated a beta sire for field testing laboratory concepts, and experiments begin on June 20, 1996.
In 1996, we celebrate the 100th anniversary of the discovery of the Sixteen to One mining claim. We look forward to a year of continued major development in the mine and in the company. We hope to see each of you at the shareholders' meeting on June 22nd, 1996 in Alleghany.
Michael M. Miller
(1) The U.S. Geological Survey Professional Paper 172 by H.G. Ferguson and R. Gannet discusses our deposits and mines thoroughly. I recommend this excellent publication to anyone who wishes to understand the geology and mining problems of this district.
(2) A detailed description of company activities including work in the mine can be found in MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS preceding the financials.
(3) When experts familiar with open pit or bulk mining attempt to analyze the Sixteen to One, they usually assume economic and geological concepts inapplicable to our high-grade hard rock mining operation. I am including as ATTACHMENT A, a report drafted by our geologist, Charles Baird, to give you access to his evolving theory about the formation and location of the Sixteen to One gold deposit and perhaps what the future may hold for us.