The company filed its Form 10-QSB for the third quarter on November 13, 1998. It is another ugly statement. Revenue was $376, 640 against total operating expenses of $524,348 resulting in a loss of $0.04 per share. Our mining efforts produced 882.19 fine troy ounces of gold (ozt), not enough to defray the expenses of operating the company.
Gold production is measured in fine troy ounces. During the first nine months of 1998, production from the mine totaled 2,810.35 troy ounces as follows:
MINE MILL TOTAL
March 36.683 02.06338.74
Total: First Qtr 500.20 550.371,050.57
Total: Second Qtr 653.6868.94722.62
September 37.7 20.0037.72
Total:Third Qtr882.19 154.971,037.16
During the first nine months of 1997 production totaled 5,068.49ozt. These results are a far cry from the million dollar day in 1993 or the 5,000 ozt. we mined in four glorious days in 1995. I refrain from whining about gold prices below $300.00 per ounce, a useless exercise. Our average price received for the gold sold during the third quarter is $385.37 per ounce. Gold sold into the jewelry industry or to specimen collectors accounts for the increase above the average spot price of $290 per ounce.
If I can whine about anything to do with our operation in Alleghany, it is the absence of mining a high grade pocket so typical of the mine. We have been teased for fourteen months in all our headings... a little gold on the 2400 foot level, thirty ounces from the 1500 foot level, high grade in the old workings, mill ore and high grade down the 2283 winze.
Sitting here today I cannot tell you the outcome of our current active mine plan. We have persevered in peril for fourteen months. I have made a decision which is supported by the directors, the crew, and many of our suppliers. We have reached a modest level of efficiency utilizing the economic dynamics of scale as a criteria. To cut production from the current level is not in the best interest of the owners.
Thirty three years ago on December 31, 1965 the last of California's fabulous Sierra Nevada gold mines closed down, the Sixteen to One in Alleghany. Management had hoped the 268 shareholders would go for a 30 cents a share assessment. Shareholders declined. Freezing the price of gold at $35.00 an ounce in 1934 finally took its toll. The company could wait no longer for a rise in the price of gold which eventually resulted from liberalizing ownership of gold for Americans on December 31, 1974. An article written in May 1968 and published by the California Division of Mines and Geology states:
"After a long and colorful history, the renowned Sixteen To One gold mine at Alleghany, Sierra County, was shut down in December, 1965. This was only after a long but vain attempt to surmount the difficulties that have beset the domestic gold mining industry since World War II. The production of this, one of California's outstanding mines, is estimated to be at least $35 million in gold valued at $35 an ounce. Much of this total was from small but surprisingly rich ore bodies, one of the factors that enabled the mine to operate until recently. The "Sixteen" was the last sustained commercial lode-gold mining operation in California; Alleghany was the last California community where the economy was based chiefly on gold mining"
Thirty three years later the Sixteen to One mine finds itself again in peril. Now there are a thousand shareholders. The price of gold is near its post liberalized low, and operating expenses are greater than current revenue. Shareholder assessments are no longer an option under securities law. We have not shut the mine, allowing it to flood.
There are a couple of things you can do to support your company and investment.
As the president and leader of.......... FLASH the phone interrupts this letter with recent news from the 2400 foot level, "Twelve ounces of gold in the sack and an estimated twelve ounces showing in the unbroken quartz in the face of the raise. It is wired and looks pretty good. The crew will drill around the concentration of high grade gold and set off a charge before the shift ends at 4 pm."
For me this was confirmation that we should explore all avenues to continue breaking rock underground at the mine. Whatever the direction of my thoughts prior to this last phone call is gone. If I did not believe that a beautiful and rich body of gold was within reach of the miners, I would abandon the path I have been following. I can visualize where Scott, the miner who drilled corn flakes in the 2400 foot level yesterday, is working. Sitting atop the mine I feel the excitement. Is this the beginning of a multi-thousand ounce pocket? Will our hopes be dashed again? No matter, we are on the trail of the treasure. What choices should be made in order to keep our crew active? Here are mine.
We have reduced the payroll to a size that is manageable and borders the low end of acceptable efficiency. Our fixed costs have been cut to the basics of taxes, insurances, utilities, safety and necessary professional fees. I cannot find any frosting in any of these categories. Our payroll is $50,000 every two weeks. If any change is made to reduce the amount, the footage we gain each week in our mine's active headings will be noticeably less. Should we eliminate two, three or four headings and lay off miners? My answer has been no, it does not make sense. Over the past months of living hand to mouth, each crew or area of the operation has produced revenue. Each area where we are working has the potential to give us gold. We are taking chances and our chances must be taken.
The remarkable support for maintaining the present plan is found in the diversity of our activities. Here is a summary:
- The mill has two distinct streams of revenue. Low grade ore from the underground has averaged between .2 and .3 ounces per ton. The mill concentrates recovered and stored in 55 gallon drums is being reworked, where we recover 3 to 4 ounces of free gold in each drum.
- Broadening gold sales and keeping an inventory of specimens and quartz laced gold is more profitable than crushing and selling the gold at spot price.
- Exploring the highest levels of the mine with a select crew has led to pockets that exceed costs: This crew hunts for over looked gold in areas that were solid producers for our ancestors. Years ago, this crew was named the "Eureka team."
- Taking a chance on opening areas that have caved in has paid for the miner's expense plus modest money to reduce fixed costs. We also profit non-monetarily because of the increased exposure of formerly inaccessible areas of the mine to new technology.
- Work below the 2400 foot level is in proven ore bodies. Prior to 1995, access below the 2400 foot level in the southern part of the mine was limited to a couple of underhand stopes. Going deeper in the Sixteen to One will always be a worth while risk.
- Raising from the 2400 foot level in the extreme south is in a proven ore body. Gold production has occurred to the south of the mine. The Rainbow mine which is 1000 feet south of the deep workings of the Sixteen to One mine contained extremely rich ore. Going south and raising on the veins is an attractive target.
- The 1500 foot level crosscut is our greatest wild card. With four miners breaking rock in three faces, it is difficult to abandon this area; however, it will be abandoned in the near future when we determine that the work of this determined crew is ``deep enough".
As you give thanks and recognition during the upcoming fall celebrations, remember the Sixteen to One mine. Mother earth, father time, god by his or her great names or the unimaginable cosmos left one of the richest and most beautiful deposits of gold under the uplifted Sierra Nevada mountains a hundred and fifty million year ago that you and I own. It is more than just a job for most of our employees. There are no slackers on the payroll. What do you want to do?