Gold Mining

Gold Mining

Gold Mining

Gold Mining

Gold Mining
Aulaska - Alaska Mines Corporation

Executive Summary

Traditionally major and midsized mining companies defined their value through exploration results with assurance that proven mineral reserves were as good as “gold in the bank”.  The proven mineral reserves determined the value of capital investment subject to extraction costs and a stable mineral market.  Since mining is a depleting enterprise, the more proven reserves the greater the longevity and value of the company making research and exploration budgets of paramount importance in using capital.

The search for new ore deposits and acquisition of existing ore deposits became the supreme objective of most major and midsized mining companies.  After all, like land, mineral commodities are finite in nature.  The term “proven reserves” in this evolutionary process became more difficult to rely on due to the tendency to overstate the value for obvious balance sheet reasons.  A well-defined process of drilling and independent analysis emerged as a standard of reliability with a restriction primarily directed to “hard rock” mining – mineral extraction from original host rock unaltered by forces of nature.  When nature erodes the hard rock ore deposit, a “placer” ore deposit is formed whereby a river or glacier disseminates the once well-defined “hard rock” deposit into various undefined random locations.  Proven reserves of placer deposits have traditionally been avoided by independent geologists due to difficulty in locating these random locations and measuring the consistency of the Placer.   Without proven reserves, placer deposits have had little attraction for investment capital other than for small operations.

Recently, economic difficult times and population consumption has given precious and base metals a new direction in popularity and price awareness.  It seems that placer deposits have emerged as viable investment property with a “proven process” even though proven reserves are undefined.  The “proven process” value is the actual mining model to process placer deposits in volume making random dissemination of precious metal economical.  The “process” is critical to mine a placer deposit due to many variables and unknowns; however, with placer gold refinery price at $1,200 per ounce, a proven process can be very profitable in placer yielding as little as .5 grams per cubic yard – a very small amount of gold about the thickness and size of a contact lens.

The threshold for locating a feasible placer mine has recently been five specks of gold per gold pan, which would equate to about 1.0 gram of gold per cubic yard.  This in turn would make placer mining feasible at $600 per ounce with a proven process.  A proven process, however, has taken several years to develop due to many obstacles and a difficult learning curve.  The resultant process and current price of gold has made Alaska Mines Corporation a front-runner in the innovative frontier of placer production and profitability.

Proven Process
Seawater has enough gold in solution that if extracted would dwarf all gold mining since time began.  The common thinking is that someday the price of gold will be high enough that mining seawater will be economically feasible; however, in truth it is not the price of gold that will make mining seawater feasible, but the process. 

Placer mining is not much different from mining seawater.  All that is needed is an economical process that will produce volume and average .5 grams per yard (current price around $1,300/oz).  Like seawater, if enough volume is processed per a given time period, the process becomes feasible; however, it is not so easy because the dynamics and all variables must work together to keep the process running.  If any variable falls out of its envelope, the entire process stops and profitability becomes a concern.

The dynamics of a mining process include the following variables and others:
Weather (uncontrollable)
Logistics (fuel, food, parts, supplies, medical aid, communications)
Labor (payroll, accommodations, safety, scheduling work, transportation)
Operation (production schedules, maintenance, material management)
Gold (cleanup, security, handling, record keeping)
Permits (licenses, taxes, hauling, environmental hazards, water purity)
Reclamation (claims, private property, esthetics)
Exploration and Sampling (controlled samples, claims, decision trees)
Politics (neighbors, local labor pools, Native American concerns)

For the last several years and a three million dollar learning curve, a dynamic model evolved as a feasible placer process in a remote and secluded area of Alaska.  Some of the modifications made included:
Technology simplified to allow repairs in the field
Production plant expanded to keep mining areas free of material backup
Logistics improved with fuel trucks, road improvements, easement negotiations
Water quality controlled with enzyme engineering
Recovery process improved with Clarkson sluice and gold room equipment
Skyline-drag system used for deep mining
Ice lens location and fracturing solved

The process in place is proven to be an efficient placer mining operation .  The deep mining process (drag-line/derocker system) is fully functional for reaching bedrock with vertical excavation.  Also a surface mining process is used for shallow mining and volume exploration.  Both these processes will mine at least 100 yards per hour / 1,000 yards per ten-hour shift.  Labor accommodations, logistics, gold sales, communications, all are reliable and functioning efficiently.

This proven placer process has been in a development stage for several years and will efficiently mine gold in volume at various depths in an unfriendly environment.  The Company has evolved as a unique production mining company capable of identifying attractive placers and mining those placers for profit. 

With a proven process and experience in other dynamics of an active mining operation, the current Company objective is twofold:

  • Surface mine 8.5 miles of Company private property on Sherette Creek and explore the feasibility of deep penetration to bedrock.
  • Build a portfolio of geologically attractive areas as inventory for future development and exploitation.
Sherette Creek
Surface mining – All equipment is available to effectively surface mine Sherette Creek although the main plant must be shipped from Fairbanks, Alaska.  The plant has been proven, completely rebuilt and can be in production within one day.

A mineral report by Jim Halloran, a consulting Placer Geologist, on sample results taken near the current mining location suggests extensive gold quantities within ten feet of the surface.  Other sample results to the north also indicate extensive gold near the surface.  It was estimated that surface gold to ten feet at $800 per ounce would exceed $100m on the 8.5miles of private land owned by the Company.

Deep penetration - Old shafting and apparent drifting on the property suggest an ounce per yard at bedrock making 1,000 ounce days possible with the use of a Skyline Drag System and a good material management program.   Current requirement to begin this process is to identify depth to bedrock and gold quantities by drilling and sampling.  All mining equipment required is in place; however, a drilling program needs to be contracted or developed.  

It seems most mining companies build portfolios of attractive mining prospects and then sell them to large production companies.  Accordingly, these companies are merely investment stock companies looking at consolidating properties and marketing them as investment property.  It is somewhat misleading to call them mining companies, as they have no intention of actual mining due to the difficulty of developing a proven process.  Furthermore, it is not easy to market consolidated properties to a large production company, as these actual mining companies are generally not interested in fragmenting their operations.  The primary purpose of existing is to inflate the value of their equity and sell out at the optimum time giving mining companies and their investment portfolios a bad reputation.  These companies are sometimes referred to as “pump and dump” companies and there are many due to the interest in the high value of gold and the failing economy.

On the other hand, Alaska Mines Corporation will acquire properties for the specific purpose of exploiting those properties for mineral content -- mining gold.  The properties become inventory as they will be considered raw material for production; however, the market value will have a material effect on the equity of the Company and the value of stock.  All attractive geological property will be reviewed for mining feasibility with serious consideration given to logistics, permitting, politics, and management.

Acquiring Inventory
There are three sources of inventory:
  • Private property
  • Claims both federal and state
  • Claims owned by others
Private Property
Sherette Creek is an example of private property.  These 568 acres were privatized by a mining patent in 1917.  Since it is in a remote location and not attached to a local taxing entity, the property remained with the patent owners – long since deceased.  Mike Peckenpaugh obtained quiet title in 2000 and it was on this property the mining process was developed – there are no property taxes.

There are many properties in Alaska and other states having title by way of a mining patent. This certainly implies a mineral value from years ago when patents were obtainable.  With rising prices of precious metals, patented properties need to be reviewed for mining potential with value added for green reclamation.

Green reclamation is used to substantially improve private property for recreation, animal habitat, and environmental esthetics.  Unlike claimed property, lakes, cabins, trails, camp and cabin sites can be planned for ultimate use of the property.  Claimed property on the other hand requires only a roughing up of the mined ground with no substantial improvements.  The roughing up is the policy of the Alaskan Department of Natural Resources which will slow erosion and give the vegetation a chance to replenish.   

Claimed Property
There is no property in the United States today that is appreciating faster than mineral claims and; accordingly, all available property is rapidly being claimed including property that has already been mined.  A review of available property in the Fairbanks Alaska territory proves this to be true.  There appears to be no open property of any value in this region as companies from all over have filed for mineral rights.  These are public companies, like utility companies in California that have no mining process.  Fortunately, if the property is remote, the difficult staking process has kept this property mostly available.

Alaska Mines Corporation has developed logistic expertise in supply and operations in remote areas and will file on available claims in these areas that have economic value.   A mining adage states, “The best place to find new ore deposits is where they have already been found.”  With this is mind, innovative technology such as orthophotography will be used to identify areas of century old shafting – a certainty that turn of the century prospectors were after high concentrations of gold.  This technology eliminates all vegetation and exposes areas of disturbance that cannot normally be seen with vegetation overgrowth.  On identification, a helicopter trip will prove the claim with subsequent staking and filing for inventory. 

Claimed Property
A typical claim cost with helicopter staking could run as much as $500 per claim for 40 acres.  A remote claim’s minimum market value is currently about $15,000.  With helicopter staking and proving the claim at $500 a claim, 25 claims in a day would add a minimum market value to the Balance Sheet of $375,000 with a book value of $12,500.  One day of staking and filing would add 1,000 acres to mineral inventory.   Make no mistake there is an active gold rush for mineral property, specifically in Alaska, and if the value of gold keeps going up, this gold rush will be in full force in the summer of 2011.

Claims Owned by Others
The older generation is a group of people that inherited a desire for adventure and dreams of striking it rich in the mystical wilderness of Alaska and the western states.  Some of this group ventured into that dream and filed claims and actually mined their property while still young.  For many reasons, however, most of this property was not mined and is still claimed with gold mining dreams replaced with “claims for sale”.  The price for sale on these claims is very high due to the rising price of gold and consequently the claims are rarely sold.

A great opportunity presents itself to a production company as some of this property has unbelievable gold producing placers.  An offer that usually overshadows a cash buyout is royalties.  A placer production company can offer royalty payments in gold to the owner for mining rights to their property.  This is a very effective way to add inventory to the balance sheet and utilize the owner’s knowledge to mine the property.  If the property is not paying as expected, it is simply a matter of moving on.

Claim owners usually believe their claims have exceptional value.  If in fact they really believe the claims have exceptional value, they will agree to a royalty.  If not, they will pursue the buyout that will require extensive testing before any offers are made.  Chances are the testing will not take place and the Company will move on to other prospects.

The claimed property available or owned through patent is generally the best of placer property and offers an inventory volume that could take centuries to mine. The older generation owning such property is actively looking for ways to mine their property but have neither the health nor funds to accomplish such.  It is important to apply the Company’s mining process to a few good placers owned by others and the rest will follow.  This is an exceptional opportunity to acquire the best gold reserves available in the United States.

The Company
This is a unique Company centrally focused on mining placer property.  As explained, placer mining has not been generally accepted as a good candidate for a stock company; but, as the price of gold has increased, a volume placer operation has great profit potential due to recovery of numerous small deposits of gold in an otherwise inconsistent property--showing net profit.  Gold is found in almost all placers in Alaska and the western states and is now profitable to mine with a proven and tried process, which this Company has proven and is now operating.

Alaska Mines Corporation has recently converted from a development stage company to a production stock company and is active in identifying other projects to expand operations and inventory.  Other Alaskan projects include underground mining property in eastern Alaska and large nugget placer property in southwestern Alaska.  Projects with proven reserves in Oregon and northern Nevada are also currently being reviewed for funding as a hedge on unexpected production, taking into account that one profitable gold mine can pay for others that are only marginally or not immediately profitable.  With such options and investigative planning, Alaska Mines Corporation is considering the possible funding of a joint venture with a cross collateral loan guarantee for each other’s mining projects in the event that one does not pay as projected (i.e. a two-part hedge guarantee on production failure).

A third assurance of continued Company growth and stability will be the development of a public market (approximately three years in publications, advertising, and articles, etc.) and the building of a public stock value.  This may be done without the need for funds (a different approach to going public) which will dictate a high value for common stock equity and a ready source of funds for additional operational costs by the Company, when needed.  A reverse merger may be one avenue pursued, enabling the Company to cost-effectively approach the public market.   

An interesting future aim of the Company, also being considered, is a dividend payment in-kind that would consist of raw gold nuggets.  Placer gold does not need refinement and generally has esthetic and jewelry value exceeding the refinery price.  Of note is that real placer gold nuggets are fewer globally in total numbers than diamonds and will increase in value as the smelters and collectors make them even rarer.

An implicit value of gold, which is often overlooked, lies within its creation process.  Unlike the diamond, which is a crystalline result of minerals and planet dynamics that can be simulated in a laboratory, gold can only be created through a supernova (a stellar explosion of divine proportions).  Gold nuggets are evidence of divine creation in our universe and, relatively speaking, are as elusive as “tears in the rain.”   The Alaska Mines Corporation specializes in finding those elusive tears in the rain with a proven process that can operate rain or shine.