It has been some time since I have updated you on the activities of your company, Thunder Mountain Gold, Inc. (TMG). The depressed gold price over the past several years caused a lack of mine project acquisition by the exploration and mining companies. This resulted in a lack of interest by others regarding the Thunder Mountain property. This is despite the fact that USMX/Dakota Mines had conducted considerable detailed exploration drilling on the Dewey Hill target, and in total they expended about $4 million and outlined a zone of mineralized material containing about 250,000-300,000 ounces of gold. They had been in the process of developing a mine plan, conducting technical studies and advancing permitting work at the time they had to cease operations due to financial difficulties and filing for bankruptcy. After USMX/Dakota Mines returned the property, the Joint Venture of TMG and Dewey Mining Company (Partners), have made significant progress on an effort to enhance shareholder value. Specifically:
- Consolidation of the mining district. The Partners essentially own a package consisting of 735.5 acres of patented mining claims, plus 272 (5,245.0 acres) of unpatented lode claims. This package covers nearly the entire mining district in the “cherry stem” within the Frank Church River of No Return Wilderness (FCRNRW). Other assets on the property consist of extensive water rights, a 500-ton per day gravity mill, substantial mine-related infrastructure and advanced permitting baseline work.
- In 2000, the Joint Venture entered into an option agreement with Trust for Public Lands (TPL) to purchase the consolidated mining district. TMG, Dewey Mining and TPL have been working since then with the United States Forest Service (USFS) on a buyout of the properties. Regarding this arrangement, the following is of note:
- TMG’s land position is particularly desirable because of its location deep within the wilderness area and at the headwaters of the Salmon River, a river system particularly sensitive because of the wild salmon fishery.
- The same reasons that it is a highly desirable property for environmental concerns are the same ones that would cause the permitting a new mining operation to be extremely difficult. This, in part, was one of the reasons that alternatives to mining were considered to preserve shareholder value.
- The appraisal process has been in progress for well over a year now, and is taking all assets into account, including the value of the land, water, timber and mineralized material based on the mine plan developed by USMX/Dakota Mining. The preliminary appraisal is due to be complete sometime in March 2003.
- A schedule developed by the USFS indicates that a final offer to the Partners would be forthcoming in mid-2003. If acceptable, payment for the properties would come sometime early in 2004. A timeframe such as this is not unusual for such a large project.
- TMG and Dewey Mining have been working with the state and local representatives, as well as the congressional delegation, regarding the potential buyout. We have incorporated in the agreement with TPL, in concert with Valley County, the ability to maintain public access into this area of the FCRNRW. Mining activity at Thunder Mountain has historically been an important factor for the economy of Valley County, and the Partners felt it was important to maintain some positive impact for the area as part of this potential sale.
When the offer is received from TPL and the Forest Service, TMG will carefully evaluate it — especially in light of the recent increase in the price of gold. If it is decided that the sale provides the best shareholder value, an added decision will follow regarding the disposition of the proceeds. The exploration and entrepreneurial experience of TMG, potentially with Dewey Mining, it may be appropriate to invest in new properties with exploration potential. A dividend to shareholders will also be considered — this depending upon tax consequences, etc., for TMG and the shareholders.
Since the last communication, other items material to your Company have also taken place:
- During 2001, a period of high value for platinum group metals, TMG, took a position in an interesting exploration target in southern Nevada. One of the few Nevada properties that produced platinum, palladium and gold during the war years, the four patented Oro Amigo lode claims, along with 40 adjoining unpatented claims, were leased from the owners. Anomalous gold, platinum, silver and palladium values were obtained from about half of the 143 rock chip samples taken on the claims, the highest from one sample being 2.02 ounce per ton (opt) gold, 0.182 opt platinum, 0.410 opt palladium and 6.0 opt silver. The samples were analyzed by Chemex labs and crosschecked. Unfortunately, due to the declining prices for the platinum group metals, and the “long-shot” style geologic target, we were unable to interest an exploration company in the claims. Thunder Mountain has reduced their claim position in the area to reduce holding costs.
- The declining stock market impacted the liquid asset position of the company. Since most of the retained earnings from the previous operation at Thunder Mountain were in mutual funds, the value declined significantly over the past couple of years. This has resulted in a cash position that has caused TMG to reduce all expenditures to provide only for maintenance of the corporation. As of the end of 2002, the value of the various liquid funds was about $50,000. This is sufficient to maintain TMG until the sale is complete, or, if the offer is insufficient, lease to an operating company. TMG has also arranged for funding to maintain the appraisal effort from their joint venture partner, Dewey Mining. The Directors received no compensation during 2002, nor is any monetary compensation planned for 2003.
- The Securities and Exchange Commission questioned some of the reporting in previous annual reports, particularly relative to the definition of “mineable reserves.” We have been working with them through legal counsel and our accountant, and will be amending some previous reports to more accurately reflect the mineralizatn the property per accepted SEC guidelines.
- TMG examined the potential of working with a talented computer programming group involved in developing Linux-based game software. It was decided tha opportunity did not provide a “good fit” for TMG’s business goals.
- TMG has been involved, along with many other water users, in successful litigation on water rigor the property. Through a settlement arrangement, TMG has secured sufficient water rights.
- A new website has been constructed at www.thundermountaingold.com. A visit to this site will provide you with an overview of the property, its history and any breaking news.
Although the past several years have been financially difficult for TMG, in part due to low gold prices and in part due to the declining stock market, the Board of Directors is very optimistic about achieving a positive shareholder value for the Thunder Mountain property during the next 18 months. The higher gold price has renewed interest in exploration and development of properties such as Thunder Mountain; this will also support a favorable appraisal. The Board of Directors will continue working with TPL and the USFS to achieve a fair return for you, the shareholder.
Jim Collord, President
1239 Parkview Drive
Elko, Nevada 89801
13 February 2003