SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Act of 1934
Date of Report (Date of earliest event reported) May 23,
1996
Cronus Corporation
(Exact name of registrant as specified in its charter)
State of other jurisdiction of Incorporation: Nevada
Commission File Number: 0-9297
I.R.S.Employer Identification No.: 36-3880744
660 S. Freeman Rd. 85748
( Address of principal executive offices ) ( Zip Code )
Registrants telephone number,including area code:(602) 751-
4585
Item 1. Changes in Control of Registrant.
On March 31, 1996 an agreement to purchase the
Lelan-Dividend Mine Group was entered into with the
Black Diamond Mining Corporation. Cronus Corporation
agreed to issue 2,250,000 shares of restricted common
stock for the purchase of the Lelan-Dividend Mine Group.
Subsequently, while waiting for the appraisal and
audited financial statements, a new agreement was
negotiated. The new agreement consists of a
Reorganization and Stock Exchange Agreement between
Cronus Corporation and Black Diamond Mining Corporation.
In this agreement dated May 23, 1996, Black Diamond
Mining Corporations shareholders receive a total of
14,074,072 shares of Cronus corporation common stock.
The stock to be distributed to the Black Diamond Mining
Corporation shareholders shall consist of 9,196,772
shares of new issue, restricted common stock, 3,877,300
shares of restricted common stock surrendered to
treasury and reissued and 1,000,000 shares of free
trading common stock purchased from existing Cronus
shareholders. The total number of issued and
outstanding shares of common stock at closing shall be
17,592,591. The Black Diamond Mining Corporation
shareholders will control approximately eighty percent
(80%) of all issued and outstanding shares of Cronus
Corporation common stock and will not hold a
directorship or an executive position in the Cronus
Corporation.
The prior control shareholders of Cronus Corporation,
Jonathan Roberts (1,000,000 shares), have agreed to
surrender their shares. Jonathan Roberts surrendered
his shares for a promissory note (Exhibit 1) at $1.00
per share.
Item 2. Acquisition or Disposition of Assets.
Cronus Corporation acquired the Lelan-Dividend Mine
Group from the Black Diamond Mining Corporation, a
natural resources company, through a Purchase Agreement
dated March 31, 1996 (Exhibit 2). The financial
statements and appraisal was provided May 23, 1996,
which concluded the acquisition. The shareholders of
Black Diamond Mining Corporation have agreed to
reorganize their company and merge with Cronus
Corporation, as a wholly owned subsidiary. Cronus
Corporation will own 100% of Black Diamond Mining
Corporation. Through this Reorganization and Stock
Exchange Agreement, Black Diamond Mine Corporation will
own the Lelan-Dividend Mine Group in addition to its
other assets. The total number of shares to be received
by the shareholders of Black Diamond Mining Corporation
for the acquisition is 14,074,072.
The Black Diamond Mining Corporation assets include the
Lelan-Dividend Mine Group, owned in fee simple title,
currently appraised at $35,000,000.00 with projected ore
reserves of $256,535,000.00 and 45,000 tons of ore
stocked piled (Exhibit 3). Approximately 50,000 acres
of wooded land in central Tennessee, with a preliminary
appraisal of $1,000 per acre (Exhibit 4), the Black
Diamond mining claims 1-10 and the Gila mine claims 1-
10. The Tennessee acreage has abundant hard wood trees
consisting of Oak, Maple and Poplar as well as Pine.
The Black Diamond Mine Claims 1-10 has $255,000,000.00
of projected ore reserves and the Gila Mine Project
claims 1-10 has $35,000,000,000.00 of projected ore
reserves. The actual value of the Black Diamond and
Gila Project mining claims are in the process of being
appraised.
Cronus Corporation plans on raising capital to bring the
Lelan-Dividend Mine Group into full production by 1997.
The company also plans to start logging operations on
the Tennessee land by 1997.
Item 3. Bankruptcy or Receivership.
None
Item 4. Changes in Registrants Certifying Accountant.
None
Item 5. Other Events.
Cronus Corporation is currently negotiating a contract
to purchase the Silver Rose Mine located in New Mexico.
The Silver Rose mine, which is currently under
production, has over 200,000 tons of ore stock piled
ready for the smelter. Upon the closing of the
acquisition, Cronus Corporation intends to begin
trucking ore from both the Lelan-Dividend Mine Group and
the Silver Rose mine to the smelter under a contract
with Phelps-Dodge Mining (Exhibit 3).
Item 6. Resignations of Registrants Directors.
None
Item 7. Financial Statements and Exhibits.
(a) Financial Statements for the Black Diamond
Mining Corporation have been provided herein (Exhibit
5). Financial statements and pro forma financial
information for Cronus Corporation pursuant to
Regulation S-X shall be provided as are available.
(b) Exhibits provided herein as follows:
1. Promissory Note to Shareholder
2. Purchase Agreement
3. Appraisal of the Lelan-Dividend Mine
Group
4. A preliminary appraisal of the Tennessee
Land
5. Financial Statements on Black Diamond
Mine Corporation
Item 8. Change in Fiscal Year.
None
Signatures
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned hereunto duly
authorized.
Cronus Corporation
( Registrant )
Date: May, 23 1996 /s/_Jonathan
Roberts_________________
Jonathan Roberts, President
EXHIBIT 1
PROMISSORY NOTE
Amount: $1,000,000.00
Tucson, Arizona
Date: May 20, 1996
Address: 660 S. Freeman
Rd.
After date, without grace, for the surrender of
1,000,000 shares of Cronus Corporation stock received, Cronus
Corporation, formerly Thunderstone Group Inc.(CRON), a
Nevada Corporation, promise to pay to the order of Jonathan
Roberts, in the city of Tucson, State of Arizona, in the
legal tender of the United States, the sum of $1,000,000,
with interest at the rate of 10 percent per annum until
paid. Interest payable Bi-annually, and if not so paid as it
becomes due, then the principal sum of this note, together
with the interest thereon, may be declared wholly due and
payable at the option of the payee; otherwise it is to be
added to the principal and bear interest at the same rate.
Should time of payment should be extended by agreement with
any of the makers, without the knowledge or consent of the
others after the said extension, the liability of all the
parties shall remain as if no extension had been made. The
makers and enforcers hereof waive grace, presentment, claims
of homestead exemption, or employed, CRON agrees to pay
reasonable attorneys fees. This note is considered a general
obligation of the Company and is due and payable one year
after the note date.
Maker:
Cronus Corporation (CRON)
By:_s/s Richard DeBernardis
Richard DeBernardis,
Secretary
EXHIBIT 2
PURCHASE AGREEMENT
THIS AGREEMENT, made and entered into this 31st dayof March,
1996, by and between Cronus Corporation, a Nevada
Corporation, located at 660 S. Freeman Rd., Tucson ,Arizona
(Buyer), and Black Diamond Mining Corporation, an Arizona
Corporation located at 8026 W. Aster, Peoria, Arizona 85345
(Seller), sometimes hereinafter jointly referred to as The
Parties.
W I T N E S S E T H:
WHEREAS, Seller currently ownes the Lelan-Dividend
Mine ( The Mine); and
WHEREAS, Seller desires to sell the Mine and Buyer
desires to purchase the same for the purchase price, and
subject to the terms and conditions, set forth herein;
NOW, THEREFORE, based upon the above and foregoing
premises and such other and further consideration, the
adequacy and receipt of which are duly acknowledged,
IT IS AGREED as follows:
I. Purchase, Sale and Purchase Price:
1.1 Purchase of Mine. Subject to all those terms and
conditions set forth herein, Seller hereby sells the Mine to
Buyer and Buyer agrees to purchase the same effective the
date hereof.
1.2 Purchase Price. The purchase price for the Mine shall
be 2,250,000 shares of Cronus Corporation restricted commpn
stock (Stock)
II. Representations, Warranties and Covenants
2.1 Buyer warrants and represents:
(a) Buyer is a Nevada corporation duly organized,
validly existing and in good standing in Arizona and has
full power and authority to carry on its business as
currently conducted and to be conducted as set forth in the
Plan, and to own or lease and to use at the places it is
currently located, and qualified to transact business in
each jurisdiction in which it does business whereby the
nature of such business it is required to be qualified in
such jurisdiction to conduct its business.
(b) There are no pending lawsuits in which it is
a party, nor has it received any information of anyones
intention to commence any litigation .
(c) Buyer has duly filed all tax returns and is
not in default with respect to the payment of any taxes, that
it is not being audited by the Internal Revenue Service
(IRS) nor received any notice from the IRS of intention to
audit Buyer.
2.2 Seller Warrants and Represents:
(a) All necessary action has been taken to make
this Agreement a legal, valid and binding obligation of the
Seller enforceable in accordance with its terms and
conditions. The Seller has sought legal counsel regarding
this Agreement and is fully understands the obligation
herein.
(b) The execution and delivery of this Agreement
and the performance by Seller of its obligations hereunder
will not result in any material breach or violation of, or
material default under any material agreement, indenture,
lease, license, mortgage, instrument, or understanding, nor
result in any violation of any law, rule regulation, statute,
order or decree of any kind to which the Seller or any of its
affiliates, is a party or by which any of them or any of
their property is or may be or become subject.
(c) The Mine is not and shall not be or become
subject to any lien, encumbrance, security interest or
financing statement whatsoever, nor shall it become the
subject of any other agreement in regards thereof.
(d) The Mine has an apprasial value of $35,000,000
and a certified financial statement of at least $20,000,000.
III. Exchange of Stock:
3.1 The parties agree that in exchange for the 1005
ownership of the Mine, as listed in Exhibit 1, annexed hereto
and made a part hereof, free and clear of outstanding
indebtedness, Buyer will issue to Seller, two million, two
hundred fifth thousand (2,250,000) shares of Stock.
3.2 The Stock to be issued to the Seller, will be
restricted stock, and will not have been registered and will
be subject to the Securities Act of 1933 and the Exchange
Act of 1934 (The Acts) and the certificate(s) issued will
be duly endorsed stating that their ownership and rights of
transfer are subject to The Acts.
IV. Notices:
4.1 All notices to be given to any of The Parties
shall be in writing sent by U.S. certified mail, return
receipt, or by facsimile mail at the addresses set forth
below:
(a) Seller:
James Ashpole, Black Diamond Mining Co.
8026 W. Aster Dr.
Peoria, Arizona 85345
(b) Buyer:
Cronus Corporation
660 S Freeman Rd.
Tucson Az. 85748
4.2 Notice shall be deemed given and delivered to the
recipient, if by mail, five(5) business days after the
posting of the notice and, if by facsimile, then one (1)
business day after the sending of the facsimile.
4.3 Any of The Parties may change the address to which
the notice is to be sent in the same manner as stated above
for the giving of notice.
V. Miscellaneous:
5.1 This Agreement constitutes the entire agreement
among The Parties and supersedes all prior agreements, if
any, written or oral, and all such prior agreements shall
have no force or effect.
5.2 The recipients of Stock represent that the same is
received.
5.3 This Agreement may not be modified or changed
unless in writing signed by The Parties.
5.4 The captions of any of the paragraphs of this
Agreement have been inserted for the purposes of convenience
and shall not be deemed to modify, explain, enlarge or
restrict any of the provisions of this Agreement.
5.5 This Agreement shall be binding upon and inure to
the benefit of The Parties successors, heirs and estate as
the same shall be applicable to the respective Parties.
5.6 This Agreement shall be governed by the laws of
the State of Arizona.
IN WITNESS WHEREOF, The Parties have duly executed this
Agreement.
Seller:
By:________/s/ James Ashpole__
James Ashpole, President
Buyer:
By:_____/s/ Jonathan Roberts_
Jon Roberts, President
EXHIBIT 3
A Limited Appraisal - Summary Report of
The Market Value of the As Is Fee Simple Interest of the
subject
property
Leland-Dividend Mine Group
A patented mining claim located on the East slope of Mount
Elliott Six mile southwest of Hombolt, Yavapai County,
Arizona
Prepared For:
Mr. James A. Ashpole
8026 W. Aster Dr.
Peoria, Arizona 85345
Valuation Date:
November 8, 1995
Inspection Date
February 9, 1995 and November 8, 1995
PREPARED BY:
Schnepf Ellsworth Appraisal Group
205 East Southern Avenue, Suite 200
P.O. Box 2829
Mesa, Arizona 85214
(602) 497-1113 Fax (602) 833-6238
JOB # 9-5244
Copyright 1995 BY Schnepf Ellsworth Appraisal Group
Schnepf Ellsworth Appraisal Group
Real Estate Appraisers Consultants
November 15, 1995
File No. 9-5244
Mr. James Ashpole
8026 W. Aster Dr.
Peoria, Arizona 85345
rE: Leland-Dividend Mine Group a patented mining claim
located on the east slope of Mount Elliott approximately
six miles southwest of Hombolt, Arizona
Dear Mr. Ashpole:
In accordance with your request and authorization for a
Limited Appraisal - Summary Report of the Market Value of the
above referenced property, we hand you a narrative appraisal
that
describes and identifies methods of approach and valuation.
The ownership, legal description, and identification of the
property is set forth in the following report.
The property appraised is located on the east slope of Mount
Elliott, approximately six miles southwest of Hombolt,
Yavapai County, Arizona and is a patented mining claim
containing
approximately 241.75 acres. The purpose of this appraisal is
to estimate the Market Value of the As Is Fee Simple Interest
of the subject property as of November 8, 1995. The date of
initial inspection of the property was February 9, 1995 and
the appraiser has subsequently visited the parcel several
times since. The function of this appraisal is to provide a
preliminary valuation basis for bonding purposes. The value
estimates are subject to the Underlying Assumptions and
Contingent Conditions as well as Special Assumptions and
Conditions outlined in this report on page 8.
This report details those pertinent physical and non-physical
factors relevant to the subject property. Information about
the region in which the property is located, the subject
neighborhood, site, highest and best use, and valuation
methods and techniques are discussed in detail in the report
that follows.
Further, the value(s) reported are intended to conform with
Code of Ethics and Standards of Professional Practice of
theAppraisal Institute; the Uniform Standards of Professional
Appraisal Practice (USPAP) as promulgated by the Appraisal
Standards Board of the Appraisal Foundation and the Appraisal
Institute for a limited appraisal assignment with departure
provisions of USPAP Standards 2-2 and as outlined in
Standards 1-4 and regulatory guidelines as published by
various federal agencies, including OCC's Rule/Policy 12 CFR
Part 34 pertaining
to federally chartered banks.
It is prepared for the above stated purpose and function and
is not to be used, given, sold, transferred, or relied upon
by any other person or persons than the client without the
prior
express written permission of the authors. The reader is
also directed to the fact that the report is under copyright
and any use, in whole or part, by anyone except the addressee
is
expressly prohibited.
Market Value, as defined in the Uniform Standards of
Professional Appraisal Practice (USPAP), 1995 Edition, is
included in the body of the report on pages 15 and 16. As Is
Value is defined in the body of the report on page 16.
A title report has been ordered and will be made apart of
this report upon it's receipt. This report is subject to
review and modification by the appraisers upon receipt of the
title report.
The value of mining interest are heavily contingent upon
geological studies and report from experts in this field. The
appraisers relied upon expert opinions in this area and made
no
warranty's or representations regarding their accuracy. The
appraisers assume the accuracy of the studies provided by the
client and reserve the right to adjust the value estimate
herein
upon the completion and availability of additional studies.
The appraisers assume the accuracy of the Floyd Hanly &
Associates report, but do not accept any responsibility or
liability of any information included within the report. The
appraisers are not experts in this area and highly recommend
additional studies from qualified professionals in the field
of geology and related fields in order to provide additional
professional opinions regarding the ore content, quality,
accessibility, quantity and value. Should additional reports
exist or be provided to the appraisers, we reserve the right
to modify our opinion. The appraisers have advised the client
on our limited experience in this area and so advised the
client
prior to accepting this assignment. We have sought the advise
of others familiar with mining properties and reviewed
published literature in appraisal publications regarding
appropriate
valuation techniques.
On the basis of data in the body of the report, our
conclusions, subject to stipulations, if any, in the report,
as of November 9, 1995, (with an original inspection date of
February 9, 1995
and November 8, 1995) was:
Market Value of the As Is Fee Simple Interest of the Subject
Property:
Thirty Five Million Dollars
$35,000,000
Respectfully submitted,
Schnepf Ellsworth Appraisal Group
/s/ Mr. Larry D. Schnepf, MAI
Certified Arizona General Real Estate Appraiser
Certificate # 30284
Table of Contents
Letter of Transmittal
Table of Contents i
EXECUTIVE Summary ii
UNDERLYING ASSUMPTIONS\CONDITIONS 1
Special Underlying Assumptions 8
FORWARD 9
SCOPE OF THE APPRAISAL 10
Premise of THE APPRAISAL and DEFINITIONS 13
Type of Appraisal Report 19
LEGAL DESCRIPTION 22
OWNERSHIP HISTORY 24
NEIGHBORHOOD DATA 27
SITE DATA ANALYSIS 32
Assessed Value And Taxes 48
Subject Photographs 50
HIGHEST AND BEST USE 54
VALUATION PROCESS 57
Income Approach 58
SALES COMPARISON APPROACH 67
RECONCILIATION AND FINAL VALUE ESTIMATE 69
CERTIFICATION 71
ADDENDA
Qualifications
Floyd Hanly & Associates Report
Phelps Dodge Contract
EMTEC reports
Quit Claim Deed
Executive Summary
General Information:
Type of Property: The subject is a patented mining
claim
Type of Report: Limited Appraisal - Summary Report
Class: Vacant
Job No.: 9-5244
Client No.: N/A
Job. Name: Leland-Dividend Mine Group
Address: East slope of Mount Elliott, 6 mile
southwest of
Hombolt, Yavapai County, Arizona
Location: The subject property is located at the
headwaters of the Galena and Ticonderoga Gulch on the East
slope of Mount Elliott in the Big Bug Mining District, on the
northeastern slope of the Bradshaw Mountains in central
Yavapai County.
Legal Description: A full legal description is included
within the report. The legal description was obtained from
public
records.
Statement of Ownership: Title to the subject is currently
held
in the name of James A. Ashpole and Catherine Ashpole.
Form of Ownership: Fee Simple Interest
Property Rights Appraised: Market Value of the As Is Fee
Simple
Interest of the subject property
Function of the Appraisal: The function of this appraisal
is to
provide a preliminary valuation basis for bonding purposes.
Improvements Summary: The subject is a vacant mountainous
site
with no above ground physical improvements. The area was
mined
during the first part of the 1900's with several underground
shafts noted.
Age: n/a
Effective Age: n/a
Improvement Size: n/a
Assessors Parcel: 104-08-500 and 501
Flood Zone Designation: Zone D, FIRM Map #040093 1260B
Real Estate Taxes: The 1994 real estate taxes total
$536.31.
Including past due for the years 1992, 1993 and 1994, total
real
estate taxes due on the subject are $1,991.84.
Site Area: Claim Name Acreage
India 17.19 acres
Bessie No. 1 7.23 acres
Republic No. 1 17.35 acres
Republic No. 2 14.61 acres
Snowstorm 18.62 acres
Clipper (grouped)
Summit
Jump Off
Peerless
Star Light
Comstock
Aladin 92.24 acres
Omar 10.87 acres
Juanita (grouped)
First Extension of the Dividend Mine
Galena Mine 57.98 acres
Total Parcel I 236.09 acres
Parcel II 5.66 acres
Total Parcel I & II 241.75 acre s
Zoning: Rural, Yavapai County
Topography: The site lies basically along the
Galena and
Ticonderoga Gulches at an elevation the varies from
approximately 5,400 to 5,600 feet. The property is considered
foothills and lies at the base of Mount Elliott (6,980 feet).
The terrain is considered rugged with slopes typically
ranging
from level to 45% plus.
Easements: No adverse easements or restrictions
were noted. No
title report was provided to the appraisers.
Nuisance and Hazards: No environmental studies have been
provided to the appraisers. No known nuisances, hazards or
environmental problems exist.
Highest and Best Use: As Is -mining site
Date of Inspection: February 9, 1995 and November 8,
1995
Date of Valuation: November 8, 1995
Valuation Conclusions:
Income Approach:
Value via the Income Approach: $35,000,000
Residual surface value rights: $350,000
Sales Comparison Approach:
Value via the Sales Comparison Approach: $24,200,000
to
$36,250,000
Conclusion: $35,000,000
Prepared By: Larry D. Schnepf, MAI
Certified Arizona General Real
Estate Appraiser
Certificate # 30284
Schnepf Ellsworth Appraisal Group
205 East Southern Avenue, Suite 200
P.O. Box 2829
Mesa, Arizona 85214
(602) 497-1113
Fax (602) 833-6238
Prepared For: Mr. James Ashpole
8026 W. Aster Drive
Peoria, Arizona 85345
Underlying Assumptions/Conditions
The following Underlying Assumptions and Limiting Conditions1
apply to the property appraised herein and the appraisal
report
transmitted herewith.
1. Limit of Liability:
The liability of Schnepf Ellsworth Appraisal Group and
employees
is limited to the fee collected for preparation of the
appraisal. There is no accountability for liability to any
third party. No third parties may rely upon this appraisal
report for any purpose whatsoever, including the provision of
financing for the acquisition of improvement of the subject
property. This appraisal was prepared specifically for our
client. Third parties who desire us to prepare an appraisal
of
the subject property for their use should contact the
signatory
of this report.
2. Copies, Publication, Distribution, Use of the Appraisal
Report:
Possession of the appraisal report or a copy of it does not
carry with it the right of publication through advertising
media, or any other public means of communication. It is a
privileged communication. The appraisal report may not be
used
for any purpose other than the purpose stated in the report
by
any person or corporation other than the client or the party
to
whom it is addressed or copied without the written consent
from
the appraiser(s), and then only in its entirety. All
valuations
in the report are applicable only under the stated program of
Highest and Best Use, and are not necessarily applicable
under
other programs of use. The value of a component part of the
property is applicable only as a part of the whole property.
The
physical report(s) remains the property of the appraiser(s)
for
the use of the client, the fee being for the analytical
services
only.
Neither all, nor any part of the contents of this report,
shall
be conveyed to the public through advertising, public
relations,
news, sales, or other media, without the prior written
consent
and approval of the author(s), particularly as to valuation
conclusions, the identity of the appraiser(s), or firm with
which he is connected, or any reference to the Appraisal
Institute, or the MAI designation. Disclosure of the
contents
of this report is governed by the By-Laws of Regulations of
the
Appraisal Institute and the Arizona Appraisal Board.
3. Third Parties:
No third parties may rely upon this appraisal report for any
purpose whatsoever, including the provision of financing for
the
acquisition of improvement of the subject. This appraisal was
prepared specifically for our client. Third parties who
desire
us to prepare an appraisal report on the subject property for
their use should contact the signatures of this report.
4. Confidentiality:
The appraiser(s) may not divulge the material (evaluation)
contents of the report, analytical findings or conclusions,
or
give a copy of the report to anyone other than the client or
his
designee as specified in writing (except as may be required
by
the Appraisal Institute as they may request in confidence for
ethics enforcement), or by a court of law or body with the
power
to subpoena. [1995 Edition USPAP, Ethics Provision]
5. Use in Entirety
This appraisal is to be used only it its entirety and no part
is
to be used without the whole report. All conclusions and
opinions concerning the analysis that are set forth in the
report were prepared by the appraiser(s) whose signature(s)
appear on the appraisal report, unless indicated as "Review
Appraiser." No change of any item in the report shall be made
by
anyone other than the appraisers, and the appraisers and
associated company shall have no responsibility if any such
unauthorized change is made.
6. Information and Data:
No responsibility is assumed for accuracy of information
furnished by or from others, the client, his designee, or
public
records. We are not liable for such information or the work
of
possible sub-contractors. The comparable data relied upon in
this report has been confirmed with one or more parties
familiar
with the transaction or from affidavit; are considered
appropriate for inclusion to the best of our factual judgment
and knowledge and is accepted as satisfactory evidence upon
which rests the final expression of property value. It is
assumed that all information known to the client and relative
to
the valuation has been accurately furnished and that there
are
no undisclosed leases, agreements, liens, or other
encumbrances
affecting the use of the property.
7. Court Testimony/Consultation:
The contract for appraisal, consultation or analytical
service
is fulfilled and the total fee payable upon completion of the
report. The appraiser(s) or those assisting in preparation of
the report will not be asked or required to give testimony in
court or hearing because of having made the appraisal, in
full
or in part, nor engage in post appraisal consultation with
client or third parties except under separate and special
arrangement and at an additional fee.
8. Exhibits:
The sketches included in the report are only to aid the
reader(s) in visualizing the property and are not necessarily
to
scale. Sizes and dimensions should not be scaled from the
sketches. Various photos, if any, are included for the same
purpose and are not intended to represent the property in
other
than actual status, as of the date of the photo.
9. Legal, Engineering, Financial, Structural, Hidden
Components:
No responsibility is assumed for matters legal in character
or
nature, whether existing or pending, nor matters of survey,
nor
of any architectural, structural, mechanical or engineering
nature. The property is appraised as if free and clear,
unless
otherwise stated in particular parts of the report. No
opinion
is rendered as to the title, which the appraiser(s) assumes
to
be good and merchantable; the property is an unencumbered
fee;
and the property does violate any applicable codes,
ordinances,
statutes, or other governmental regulations. The property is
appraised as though under responsible ownership and competent
management. The appraiser(s) assumes that all required
licenses,
certificates of occupancy, consents, or other legislative or
administrative authority from any local, state, or national
government or private entity or organization have been or can
be
obtained or renewed for any use on which the value estimate
contained in this report is based.
10. Legal Description:
The legal description is assumed to be correct as used in
this
report as furnished by the client, his designee or as derived
by
the appraiser. The appraiser(s) has neither made a legal
survey
nor has he commissioned one to be prepared; therefore,
reference
to a sketch, plat, diagram or previous survey appearing in
the
report is only for the purpose of assisting the reader to
visualize the property. [1995 Edition USPAP, S-R, 1-2(a)]
11. Soil Conditions:
The appraiser(s) inspected, by observation, the land and the
improvements thereon; however, it was not possible to
personally
observe conditions beneath the soil or hidden structure, or
their components, or any mechanical components within the
improvements; no representations are made herein as to these
matters unless specifically stated and considered in the
report;
the value estimate considers there being no such conditions
that
would cause a loss of value. The land or the soil for the
area
being appraised appears firm; however, subsidence in the area
is
unknown. The appraiser(s) do not warrant against this
condition
or occurrence of problems arising from soil conditions.
12. Unapparent Conditions:
The appraiser(s) inspected, by observation, the land and the
improvements' thereon; however, it was not possible to
observe
conditions beneath the soil or hidden structure, or their
components, or any mechanical components within the
improvements; no representations are made herein as to these
matters unless specifically stated and considered in the
report;
the value estimate considers there being no such conditions
that
would cause a loss of value. The land or the soil for the
area
being appraised appears firm; however, subsidence in the area
is
unknown. The appraiser(s) do not warrant against this
condition
or occurrence of problems arising from soil conditions.
The appraisal is based on there being no hidden unapparent or
apparent conditions of the property site, subsoil or
structures
that would render it more or less valuable. No
responsibility
is assumed for any such conditions or for any expertise of
engineering to discover them. All mechanical components are
assumed to be in operable condition and status standard for
properties of the subject type. Conditions of heating,
cooling,
ventilating, electrical and plumbing equipment is considered
to
be commensurate with the condition of the balance of the
improvements unless otherwise stated. No judgment is made as
to
adequacy of type of insulation or energy efficiency of the
improvements or equipment.
13. Copyright Work:
This is a copyright work protected by the laws of the United
States (title 17, U.S. Code). It is illegal for anyone to
violate any of the rights provided by this Copyright Act.
14. Legality of Use:
The appraisal is based on the premise that there is full
compliance with all applicable federal, state and local
environmental regulations and laws unless otherwise stated in
the report; further, that all applicable zoning, building and
use regulations and restrictions of all types have been
complied
with unless otherwise stated in the report; further, it is
assumed that all required licenses, consents, permits or
other
legislative or administrative authority, local, state,
federal
and/or private entity or organization has been or can be
obtained or renewed for any use considered in the value
estimate.
15. Hazardous Materials:
Unless otherwise stated in this report, the existence of
hazardous material, which may or may not be present on the
property, was not observed by the appraisers. The appraisers
have no knowledge of the existence of such materials on or in
the property. The appraisers, however, are not qualified to
detect such substances. The presence of substances such as
asbestos, urea-formaldehyde foam insulation, or other
potentially hazardous materials may affect the value of the
property. The value estimate is predicated on the assumption
that there is no such material on or in the property that
would
cause a loss in value. No responsibility is assumed for any
such
conditions, or for any expertise or engineering knowledge
required to discover them. The client is urged to retain an
expert in this field, is desired.
16. Component Values:
The distribution of the total valuation of this report
between
land and improvements applies only under the existing program
of
utilization. The separate valuations for land and building
must
not be used in conjunction with any other appraisal and are
invalid if so used.
17. Auxiliary and Related Studies:
No environmental or impact studies, special market study or
analysis, highest and best use, analysis study or feasibility
study has been requested or made unless otherwise specified
in
an agreement for services or in the report. The appraiser(s)
reserves the unlimited right to alter, amend, revise or
rescind
any of the statements, findings, opinions, values, estimates
or
conclusions upon any subsequent such study or analysis or
previous study or analysis subsequently becoming known to him
(them).
18. Dollar Values, Purchasing Power:
The market value estimated and the costs used, are as of the
date of the estimate value. All dollar amounts are based on
the
purchasing power and price of the U.S. dollar and financing
rates prevailing at the effective date of the value estimate.
[1995 Edition USPAP, S-R, 1-2(b)]
19. Inclusions:
Furnishings and equipment or business operations except as
specifically indicated and typically considered as a part of
the
real estate have been disregarded with only the real estate
being considered. [1995 Edition USPAP, S-R, 1-2(e)]
20. Proposed Improvements, Conditioned Value:
Improvements proposed, if any, on or off site, as well as any
repairs required are considered, for purposes of this
appraisal,
to be completed in good and workmanlike manner according to
information submitted or considered by the appraiser(s). In
cases of proposed construction, the appraisal is subject to
change upon inspection of property after construction is
completed. [1995 Edition USPAP, S-R, 1-4(h)]
21. Value Change, Dynamic Market, Influences:
The estimated market value is subject to change with market
changes over time; value is highly related to exposure, time,
promotional effort, terms, motivation, and conditions
surrounding the offering. The value estimate considers the
productivity and surrounding the offering. The value
estimate
considers the productivity and relative attractiveness of the
property physically and economically in the relative
attractiveness of the property physically and economically in
the marketplace. The "Estimate of Market Value" in the
appraisal report is not based in whole or in part upon race,
color or national origin of the present owners or occupants
of
the properties in the vicinity of the property appraised.
22. Management of the Property:
It is assumed that the property, which is the subject of this
report, will be under prudent and competent ownership and
management, neither inefficient nor super efficient.
23. Fee:
The fee for this appraisal or study is for the service
rendered
and not for the time spent on the physical report. [1995
Edition
USPAP, S-R, 2-3]
24. Interest Appraised:
The valuation estimate applies only to the property
specifically
identified and described in the ensuing report. The value
reported is only applicable to the property rights appraised
and
the report should not be used for any other purposes. [1995
Edition USPAP, S-R, 1-2(d), and, S-R, 2-2(b)]
25. Publication:
Neither all, nor any part of the contents of this report,
shall
be conveyed to the public through advertising, public
relations,
news, sales, or other media, without the prior written
consent
and approval of the author(s), particularly as to valuation
conclusions, the identity of the appraiser(s), or firm with
which he is connected, or any reference to the Appraisal
Institute, the MAI or SRA designations.
26. Federal/Professional Guidelines:
The Report has been prepared in conformity with, and is
subject
to the requirements of the 1995 Edition of the Uniform
Standards
of Professional Appraisal Practice (USPAP) as promulgated by
the
Appraisal Standards Board of the Appraisal Foundation and
required by the Arizona Board of Appraisal licensure law for
all
licensed State of Arizona appraisers; the appraisal standards
required by Title XI of FIRREA (Federal Financial
Institutions
Reform, Recovery, and Enforcement Act of 1989) and the OCC
(Office of the Comptroller of the Currency); the Office of
Thrift Supervision CFR insurance regulation 563.17-1a and
policy
statement 571.1b, effective January 7, 1988, and the Code of
Professional Ethics and Standards of Professional Appraisal
Practice of the Appraisal Institute.
27. Americans with Disabilities Act:
The Americans with Disabilities Act ("ADA") became effective
January 26, 1992. I (we) have not made a specific compliance
survey and analysis of this property to determine whether or
not
it is in conformity with the various detailed requirements of
the ADA. It is possible that a compliance survey of the
property, together with a detailed analysis of the
requirements
of the ADA, could reveal that the property is not in
compliance
with one or more of the requirements of the Act. If so, this
fact could have a negative effect upon the value of the
property. Since I (we) have no direct evidence relating to
this
issue, I (we) did not consider possible noncompliance with
the
requirements of ADA in estimating the value of the property.
28. Other:
The Schnepf Ellsworth Appraisal Group or the individual
analysts will expect to be held harmless from all claims that
might be brought by third parties that relate in any way to
claims for injury or damage suffered as the result of the
implementation of any advice we may have given or service we
may
have rendered in this connection.
Separation of the signature pages from the balance of our
report
invalidates the value conclusion. The valuation estimate
applies
only to the property specifically identified and described in
the ensuing report. The value reported is only applicable to
the
property rights appraised and the report should not be used
for
any other purposes.
Acceptance of, or the use of, this appraisal report
constitutes
acceptance of the above conditions.
Special Underlying Assumptions2
As agreed upon with the client prior to the preparation of
this
appraisal, this is a Limited Appraisal because the Departure
Provisions of the Uniform Standards of Professional Appraisal
Practice has been invoked by the appraiser. As such,
information
pertinent to the valuation may not have been considered
and/or
the full information pertinent to the valuation may not have
been applied. Depending on the type and degree of
limitations,
the reliability of the value conclusion provided herein may
be
reduced.
This is a Summary Appraisal Report which is intended to
comply
with the reporting set forth under Standards Rule 2-2(b) of
the
Uniform Standards of Professional Appraisal Practice (USPAP)
for
a Summary Appraisal Report. As such, it might not include
full
discussions of the data, reasoning, and analyses that were
used
in the appraisal process to develop the appraiser's opinion
of
value. Supporting documentation concerning the data,
reasoning
and analyses is retained in the appraiser's file. The
information contained in this report is specific to the needs
of
the client and for the intended use stated in this report.
The
appraiser is not responsible for unauthorized use of this
report.
The value(s) reported are intended to conform with Code of
Ethics and Standards of Professional Practice of the
Appraisal
Institute; the Uniform Standards of Professional Appraisal
Practice (USPAP) as promulgated by the Appraisal Standards
Board
of the Appraisal Foundation and the Appraisal Institute for a
limited appraisal assignment with departure provisions of
USPAP
Standards 2-2(j) and (k) as outlined in Standards 1-4(a)
through
(i) and regulatory guidelines as published by various federal
agencies, including OCC's Rule/Policy 12 CFR Part 34
pertaining
to federally chartered banks.
As previously noted, the appraisers have defined this report
to
be a Limited Appraisal - Self-Contained Report. The report is
limited to the Sales and Income Approaches, two of the three
traditional approaches to value. In addition, all of the sale
were checked against public records but all may have not been
verified by a buyer or broker. Therefore, this report is
deemed
to be a Limited Appraisal.
The appraisers believe the above cited Special Underlying
Assumptions are not so limited in scope that the resulting
appraisal would tend to mislead or confuse the client, the
users
of the report, or the public. The client is hereby advised
that the assignment is subject to these Special Underlying
Assumptions.
Forward
Real estate investment decision-makers are frequently
confronted
with problems that require the valuation of specified rights
of
real estate to aid in facilitating reasonable and logical
solutions. Such valuations are called appraisals that, if
professionally produced, are defensible in terms of a
specified
set of market or other value considerations or decision
criteria.
A professionally produced appraisal is a supportable estimate
of
the value of real property. It is one thing to comment or
speculate upon the value of real estate. It is quite another
to
describe the factors and influences that affect value, to
describe the environmental and locational factors which
influence value, and to support the presentation and analysis
of
relevant data to a supportable value conclusion.
The structure of real estate appraisal is predicated upon a
rational decision-making approach by informed decision-
makers.
That is to say, once presented with the best available
information about the alternatives or decision choices
confronting him, the decision-makers are presumed to apply
logic
in selecting the alternative course of action that promises
to
come closest to their stated objective. These decision-
makers
are generally seeking to maximize or optimize their economic
well-being. The "best available information" on which the
decision choice is made is (or should be) provided by an
appraisal, and "best available information" should be
adequately
analyzed to aid the decision-maker.
It is the intent of the report that follows, to present
analyses
of relevant economic, locational and physical data to produce
a
professional, supported value estimate of the subject
property
as of the date indicated.
A narrative appraisal report is a description of the factors
that influence the value of the property, a word portrayal of
the property, the facts concerning the property and an
account
of the reasoning by which the appraiser has developed his
opinion of its value. Procedurally, the process approximates
a
funnel whereby the multitudinous data, influences and
opinions
are introduced, analyzed and correlated to permit the reader
to
follow intelligently the appraisers' reasoning.
Hopefully, upon completing perusal of the report that
follows,
the reader will concur in the appraiser's conclusions and
that
he will agree professional, supportable value estimates of
the
subject property have been presented. The staff of Schnepf
Ellsworth Appraisal Group, encourage your comments and
questions
on the following appraisal report.Scope of the Appraisal3
The firm of Schnepf Ellsworth Appraisal Group has been
retained to estimate the Market Value of the As Is Leased Fee
Interest of the subject property.
Purpose:
Scope of the appraisal. A clear and accurate description of
the
scope of the appraisal is desirable to protect third parties
whose reliance on the appraisal may be affected. The term
scope
of the appraisal refers to the extent of the process of
collecting, confirming, and reporting data. The standards
clearly impose a responsibility on the appraiser to determine
the extent of the work and the report required in relation to
the significance of the appraisal problem. By describing the
scope of the appraisal the appraiser signifies his or her
acceptance of this responsibility.4
The preparation of this report and the value indications
adopted
resulted from the utilization of numerous investigations and
analyses. Initially, we relied on Schnepf Ellsworth Appraisal
Group data which is retained in our files and regularly
updated
to reflect current market phenomena and attitudes. Further
investigations undertaken and major data sources follow.
Area and Neighborhood Analysis:
Major sources utilized include the Arizona Department of
Economic Security and the Arizona Real Estate Center of
Arizona
State University and Yavapai County. Further data was
abstracted from various other Arizona business publications.
Site Description and Analysis:
Yavapapi County provided zoning information and information
relative to the availability of utility infrastructure. Other
sources of information included the Federal Emergency
Management
Agency, the Yavapai County Assessor's Office, and the Yavapai
County Treasurer's Office.
Improvement Description and Analysis:
Property data was gathered from the Yavapai County Assessor's
property records (TRW) and an inspection of the subject site
and
improvements and from blueprints (where available).
Market Data Program:
The appraisers obtained data on property transfer's occurring
between the 1980's and the date of valuation. Further, we
made
exterior inspections of all properties utilized in our
analyses.
Sales were confirmed with public records where possible.
Summary:
Our analyses encompass historic and projected demand, current
supply, and planned or new construction. The value estimates
and
judgments contained herein are intended to reflect the
appraisers' opinion as a disinterested third party. The
reader
is referred to the Certification section of the report
wherein
the conditions are stated under which the report has been
prepared. The Underlying Assumptions and Contingent
Conditions
section of the report present pertinent caveats.
The report considers the various segments of the local area
real
estate market and population and land use patterns in the
vicinity of the subject property. Additionally, an analysis
of
the highest and best use of the subject property has been
completed together with an investigation into the sales of
vacant sites in the general area. Data and information
pertinent to utilization of the three approaches to develop a
final value estimate under the leased fee property rights
concept was also collected and analyzed.
Research Methodology:
Schnepf Ellsworth Appraisal Group has been retained to
conduct
a limited appraisal of the Market Value of the As Is Fee
Simple
Interest of the subject property a patented mining claim
located
at east slope of Mount Elliott, Phoenix, Arizona. This report
is
the culmination of our market research analysis and
assessments
of this property. The objectives of the research are:
To define the qualifying conditions of the appraisal;
To define the purpose and function of the appraisal;
To identify and describe the subject property and its
ownership;
To describe the subject area and neighborhood in adequate
detail;
To determine the Highest and Best Use of the subject property
both as if vacant land and as improved. Within the Highest
and
Best Use study, we will analyze the technical, market and
economic feasibility of the subject. The objectives of this
portion of our research are:
1. To estimate the various alternatives available to
the
subject.
2. To identify the market components that could be most
successfully attracted to the subject.
3. To analyze market supply, demand, and absorption
within
the defined market area.
To process, analyze and interpret the pertinent data, using
one
or more of the three approaches to value.
To estimate the as is values as of the date of valuation.
Market Value of the As Is Fee Simple Interest of the subject
property The value(s) reported is subject to the constraints
set
forth in the Certification Section at the end of this report.
Premises of the Appraisal and Definitions
Purpose of the Appraisal:
The purpose of this appraisal is to estimate the Market Value
of
the As Is Fee Simple Interest of the subject property, on a
cash
equivalent basis, assuming a reasonable marketing period, of
the
asset as described.
Function of the Appraisal:
The function of this appraisal is to provide a preliminary
valuation basis for bonding purposes.
Date of the Report:
The date of inspection is February 9, 1995 and November 8,
1995.
The date of our initial inspection of the subject property.
In
accord with the client's instructions, the effective
valuation
date5 is November 8, 1995, thus references to market
conditions,
sale prices, rental rates, etc. pertain to this era.
The effective date of the appraisal establishes the context
for
the value estimate, while the date of the report indicates
whether the perspective of the appraiser relative to market
conditions as of the effective date of the appraisal was
prospective, current, or retrospective. Reiteration of the
date
of the report and the effective date of the appraisal at
various
stages of the report, in tandem, is important for the clear
understanding of the reader whenever market conditions on the
date of the report are different from market conditions on
the
effective date of the appraisal.
The perspective of the appraiser(s) is a current date or
effective date of November 8, 1995, where the date of the
report is the date of inspection of the subject property by
the
appraisers and is also February 9, 1995 and November 8, 1995.
Property Rights Appraised:
Property rights are ownership interests in real estate and
have
value. It is important to know what property right(s) or
estate(s) are involved in the appraisal because the estate
identifies the rights being valued. Estates may be classified
in
several ways, the most common of which are defined as
follows:
Fee Simple Estate:
Absolute ownership unencumbered by any other interest or
estate
subject only to the limitations imposed by the governmental
powers of taxation, eminent domain, police power, and
escheat.6
Fee Simple Title:
A title that signifies ownership of all the rights in a
parcel
of real property, subject only to the limitations of the four
powers of government.7
Leased Fee Estate:
An ownership interest held by a landlord with the rights of
use
and occupancy conveyed by lease to others. The rights of the
lessor (the leased fee owner) and the leased fee are
specified
by contract terms contained within the lease.8
Leasehold Estate:
The interest held by the lessee (the tenant or renter)
through a
lease conveying the rights of use and occupancy for a stated
term under certain conditions.9
Leasehold Improvements:
Improvements or additions to leased property that have been
made
by the lessee.10
Sandwich Lease:
A lease in which an intermediate, or sandwich, leaseholder is
the lessee of one party and the lessor of another. The owner
of
the sandwich lease is neither the fee owner nor the user of
the
property; he or she may be a leaseholder in a chain of
leases,
excluding the ultimate sublessee.11
Sandwich Leaseholder:
The lessor under a sandwich lease.12
Going Concern Value:
Going-concern value is the value of a proven property
operation.
It includes the incremental value associated with the
business
concern which is distinct from the value of the real estate
only. Going-concern value includes an intangible enhancement
of
the value of an operating business enterprise which is
produced
by the assemblage of the land, building, labor, equipment,
and
marketing operation. This process creates an economically
viable
business that is expected to continue. Going-concern value
refers to the total value of a property, including both real
property and intangible personal property attributed to
business
value.13
Also defined as:
"The value existing in a proven property operation,
considered
as an entity with business established; as distinct from the
value of real estate only, ready to operate but without a
going
business."14
Trade Fixture:
An article owned and attached to a rented space or building
by a
tenant and used in conducting a business.15
Fixture:
An article that was once personal property, but has been
installed in or attached to the land or building in some more
or
less permanent manner, so that it is regarded in law as part
of
the real estate.16
Summary of the Property Rights Appraised:
The subject property is comprised of a patented mining claim.
The land and improvements are held under one ownership and
will
be occupied by multiple-tenants, therefore, the purpose of
the
appraisal is to estimate the Market Value of the As Is Fee
Simple Interest of the subject property with an effective
date
of November 8, 1995.
Definition of Market Value:
For purposes of this report, market value is defined as
follows:
"Market value17 is the major focus of most real property
appraisal assignments. Both economic and legal definitions of
market value have been developed and refined. A current
economic
definition agreed upon by agencies that regulate federal
financial institutions in the United States of America is:
The most probable price which a property should bring in a
competitive and open market under all conditions requisite to
a
fair sale, the buyer and seller each acting prudently and
knowledgeably, and assuming the price is not affected by
undue
stimulus. Implicit in this definition is the consummation of
a
sale as of a specified date and the passing of title from
seller
to buyer under conditions whereby:
(1) Buyer and seller are typically motivated;
(2) Both parties are well informed or well advised, and
acting
in what they consider their own best interests;
(3) A reasonable time is allowed for exposure in the open
market;
(4) Payment is made in terms of cash in United States
dollars
or in terms of financial arrangements comparable thereto; and
(5) The price represents the normal consideration for the
property sold unaffected by special or creative financing or
sales concessions granted by anyone associated with the
sale."
This definition is the defacto national definition of Market
Value and is required on all appraisal assignments done in
the
State of Arizona under the Arizona Appraisal Board's USPAP
minimum standards requirements.
Definition of "As Is Value":
As is18 value is as defined as follows:
the value of specific ownership rights to an identified
parcel
of real estate as of the effective date of the appraisal;
relates to what physically exists and is legally permissible
and
excludes all assumptions concerning hypothetical market
conditions or possible rezoning.
It is also defined as follows:
"Market Value as is" on appraisal date means an estimate of
the
market value of a property in the condition observed upon
inspection and as it physically and legally exists without
hypothetical conditions, assumptions, or qualifications as of
the date the appraisal is prepared."19
When an AS IS valuation premise is used, the property is
valued
as of a specified date, assuming the property is in precisely
the condition or status it actually was (is) in on the
effective
date of value. This condition must be accurately described
in
the appraisal report.
One proper approach in estimating the market value of an AS
IS
condition is to first estimate the market value of the
completed
or "stabilized" condition. The AS IS condition should
consider
(deduct) all of the anticipated costs incurred to achieve
full
completion and/or stabilized occupancy of an income property.
Included might be leasing commissions, rent concessions
typical
of the existing market, sales concessions, estimated costs to
complete construction or tenant improvements, and lost
opportunity, etc. along with appropriate discounts for time,
etc.
In summary, an appraisal of the AS IS condition will estimate
the defined value of a property while precisely reflecting
its
actual physical, legal, economic, and political status on the
effective date of valuation.
The above value definition pertains to the subject property
As
Is. This report addresses the subject property under this
parameter. The appraiser(s) inspected the property on
February
9, 1995 and November 8, 1995. The effective date (valuation
date) of the report is November 8, 1995.
Definition of Prospective Value:
Market Value is a current, as of the date of the report
value,
whereas the Prospective Value indicates a hypothetical future
value upon the completion of the proposed construction and
reaching stabilized occupancy. Prospective Value is defined
as:
A forecast of value expected at a specified future date. A
prospective value estimate is most frequently sought in
connection with real estate projects that are proposed, under
construction, under conversion to a new use, or those that
have
not achieved sellout or a stabilized level of long-term
occupancy at the time of the appraisal report is written.20
It is also defined as follows:
Prospective Future Value Upon Completion of Construction
Premise:
"Prospective future value upon completion of construction
means
the prospective future value of a property on the date that
construction is completed, based upon market conditions
forecast
to exist as of that completion date."21
The prospective future value upon completion premise assumes
that all assumptions are in place as of a future date.
Prospective Future Value Upon Reaching Stabilized Occupancy
Premise:
"Prospective future value upon reaching stabilized occupancy
means the prospective future value of a property at a point
in
time when all improvements have been physically constructed
and
the property has been leased to its optimum level of long
term
occupancy."22
The prospective future value upon reaching stabilized
occupancy
assumes that all assumptions are in place as of a future
date,
and that the property has reached stabilized occupancy.
Inasmuch
as we have estimated the As Is Value with a current effective
date of valuation, the Prospective or Future Value does not
apply to this report.
Definition of Retrospective Value
An estimate of value that is likely to have applied as of a
specified historic date. A retrospective value estimate is
most
frequently south in connection with appraisals for estate
tax,
condemnation, inheritance tax, and similar purposes.23
Historical or retrospective appraisals are often required in
both businesses and in government. The availability of
detailed
information on the subject and on market data is necessary so
market value as of an explicit date can be estimated in
retrospect.
Inasmuch as we have estimated the As Is Value with a current
effective date of valuation, the Retrospective Value does not
apply to this report.
Bulk of Wholesale Premise
Bulk or wholesale market value is the value of the property
typically consisting of multiple parcels, as if sold to a
single
buyer. It is not the sum of the retail values.24
One of the most common errors in discounting future "retail"
unit prices to reasonable "wholesale" or "bulk" multiple unit
price is failure to allow for the full influence of the
developer's/investor's profit motive. In a sense, the
typical
developer/investor is a manufacturer or a merchant who
depends
on a cost markup sufficient to cover expenses and produce a
reasonable profit as a reward for risks and efforts. This
provision for profit may be expressed in a variety of ways:
as
a percentage markup of original cost or a percentage discount
of
final selling prices; as "interest" on borrowed capital,
"yield"
on equity capital or a "rate of return" on invested capital.
However expressed, the provision for profit and/or return on
capital should not be excessive but should be sufficient to
attract the necessary capital to the project. A particular
level of profit is not always appropriate, obtainable or in
the
public interest.
The appraiser must distinguish between gross sellout, which
is
the aggregate of individual retail unit prices, and the
discounted or wholesale value, which is market value. A
value
conclusion is rendered as of a specific point in time. When
a
significant period of time has elapsed since the original
valuation, the opinion of value previously rendered may no
longer be appropriate in light of existing market conditions.
No value opinion can be rendered without a reassessment of
current market conditions.25
The Bulk or Wholesale premise does not apply with regards to
this report.
Type of Appraisal Report
Over the last several years the appraisal industry has
undergone
major changes including the standards or guidelines which
practitioners must adhere to.
In 1987 the Appraisal Foundation copyrighted the original
Uniform Standards. Since this time these standards have had
some
minor modification and some significant additions. (A
complete
copy of the most current as well as historical editions of
the
standards are found in the appraisers office).
In 1991 the State of Arizona pursuant to federal mandate
formed
the State of Arizona Board of Appraisal and began a licensing
program for all appraisers doing work within the state
borders.
At the time the State of Arizona Board of Appraisal was
organized the state board by statue incorporated the 1990
Uniform Standards of Appraisal Practice (USPAP). On August 4,
1995, the state board adopted the 1995 edition of USPAP.
The 1995 Edition to the Uniform Standards of Professional
Appraisal Practice provides several new appraisal
definitions26.
These definitions help define 1) the act of appraising and 2)
the reporting of that act. The first two definitions relate
to
the act of appraising and the next three relate to the
reporting
process.
Appraisal Development (USPAP Standard #1)
Complete Appraisal: The act or process of estimating value or
and estimate of value performed without invoking the
Departure
Provisions.
Limited Appraisal: The act or process of estimating value or
and
estimate of value performed under and resulting from invoking
the Departure Provisions.
Appraisal Reporting (USPAP Standard #2)
Self-Contained Appraisal Report: A written report prepared
under
standards Rule 2-2(a) of a Complete or Limited Appraisal
performed under Standard 1.
Summary Appraisal Report: A written report prepared under
standards Rule 2-2(b) of a Complete or Limited Appraisal
performed under Standard 1.
Restricted Appraisal Report: A written report prepared under
standards Rule 2-2(c) of a Complete or Limited Appraisal
performed under Standard 1.
The incorporation of these new definitions allow for six
different combinations of appraisal assignments. There can be
either
1) Complete Appraisals that are Self-Contained, Summary or
Restricted Appraisal Reports; or
2) Limited Appraisals that are Self-Contained, Summary or
Restricted Appraisal Reports.
The difference between a Complete Appraisal Report and a
Limited
Appraisal Report is that a Complete Appraisal Report meets
all
of the requirements of USPAP S-R 1 and a Limited Appraisal
Report invokes the Departure Provisions which allows selected
parts of S-R 1 not to be meet; however there are additional
requirement to meet whenever the Departure Provision is
utilized.
The Departure Provision allow an appraiser to perform an
appraisal assignment which contains less than or different
from
the work that would otherwise be required by the specific
guidelines detailed in the Uniform Standards if the
assignment
is not so limited as to be misleading and the client
understands
and has agreed to the use of the departure provisions.
Once an election has been made as to the use of a Complete
Appraisal Report or a Limited Appraisal Report, there are
three
different manners in which the data can be organized. This is
where the Self-Contained, Summary or Restricted Appraisal
Reports come into play. Generally speaking a Self-Contained
Appraisal Report describes in greater detail all of the
various
items found in an appraisal report. In a Summary Appraisal
Report this same information is provided but it is generally
summarized or stated and not explained in the same detail. A
Restricted Appraisal Report is very similar to a Summary
Appraisal Report except that it contains a restriction that
limits reliance on the report to the client and warns that
the
report cannot be understood properly without additional
information which is contained in the work file of the
appraiser.
For the purpose of this report and per the clients request
this
report has been prepared as a Limited Appraisal - Self-
Contained
Appraisal Report. This type of report requires the invoking
of
the departure provisions under the 1995 uniform standards.
Plat Map - APN: 104-08-500 and 501
Legal Description
The subject property is located at the headwaters of the
Galena
and Ticonderoga Gulch on the East slope of Mount Elliott in
the
Big Bug Mining District, on the northeastern slope of the
Bradshaw Mountains in central Yavapai County. It is commonly
known as Leland-Dividend Mine Group, East slope of Mount
Elliott
6 mile southwest of Hombolt, Arizona. The subject property is
legally described as follows27
The cited above legal description was taken from Public
Records.
The subject site contains 241.75 acres. The subject is
further
identified as Yavapai County Assessor's Tax Parcel Number
104-08-500 and 501. The square footage indicated by our
measurement of the improvements during inspection is utilized
throughout this report. The Yavapai County Assessor's Plat
Map
is presented on a prior page.
This is the legal description which has been furnished to us.
We
have accepted the legal description as a correct
representation
of the boundaries of the property appraised. We assume no
responsibility for the accuracy of the description and we
recommend that the information be verified through legal
counsel
or through a licensed State of Arizona land surveyor.
Ownership History:
A guideline of the Uniform Standards of Professional
Appraisal
Practice (USPAP) includes a provision for the reporting and
analysis of any pending or prior sales of the subject
property
over the last three years.28
Title to the subject is currently held in the name of James
A.
Ashpole and Catherine Ashpole. Title was conveyed via a Quit
Claim Deed signed November 9, 1995 (recorded number unknown).
Title was transferred from Black Diamond Mining, Inc. Black
Diamond had previously obtained title on April 25, 1994 as
recorded in Book 2818 Page 790 through 793. Title was
transferred from James A. Ashpole and Mary Catherine Ashpole.
The Ashpole's obtained prior title in October of 1994 from
Triple R Mining Corporation and Omistar Inc. for a reported
$25,500,000. The sales price included a combination of cash,
stock and exchange.
Triple R Mining Corporation obtained the property in December
of
1983 via a deed recorded in docket 83-042484.
The subject is a vacant mountainous site with no above ground
physical improvements. The area was mined during the first
part
of the 1900's with several underground shafts noted.
This is the legal description which has been furnished to us.
We
have accepted the legal description as a correct
representation
of the boundaries of the property appraised. We assume no
responsibility for the accuracy of the description and we
recommend that the information be verified through legal
counsel
or through a licensed State of Arizona land surveyor.
Arizona Map
Topographic Map
Neighborhood/Prescott Area Data
A property is an integral part of its neighborhood and
normally
cannot be treated as an entity separate and apart from its
environment. The value of real property is not intrinsic but
flows into the property from its environment; real property
shares the future with its neighborhood.
Every neighborhood, depending on the property types located
within it, has an economic life. Criteria have been developed
for property types within various neighborhoods. A primary
consideration in deciding the criteria for achieving optimum
value for improvements in a given neighborhood is the
specific
purpose, or market, which the improvements serve.
Specifically,
the improvements must be compatible with the existing or
transitory nature of the environment, and they must appeal to
the user for which they were or may be constructed.
Boundaries of the Neighborhood/Trade Area:
A neighborhood is:
. . . a group of complementary land uses.29
The four basic forces are identified as social ideals and
standard, economic conditions, government controls and
regulations, and environmental conditions. The neighborhood
is
defined by economic and political boundaries. The general
boundaries of the neighborhood are thus considered to be all
of
central Yavapai County. The subject property is located at
the
headwaters of the Galena and Ticonderoga Gulch on the East
slope
of Mount Elliott in the Big Bug Mining District, on the
northeastern slope of the Bradshaw Mountains in central
Yavapai
County. These boundaries tend to identify an area of ranching
and mining interest.
The subject is located approximately 12 air miles southeast
of
Prescott. It is 26 miles from Prescott by car and six miles
from
Homboldt.
Major Arterials:
The subject property is located at the headwaters of the
Galena
and Ticonderoga Gulch on the East slope of Mount Elliott in
the
Big Bug Mining District, on the northeastern slope of the
Bradshaw Mountains in central Yavapai County. Primary access
to
the subject is via a dirt and gravel road assessable via a
pickup or other high clearance vehicle. The road adjoins
other
similar dirt and graveled roads in the area and connects with
Highway 69 near Poland Junction approximately 5 miles east of
the subject. Humboldt is located approximately 6 miles
northeast
of the subject. The appraisers do not know the legal status
of
the access road and this report assumes that the subject has
legal access along the route indicated above. This report is
subject to change upon clarification of legal access.
Highway 69 is the major route connecting Prescott with
Interstate 17 and Phoenix. The turn-off point on Highway 69
to
the subject is approximately half-way between Prescott and I-
17
(at Cordes Junction). .The subject is approximately 82 miles
northwest of Phoenix.
Principal Economic Activities:
Prescott is in central Arizona amid the largest stand of
Ponderosa Pine in the world. The community is 90 miles
southwest
of Flagstaff at an elevation of 5,400 feet. Prescott was
established in 1864, incorporated in 1881, and is the Yavapai
County seat. The city is named in honor of William Hickling
Prescott, a noted historian.
Since Prescott's founding as the first Territorial Capital of
Arizona and the establishment of nearby Fort Whipple,
government
has been a dominate sector in Prescott's economy. Prescott is
the headquarters of the Prescott National Forest with an
annual
payroll of nearly $3 million. Other major government
employees
are: Arizona Department of Transportation, the Veterans
Administration Center of Fort Whipple Yavapai County, the
City
of Prescott and the Prescott Public Schools.
The fastest growing sector of the Prescott-area economy is
manufacturing. Better-Bilt Aluminum Company employs
approximately 530, Global Wulfsberg Systems, Inc., 263. Other
plants in the area are Sturm-Ruger, Quality Plastics of
Prescott
Inc., Ace Hardware Inc. (regional distribution center),
Telesheen Inc., Printpack and Eaton Corp.
Cattle and sheep ranching are the main agricultural
activities
with grazing lands in the Prescott National Forest under paid
permit, as well as on privately owned land. The Arizona Crop
and
Livestock Reporting Service indicates a total of 50,000 head
of
cattle in Yavapai County.
Mining activity is significant in the Prescott area.
Cyprus-Bagdad Corporation maintains a large open pit copper
mine, concentrator and electrolytic refinery in Bagdad, 66
miles
west of Prescott. Twenty-five church-affiliated camps and one
private summer camp, are significant to the Prescott economy.
Medical Facilities:
The community has more than 200 medical professionals,
including
physicians, surgeons, dentists, orthodontists,
opthamologists,
optometrists, podiatrists, osteopaths and chiropractors.
There
are two hospitals, the Yavapai Regional Medical Center (129
beds, 77 physicians), and the Department of Veterans Medical
Center.
Educational Facility:
Prescott has six public elementary schools, one middle school
and one high school, with 297 teachers and a combined
enrollment
of almost 5,000 students. There are also five private
elementary
schools, with combined enrollment of nearly 400 students.
Yavapai College, a public two-year institution with about
7,000
students, is here. The college offers both university
transfer
and occupational education. There are also two private
institutions of higher education. Prescott College, with 500
students, is a four-year liberal arts college. Embry-Riggle
Aeronautical, with 1,800 students, is a four-year university
offering bachelor degrees in the field of aviation.
Community Facilities:
Prescott offers a broad range of community facilities. There
are
four libraries, five museums, four art galleries, six
theaters,
1,218 acres of parks and a zoo (Prescott Animal Park). For
the
sports-inclined, there are two 18-hole golf courses, 16
lighted
tennis courts, racquetball courts a roller skating rink, a
bowling alley, 19 baseball diamonds and four football fields.
Government Services:
Local Government: Mayor, 6 Council Members, City
Manager
Police Department: City of Prescott
Fire Department: City of Prescott
All utilities are municipally provided, including water and
sewer service, natural gas service from Citizens Utilities,
electrical service by Arizona Public Service, and telephone
service via US West Communications/AT&T.
Housing:
Housing in the Humboldt area consist of generally one to 10
acre
homesites with a mix of stick built and mobile homes.
Single-family prices typically range from $25,000 to $100,000
plus.
Industrial Properties:
Prescott has five industrial parks totaling more than 380
acres.
Lodging and Meeting Facilities:
There are 1,208 rooms available in 25 hotels/motels which
also
feature numerous meeting facilities with the largest seating
600. The area has seven national forest campgrounds and six
private facilities.
Conclusions:
Overall, during the past three years, the Prescott area
experienced new growth both in terms of business and
population.
Neighborhood land uses include a variety of residential and
commercial developments. Commercial land uses are primarily
retail oriented and consists of neighborhood shopping
centers,
individual stores and strip/specialty centers.
The subject property is located in a remote area west of
Homboldt. The area consists of primarily foothills and
mountainous terrain. Access is via dirt road and the closest
public services available are in Homboldt. Primary land use
in
the immediate area include mining and cattle ranching.
Area Plan
Site Data Analysis
The following site description is based upon a physical
inspection of the property by Mr. Larry D. Schnepf, MAI of
Schnepf Ellsworth Appraisal Group on February 9, 1995 and
November 8, 1995.
Location:
The subject property is identified by address as east slope
of
Mount Elliott. The subject property is located at the
headwaters
of the Galena and Ticonderoga Gulch on the East slope of
Mount
Elliott in the Big Bug Mining District, on the northeastern
slope of the Bradshaw Mountains in central Yavapai County.
The property is located in the Big Bug Mining District on the
Poland Junction Quandrangle Map, Section 25 and 36, Township
13
North, Range 1 West, and in Section 31, Township 13 North,
Range
1 East, Yavapai County, Arizona.
Measurements/Configuration:
No survey was provided to the appraisers. The appraisers
review
the Yavapai County Assessor's Tax Parcel Maps (APN # 104-08-
500
and 501). The plat map indicated an area of
Parcel I
Claim Name Acreage
India 17.19 acres
Bessie No. 1 7.23 acres
Republic No. 1 17.35 acres
Republic No. 2 14.61 acres
Snowstorm 18.62 acres
Clipper (grouped)
Summit
Jump Off
Peerless
Star Light
Comstock
Aladin 92.24 acres
Omar 10.87 acres
Juanita (grouped)
First Extension of the Dividend Mine
Galena Mine 57.98 acres
Total Parcel I 236.09 acres
Parcel II 5.66 acres
Total Parcel I & II 241.75 acre s
The subject is contained in two groups, both of which are
irregular in shape (see plat map). Parcel I contains the
patent
mining claims while Parcel II contains a 5.66 acre parcel of
private deeded land. No assessment work is reportedly
required
on this property.
Deposit Listing from State Records
Flood Insurance Rate Map
Assessed Valuation and Taxes:
The subject property is located in Yavapai County and valued
by
the county assessor for taxing purposes. The assessor's
office
is responsible for classifying and appraising all real
property
at current Market Value. Commercial and industrial real
property
is primarily appraised by use of a Multiple Regression
Analysis
Program, based on cost and comparable sales data.
Since 1980, there has existed a unique two-tier property
value
system; primary (limited) valuation and secondary (full cash)
valuation. This system controls wild fluctuations in the
value
of real estate from appreciation or inflation. Each property
has a "limited" value that cannot exceed the "full cash"
value.
This "Limited Value" is based on the previous year's limited
value increased by either 10 or 25 percent of the difference
between the full cash value of the current year and the
limited
value of the prior years, whichever is greater, unless the
property has been changed as defined in ARS 42-201.02C and D
since the previous year. The current assessment ratios are
listed as follows:
Legislative Class Assessment Ratio Property Type
3 25% Commercial or industrial
4 16% Agricultural, vacant land and
other
5 10% Owner-occupied residential
6 10% Leased or rented residential
There are also two tax rates: the primary rate and the
secondary rate. The primary rate currently comprises the bulk
of
the overall tax rate and is applied to the limited value. The
secondary rate is applied to the full cash value. The
primary
(limited) property taxes are for state, county, city
governments, and school and junior college districts. The
growth
of actual tax levels for the primary rate is limited to an
increase of 2 percent per year. Taxes are restricted in
growth
by limiting the increase in value of real estate by 10
percent
per year over a base year (1979) or the year in which it was
developed. For secondary (full cash value) property taxes,
full
cash value is used unadjusted to calculate tax levels for
flood
control, water provision, bonds, and overrides.
Subject Property Tax Assessment History
For 1993, the subject was identified as part of Yavapai
County
Assessor's Parcel Number 104-08-500 and 501. The 1994 real
estate taxes total $536.31. Including past due for the years
1992, 1993 and 1994, total real estate taxes due on the
subject
are $1,991.84.
According to the Yavapai County Treasurer's Office, all taxes
have been paid to date. The subject property's tax rate
within
the range believed typical for the area with and is
considered
reasonable.
Special Assessment
No special assessment were discovered during our research.
Conclusions
The appraisers have reviewed the market for similar and
like
kind properties. The subject property's tax rate within the
range believed typical for the area and are considered
reasonable.
Subject Photographs
1. View looking west along the access road across the
subject.
2. View looking southeast from near the subject property
towards the Maga McCabe Mine site (currently under
construction).
.
3. View looking southwest along a creek that runs through the
subject property.
4. View looking westerly from the subject site across some of
the ore dumps towards Mount Elliott.
5. View of one of the mining shafts on the site.
6. View of one of the mining shafts on the site.
7. View looking north across one of the ore dump sites on the
subject.
8. View of one of the mine shafts (left side is top).
Highest and Best Use
Highest and Best Use is a fundamental concept in appraising
real
estate because it focuses market analysis on the subject
property's optimum use given current market conditions. The
Appraisal Institute has recognized highest and best use as:
The reasonably probable and legal use of vacant land or an
improved property, which is physically possible,
appropriately
supported, financially feasible, and that results in the
highest
value.30
Implicit in the above definition are two different and
distinct
value estimates: the highest and best use as vacant and the
highest and best use as improved.
Highest and best use of a site as though vacant and available
for development assumes that a parcel of land is vacant or
can
be vacated by demolishing existing improvements.
The goal of the analysis is to ascertain the optimum use of
the
land if it is, or were, vacant and what type of improvement,
if
any, is warranted given market conditions.
In growth areas and neighborhoods in transition or where a
change in the near term is expected, an interim use may be
appropriate. For instance, the highest and best use of a
farm
in the path of urban growth may be as a future shopping
center
with an interim use as a farm.
Highest and best use implies contribution of that specific
use
to the community environment or to community development
goals
in addition to wealth maximization of individual property
owners. Also, the estimate of highest and best use results
from
the appraiser's judgment and analytical skill, i.e., the use
estimated from analysis represents an opinion, not fact to be
found. In appraisal practice, the concept of highest and
best
use represents the premise upon which value is based. In the
context of most probable selling price (market value),
another
appropriate term to reflect highest and best use would be the
most probable use.
In estimating the highest and best use of a property, the
test
is to forecast which program of future utilization is able to
develop the highest net return on the land over a long period
of
time. Highest and best use does not necessarily refer to a
building of the greatest size that someone might be induced
to
erect, nor does net income always need to be interpreted
strictly in terms of money. It can take the form of
amenities,
such as an attractive wooded site best used as a park or game
refuge.
An equally important consideration in developing a best use
estimate is recognition of the fact that the appraiser's
estimate for a particular property is dependent upon the type
of
value being estimated. Each type of value is based upon a
particular set of conditions which are assumed to exist as of
the date of valuation. Depending upon the purpose of a
particular appraisal assignment, the best use estimate may
vary
depending upon the type of value being sought. In a market
value assignment, a best use estimate is always developed
from
the perspective of potential purchasers/users who constitute
an
active market for the subject property.
In many properties, the highest and best use conclusion may
be
identical to the one permitted by either zoning ordinances or
private restrictions. There may be cases, however, where the
land has a more valuable use than that permitted by law, and
if
there is a strong possibility that changing the legal use
would
be permitted, then it could properly be considered as a
factor
affecting value. Conversely, zoning could legally permit a
use
more intense than the site could reasonably be expected to
perform. In such cases, if zoning will not permit a less
intense use, then it is necessary to determine whether or not
the zoning could be changed and the effect of this factor
upon
the ultimate utilization of the property.
In ascertaining the highest and best use of a site or a
property, it is necessary to study four factors:31
Legal Permissible Use - the uses that are permitted by
zoning,
existing leases and/or deed restrictions.
Possible Use - the uses that are physically possible;
Financial Feasible Use - the uses which are possible and
permissible, which will produce a net return to the owner of
the
subject; and
Maximally Productive Use - the use of the subject site among
the
feasible uses which produces the highest net return. This
use
is essentially its highest and best use.
The appraisers' analysis considers the four factors as they
relate to highest and best use of the site as vacant as
follows:
Highest and Best Use, As Vacant:
1. Legally Permissible:
As discussed in the "Site Data Analysis" section of this
report,
the subject site is zoned Rural, Yavapai County The subject,
a
patented mining claim, is a legally permitted use.
2. Physically Possible:
The next constraint imposed on the use of the subject
property
is primarily dictated by the physical aspects of the site
itself. Size, shape, and topography affect the uses to which
land may be developed. The subject property is assessable,
with
modest road improvements, by heavy duty truck, a requirement
for
hauling ore from the site.
Our analysis of the physical characteristics of the site, as
vacant, indicates a limited number of physically possible
uses
for the subject parcel; i.e. ranching, mining, homesites.
3. Financially Feasible:
In determining which uses are legally permissible and
physically
possible, we have eliminated many uses from consideration.
The
appraisers are of the opinion that it would be currently
financially feasible to develop the subject site as a mining
property, assuming geologist test for developable ore are
accurate.
4. Maximally Productive:
The maximally productive uses for the subject site which were
found to be financially feasible, as of the date of the
appraisal is to develop the mining interest of the site.
Conclusions of the Highest and Best Use:
Since zoning and regulation of community plans tend to take
precedence over private wants and aspirations, the decisions
as
to Highest and Best Use must be considered within the
framework
of public limitations. Finally, the Highest and Best Use is a
logical and appropriate use or range of uses that fall within
the constraints of private wants and public standards,
presuming
that all are working within the guidelines of the real estate
market. In general, decisions would be rational, not
arbitrarily
arrived at, and would function in the scope of good planning
and
reasonable productivity of use. Therefore, we conclude the
following:
Considered "As Is," the Highest and Best Use is to develop
the
sites mining interest.
Valuation Process
Typically, real estate can be valued by applying three
approaches, e.g., Cost, Income and Sales Comparison. In
addition, the site or land valuation is typically analyzed by
the usage of the sale comparison methodology. The three are
defined as follows:32
COST APPROACH
That approach in appraisal analysis which is based on the
proposition that the informed purchaser would pay no more
than
the cost of producing a substitute property with the same
utility as the subject property. It is particularly
applicable
when the property being appraised involves relatively new
improvements which represent the highest and best use of the
land or when relatively unique or specialized improvements
are
located on the site and for which there exist no comparable
properties on the market.
INCOME APPROACH
That procedure in appraisal analysis which converts
anticipated
benefits (dollar income or amenities) to be derived from the
ownership of property into a value estimate. The Income
Approach
is widely applied in appraising income-producing properties.
Anticipated future income and/or reversions are discounted to
a
present worth figure through the capitalization process.
SALES COMPARISON APPROACH
Traditionally, an appraisal procedure at which the market
value
estimate is predicated upon prices paid in actual market
transactions and current listings; the former fixing the
lower
limit of value in a static or advancing market (price wise),
and
fixing the higher limit of value in a declining market; and
the
latter fixing the higher limit in any market. It is a
process
of analyzing sales of similar recently sold properties in
order
to derive an indication of the most probable sale price of
the
property being appraised. The reliability of this technique
is
dependent upon (a) the availability of comparable sales data,
(b) the verification of the sales data, (c) the degree of
comparability or extent of adjustment necessary for time
differences and (d) the absence of non-typical conditions
affecting the sale price.
In essence, all approaches to value (particularly when the
purpose of the appraisal is to establish market value) are
market data approaches since the data inputs are presumably
market derived.
This report is Limited in its scope with only the Sales and
Income Approaches utilized. The Cost Approach is not
considered
in this report. Income Approach
This approach deals with the estimating of property value by
measuring the worth of a future income stream.
All of the basic real estate appraisal principles are
involved in some manner in the Income Approach. The principle
of
anticipation is very important and serves as the
underlying premise. The procedure in the Income Approach is
to
estimate the present worth of value of future anticipated
benefits that are derived from ownership of the real
property. The reason ownership of property rights have a
value in exchange is that the owner of these rights is
entitled to the future benefits accruing from the real
estate. Anticipated future benefits have a direct affect on
value.
The Income Approach is a valid technique of estimating value
when the appraised property is an investment property that is
purchased for the generation of income. Properties like the
subject are typically purchased for their anticipated
benefits
in the form of annual cash throw-off and capital appreciation
upon reversion after the investment holding period.
The procedures involved in the Income Approach are a
simulation
of investor-purchaser behavior. The approach accounts for
many
thought processes and analysis an investor performs in the
acquisition of real estate.
Rather than use an individual's investment objectives,
general
market objectives for the typical purchaser are substituted
so
that the result is a Market Value or value in exchange.
The process involved in this approach is twofold; (1) the
various income and expense items are defined that results in
the estimation of Net Operating Income, and (2) the Net
Operating Income is then discounted into a value estimate by
the income capitalization process. The basic capitalization
formula is: Value is equal to the Net Operating Income
divided
by the Overall Capitalization Rate.
The following pages will present the above items under two
major
headings, Income and Expense Estimate and the Income
Capitalization Process.
INCOME AND EXPENSE ESTIMATE
This portion of the report concerns itself with the
estimation
of income and expenses directly related to the operation of
the
real property under typical management conditions. Income
refers
to monies or other benefits received from the use and/or sale
of
the subject, while operating expenses denote those items
necessary to maintain the production of income to the
property.
INCOME:
This portion of the report seeks to derive the Effective
Gross
Income for the subject property.
Operating History:
The subject is a patented mining claim.
Expenses:
Based upon the above and per discussions with Mr. Ashpole,
the
following expenses are estimated.
Mining from shaft $50 per ton
Smelting Charges 15%
Loading/Crushing Cost $8 per ton
Hand Sorting $30.00 per ton
Hauling Cost $25 per ton (20 to 25 ton trucks)
Reclamation Cost $1.00 per ton
Cost to improve the road $15,000
Power $125,000
Water $10,000
Telephone $7,000
Permits $125,000
Exploration $300,000
Mr. Ashpole indicated that he has a current trucking contract
with an independent trucker for 15 trucks with a 24 ton
capacity. He expects to haul 200 tons per day to reach a
6,000
ton monthly commitment.
NET OPERATING INCOME:
The next step in the Income Approach is the mathematical
derivation of the Net Operating Income. Estimated expenses
are
subtracted from the Effective Gross Income. It is this income
that is used in the capitalization formula. The Net Operating
Income represents the return on and the recapture of the
improvement investment and a return on the land investment.
The above estimates are based upon geological reports
provided
by the client and contingent upon their verification and
accuracy. The above estimates are based upon November 8, 1995
spot prices and are subject to daily changes.
DISCOUNTED CASH FLOW ANALYSIS
The Discounted Cash Flow (DCF) Analysis is an analytical tool
and method of valuation increasingly used by market
participants
in their decision-making process. It is regarded as one of
the
best methods of replicating steps taken to reach investor
buy/sell/hold decisions by market participants. It allows
the
analyst the opportunity to utilize the most detailed, precise
means of considering the amounts and timing of investment
cash
inflows and outflows over the life of an investment. With
this
procedure, any series of cash inflows and outflows over any
specified time frame at any rate of return can be analyzed
and
the present value of the investments anticipated performance
can
be measured.
Discounted cash flow analysis relies on compound interest
measurements to convert future dollars into their present
value
equivalents. Because dollars to be received in the future are
worth less than current dollars, successive cash inflows and
outflows are discounted at a selected rate to their present
value as of a given date. The sum of the present values for
each
future positive or negative cash flow represents the
discounted
cash flow value indication at a given discount rate.
Significant in the discounted cash flow value indication are
the
forecasts and assumptions utilized. In the instance of those
utilized in the value indication which follows, they are
based
upon the market-oriented data and opinions subsequently
related.
The discount rate utilized has been derived from the real
estate
and capital markets. Current investor expectations concerning
property type, age and condition of the improvements, cash
flow
characteristics, etc., have been considered. Growth rates,
terminal capitalization rates, financing terms and conditions
are market-derived.
Summarily, discounted cash flow techniques are applicable in
the
valuation or analysis of various property types, including
proposed construction and land development, rehabilitation,
condominium development or conversion, and income properties.
Using the Discounted Cash Flow Analysis with a middle range
yield rate of 35% the range of Net Present Value was
estimated
at between $30,285,000 to $38,290,000 (rounded).
The residual surface rights to the subject are estimated at
between $1,000 to $2,000 per acre or $242,000 to $484,000
with a
middle range value of $350,000 considered reasonable. Sales
Comparison Approach
The Sales Comparison Approach is one of three traditional
approaches to value. This approach is also called the
Market Data or Market Comparison Approach. It is:
Approach through which an appraiser derives a value
indication
by comparing the property being appraised to similar
properties
that have been sold recently, applying appropriate units of
comparison and making adjustments, based on the elements of
comparison, to the sale prices of the comparables.33
Basic real estate appraisal principles involved in this
approach are the principle of substitution, anticipation and
contribution. The "principle of substitution" is the
underlying
premise from Sales Comparison Approach and its definition
is
very similar to that of the approach itself. This principle
fundamentally states that the value of a property is
influenced to a large extent by the prices being paid in the
open market for similar properties offering the same utility.
The market that is made up of substitute properties then
represents alternatives for a prospective buyer and tends to
set
the range of values.
The "principle of anticipation" states that prices paid
for
property is a reflection of the market's expectation of
future
benefits that accrue from ownership. It follows, then,
that if the property is old and nearing the end of its
economic
life, or for another reason has a dismal future, the
present
worth of value of all future benefits would be considerably
lower than if the property was new and could generate
benefits for a longer period. The value of real property,
therefore, can be considered the present worth of all
future
benefits that can be derived from its ownership.
The "principle of contribution" is the underlying rationale
for
the adjustment process in the Direct Sales Comparison
Approach. This principle views the sale price of real
property as the sum of all value contributing
characteristics.
The individual characteristics are measured by the effect
their
presence or absence has on the total sale price. Not only is
their mere presence important, but also the quantity and
quality
in which they exist.
There are other appraisal principles involved in Direct Sales
Comparison, but the three mentioned are considered most
pertinent.
COMPARABLE SALES DATA
Due to the mineral content, there are no direct comparable
sales
to the subject property. There are several sales of mineral
rights and patented land that include mineral rights.
Related Sales
All of the above sales are located in the Bradshaw Mountains
and
within 15 miles (as the crow flies) of the subject. An
additional sale of the Maga McCabe Mine located 1/2 mile
northeast of the subject was reportedly acquired by Maga
Copper
Company for $37,000,000. This figure could not be confirmed
by
public records and included additional tranferes, including a
4/28/94 tranfer for $268,874. According to the Arizona
Department of Mines and Mineral Resources "Directory of
Active
Mines in Arizona" 1994 edition, this mine was operated by
Maga
for a year and before it was taped out. End of production
numbers were 28,405 oz. of gold; 113,116 oz. of silver and
473,946 lbs. of copper. This project is currently in the
reclamation stage. At current market rates, this caculates as
follows:
28,405 oz. of gold x $385.10/oz. = $10,938,765.50
113,116 oz. of silver x $5.34/oz. = $
604,039.44
473,946 lbs. of copper x $1.36/lb. = $ 644,566.56
Total Net production $12,187,371.50
The relationship between the commodities as extracted from
this
mine are: 3.98 oz. of silver for every 1 oz. of gold; 266.96
lbs. of copper for every 1 oz. of gold.
We believe that the subject would likely demand a value in
the
upper end of the range due to the geological reports.
Therefore,
based upon a value in the $100,000 to $150,000 per acre
range, a
value for the subject is caculated as follows:
241.75 acres x $100,000 = $24,175,000, call
$24,200,000
241.75 acres x $150,000 = $36,262,500, call
$36,250,000
Reconciliation and Final Value Estimate
Final reconciliation is:
The application of the process of evaluating alternative
conclusions, and selecting from the indications of value
derived
from each of the approaches utilized in the appraisal
problem,
to arrive at a final estimate of value. The appraiser weighs
the
relative significance, applicability and defensibility of the
indications of value derived from each approach and places
the
most weight and reliance on the one that, in his professional
judgment, best approximates the value defined. He reconciles
the
facts, trends and observations developed in the analysis and
reviews his conclusions and the probable validity and
reliability of those conclusions.34
The Cost and Sales Comparison Approaches are,
characteristically, expressions of the value of fee simple
interests. The Income Approach may or may not express a value
indication of the fee simple interest dependent upon the
leasing
status of the property. Because the subject is to be
appraised
As Is, the fee simple interest was estimated.
This a Limited Appraisal - Self-Contained Report and the Cost
Approach was not addressed. Please refer to the Special
Underlying Assumptions on page 8. A summary of the value
indicators follows:
Income Approach:
Value via the Income Approach: $35,000,000
Residual surface rights $350,000
Sales Comparison Approach:
Value via the Sales Comparison Approach: $24,200,000
to
$36,250,000
Usually, depending upon the type of property appraised or the
purpose of the appraisal, one approach may carry more weight
or
be considered more reliable for a final value estimate. In
other
instances, because of the inadequacy or unavailability of
data,
one or even two approaches may be accorded little weight in
the
final value estimate.
Concerning the subject, the value indication by the Cost
Approach was excluded.
The value suggested by the Income Approach attempts to
consider
the investment characteristics of the property and the risks
inherent in this type of investment. The value of mining
interest are heavily contingent upon geological studies and
report from experts in this field. The appraisers relied upon
expert opinions in this area and made no warranty's or
representations regarding their accuracy. The appraisers
assume
the accuracy of the studies provided by the client and
reserve
the right to adjust the value estimate herein upon the
completion and availability of additional studies.
The Sales Comparison Approach offers somewhat comparable
sales,
although without accurate geological studies on the
comparable
sales, no true comparison can be made. This approach is
considered in a supporting role.
Within this Limited Appraisal - Self-Contained Report the
Sales
and Income Approaches are employed, providing reasonable and
justifiable estimates of market value. In sum, the value
indicated from the Income Approach is considered appropriate
at
this point within the appraisal process.
On the basis of data in the body of the report, our
conclusions,
subject to stipulations, if any, in the report, as of
November
8, 1995, (with an inspection date of February 9, 1995 and
November 8, 1995) was:
Market Value of the As Is Fee Simple Interest of the Subject
property:
Thirty Five Million Dollars
$35,000,000
The residual surface rights to the subject are estimated at
between $1,000 to $2,000 per acre or $242,000 to $484,000
with a
middle range value of $350,000 considered reasonable.
Certification
As a result of a request for a Limited Appraisal Self-
Contained
Report assignment of the property, legally described in the
body
of the report, at:
Leland-Dividend Mine Group
Located on the east slope of Mount Elliott
Approximately six miles southwest of Hombolt, Arizona
We certify to the best of our knowledge and belief:
The statements of fact contained in this report are true and
correct [S.R. 2-3, USPAP, 1995].
The reported analyses, opinions, and conclusions are limited
only by the reported assumptions and limiting conditions, and
are our personal, unbiased professional analyses, opinions,
and
conclusions [S.R. 2-3, USPAP, 1995 Edition].
We have no present or prospective interest in the property
that
is the subject of this report, and we have no personal
interest
or bias with respect to the parties involved [S.R. 2-3, USPAP
1995 Edition].
Our compensation is not contingent upon reporting of a
predetermined value or direction in value that favors the
cause
of the client, the amount of the value estimate, the
attainment
of a stipulated result, or the occurrence of a subsequent
event
[S.R. 2-3, USPAP 1995 Edition].
Our analyses, opinions, and conclusions were developed, and
this
report has been prepared, in conformity with the Uniform
Standards of Professional Appraisal Practice (USPAP)
published
and copyrighted by the Appraisal Foundation and the Arizona
Appraisal Board and the standards and reporting requirements
of
the Code of Professional Ethics and the Standards of
Professional Practice of the Appraisal Institute. [S.R. 2-3,
USPAP 1995 Edition].
Larry D. Schnepf has made a personal inspection of the
property
that is the subject of this report. [S.R. 2-3, USPAP 1995
Edition].
No other persons than those listed herein provided
significant
professional research assistance to the persons signing this
report.
The use of this report is subject to the requirements of the
Arizona Appraisal Board and the Appraisal Institute relating
to
review by its duly authorized representatives.
Mr. Larry D. Schnepf, MAI is currently certified under the
State
of Arizona's Appraisal Board mandatory appraiser licensing
and
continuing education program [A.R.S. Section 32-3601].
The appraisers have reviewed the Competency Provision of the
USPAP and are in full compliance with this provision
[Competency
Provisions - USPAP 1995 Edition].
The appraisal assignment was not based on a requested minimum
valuation, a specific valuation, or the approval of a loan
[Ethics Provision - Management, USPAP 1995 Edition].
We certify that, to the best of our knowledge and belief, the
reported analyses, opinions and conclusions were developed,
and
this report has been prepared, in conformity with the
requirements of the Code of Professional Ethics and the
Standards of Professional Appraisal Practice of the Appraisal
Institute [S.S.R. 2-1, Appraisal Institute SPAP].
We certify that the use of this report is subject to the
requirements of the Appraisal Institute relating to review by
its duly authorized representatives [S.S.R. 2-2, Appraisal
Institute SPAP].
As of the date of this report the appraisers are/have
completed
the requirements of the continuing education program of the
Appraisal Institute [S.S.R. 2-3, Appraisal Institute SPAP].
The undersigned hereby acknowledges that he/she/they has/have
the appropriate education and experience to complete the
assignment in a competent manner. The reader is referred to
the
appraisers' Statement of Qualifications.
Further, the value reported is based upon cash in U.S.
dollars
or in terms of similar financial arrangements.
The value(s) reported are intended to conform with Code of
Ethics and Standards of Professional Practice of the
Appraisal
Institute; the Uniform Standards of Professional Appraisal
Practice (USPAP) as promulgated by the Appraisal Standards
Board
of the Appraisal Foundation and the Appraisal Institute for a
limited appraisal assignment with departure provisions of
USPAP
Standards 2-2 as outlined in Standards 1-4(a) through (i) and
regulatory guidelines as published by various federal
agencies,
including OCC's Rule/Policy 12 CFR Part 34 pertaining to
federally chartered banks.
Respectfully submitted,
Schnepf Ellsworth Appraisal Group
Mr. Larry D. Schnepf, MAI
Certified Arizona General Real Estate Appraiser
Certificate # 30284
Addenda
Qualifications
Floyd Hanly & Associates Report
Phelps Dodge Contract
EMTEC reports
Quit Claim Deed
Schnepf Ellsworth Appraisal Group
Based in Mesa, Arizona, Schnepf Ellsworth Appraisal Group
evolved from Ellsworth Appraisals, founded in the 1960's by
D.
Delos Ellsworth, ARA. The firm is staffed with dedicated,
experienced appraisal professionals who bring together their
diversified backgrounds in various income-producing
properties
into detailed, comprehensive and objective analysis.
Our firm's professional appraisal qualification standards are
some of the highest in the industry. Each professional
appraiser on our staff is required to have a minimum of 10
years
commercial appraisal experience with the last five years of
appraisal experience in Arizona properties. All of the
professional staff appraisers are required to be licensed by
the
State of Arizona Board of Appraisal as "Certified General
Real
Estate Appraisers."35 In addition, the professional
appraisal
staff is encouraged to actively participate in professional
trade organizations and continuing education programs. The
trade
organizations promote various professional appraisal
designations including: MAI, RM, SRA and SREA. These high
company standards mean that the appraiser is more experienced
and is dedicated to writing a quality analysis. Schnepf
Ellsworth believes that qualified, experienced and licensed
professional appraisers eliminates the trial by error or the
learning to write an analysis at the client's expense which
is
common in the appraisal industry.
The unique talents and experience of our professional
appraisal
staff is exemplified by the detailed analysis in all of our
clients' reports. Our staff are specialists in:
Agricultural,
Retail, Office, Industrial, Apartments and Hotel/Motel
Properties. Clients and prospective clients are encouraged to
check our professional appraisal staff references.
Please do not hesitate to contact us at (602) 497-1113, with
your firm's questions or need for a fee quote on your
income-producing appraisal property needs.
Qualifications LARRY D. SCHNEPF, MAI
Mr. Schnepf has been a real estate appraiser/consultant in
Arizona since 1974. He provides both appraisal and consulting
services ranging from feasibility studies to appraisals of
new,
one-of-a-kind facilities.
EDUCATION:
Arizona State University
Graduate, Brigham Young University - 1976, B.A. in
Communication
APPRAISAL EDUCATION:
Appraising of Agricultural Properties, Brigham Young
University,
1976
SREA Seminar, Cash Equivalency and Creative Financing, San
Diego, California - 1981
SREA Exam 101, An Introduction to Appraising Real Property,
Phoenix, Arizona - 1982
SREA Exam 102, Applied Residential Property Valuation,
Phoenix,
Arizona - 1982
SREA Course 201, Principles of Income Property Appraising,
Boulder, Colorado - 1982
SREA Course 202, Applied Income Property Valuation, Tempe,
Arizona - 1982
AIREA Exam 1A-1, Real Estate Appraisal Principals, Hanover,
New
Hampshire - 1985
AIREA Exam 1A-2, Basic Valuation Procedures, Hanover, New
Hampshire - 1985
AIREA Course 2-1, Case Studies in Real Estate Valuation,
Cocoa,
Florida - 1985
AIREA Exam 2-2, Valuation and Report Writing, San Diego,
California - 1985
AIREA Courses 2-3, Standards of Professional Practice,
Austin,
Texas - 1985
AIREA Exam 10, Market Analysis, San Diego, California - 1985
AIREA Exam 1B-A, Capitalization Theory and Techniques, Part
A,
Tucson, Arizona - 1985
AIREA Course 1B-B, Capitalization Theory and Techniques, Part
B,
San Diego, CA - 1986
AIREA Seminar, R-41b, Tempe, Arizona - 1986
SREA Seminar, R-41c and the Appraiser, San Diego, California
- -1986
American Demographics Institute, How to Build and Use a
Demographic Information System, Marina Del Rey, California -
1986
AIREA Seminar, Federal Home Loan Bank Board Regulation R-41c,
Mesa, Arizona - 1987
AIREA Seminar, Malpractice/Court Testimony, Phoenix, Arizona
- -1987
American Demographics Institute, Consumer Demographics,
Marina
Del Rey, California - 1987
AIREA Seminar, UCIR Appraisal Form/FHLBB Appraisal Policies,
Anaheim, California - 1988
The Resolution Trust Corporation, Appraisal Seminar, Phoenix,
Arizona - 1990
AI Course SPP-A, Standards of Professional Practice, Part A,
Scottsdale, Arizona - 1991
AI Course SPP-B, Standards of Professional Practice, Part B,
Scottsdale, Arizona - 1991
AI Seminar, Arizona Law, Scottsdale, Arizona - 1991
AI Seminar, Market Extractions, Tempe, Arizona - 1992
Arizona School of Real Estate, Appraisal Valuation & Current
Economic Trends, Scottsdale, Arizona - 1992
PROFESSIONAL MEMBERSHIPS:
APPRAISAL INSTITUTE (formerly the AMERICAN INSTITUTE OF REAL
ESTATE APPRAISERS) - MAI Number 7760 - Phoenix Chapter
The American Institute of Real Estate Appraisers conducts a
voluntary program of continuing education for its designated
members. MAI members who meet the minimum standards of this
program are awarded periodic educational certification.
The Appraisal Institute conducts a voluntary program of
continuing education for its designated members. MAI members
who
meet the minimum standards of this program are awarded
periodic
education certification. As of the date of this report, Larry
D.
Schnepf has completed the requirements under the continuing
education program.
CERTIFIED GENERAL REAL ESTATE APPRAISER, State of Arizona,
Certificate No. 30284.
CHRONOLOGY OF WORK HISTORY:
Senior Partner, Schnepf - Ellsworth Appraisal Group,
providing a
wide range of valuation and consulting services. (1988 to
present)
President, Schnepf, Layton & Watkins, Inc. appraisal firm in
Mesa, Arizona. (1991)
Associated with the late David N. Peterson, MAI and Patrick
Nolan, MAI (Real Estate Science Corporation), 2200 North
Central
Avenue, Suite 416, Phoenix, Arizona 85004. (1982 to 1988)
Independent Fee Appraiser and Corporate Real Estate Broker
for
Kaibab Industries. Partner, Payson West, a 300 acre
subdivision
development in Payson, Arizona. (1980 to 1982)
Independent Fee Appraiser and Real Estate Salesmen in small
firm
specializing in agricultural properties. (1976 to 1980)
Scope of Work:
Real estate asset appraisals including: residential,
subdivision, commercial, retail, industrial, transient
lodging,
retirement/congregate care, agricultural, ranch, special and
mixed-use purpose properties. Other services performed
include:
right-of-way, business valuations, highest and best use
studies,
market-demand studies, marketability studies, feasibility
studies, site selection analysis, portfolio analysis, second
opinions, due diligence reviews, tax Certiorari analysis.
Testimony Experience:
Qualified witness in the Superior Court, State of Arizona and
Federal Bankruptcy Court.
Floyd Hanly & Associates Report
Phelps Dodge Contract
EMTEC reports
Quit Claim Deed
1 As required by 1995 Uniform Standards of Professional
Appraisal Practice (USPAP), 1995 Edition, Standard Rule (S-
R),
2-2(b), page 20.
2 USPAP, 1995 Edition .
3 1995 Uniform Standards of Professional Appraisal Practice
(USPAP), Standard Rule 2-2(f).
4 The Appraisal of Real Estate, 10th ed., op. cit., p. 575.
5 1995 Uniform Standards of Professional Appraisal Practice
(USPAP), 1995, Standard Rule 1-2(a) , p. 12, and Standard
Rule
2-2(c), p. 22 and Statement Appraisal Standards No. 3 (SMT-3)
and (SMT-4), pp. 65 -67.
6 Appraisal Institute, The Dictionary of Real Estate
Appraisal,
3rd ed. (Chicago; Appraisal Institute, 1993), p. 140.
7 Ibid., p. 120.
8 Ibid., p. 204.
9 Ibid., p. 204.
10 Ibid., p. 204.
11 Ibid., p. 320.
12 Ibid., p. 320.
13 The Appraisal Institute, The Appraisal of Real Estate,
10th
ed., (Chicago: The Appraisal Institute, 1992), pp. 23-24.
14 Society of Real Estate Appraisers, Real Estate Appraisal
Terminology, Revised Edition, (Cambridge, Massachusetts:
Ballinger Publishing Company, Fifth Printing, May 1983), p.
118.
15 Ibid., p. 308.
16 Ibid., p. 124.
17 1995 Uniform Standards of Professional Appraisal Practice
(USPAP), 1995 Edition, 1995, pp. 7 and 8.
Title XI of the Federal Financial Institution's Reform,
Recovery and Enforcement Act of 1989 ("FIRREA"), Public Law
No.
101-73, 103 Stat. 183 (1989).
Department of the Treasury, Office of the Comptroller
of
the Currency (OCC), Treasury, Rules and Regulations 12
C.F.R.,
Subpart C, 34.42 Federal Register, Volume 55, No. 165,
Friday,
August 24, 1990, page 34696.
Resolution Trust Corporation's Final Regulation on
Appraisals, 12 C.F.R., Part 1608, Revised June 1991.
18 The Dictionary of Real Estate Appraisal, 3rd ed., op.
cit.,
p. 385.
19 Appraisal Policies and Practices of Insured Institutions
and
Service Corporations, Federal Home Loan Bank Board, "Final
Rule", 12 CFR Parts 563 and 571, December 21, 1987.
20 The Dictionary of Real Estate Appraisal, 3rd ed., op.
cit.,
p. 283.
21 Appraisal Policies and Practices of Insured Institutions
and
Service Corporations, Federal Home Loan Bank Board, "Final
Rule", 12 CFR Parts 563 and 571, December 21, 1987.
22 Ibid.
23 The Dictionary of Real Estate Appraisal, 3rd ed., op.
cit.,
p. 308.
24 "Subdivision Analysis," An Educational Memorandum of the
American Institute of Real Estate Appraisers. Modified by
Davis
Appraisal Services, Inc. for general usage.
25 Ibid.
26 1995 Uniform Standards of Professional Appraisal Practice
(USPAP), 1995 Edition, 1995, Appraisal Standards Board,
Effective 1/1/95.
27 Per Public Records.
28 1995 Uniform Standards of Professional Appraisal Practice
(USPAP), 1995 Edition, 1995, Standard Rule 1-5(b), p. 15.
29 The Appraisal of Real Estate, 10th Edition, op. cit., p.
171.
30 The Appraisal of Real Estate, 10th ed., op. cit., p. 275.
31 The Appraisal of Real Estate, 10th ed., op. cit., pp. 280-
283.
32 Byrl N. Boyce (ed.), Real Estate Appraisal Terminology,
American Institute of Real Estate Appraisers and the Society
of
Real Estate Appraisers (1st ed. rev.; Cambridge; Ballinger
Publishing Co., 1981), p. 62, 126.132, 160.
33 The Dictionary of Real Estate Appraisal, 2nd ed., op.
cit.,
p. 265.
34 Boyce, p. 103.
35 As of July 1, 1991, all appraisals performed in the State
of
Arizona requires a state licensed "certified" appraiser.
PRODUCTION POTENTIAL:
In the 1920'8, this mine was actively producing 30 ounces of
gold per ton at an average $12.70 per ounce. There have been
four studies on this mine that I have in my possession dating
from 1915, and they all give similar information, that has
been verified independently by different
parties over the past 40 years.
The estimated cost per ton to operate this mine is around
$60.00 per ;on, to produce a minimal 1 ounce of gold per ton.
The neighboring mine is producing, closer to 2 ounces of gold
per ton with modern mining technique 8. Start up costs are
estimated at around $350,000.00 to de-water the mine, reopen
the existing mining shafts, and start production. This figure
could vary, mainly on the downward side, depending on the
size of mining operation the owners desire.
This proven gold mine could be reactivated and in production
within 6O days from its capitalization. The mine is well
known to mining Consultants and engineers in the region. The
claims have been duly recorded and perfected. The property
has been surveyed, and survey maps are on file with the
proper state and county officials.
PROFIT Potential:
The neighboring "Stan West Mine" is also well known, and it
is producing today, over 100 tons per day, at probably close
to 3 ounces of gold per ton, t a cost of $60.00 per ton and a
gross profit at todays estimated gold price of $390.00 per
oz.: this would mean $330.00 profit per oz.
On the "Lelan Dividend Mine", using the old production "pick
& shovel" level of 30 oz. per day, this could mean a yearly
gross profit after Lining costs of $3,000,000.00 plus.
CERTIFICATIONS:
The attached reports, charts, & maps are only compiled to lay
out the istory of the mine, the potential of the mine, and
allow a potential .investor to familiarize himself with the
situation before actually visiting the area or retaining an
independent mining consultant for a separate opinion or
appraisal.
I. Brief review of the "Lelan Dividend Mine"
Location
District
Geology
Early Operations
Requirements
II. Recorded Mining Claims & Maps
State Map of General Area
Topographic Maps Prescott Valley South
Sectional Map of Claims
Mine Shaft Map
III. Estimated Costs to Activate Mine
De-water & sample at 600' level
Equipment Rental
Headframe cost & Crane cost
Estimated time-- Ore sample
IV. Existing Studies on"Lelan-Dividend Mine Group".
E.W. Wells, Prescott, Arizona, Nov. 20, 1915
Max Stockder, Tuscon, Arizona Feb. 29, 1916
T.J. Sparker Prescott, Arizona, Sept. 22-23, 1923
I. Brief review of the "Lelan Dividend Mine".
LOCATION
The property is twelve air miles south east of Prescott. By
road it is 26 miles from Prescott and 6 miles from Humbolt.
It is reached from Prescott by taking Highway 69 to a short
distance beyond Humbolt then taking a side road to the right
through the Iron King property.
The group of claims is situated on the head waters of the
Galena and Ticonderoga Gulch on the East slope of Mt. Elliott
in the Big Bug Mining District, Yavapi County, Arizona.
THE DISTRICT
The Big Bug Mining District is on the North Eastern slope of
the Bradshaw Mountains and extends from Big Bug Mesa to the
Agua Fria Valley. It ranges in altitude from 4,500 to 7,000
feet.
Placer gold was discovered in the Big Bug region in the
1860's, and it is understood that all of the gulches paid
well. This lead to the discovery of numerous veins and the
subsequent working of the oxidized zones. In the early days,
mining stopped when the limit of the oxidized zone was
reached. Although the continuing sulfides often held values
that steadily increased with depth, they could not profitably
be received by amalgamation. No estimates of early production
are available. The Arizona Bureau of Mines bulletin #37
states, that during some days, some of the Big Bug deposits
yielded a considerable amount of gold and silver from the
oxidized zones. From 1901 to 1931 inclusive, the production
of the district, as recorded by the U.S. Mineral Resources,
amounts to approximately $17,000,000.00 in copper, silver,
lead and zinc. Nearly $4,000,000.00 Of this amount was in
gold, of which the amount of $30,000.00 came from placers.
Gold at this time was only $30.00 to $35.00 an oz.
The mines in the immediate vicinity of the Lelan-Dividend
group have good production records. The adjoining properties
are the Union and Little Jesse, which are now consolidated
and known as the "Union Jesse". Both became known in the late
1960'8. From about 1890 to 1898, it was worked by J.S. Jones
and Lessees. Their mill is reported to have produced about
$750,000.00 worth of bullion and concentrates chiefly from
the Little Jessie. The combined production record of the
Union Jessie is $1,400,000.00 The next adjoining properties
are the McCabe and the Gladstone on the Galena Gulch. Arizona
Bureau of Mines Bulletin #37 states, regarding the McCabe
Gladstone, during the seventies, this deposit yielded
considerable amounts of rich oxidized ores." The property
then remained practically idle for many years. It was worked
continuously from 1898 to 1913 by the Ideal Leasing Company,
with reported production of $2,500,000.00 to $3,000,000.00
and at this time gold was under the $35.00 per oz mark. The
McCabe Gladstone property is now the Stan West Mine, which
lies approximately one mile from the "Lelan-Dividend Mine".
(See insert for further information on Stan West Mines)
GEOLOGY
It is characterized by prominent quartz outcroppings of
numerous veins. These occur in and at the contact of a belt
of sericite schist formations between quartz diorite on the
east and massive Bradshaw granite on the west. Several basic
dykes traverse the schist and quartz diorite. There is a
great similarity in the different outcroppings and in the
vein contents and the mineralization underground.
There are five main veins, the Galena, Lelan-Dividend,
Independence, Ticonderoga, and Union. They have a lateral
extent of several thousand feet and converge in a
Southwesterly direction in the western half of the Galena
Claim.' All dip more or less steeply to the south. There are
several other less pronounced outcroppings in the western
portion of the group.
The average width of the main veins is about five feet and
they vary from two to ten feet. The foot and hanging walls
are well defined. The filling consists of massive white
quartz. The ore shoots are lenticular in form. The pinching
and swelling lenses sometimes overlap or are lying alongside
of each other and separated by schistose sericilic gangue
material. The lenses vary in thickness from two to ten feet
or more and from twenty to seventy-five feet in the lateral
extent. Gold bearing sulfides, principally pyrite are
irregularly distributed through the quartz lenses. Small
amounts of lead and zinc sulfides are also present. Below the
oxidized zone, mineralization commences at or below the 170
ft. level and with depth, more sulfides and better values are
encountered. The gold is deciminated in the sulfide in
microscopic particles.
The Lelan shaft is 436 ft. deep with workings on five levels.
On the 120 ft. level drifts extend 60' east and 140' west,-
with a crosscut from the end of this drift, 365 feet to the
surface.
On the 170 ft. level, drifts extend 120 east and 280 west,
level, drifts extend 180 east and 220 west. level, drifts
extend 150 east with a north crosscut 243'10ng and 400 'or
morevest with a south cross cut 160' long. On the 436 ft.
level, drifts extend 150' east, connecting with the old
Dividend, & 40 ft. wince driven from this level 270 west of
the shaft. The Dividend shaft is probably carried some
distance below the lowest 477 ft. level. Drifts were driven
on four levelss
On the 145 ft. level, drifts extend 40 east and 50 west. On
the 270 ft. level, drifts extend 20 east and 50 west. On the
352 ft. level, drifts extend to an undetermined footage east
& 100 west On the 477 ft. level, drifts extend 200 east and
100 west.
EARLY OPERATIONS
The property is the result Of a number of consolidations.
Available records of the early operation and production are
fragmental and incomplete. It appears, however that the
claims on which the two mines are located were originally
owned and operated separately and that one development and
operation of the various claims has been carried on more or
less intermittently since considerably before 1877, when the
Dividend and Galena Claims were patented and while no
definite records of production prior to 1901 are available,
it is probably that the ore deposits known to have been mined
before that time yielded a considerable amount of gold from
the oxidized zones. Brown's report of 1868 mentions a sixty
ton shipment from the Dividend mine to the Big Bug
(Henrietta) mill that yielded $20.00 per ton in free gold, At
the time it was not considered of commercial grade. For gold
at that time was only $35.oo per ounce.
REQUIREMENTS
In the consideration of gold mining properties, it must be
recognized that the point of view has been considerably
altered not only by the increased price of gold, buy by the
greater economy of operation and recovery of values made
possible by modern methods of mining and milling.
Even before the price of gold had increased, improvements in
the methods of recovery were making possible the resumption
of operation of old mines that had long been idle and even
the profitable working of old dumps and stope fills.
With the price of gold at $380.00 per oz., compared with the
old price of $35.00, an actual recovery Of values from the
sulphides ore of the Lelan are 98% compared with the 60% to
65% by the old methods of amalgamation and table
concentrations therefore, a much lower grade of ore can be
profitably mined and milled than was possible at the old
price and old mining methods.
The important factor, in final analysis, is the grade of ore
that will permit profitable operation and production. Also,
the tonnage of that grade that can be developed must be
considered.
To arrive at the grade of ore that will permit a profitable
operation, the factors are as follower The cost of mining and
milling, the percentage of recovery of values in the mill
concentrates, and the net smelter returns, which would be the
value of the concentrates at the point of shipment, because
the smelter pays and deducts the freight and treatment
charges.
For convenience and because the proportion of gold and silver
are fairly uniform, the set smelter can be reduced.
(The Net smelter returns from concentrates in the Lelan-
Dividend mines for 1934 do show up in net smelter reports.
One return of net smelter returns from concentrates in August
and September of 1934, when gold was $35.00 per ounces show
that the total return was $9,971.28 and the net return per
ounce of gold content therefore was $30.97.)
(Confirmations on this report, corresponding mining claims
and general mining details can be obtained from the
followings (Mr. Floyd Hanly & Associates, Arizona Bureau of
Mineral Resources, and attached studies).
ESTIMATED ORE RESERVES and VALUES
"GOLD BUG GROUP"
DEFINITIONS:
PROVEN ORE: Measured Blocked out ore is determined from
exposure in outcroups, cuts, pits, shafts mine workings,
drill holes or otherwise where measurements are so closely
spaced What she computed tonnage will have a high degree of
accuracy.
INDICATED ORE: Probables is computed upon observable data
Which is projected for a reasonable distance on the basis of
geological evidence and the tonnage computed is reasonably
assured but not absolute.
INFERRED, POSSIBLE ORE: is computed largely on broad
knowledge of the geological environment and the character of
the mineralization. Few measurements are available. The
computed tonnage is a reasonable estimate rather than a
quantitative amount.
BASIS:
It is determined from the above DEFINITIONS, and previous
mining activity on the Gold Bug Group and or adjoining mines
as described in the reports attached, as a reasonable length,
depth, thickness and grade factor based on geologic evidence,
as defined as factors used by the U.S Bureau of mines and the
U.S.G.S. to signify dependability of information. (see
history attached).
DEPTH LENGTH THICKNESS GRADE
200' to 1100' Several Thousand ' 31/2 to 10'
1/2 to 3 0z.
AVERAGE OF THE ABOVE
( Gold price $375.00 )
650'deep X 2000'long X 61/2 thick = 8, 320, 000 cubic feet
8,320,000 cu.' divided by 12 cu.' per ton = 693,300 ton
AVERAGE ORE GRADE= 1.12 onces per ton X $375.00 = $420.00 ton
ESTIMATED COST TO PRODUCE ORE MINE,, MILI , SALES = $50.00
ton
VALUES
GROSS VALUE TON $420.00 X 693,300 TON= TOTAL $291, 200,000.00
PRODUCE COSTS 50.00 X 693,300 TON = COSTS 34,665,000.00
NET POTENTIAL $370.00 X TONS
$256,535,000.00
*"All Estimates herein has no intent to imply or guarantee
accuracy.
PARCEL I:
INSET
Map shown of fria basin and galena gulch.
PARCEL II:
That portion of the Republic No. 1 Patented Lode mining Claim
situate in the Big Bug Mining District, Yavapai County,
Arizona, described as follows:
COMMENCING at Corner No. 2 of the Republic No. 1 which is the
point of beginning; thence North 49n50' West 600 feet to
Corner No. 3 of the Republic No. 1 lode mining claim; thence
South 66 = 20' West 205.5 feet to a point on the West line
of Section 31, Township 13 North, Range 1 East of the gila
and Salt River Base and Meridian, which Stetson line is the
boundary of the Prescott National Forest; thence due South
S87.8 feet; thence North 66820' East along line 1-2 of the
Republic No. 1, 706 feet to Corner No. 2 of the Republic No.
1 lode mining claims, which is the POINT OF, BEGINNING.'
EXCEPTING from the REPUBLIC NO. l, all that portion in
conflict with the ; INDIA LODE MINE as set out in said
mineral Survey.
INSET
Picture of shaft and mine
shows a further ore-body of three feet in width of the value
of $10.00 and more per ton.
A map marked B of the underground development
accompanies this statement.
About 180 feet east of the said Lelan shaft, and on the
same vein or lode, a shaft, through the eastern end of the
ore zone developed by the Lelan shaft, has been sunk to a
depth of about 700 feet. Heretofore, we have not had access
to these workings which are now under water. A considerable
quantity of ore, in the past, has been mined and taken out
throwgh this east, but we have no accwrate information Of the
quantity nor the value of the mineral extracted there from.
However, we are briefly furnished with the following data by
that we consider reliable authority, and which may be oi some
interest on the question oi development. "111 recent work on
this shaft has been confirmed to the fourth-d, fifth, and
seventh level, also timbering shaft from sixth to seventh
level, a distance Of 126 feet.
Work on the third level, consisting of an upraise Of
four feet, started on hanging wall vein at e distance of 20
feet west Of dividend shaft. Raise connecting with main 300
foot level of Lelan vein.
Fifth level. This work consists of driving drift west on
hanging wall vein 121 feet, which is
directly underneath on the same vein Of the fourth level of
the Lelan.
We find continuance of ore on that level for fifty feet
to face of drift, which allows 48 inches of ore of fairly
good value.
Seventh level. East drift consists of work for a
distance of 113 feet east in which we have encountered
bunches of some very good ore. West drift 136 feet, showing a
strong ledge of quartz, in places showing good values.
Cross cutting in foot wall 36 feet, started at a point
about 36 feet west of shaft. In my estimation crosscut will
out foot wall ledge at a distance of about 42 feet
The Ticonderoga claim is developed by a shaft 200 feet
deep with levels run at points 65 feet and 200 feet from the
collar.
Lelan-Dividend Group
The Lelan-Dividend Group of Mining Claims comprises
twenty claims, fourteen of which are patented and the rest
are held by location and possession.
The whole tract covers about 325 acres of mineral lands
lying contiguous and in one body, and penetrated by a series
or belt of lodes or veins carrying gold and silver located in
the Chaparral section of the Big bug Mining district in
Yavapai County, Arizona, and two and one-half miles iron an
operated railroad with good wagon road conection. The names
of the mining claims are the Lelan, Ticonderoga, Dona ana,
independence, Dividend Jo. 1, Galena, Jawnlta, Summit,
A surface map of the claimsaccompanies this statement
and is marked A
Serveral thousand feet of devlopment has been done on
theae claims in shafts, tunnels, drifts, winses, raises, etc.
- - approximately 20,000 tons of dependable ore Of the average
value of $10.00 per ton is developed, in these claims.
The principal development is done on the Lelan claim.
the shaft 18 484 feet in depth, of good working size, well
timbered, and the underground workings are in good shape,
properly timbered and connected for ventilation. There are
five stations from which levels are run out on and cutting
the ore-bodies. Occasional connections between levels are
made. The ore-bodied are well defined and fairly well opened
up. Only moderate stoping has been done. Prom the fourth
level up the mine is open to inspection and investigation.
the fifth level has been under water for four years. It
can be unwatered at a small cost, but then so done
preparation should be made for taking care of the shaft and
opened ground.
On the fifth level in the west drift there is exposed an
ore-body about six feet in width and 70 feet in length of the
average value of $10.00 per ton. A cutting into the hanging
wall of the shaft. The accompanying map "C" shows the
development done.
We have been furnished the following data by a reputable
person who was in charge of the development work during the
process, and which we hare no reason to question.
"!lrot lerel. 66 ieet irom owrisoo. Wost iriit havlng
been irlven from polnt 90 ioet, weot oi oEsft to point w66
ieet, West irom 100 to 236 ieet. Eest of ohait, have stopoi
oat oonolierable ore ranglng in ralues fros ~~60.00 to $66.00
per ton. Tho iace of thewarlit 18 about 100 feot, rertloal
ffiepth, irom ourisoe, oting to pltoh of grottS.
200 foot level. West arlit hao been oontinted to 702
feet w weot of ohait, hating two gooa ore ohooto, one
betlaning at a point 150 ieet weot of obbft, 60 ieet in
length thioh lo otopei aboot 80 foet hlgh. haok of otope nc~~
showsnt 18 lnehoo of ore, arerage ralwe $40.00 per ton. The
other ohoot betlsnlng at a polnt EfiO ioet woot oi ohait ana
aboot 100 foot ln length, ani stopei to a helght oi 35 Seet,
but I ieel satlsilea we are at tho top of a
t & ore shaftt.
Croso out hao been startei irom a point 178 ioet woot Of
shsft in s sowtherlz ilreotlon, from polnt of otartlng to
face oi same lo 327 ieet. In arl-lng oross out to enoountereF
three separate relno. The ilrot one has not boen Fevelope&.
The eeoont rein enoounterei 125 feet from otartin6 polnt, le
Oe elopeS bq lrlft to weet 21 ieet, Frlft to east 80 deet,
also ratee ln east ~~rlft ZO ieet, showlng gOol salueo.
The thlri rein encountere~~ 180 ieet irom polnt oi
startlng, thlch has been drlitea on weot to a dlstanoe oi E36
feet with ralse of 15 feet, thloh ohows quarts oonteinlng a
walve oi ~~ZO.OO.
Tho ohait lo ln low grouna ani lo fllloS with rater. We
have ha~~ no opportunlty to rorltt thlo lnformatlon.
Conslaerable do-olopment hao beon ione ln olaloo on
other relno penetratlnt thlo group thloh w111 be bottsr
onaorotooi by e peroonsl lnspeotion on the gro~~-^, and thlo
oboor atlon spplleo to the ivproromento upon the sarfaoe,
oporatlnt eqnlpment, oto., portalnlng to tho thole growp.
So far ao aecertalned tho general oharaoter of the ores
of the veins in thls group appear to be about the oame, bni
lo typloally an amilgamatlng ani oonoentratlng ore.
Conoentrateo msie as a proFuct aftsr amalgamatlon, have a
6oli waloe of from four to ilve ounce por ton.
A ten stamp mlll slth ooncentratlon table tBO bullt to
trz ont the mlllirt qualltleo oi the ore ln the Nelan mlne. s
test run was msde on ore taken prinolpally from all parto oi
the mine, lnoluilng the aoowmilatei ore extraoted in osnadng
shait, rennlng levelo and other de-elopment tork, gave the
followlng returns.
Qwantlty oi ore mlllei, 1600 tono. Talue reoo ere&:
lot. Az amalgamatlon, ao per mlnt oortlfloate, Oold
~~lZ,Z94.68, Sllver $168.05, total billlon $15,56P.71.
Snd. P~~ oonoentratlon, as per emelter oortlfloate:
Bo. 1 E7.1Z2 tons at ~~lOZ.ZO per ton, tt,801.79
Jo. P pZ.016 tons at 98.Z9 per ton, P,166.16
Making total recovery of $18,530.66.
(Signed) E. W. Wells.
Prescott, Arizona;
November 2O, 1915.
NOTES ON PRELIMINARY EXAMINATION or THE
LELAN-DIVIDEND GROUP OF MINES, YAVAPAI COUNTY, ARIZ.
GENERAL DESCRIPTION
The Lelan-Dividend Group comprises 20 contiguous claims;
14 of those are patented.
The Group is situated about 12 miles southeast of
Prescott on the headwaters of Galena and Tiocnderoga Gulch,
Yavapai County, Arizona. The camp lies at an altitude of 5500
feett; it is connected by a five mile wagon road with
Humboldt (elevation 4500') on the Prescott Line, in Agua Fria
Valley, another four mile down grade road leads to Huron
Station, south or Humboldt, on the same railroad. The main
transmission line for the Arizona Power Co. passes over the
property; the Lelan Hoist is conected therewith.
GEOLOGY AND MINERALIZATION
The Group covers a large mineral area, approximately 325
acres, charcterized by prominent quartz outcroppings of four
main veins, the Galena the Lelan-Dividend-Independence, the
Ticonderoga, and the Union Vein, as well as by several other
less pronounced quartz Droppings in the western portion of
the Group. The main veins, which have a lateral extent of
several thousand feet, converge in southwesterly direct on
toward each other, in the western half of Galena, Claim, and
all of them dip more or less steeply to the south.
The average width of the main vein is about five feet,
they vary two to ten feet. Their outcrop occurs in,
of, a narrow belt of the sericite schist formation, which
have is wedged or closely pressed by quartz diorite on the
east, against massive Bradshaw granite on the west. Several
narrow basis dikes traverse schist and Quartz diorite alike,
conforming in strike to the trend of the veins. Geologically,
the group presents rather complex but interesting features
and considerable field and exploration work remains to be
done, to olear up details suffcienlty so as to form positive
conclusion regarding the value of the group.
There is a great similarity between the different
veincroppings, but also in respect to the vein contents
and_mineralization underground. The ore bodies ocour between
well defined foot and hanging wall in shoots of irregular
form, or in the form of a series of lenses which overlap each
other, or lie alongside of eachother, being separated by
schlatose, ericltio gangue material,
Gold bearing iron sulphides are irregulary distribited
through the quartz lense, and very small amounts of lead and
sulfided are present.
THE LELAN MINE
The ore shoots, which are up to 300 St. lateral extent,
alternate with barren schlstose zones, but they are
continuous in their down-art northwest pitch. On the Lelan,
which is in operation and open for inspection to the 400 foot
level , they base been followed from the surrace down to the
500 rt. level. Oxidation has proceeded to about 100 ft. below
the surface. The water level stands at about 55O ft. in the
Lelan. The cementation zone between these horizons shows some
local enrichment of the sulphides.
The average value of the Lelan ores, accoording to 175
mine samples, taken during the course of development, is .63
ozs. My own sampling in the open workings is indicated by
Nos. 107361078 on attached assay plan and section. 1600 tons
of average mine ore from various levels are milled several
years ago in the Lelan 10 stamp mill, with a recovery of
Bullion by amam-lgamation-------$13,502.30 or $8.48 per ton
49 tons concentrates 4,900.00 or 3.06 per ton.
The Lelan shipped also the following amounts of 90% SiO2 ore
under contract to neighboring smelters. *
In 1911 to Humboldt 1,400 tons, .41 oz. Au, 0.5 oz. ABE, 91.1
Sio2 In 1911 to Jerome 3,000 tons, .35 " " O.S " t 89.1 " 3%
Fe, 0.2 Pb, 1.5 S. In 1914 there were shipped seven tons
smelting ore of 2. oz. Au. p. t.
Attached hereto is sketch of plan and section of Lelan
workings
HISTORY AND OPERATION
The claims were located a number Of years ago From 1900,
1909, a part of the group was operated by the Dividend Gold
Mining Co. who accomplished most of the development work On
the Galena, Dividend, Ticonderoge, until litigation ensued
wlth Lelan, which finally resulted in consolidating the
lndividual enterprises into the present boundaries of the
Lelan Dividend Group , now controlled and largely owned by
Judge D. W. Wells, of Prescott, Arizona, At present, a crew
Or about ten men is employed, prospecting on the lower levels
or the Lelan Vein. The owner fully realizes that it is beyond
this province to insogurato a mining and milling enterprise
on a scale large enough to insure succeesrul results, and he
therefore prefers to sell the group at a price of S200,000.00
SUMMARY:
On the whole, the district has impressed me rather
favorably. I believe that it has merit and warrants further
investigation.
THZ OLDER WORKINCS: On the galena-DividendTiconderoga veins
were found to be inaccessible, most Or them being under
water. Attached hereto, are sketches ofr the extent of
prospecting done, according to reliable sources. Two small
stamp mills which are now put out of commission have operated
intermittently on the output of the mines.
THE GALENA SHAFT is 300 feet deep, following a quartz orebody
from 30t to 60t wide, the bottom of start is said to contain
10" Or ~~.50 02a. Au ore. The ground above the of rt. level
has largely been stoped, the race is 240 rt. west of abort
and said to contain 40 Or ore Or 1.50 ozs. Au. p. t.
The 165 rt. level extends 140 rt. east on 24t Or
goldbearing quartz.
The 265 level extends 370 ft. west on 48" low grade gold
bearing quartz.
The droppings of the vein are large; they extend for
about 5OO ft. west Of sharf, and can be traced throughout the
Dividend Around on the east. The Lelan crew is engaged at
present in crosscutttin from tbeir 400 ft. level towards the
Helena Vein, a distance Or approximately 400 rt. the collar
of galena shaft is 35 ft below Lelan shaft.
The DIVIDEND SHAFT has reached a depth of 700 rt. The outcrop
of vein is 24" wide. On the 300 ft. level, it is said to be
10 ft. wide, containing shipping and milling ore. On the 5tb
level, it is 48t wide, with rairly good values, 250 rt. Or
work has been done on 7tb level east and west on strong
quartz vein, with rairly good values and bunches of some very
good ore.
A little toping has been done. During seventeen month period
between 1099 and 1901, there were treated in the Dividend 5
stamp mill a total of 605 tons or ore with a reoovery of
Bullion, by Amalgamation $b2,919.3Z or J34;40 p. t, by
Conoentration 3.748.74 * 5.04 p. t. $26,00B.Oo 40.10
THE TICONDEROGA SHAFT is 200 rt. deep. The 55 foot level
estends on vein 255 feet west, with conslderable stoping on
good ore.
Tbo 200 rt. level estond~~ 702 rt. west, wlth two
topes,
one 60 rt. long by 80 rt. high, s^1d to show 18t Or 2.00
oz. Au in back; the other 100' long by 35' high. At 327 St. a
crosscut south was run from bottom level for tbe purpose of
intersecting the Dividend and Calene Veias. It appered that
two branches of the Dividend were cut and several hundred
feet of driling was done on ore oontaining Au. good values,
up to .1.00 ozX per ton .
The Ticondoroga Shaft is approximately 300' below the Lelan
Dlvidend Shaft and also more centrally located for
advantageous prospecting.
THE INDEPENDENCE VEIN shows very large croppings, from South
to fifteen feet west. It is prospected by two shafts 5O rt.
and 90' deep, respectively, The Jones Tunnel, ~~t320 feet
from protal, intersects tbe vein sbout 100' below the surface
and a drift Of 90 on guartz which contains fairly good
values.
T9Z UNION VEIN 1s prompeoted by evernl aballow Jharte in tbe
east portion Or Dona lnna Claim. Tho oropplngR are lzrge and
persistent. espeoillly on the dJoining Unloa Clels, bero
zislng nd S stzmp silllng operationa have been sucoeaarully
carried on fOr bout 15 years. Tho ore eboot la SOO' long and
estonda from surSaoe down to Union Tunnell, distance Or
lB5'. Uoat Of tho ground above the tunnel Le etoped, nd very
little prospeotinS hag been done below. The vein averages
sbout rive roet in widtb znd 1~~ acoompanied by z besis dike.
Respectfully Submitted
Sgd. Max Stoekder Tucson, Arizona Feb. 29, 1916.
Brief Review of the Lelan-Dividend Mine by T.J. Sparkes
The report by Sparkes was made ln 1916 and has little value
at present. I knew Sparkes well and he was an excellent
engineer, but lt is evident that he merely examined the
property for the purpose of obtaining a general lnformation
for his employeres (The American Smeltlng & Refining Co.)
rather than for the purpose of placing any value on the mine
or determining whether or not they should consider as an
investment.
DEsCRIPTION, HlSTORY AND PRODUCTION of THE LELAN Dividned
GROUP OF MINES, YAVAPAI COUNTY.
A condeneed compliation of avaliable reports and a
review of recent operations
LOCATION:
The property
le t7elve mllee alr llne eouth ast Or Preeoott. By road lt
le Z6 mllec froa Presoott and ff 31les froz Rumboldt. It le
reached from Preecott by tatln6 Rlghwar ~~ll2 to a ahort
dlstance beyond Rumboldt then taklng a elde road to the
rlght, croselng the rallroad near the sldln6 on the Presoott
and Eaetern Dlsielon Or the 8anta Fe, whlch le. lncldentally,
the neareat ehlpplng point.
be group or elalme le eltuated on the head watera Or the
Oalena and Tlconderoga Oulch on the East elope of Xt. Elllott
ln the Blg Bug Mlnlng Dlatrlet, Yavapa] Zounty, Arlzona. THE
DISTRICT2
The Blg Bu6 ?dnlng Dlatrlot la on the northe-etern
clopee Or the Bradahat 1tountalna and extende from Blg Bug
weae to the Agua Frsa Valley. It raneca ln altltude from
4SOO~~ to 70002.
Placer Eold was dlecovered ln the Blg Bu6 reglon ln the
elxtlec and lt 1^ eenerally underetood that all Or the
gulohea pald weil. Th:e leade to the dlscovery Of numeroue
elne and the eubeequent worklng Or the oxldlzed zonea. ln
early daJe mlnln6 etopped when the llmlt Or the oxldlzed
ronee wae reached. Although the contlnulng aulphldee orten
held valuee that eteedlly lncroseed vlth depth, they could
not prorltably be reeovered by amalsasatlon. Slo eetlmaten Or
early productlon are avallable. Arlzona Bureau Or Vlnec
Bulletln #37 ataten, wDurlng the Early daya eome of the Blg
Bu8 depoelta ylelded a conslderable amount Or gold and ell-er
rrom the oxldlzed zonee. rrom l90l to 1931 lncluelve, the
profuotlon Or the dletrlot, ae reoorded by the U. B. Rlneral
Resourcea, amounta to approxlmately Sl7,000,000 ln copper,
Eold, ellver, lead nnd zlno. Rearly 4,000,000 Or thla amount
was ln gold, Or whlch azount $30,000 came rrom placera.
The mlnee ln the lxmedlate slolnlty Of the Lelan-
Dlvldend group hzve epod productlon recorda. Rhe adJolnlng
propertles are the Unlon-ant llttle Jeeele, whlch are
conaolldated and now known aa the
Unlon-Jesele. 90th became inown sn the late elstlee. From
about 1890 to 1898 lt wse torked by J. d. Jonee and leeeeee..
Shelr mlll le reported to hare produced about $750,000 worth
Or bulllon and oonoentrates ohle n J from the Llttle Jeeele.
She oomblned produotlon record Or the Unlon Jesele 1s
tl,400,000. She nest adJolnlsr propertlee are the McCabe and
~~ on the Galena Osloh. Arlzona Bureau Or Slnte Bulletln #37
etatee, regardln6 tbe YoCabe-Gladetone ZDureng the early
eerenttee thle depoelt Jlelded oonelderable ancunts Or rlch
oxldlzed oree. The property then remalned praotlcally ldle
ror many yeare. St wae worked oontlnuouelr rrOm 1898 to 1913
by the ldeal Leaelng Company vlth a rePorted produotlon Or
$2,500,000 to
SHE LELAN DIVSDEND oRout:
Estent or property ~~ reln eyetem and zlnerallzatlon~~
Underground DeveloPment, eurfaoe Lzprovemente and equlpaent.
Shle group Or contlguoue olalme eoverc a large mlneral
area, approxluntely ~~20 aoree Of patented lgnd ani extende a
mlle or more ln length on the otrlke Of the alnerallseO sone.
It ls oharaoterlzed by prowlnent quarts outoropplnge Or
numeroue velne. Thene oocur ln and at the oontaot Of a belt
Of aerlolte enhlet rormatlon between quarts dlorlte on the
eaet and macalre Bradehas 6ranlte on the weet. ge eral baelo
dJkee traYeree the echlRt and quartz dlorlte. Shere le a
great etzllarlty ln the dlRrerent outcropplnge and ln the
veln oontente and the mlnerallzatlon underground.
Shere are rour maln velne, the Oelena, Lelan-
DlvidendSn^rp-d~~^^tP Sloonderoga, and Unlon. Shey ha e a
lateral extent Or ee-eral thoueand reet and oonverge ln a
eouthweeterly dlreotlon ln the weetern halS Or tho Galena
olSls. All dlp more or leee eteeply to the eouth. Shere are
eeveral other leee pronounoed outcropplnge ln the weetern
portlon Of the group.
me *-erage vldth Or the saln velne le about rlve reet
thoy vary from two to ten reet. She rOot and hanglDg walle
are well derlned. Rhe rllllng conelste Of maeel e thlte
quarts. Ee ore ehoote are lentlcular ln form- me plnchlng and
rselllng leneee sometlmee
3
overlanplng or lylng alongelde Or esoh other and eepareted b
ohls_ toeo eerlolllo 6angue materlal, warJ ln thlckneee rrom
2 to 10 reet or more end rrox 20 to 76 reet ln lateral
extent. Oold bearlng eulphldeo, prlnolpally pyrlte nsb
lrregularly dletrlbuted througft the quartz lenees. Small
amounte Of lead and zSno yulphldee are aleo preeent. Below
the oxldlzed zone mlnerallzatlon oo=aenoes at or below the
170 ft. level and vlth depth sore eulphldoe end better salues
are encountered.. X^e gold ls deolmlnated ln the selphldee ln
mlorosooplc partlolen.
There are rour dletinot nslnee, the Lelan, Dl-ldend,
Oalena, and Tloonderogz
(The Lelan shart le 433 rt. deep slth workln6e on flve
levele. On the 120 rt. level drlRts extend 60~~ eaet and
lt>Ox weet.
' with a oroseout frOm tYze end Or thle drltt
36S feet to the surface.
" | 170 ft. level drlfte extend 120 east and 2802 it.
.54^ orone cut 2432 long and 400~~ or more weet wlth a
eouth orose out 160' lonz 436 rt. level drlRt extend 150~~ eaet oonneotln6
slth the
Old Dltldend torklngs, and 8402 weet. Shere le A 40@ vlnze
drlven frO~~ thle level 2701 weet Of the ehaSt.
She hlvldend ehart le probablo ozrrled eome dlettnoe below
the lowest or 477 rt. level. DrlRte lrere drl~~n on four
levelz.
/ On the 145 ft. lerel drlRte estend 40@ enet and 502
wret.
me collar of the Sloonderoga le 246 rt. lower than the
Lelan and Dlvldend. the ~~har
levele.
She Oalena ghart le 265 reet~~ deep the oollar beln6 ZS'
below the oollar Of ths Lelan. DrlftSng wse done on four
levele.
On the 65 foot level drlft~~ extend 56' eaet and 220~~ weet.
On the 16S rOot level drlRt 1s caved 40' eaet Of ehart and
extende 340~~ lreet.
On the 2do St. lescl drlRt~~ estend ll5~~ eaet and 150' weet.
4~~
the workings ln thls mlne have not resohod the horlton
that produced the best values ln the Lelan.
Recent operatlone hare been llmlted to the Lelan, vhloh
18 equlpped slth an electrlc holst (the property 1s ser-ed bJ
Arlzona lover Co. transmlss10n llnes) two motor drlven alr
compressors enolosed ln substantlal bulldlngs, etore rooma
blaok~~=lth ahop, ohange house and heasZ tlaber head rrnme.
She old en61ne room at the Dltldend 1s used ror a gara6e and
store room. the Oalona ahart has a llght head Sr>~~e and
gasollne holst, recently used ln openlng the ehart. Rere also
the old englne room le used ror a gara6e. Rho old tamp mlll
and oth-r bulldlngs at the tlconderoga have been partlally
dlsDantled. She Lelan M1^ , about 15C reet vest Or the Lslan
shart, reoently rebullt and brought up to date, contzlne a BA
Telsalth gyratory orusher, a hundred ton ore bln, ten
sta.mps, 4 s 5 ball mlll, 46 x 18 duplex olaeslRler, two
EllRley tablos, an el8ht oell (Z73/4' s 27 3/4') Fahren~~rald
flotatlon machlne, a lO x 20 tallln~~s thlokner and oomplete
supplLmentary equ1pment, all elootrlcally drlven, tor a
capaclty Of 75 to 100 tone per day. Tllo other bulldlngs on
the property are euperlntendent's houee, gara6e and tore
houee, rorevan2s house, bunX hou3e and boardlng houeo, all ln
6nod repalr. Exoellent water ror domestlo u3e le pumped from
a vell ln the headwatere Or the Ohlena 6ulch, rest or the
canp, to etorage tan~~s an,d plped to dwellln6 and boardrnz
house^.
The elevatlon Of thc camp 1~~ 5500 Seet. The clloate 18
excellent ror worklng during all eeasons. EARLY OPERATION8
AND CoNsoLlDATInN8:
Tho property ae lt stands today 1s the rerult Or a
number Or consolldatlons. AvaLlable reoords Or e rly
operatlon and productlon are frag3ental nnd lncomplete. lt
appears, howe er, th t the el-lme on vhlch the rour mlnes are
located vere orlglnallJ owned and operated separately and
that the development and operatlon Or the sarloue clalms hae
been carrled on more or le es lntermlttently slnoe con
slderably berore 1877, vhen the Dlvldend and Oalena C:alas
vere patented and vhlle no derlnlte records of produotlon
prlor to 1901 are avallable,
6
lt le probablo that the ore depoelts known to have been alneF
berore thaS tlme ylelded a oonslderable anount Or golO fro~
the oxlalzed zonee. Brown~e report Or 1868 Dentlone a eo ton
ahlpment rrom the DltIdend mlne to the Blg Bug (Renrletta)
alll that rlelded t20.00 per ton ln rree goli. At that tlme
lt wse not ooneldered Or oo=nerolal grade.
The Dlvldend Gold Ylnlng Co. wse orBanlzei In 190C to
take over the Dltldend and the Tloonderoga. In 17 aonthe
operatlon ln 1901 anffi 1902 recorde show that 60S tone Of
ore wse nlrled slth a reoo ery or t26,6&8.06 or t40.10 per
ton. The asall rlve eta~P a111 wse operateO at the rate Or
only 1.6 tone per fay. In 1902 negotlatlone were etarted to
ooneollda-te the DlvidenO Ylnln6 Co. and the Oslena Ylnlng
Co. slth a sles of lnereaelng the oapsolty Of the m111 ana
rurther de-elopment and laprovemente. Shle ooneollFatlon wse
erreoted by the Dlrldend Coneolldatei GolO Ylnee Oo. It
ooaprleed the followlng olalme, from that tlme ont known ae
the DlsiCend Groupt Intependence, Sloonderoga, Dltldend tl,
Galena, Cllpper, Summlt, Coastook, Juzp orr, Starllght,
Peerlese and aundry fraotlons. 90ne alnlng but prlnolpally
work on development anO laprovemente wse oontlnued untll the
latter part or 1906. Ee mlll wse Inoreased to ten etampe and
with other lmprovemente lts capsolty was etated to be 20 tons
per d^z. The property wse then taken oxer by the ne-ly
organlsed Yt. En lott ConeollOated Rlnee Co. At thle tlme the
Aladln and Unlon olalse are ehown to be a pxrt Of the
property ln addltlon to those pre-louely llsted ae the Dl-
ldend group, all pat nted extept the Unlon, ~iklng 12 olaLms
aggregatlng ln area about 200 aores. Operatlon wse resumed
and records ahow that from Nov. 1O, 1907 to teb 11, 1910, the
recoverJ amounted to $28,029.32.
thlle the DlvldenO Oroup wse belng de eloped and
operated work on the Lelan, adJolnlng the Dlxliend, had been
oarrled on. She ehart belng only 200 rt. weet Of the Dl-ldend
dhaft. 5hle property, lnoludlng eeveral oontlguoue olalme,
all adJolnlng the Divendend group
generated by hls son Elmer w. wells. A rather extenel e
development program wse carrled out and a ten stamp nlll was
operated lnternlttentlr. Records ehow that ln 1906 ane lsoe,
1600 tone Or average ore taken from the varlous le-els above
the nRth, were nllled slth a reoo ery by analgamatlon and
table concentratlon of tl8,462.30 or tll.54 per ton slth m111
talllng arer:glng t3.00 to t4-00 per ton and that ln 1911,
1400 tons Or ore averaglng .4 ~~ . gold and .46 oz. ell er
per ton was shlpped to the RumbolOt emelter and 300 tone
averaglng .36 oz. gold and .3 oz. ellter per ton were ehlpped
to Jeroxe. Sheee shlpments were made on contraot vlth the
emelters tor hlgh ( u s102 ore ror Surnaoe llnlng and no
errort ae uade to eort rOr hlgher
however gold and sllver walues ln theee ahlprents at
prlces then ln erZect azounted to approxluately tO4P000.00.
Conslderable trouble arose between the operatore Or the
Lelan and Dltldend on account Or allegeC lnsselons and
operatlons were dlecontJriued then the questlon wee thrown
lnto lltlgatloo, wElch rlnallr resulted ln the organlzatlon
Or the Lelan-DlTldend Rlnlng Co. by the two owners, Judge E.
W. Wells Or Phoenlx and genator Reynolde or h. !. and the
consolldatlon Or the Lelan and Dltldend Oroupe, whloh now
lficlude the followlng patented alnlng olalast Sloonderoga,
Dltidend fl,
Independenoe, Oalena, Cometock, Cllpper, 8us~~1tt, Ju~~p orr,
Peerlee8, 8tarllght, Aladln, Lelan, Dona Ana, Yldette,
Bettle, Contentlon, Lelah, Extentlon, Omar and the hUneral
Junotlon unpatenteO olal=.
Llndgren states that the ore produotlon ~~
Dlvldend prlor to l923 wae probably lO,OOO tone whloh
oonts1n
gold per ton together with a llttle ellver, copper and lead.
tork had been dlecontlnued ln 1916 to be resumed ln 28
and 29 on a t25,000.0O de elopment prograw, praotl~~ally all
work belng done on the flRth lesel. then thlg amount of money
had been spent the owners were unablo to agree on plane for
oontlnutX6 the work and operatlons were agaln dlsoontlnueC.
In 1931, 8enator Reynolde, Zho by ttle tlme had a oontrolllng
lntereet, was preparlng to resume operatlone but dled berore
hle plane oould be oarrled out. A oaretaker
was left on the property and the Lelan mine kept unwatered.
RECENT OPERATIONS AND IMPROVEMENS8t
Early in 1932 a member Or a known as the
Southern Zxploratlon Company Or & n Antonlo, Texas, learned
that the exeoutors of the Reynolds estate would conalder
leasing or disposing or this property. Negotlatlons were
entered into and in reb. 1932 the Southern Exploration
Companies Sn6tneer and two members or the szndloate visited
the property. 900e samples were taken that showed
satlsractory values, but it was ~~mpoeslble to get far enough
into the Lelan to make a Satisfactory exanlnatlon. rhey were
lmpreesed, how- e-er, by the eurrace lndloatlons and by what
they were able to learn of the history and production Of the
Lelan Dlviffiend group and or the adJolnlng properties, the
Unlon-Jes~~le and the McCabe-Oladetone. They also learned
that shortly before operation was dl-oontlnued in 1916 the
property had been examined and reported upon fa drably be a
statr engineer Or the American Felting & Rerlnlnt Co. buS
that no deal was ooneumated due to the large purchase price
aiked at that tlme. This report including the aBeay map Or
the Lelan was made invallable. Wlth this Information it was
decided to secure an option and to do the work necessary to
get lnto the Lelan for a more thorough examlnatlon. The
results or this preliminary work were surRloiently
encouraging to Justlry ralsing Of funds for a more formal de
elopment program Whloh included preparing the m ne for
extraction of ore and modernizing the mlll. The necessary
funds were ralsed by private subsoriptlon prlnolpally by
members or the original erndloate. Xn June 1932 contract and
option to purchase was formally eonoluded vlth the owners and
slth the operating capital available general repair ork was
carried on, a large stope west of the Lelan chart Ear
prepared for extractions the neoeseary repairs to buildings
made, assay laboratory equipped, modern mill equipment
purchased and installed and alll repaired and reconstructed.
Ore extraction and mllllng was started on August 1, 1933
and continued for flve months. Daring this period 2020 tons
or ore were mined and milled filth an average gold content of
.44 oz. per ton.
~~ _
Jlnety and one halr tone Or concentrates were produoed and
shlpPed to the E1 Paso smelter. The total gold oontent wae
808.3B oe. lndludlng patcents tor lead and oopper net
uselter returns amounted t to S23IZ13.86 vlth an a erage
prloe or gold durlng the rl e months
2t Or SZ8.50 per os.
_ - - _
She mlll functloned perSeotly saklng a retovery Or 92.4
per oent Or gold oontent. Rowever vlth a mlllLng oapaolty Or
2000 tons or more per month, only 400 tons was belng produced
bJ the mlne and thatirram one stope. Arter startlng
extractlon rrom thle stope lt was found lmposslble to
practloe schletose condltlon on both foOt and hanglng walls brhought
about a serlous stoplng problem. It wae neoeseary to dra- and
spread waste rllls rrom old oated stopes Or the le-el above.
The eare handllng or the ground naturallJ reeulted ln much
ilower produotlon than had been scheduled.
Fhen operattons were starteO lt was expeoted that lt
would be posolble to bulld up a cash reserre to take oare or
preparatlon ror stoplng Or three other blocke ln the Lelan
and to open the Galena and Dlvldend, but vlth extraotlon
oonRlned to one tope anC that retardet by unexpeoted
condltlone, returne were not surRlolent to take oare or thls
and although operatlng at a smZll prorlt, St was oonoluded
that ore reeervee were belns used up uneoonomloally, that the
sery oommon error or attemptlng to equlp a mlne and a111 and
get lnto produotlon vlth lneurRlelent runds had been made.
Consequently lt was deosded to ehut down the mlll and eeoure
rlnanolng ror at least three months Or stralght mlne
preparatlon and de elopment and to pro-lde addltlonal
comoressor oapaclty, whloh had been Sound to be lnadequate.
The members Or the orlglnal B^ndlOeto wore unable to ad_
vanoe the amount neteseary for the proponed tork and gteps
were taken to seoure outelde flnanolng vlth the result that
two examinatione were made by englneere tor partlee
lntereeted ln the propoeltlone. Both englneere reported fa
orably to thelr prlnolpals. ln April, 1934,
a satlsfaotoro agreement was reached and what had been
estimated to be a surRlolent amount to carry out the proposed
plans was provided by New York interests
These plans
He the Bouthern Exploratlon Companies engineers in
conference slth the engineer representing the New Tork
lntereets, lnolude: the lnsth11atlom Of an addltional sir
Compressor, purchase Or sore additional mine equipment,
lnstal1atlon Or a drier for ooncentratee,ppreparlng three old
stopes in the Lelan for extraotlon, clearing and repairing
the old Dividend shart, drifting east on the rlRth level Of
the Lelan to connect slth the Dlvltend, unwater the Dlvldend
and get into the old workln6s, oontlnue development work in
the ulnae below the flRth level we et Or the Lelan Chart,
develop new ore bodies between the 4th and 5th levels between
the Lelan and Dltldend, repair and clear the Oelena shaft and
resume extraction and selling not ~~
The Ne- York lnterest were lnslstAnt on starting the
ml11 on this date and although, by working double shirt, a
oonelderable part Or the proposed work had been accomp1l hed,
lnoludlng the enlargrent Or the compressor house and the
installation Or a 700 ou. ft. per minute oompreseor, very
little Dance had been made in exploration or dove10pment Or
new ore bodies and only one new ore body and two old
partially stoped ore bodles An a very 11mlteO area east of
the Lelan Chart were pro
ssvtraotlon. Ro ever, up to the time m111lng was resumed
on Aug. 1, 1934, no anxiety was felt as to tonnage or grade
Of the ore exposed in these stopes. Yelling was startef at
. . .
the rate Or 40 tone per day, the ore averaging .33 on. Or
gold per ton. while this was oonslderably lower than the a
erage grade Or the ore milled in 1953 it was good enough to
how a profit. As the ml11 was not running to Oapeolty no
particular effort wse made to improve the grade Or the ore by
sorting either in the stopee or at the ally. Anything that
showed even a trace Or sulphldee was put through the m111. It
was felt certain that as progressed, an average grade
equal to that Of the former m111 run would be readily
malnUlned. Instead, these ore bodies showed an unexpected
laok Of unlrorzlty and
10~~
with no other stopes prepared rOr extraotlon lt became more
and more dlRrloult to supp1Y the mlll slth ore.
Rhe m111 was run two months. Only 182ZD tons Or ore were
ollled produclng 4X.1 tons Or conoentrates slth a gold
oontent Or 321.9Z OS. anO net ezelter returns auountlng to
t9,9 n .28.
Wlth productlon deoreaslng Srom the on1y ~~topes that
had been preparod, operatlng 1 sses were slowly but surely
depletlng the operatln6 oapltal. Consequent1y lt wae deolded
to o10se doun operatlone before lnourrlng lndebtednees that
oo ld not be 1lquldated by gmelter return~~.
An erfort was made to proslde addltlonsl to
oontlnue the proposed development east Or the DlTldeni br a
loan scoured by the machlnery and equlpuent. ~~hle was
reoomaenOeO by the englneers Of the Southern Zxploratlon Co.
anO the englneer aseoolated slth the Bew York snterests. To
do thls, lt would have been neeessary to modlry the terms Or
the 1ease. Bowever, lt proreO to be laposslble to reach an
agreement and ln Of the olrcusstancee lt beo^se
neoessary, ln accorOanoe vlth the terms of thelr oontract,
tor the Bouth
ern Exploratlon Co. to return the property to the owners.
snouuRr or 1933 and 1954 CPCRATIONSt_
me Judgment Of the englneers Of the Southern Exp10ratlon
Company, Vhlch was later oonflrmeO by englneers Or reoognlzed
standlng and ablllty Or three other mlnlng companles, ln
recommendlng thls property, ls not questloneO.
In the subsequent operatlon, lnsteaO Or an extenslve
exploratlon and deve10pment program, spreaOlng over a 1arge
area, prlor to startlng produotlon, the 11niteO oapltal and
the preesure Or some of the larger stock ho10ers for quloF
returns anO to a-olO lr posslble the necesslty Or ralslng
addltlonal SunOs, dioltated the polloy Or hurrled preparatlon
for extraotlon and allllng Or the lxmedlate1y atallable ore
ln the Lelan. ln the rlrst operatlon the adoptlon Or thls
plan for the de-e10pment Or the property was also
oonslderably lnfluenoed by the faot that the bul1dlngs and
equlpaent on the property were ls usable oonOltlon, that the
Lelan shaft and a part Or the under
9 a satlsfaotory agreement was resoheO and what haO been
estlmsted to be a suSrlolent amount to oarry out the proponed
plans was proslded by New York lntereetsc
These plene whlch were arrlsed at by the Bouthern
Esploratlon Company's en61neers ln oonrerence slth the
englneer representtng the New Tork lntereets, lnoludeO the
lnstallitlon Of an sddltlona1 alr oompressor, purchase Or
eone adOltlonal mlne equlpment, lnstallatlon Of a drler fOr
concentrates,ppreparing three old stopee ln the Lelan for
extraotlon, clearlng and repalrlng the old DlTldend shart,
Orlftlng east on the flfth leve1 Of the Lelan to oonneot slth
tbe Dl-ldenO, untster the DlvlOend and 6et lnto the ola
worklngs, oontlnue development work ln the slnze below the
SlRth 1eve1 west Or the Lelan shart, Oeve10p nes ore bodles
between the 4th and 5th levels between the Lelan anO
Dlvldend, repalr and olaar the Gelena dhFK anO resume
extraotlon and sllllnz not later than Auxust 1st. 1954. _
The he- Tork lntereet were lnsletoat on startlng the
mll1 on thle date ani although, by workln6 Oouble shlft, a
oonslderable part Of the proposed tork hld been sccomp11ehed,
lnoluOlng the enlar6ment Of the oompreesor house and the
lnstallatlon Of a 700 ou. ft. per nlnute oompressor, sery
1lttle aOvanoe had been made ln exploratlon or developxent Of
nes ore boOles and only one nes ore body and two olO
partlally stoped ore bodles ln a wery 1lmSteO area east Of
the Lelan shart were prepared for exSraotlon. Sowever, up to
the time mllllng was resumed oK Aug. 1, 19Z4, no anxlety was
felt as to tonnage or grade Of the ore exposed ln these
~~topes. Ysllln6 was starteO at the rate Of 4C tone per dsy,
the ore averaglng .35 os. of gold per ton. Ehlle thle was
oonelOerably lower than the a erage 6rade Or the ore ml11ed
ln 1953 lt was good enough to ehow a proflt. As the ml11 was
not runnlng to Oapaolty no partlcular etfort wa made to
loprove the 6rade Of the ore by sortlng elther ln the stopee
or at the111. Anythlng that showed even a trace of
ulphlOes was put throuzh the mlll. lt was Selt certaln that
as xlnlng progresseO, an awrage grade equal to that Of the
rormer ml11 run would be readlly malnUlneO. Instead, these
ore boOles shoved an unexpeoteO laok ot unlforalty and
11ground worklngs were open and accessable and that the
neoessary addltlonal equlpment requlreO to modernlze anO
lncrease the oapaolty Or the mill oould be acqulreO at that
tlme at ery lot prloes.
thlle a great deal wse acoomp11 hea wlth the moneJ
opent, the Sunds proslded were lnaiequate to oover the
regulldlnge Or the mlll, reequlpplng the mlne, olearlng the
old workings and lea e a surRlelent amount ror preparlng the
old stopee fOr extraotlon Of the ore remalnlng ln them and lr
exp10ratlon and development Of new ore bodles.
Preporatlon fOr extraotlon, Oue to the 1S31teO funde anO
the rush to get lnto produotlon, had been neeesearl1y
oonflneO to ~~ss1 anO 1ls1teO areae. In the rlret operatlon,
to the large atope between the 3rd and 4th 1eve1 west of the
Lelan and ln 1934 to the two old atopes and one soal1
new ore boOy, eaet Of the shart, between the 3rd and 5th le
ele. Both ln 19Z5 ani 1954 ml11lng wse started before the
mlne had been made ready to take oare of anywhere near the
oapaolty dr the mlll, slth the expeotatlon that returns woulO
Bhow surRlelent proflt to provlde a rurplue Sor deve10pment
anO preparatlon for cxtraotlon Of other ore bodles.
In 1933 funde had been entlrely exhausted by the tlme
produotlon started anO lt wse neeeseary to borrow operatlng
onpltal and ln 1934 only a eurRlolent balanoe had been
reserved for one month's operatron.
Contlnuous operatlon dependeO not onlp on alntalnlng a
surRlelently large tonnage of ore frO tho ulne ror
eoonomloa1 operatlon but the preparatlon of new ore bodlee
for extractlon.
Unexpeoted undergrounO oondltlons retarded the rate Or
produotlon anO shortage of rundst khlch haO serlouely
ourtalled delelopment beSore startln6 produotlon, creventeO
preparatlon or nes etoplng ground for future tonnage to
replaoe that extraoteO.
She uneuooesstu1 experlenoe or the 50uthern Kxploratlon
Company ln no way detraots froa the salue or posslb < ltles
of the property as a ~~hole, espeolallJ ln wiet or the
present prloes Of go1G and ellver. Ir the flrst operatlon ln
19Z3 oould have been delayed
12untll the prloe or gold had re ohed SZ5.OO per oz. and
eurRlolent run0 had been arav able rOr the derelopxent of the
are bodles ln the mlne, ln the meantlue, the erentual
operatlon would not only hare been more erRlolent and
eoonowloal due to 6reater dally tonnage but tho returns would
hare been conslderably ~~ore and lt 1s entlrely posslble that
the oceratlon oould hare been oontlnued. ~~he reoorery frao
the cotparatlrely amall tonnage tlees than 2b por cent or the
oaptolty Or the 0!11) extraoted from two rery llalted areas
ln the Lelan, ln the
se en aonths operavtlon ln l9Z3 and 1934, at preeent prlces,
would hate amounted to approxlaately $40,000.
there 1s erery lndloatlon Or the oontlnuatlon of the ore
bodlea. It was tound that the relna, though looallJ
lentloular, were perslatant vlth derlnlte walla and that the
lena for0atlons oould attaln a oonalderable slze. Froa the
extent Or the old tortlngs and the balanoe or the tonnage
recovered ln 19ZZ frO~~ one Or these lensee betteen the 3rd
and 4th lerels weat Or the Lelan Shnttw thla alngle lens that
reached a thlckness Or ZO reet auxt hare orlglnally held rery
olose to 5000 tona oS ore that would average halS an ounoe Or
gold to the ton.
be deepeet work ln the Lelan la the 40 rt. slnze Creren
rrom the 5th lerel went Or the ahatt. The bottom Of thla
slnze, whlch le 47B rt. belo- the surraoe, 1s ln ore as were
the old DlvldenO worklngs, sbout 500 rt. to the east at
approslsately the saxe level. No worklngs have gotten below
the ore bodlee and not onlJ the ahowlnga at the greatest
deptha reached ln the Lelan-Dlrldend group but the aotual
recovery ln other mlneo ln the rlolnlty at ruoh 6reater
depthe sre lndlcatlve Of that ~~ay reraonably be expeoted
both ln tonnage znl grade by deeper derelopment.
The adJolnlfg propert^, the Llttle Jeeale, haa been
worked to a depth Or B59 St. nd the oollar Or the shart ls
about lower than ths oollar or the Lelan. Llndgren states
that xuoh hlgh grade aurlreroue pyrlte waa encountered
betteen the 500 and BOO~~ lerels. Shls tould be ln a horlzon
rrom 200 to 300 ft. below the deepest worklng
15~~ or the Lelan. She next adJol41ng property, tbe YoCabe-
Oladstone la 600 rt. lover than the Lelan at the eurfaoe.
~~_e MoCabe shart l~~ 900 rt. deen and the ladstone 1102 St.
The extenslre permanent lmprorementa tade by the
90uthern Explorstlon Co. are now a p-rt or the prdperty. Rhe
bulldlng were repalred anC equlpped ror use where neeeesary.
The oompreesor house was enlarged and a 700 ou. rt. rer
mlnute alr oompreneor lnatalled. The capsolty and erRlelency
Or the mlll waa lncressed by the lnstallatlon of up to date
equlpoent, whloh le 1D exoellent oondltlon, lesa than 4000
tone hav1ng been mllled ffllueetthe mlll waa rebulit.
She Lelan ehart waa repalred, oared drlfte oleared and
tlmbered and conneotlons made betteen the Lelan and Dlvldend
torklnga. She Galena, Slconderoga and Dlrldend aharte were
opened. The road to the property was 6reatly lmproved.
Shls ork, all neceeeary to raollltate Surther
exploratlon and development, la done. C09TS AND REXUIREUENT8
FOR .=ROFISAEIE OPERASIOBs
ln the eonaldnratlon Or gold mlmlng propertlea, lt
nottebe recognlzed tEat the polnt Or vlew haa been
oonalderably altered not only by the lncreeaed prloe cr gold
but by the eater eoonomy Or operatson and reco ery Or valuee
made pozelble bJ modern methode Or mlnlng and mlllin8.
E en before the prlce Or gold had lncreased,
lxprovementa ln methoda Or recovery were maksnB poeelble the
reaumptlon Or operatlon Or old mlnea thtt had long been ldle
and even the prorltable worklng Or old duspa and stone rllle.
Wlth the prlce Or gold at tas oo per ounoe oompared vlth
the old ~~ and actual reoovery Or waluee frOx the aulphlde
ore Or the Lelan 92.A% oompared wlth 6~~ to 65! by the old
methoda Or amalgamatlon and table ooncentratlon, a wueh lower
grade Of ore
! oan be prorltably mlned and mllled than waa poealble at the
old prloe nnd wlth the old methode.
She lmportant ractora, ln the rlnal analJBlaS are the grade
I or ore that ttll peralt prorltable operatlon and the
tonnage Or that
14~
Brade that can be developed.
So arrlve st the Brade Or ore that will permlte
prorltable operatlon, the faotors, are, the ooste Or mlnlng
and allllng, the peroentage of reoovery Or taluee ln xlll
oonoentrates, and the net emelter returns, Whlch 16 the talue
Or the oonoentrates at the polnt Or ehlpment, ae the saelter
paye and deduote the rrelght and deduots treatment and other
ohargee.
For co"vealence snd becauge the proportson Or gold
selver and lead are falPlY unlrorm, the net emelter return
oan be reduced to doqlar~ Der ounoe Or gold oontent. ~
Net smelter returne rrOa shipments Or oonoentrates ln
Auguet and 8pptember 1934, rhen gold wee 136.00 per ounoe
a~ounted to $9,9 n.Z8. She gold oontent was Z21.92 ouneee.
the net return per ounoe Or gold oontent was, thererore,
tZO.97.
Durlng thle perlod the peroentage Of retovery Or gold
taluee ln the conoentrates was 9Z.4:
Ee estlsated oost Or mlnlng and allling, based on a
nlnl= produotlon Or lOOO tons per month, exelus1ve Or
asortlzatlon lst
/ U1NING (lnoludlng developnent - tl-OOl 1 20
1LARXETING
/ Fre~ght on Cono'tea to E1 Paeotl?.27
9melter treatment6.00
Raulage - Nlne to Rumboldt.75
5aoklng ana }1andlln6Z
Representatlve nt smelterlZ
Per ton Or Conoet'sgZO.44
/ Per ton Or orude ore (ratlo 25 to l)
Compeneatlon Insuranoe
1 State Taxes
1 Flre Inouranec
/ UNFORE^rEN
TOTAL OPERATING J6 z
As oonoentrates are losded In truoks
at the mlll ror dellvery to the smelter and the
marketlng and treatment etc. hes been taken lnto
oonslderatton ln Net atelter returns, Deduot.
___ii4__
$5.27-
Shls estlmate 18 based on lOOC tons per tonth
rrem one shart. She mlll oan oonoentrate 75
tons ore more or 2250 tons per month, saJ 2000
tons per month.
lon thle banle add t.70 per ton rOr transportatlon
and other costs, poeslbly necessStated by operatlng
more than one mine and .30 for saottng, handling and
loading concentrates.
COST PER
TOS
Uslng these fleurest
.73
Cost or mlnln6 and nslllng per ton as cry 56.00
Net smelter returns per os. Or gold re
ooverd{.
Recovery 92.4%
the grade or gold content per ton of ore, to Just equal
alnlng and Ha ling costs would be 0.2l oz. per ton.
5 - .1935, .1935 -- .21
31 '92.4
ad .00
From this mating allowance for a mlnlwam profit and
unforescen oontlngenolee the eoonomtoal slnl2us of grade of
ore to be Knee and mlv ed should be .3 to .36 os. per ton,
depending on prospective tonnage and dlstrlbutlon of
amortlsatlon.
GEOLOGY BIGBUG DISTRICT"
The Bigbug district is on the northeastern slopes of the
Bradshaw Mountains. It ranges in altitude from 7,000 feet,
west of Bigbug Mesa, to 4,500 feet, in Agua Fria Valley Trhe
western portion IS umtereu and fairly wEll~~lcHd~~e the lower
dissected pediment or foothill belt is rather dry and brushv
to opera country.
This area is made up of schist, intruded in places by
diorite granodiorite, granite. and dikes of rhyolite-
porphyry. The schist is mainly of sedimentary origin, with
many quartzitic beds, but contains also some igneous members.
It is intruded on the west by the Mount Union belt of
granite, and southwest of McCabe, by a stock of granodiorite.
These relations are shown on the geologic map of the Bradshaw
Mountains quadrangle, by T. A. Jaggar and C. Palache.:t
Basalt flows of post-mineral age-form Bigbug Mesa where they
rest upon a late Tertiary or early Quaternary pediment.
Elsewhere in the district, this pediment has been extensively
dissected by post-basalt erosion.
Lindgren has classified the ore deposits, other than
placers, as follows: (1) Pyritic copper deposit such as the
Blue Bell, Hackberry, Butternut, and Boggs; (2) Pre-Cambrian
quartz veins, such as the old Mesa, near Poland; (TEhe Iron
King gold-silver replacement deposit; (4) Later veins,
probably connected genetically with rhyolite-porphyry dikes,
mainly near Poland and Providence.
During the early days, some of the Bigbug deposits
yielded a considerable amount of gold and silver from the
oxidized zone. From 1901 to 1931, inclusive the production of
the dlstnct, as recorded by the U. S. Mine;al Resources,
amounts to approximately S17,000.000 in copper, gold, silver,
lead, and zinc. Nearly S4,000,000 of this amount was in gold
of which about $30,000 came from placers.
"Abstracled from Lindgren, W., work cited, p. 112. " Ivrcely
abstracted from Lindgren, W., U. S. Ceol. Survey Bull. 7a2.
'*Published by U. S. Geol. Survey in Folio 126 and Bulletin
782.
,4R120NA LODE GOLD MINES AND MINING 37
Fields and associates. In June, 1934, mine ore, mixed with
old gob and dump material, was being treated in a 200-ton
flotation mill.
The mine is developed by two shafts, 800 feet apart and 900
to
_1.100 feet deem together with several miles of worEnas. A
longitudinaJ section of t~~_rvey ENulletin 78..
Here, amphibolitic schist is intruded by dikes of
rhyoliteporphyry and, a short distance farther southwest, by
a stock of quartz diorite.
The vein strikes N. 54~~ E. and dips 79~~ SE., but,
between the two shafts, a 20-foot dike of rhyolite-porphyry
apparently deflects the strike southward. The vein averages
about 3% feet wide. Stoping has followed five ore shoots,
each 200 to 500 feet long. At least two of them appear to
extend to the 1,100-foot level. They pitch steeply westward
and average somewhat less than a foot in thickness.
The ore consists of quartz together with considerable
amounts of Dvrite ant arsenopyrite and a little sphalerite,
galena, and chal- copvrite. The following analysis of the
shippmg ore and the concentrates is given: Silica, 31.4 per
cent; copper, 2.0 per cent; lead, 2.1 per cent; zinc, 4.7 per
cent; iron, 24.6 per cent; arsemc, per cent; antimony, 1.0
per cent; sulphur, 20.4 per cent; gold, 1.6 ounces per ton;
silver, 10.2 ounces per ton.
UNION MINZ~~~
The Union mine is about 1N4 miles southwest of McCabe,
in the upper part of Chaparral Gulch, at an elevation of
approximately S,000 feeL
This deposit, which became known in the late sixties, at one
. time was consolidated with the Little Jessie. Except for a
little intermittent work and small production, the property
has been
practically idle for many years. Early in 1934, the Union
and Jessie mines were reported to be held by the Arizona
Consolidated Mining Company which was carrying on development
work and installing new milling machinery.
The workings include a 1,200-fwt tunnel, with more than
1,000 feet of drifts on the vein, and a 200-foot shaft sunk
from the tunnel level; The vein, which is a continuation of
the~~Lelan vein, strikes about N. 70~~ 1g~~ dips steeply
southeastward, and is followed by later unmineralized basic
dike. The ore consists of massive glassy quartz, up to 10
feet thick, with irregularly disseminsted pynte,
arsenopyrite, sphalerite, and galena. Where cut on the tunni
level and on the 77-foot level of the shaft, the ore shoot is
reported to be 250 feet long, with a pitch of about 30> SW.
The lower limit of the ore is reported to be about half an
ounce in gold per ton. Except in the oxidized zone, which is
snallow, the gold does not occur free.
"largely abstracted from Lindgren, we work eited, pp. 133-34.
36 ARIZONA BUREAU or MINES
IRON RING MINERS
"A little more than a mile west of the Humboldt smelter,
in the open foothills, is the Iron King mine, now owned by
the Southwest Metals Company, which also owns the Humboldt
smelter. To the officers of that company I am indebted for
most of the following information. The deposit, which carries
gold and silver, forms a replacement zone In the Yavapai
schist, but it differs from the normal copper deposits that
are so numerous farther to the south in the same schist. It
was worked about 1906 and 1907. The production in 1907 was
1,253 ounces of gold, 35,491 ounces of silver, and 3,933
pounds of copper.
"The deposit is developed by two shafts 750 feet apart
and 435 and 225 feet deep. Several thousand tons of ore
averaging S8 a ton in gold and silver have been shipped to
the neighboring smelter. It is claimed that the ore in sight
amounts to 20,000 tons and that the deposit contains much low-
grade siliceous material averaging S1 or S2 in gold to the
ton. The ore is reported to contain from S6 to S8 in gold and
4 to 23 ounces in silver to the ton. Some diamond drilling
has been done; the cores in the ore body contained $8 in gold
and 9.60 ounces of silver to the ton, 32 per cent of iron and
14 per cent of insoluble matter. Other parts of the ore body
contain as much as 70 per cent of insoluble constituents.
"The deposit forms a series of lenses in part
overlapping, in highly silicified schist, which strikes N.
21 E. and dips 75@ W. These lenses are 150 to 500 feet long
and 5 to 10 feet wide. The whole mineralized zone is 75 feet
wide.
"The water level was found at a depth of 140 feet, and
near this level in one ore body there was some enriched
copper ore containing 4 to 5 per cent of copper.
"The ore is a steel-gray flinty schist containing a
crushed quartz mosaic of coarser and finer grain intergrown
with some dolomitic carbonate and abundant prisms of bluish-
gray tourmaline. The sulphides are disposed in streaks and
consist of fine-grained arsenopyrite, pyrite, light-colored
sphalerite, and a little chalcopyrite and galena."
MeCABE-GIADSrONE MINERS
The McCabe-Gladstone property of eight claims is a short
distance south of McCabe, on Galena Gulch.
During the early seventies, this deposit yielded
considerable amounts of rich oxidized ore. The property then
remained practically idle for many years. It was worked
continuously from 1898 to 1913 by the Ideal Leasing Company,
with a reportd production of S2,500,000 to S3,000,000. The
mine was again idle from 1913-1933 but early in 1934 was
reopened and unwatered by H.
" Quoted from Lindgren, W., work eited, pp. 127-21. . "
Largely abetreeted from Lindgren, Ws work cited. pp. 130-12.
38
ARIZONA BUREAU OF MINES 4 2y0t
LITTLE JESSIE MINERS 5~~ p
The Little Jessie mine is about 1 700 feet south of the
Union. This deposit was discovered in 1g67. From about 1890
to the end of 1898, it was worked by J. S. Jones and lessees.
Their mill is reported to have produced about $750,000 worth
of bullion and concentrates, chiefly from the Little Jessie.
From about 1909 to 1916, considerable development work was
done and a little ore was shipped, mainly by the Chaparral
Mining Company. Early in 1934 the Arizona Consolidated Mining
Company was reported to be carrying on development work and
installing new mill machinery at the Union-Jessie property."
Lindgren states that, in 1922, the shaft was 6S9 Met
deem and that much hieh-~~rade auriferous pyrite was
encountered between the 500- and 600-foot levels. He adds
that the ore contains from one-half to one ounce of cold per
ton and very little silver."
LELAN-DIVIDEND PROPERTY
The Lelan mine is on a ridge southwest of the Jessie.
This deposit was discovered during the sixties. Browne's
re
port for 1868 states that 60 tons of ore from
thetqDividend mined
treated in the Big Bug (Henrietta) mill, yielded S20 per
ton in s I O o
free rnld.'t At that time however, it wail commercial
H ~~ ~~ A a were
worked more or less from 1900 to 1914, and during part
of that
time were equipped with a 10-stamp milL He states that
their
ore production Drior to 1923 was probably at least 10000
tons
which contained from a half to 3 ounces of gold iFEi~~
gether with a little silver, copper, and Iead.3J In 1932
and 1933,
the property was operated by the Southern Exploration
Com
pany with a force of about twenty-five men. This company
erected a 100-ton flotation-concentration plant and
produced con
centrates during part of 1933. Operations were suspended
at the
end of the year.
The vein. which is a continuation of the Union, strikes
north
eastward and dips steeplrsrutheastward. at IS opened by
a 500
foot shaft inclined at 80@, with development on five
levels. MoSl
of the recent production is reported to have come from
the fourth
level. The vein is rather lenticular and ranges up to
several
feet in width. Its filling consists of massive, shiny
white quartz
with irregular masses, seams, and dlssemmations of
pyrite. chal
copyrite, sphalerite, and galena. The gold occun in the
sulphides.
_ _
" History compiled by J. B. Tcnner
a~~Work cited, pp. l32-i3.
al Brown, J. Rosa Mineral resources of the states and
territories west
of the Rocker Mountaina 1868.
, Jo Work alter P- l33
7Ot
ARIZONA LODE GOLD MINES .4ND MINING 39
HENRlESTA OR BIG BUG MINE
The Henrietta mine which, in the early days, was known
as the Big Bug, is about one-half mile north of Bigbug Creek
and one mile west of Poland siding.
Browne's report for 1868 states that, in 1866, the Big
Bug mine was some 50 feet deep and was producing ore from
near the surface. In 1871 according to Raymond, the Big Bug
vein was not being worked but the Big Bug 10-stamp mill was
treating gold ores from the vicinity At that time, the
combined costs of mining and milling amounted to about S9 per
ton.
The following data are largely abstracted from
Lindgren's report: In 1883 and 1884, the Big Bug property was
the most prominent one in the district. During this early
period, the mine made a large production mainly from the
oxidized gold ores from the upper levels. From l91S to 1919,
the mine was operated by the Big Ledge Copper Company which
did considerable development below the old workings and
produced goldbearing copper ore. The property was equipped
with a 100-ton flotation mill. In 1923, this company was
reorganized as the Huron Copper brining Company. Some
shipments of copper ore containing gold were made in 1926 and
1930.
A longitudinal section of the workings is shown in U. S.
Geol. Survey Bulletin 782. The old developments, which
extended to the sulphide zone include a 500-foot shaft, on
the ridge, with a 1,500-foot tunnel through the ridge, 220
feet below the collar, and considerable stoping. Farther
north, on the Gopher claim, the vein has been opened to
depths of a few hundred feet. The deeper work, which was done
by the Big Ledge Copper Company, included a 2,200-{oot tunnel
and a 600-foot winze with levels and stopes extending a few
hundred feet northward.
The vein, which occurs mainly in massive, fine~~grained
amphibolite or diorite, strikes north, dips about 70- W., and
is from 2 to 6 feet wide. Its gangue consists of massive
quart. with some calcite. About 60 per cent of the unoxidized
ore consists of pyrite, chalcopyrite, sphalerite, and galena.
Ore from the lower levels is reported to contain 3.2 Der cent
of copper and 14 per cent of iron, together with 0.2 ounces
of fold and 2.7 ounces of silver per ton.
POLAND-W^LKER TUNNEL"
Poland, at the northern foot of Bigbug Mesa, is
accessible by road from the Black Canyon Highway. The spur of
the Santa Fe Railway that formerly served this vicinity was
dismantled a few years ago. Near the southern portal,
amphibolite is intruded on the north by somewhat schistose
granite, and on the west by a 7S-foot dike of rhyolite-
porphyry. The tunnel extends northward
at Raymond, R. w., Statisticss of mines and mining in the
states and terri
tories west of the Rocky Mount ins IS71 " Largely
abstracted from Llndgren. We work cited. p. 136.
~~ '
ARIZONA BUREAU or MINES
for 1,100 feet through a ridge of this granite. It exposed
several . veins upon which considerable work has been done.
The Poland vein, which was cut 800 feet from the south
portal strikes northeast and dips steeply northwest. Ore on
the dump shows druzy quartz with pyrite, sphalerite, and
galena. According to local reports, the vein was opened by
several thousand feet of drifts and a 325-foot shaft below
the tunnel level. From 1900 until about 1912, intermittent
production was made with a 20-stamp milL The 1907 yield was
$130,465 in gold and 16,609
ounces of silver. The total output for this period is
estimated at $750,000, probably mostlv in silver. According
to the U. S. Mineral Resources, the mine made 9 small
production of gold ore in 1926, 1930, and 1931. Early in
1934, occasional shipments of gold-bearing ore and
concentrates were behg made by F. Gibbs and associates.
Prior to 1922, some production was made from the
Occidental vein which is reported to have been cut 500 feet
from the north portal of the tunnel and followed to a depth
of 200 feet below the tunnel level. This vein, which is said
to be similar to the Poland vein, carries gold, silver, and
lead.
MONEY M9r^LS MINE
The Money Metals mine, about 1Y4 miles west of the
Poland tunnel and Bigbug Mesa, is accessible by road that
branches northeastward from the Senator Highway at a point
about % nile south of the Hassayampa bridge.
This deposit was located in 1897 by F. Reif who shipped
some ore from the upper levels and sold the property. After
some further development work, the mbe remained idle until
1928 when it was reopened Since 1933, it has been operated by
the Yavapai Gold and Silver Mining Company.
The country rock is gneissoid granite. A rhyolite-
porphyry dike about 60 feet wide follows the hanging wall of
the vein, and, a short distance farther west, a mass of
diorite intrudes the granite.
Workings on the property include a 300-foot shaft,
inclined 68W., together with 9 total of approximately 1,400
feet of dnfts OD three levels. nthen visited in February,
1934, water Us lcept from the 200-foot level with a Cornish
pump.
As exposed underground, the vein strikes N. 50- W. and
dips 65@ to 70W. In places, it has been offset by transverse
faults. The vein filling consists of coarse-grained, grayish
vhite quartz with irregular masses, veinlets, and
disseminations of galena, sphalerite, He _ And The wall rock
shows strong s~~iEration. According to J. K Kilfeder," mine
superin- . tendent, much of the vein contains about half an
ounce of gold per ton. On the 200-foot level, the ore shoot
is about 175 teet long by 2 to 5 feet wide.
Surface equipment on the property includes a 20-ton
concentrator powered with two Dodge motors. The sulphide
concentrates are reported to carry more than s20rl~~i ~~ go
OZ .
INSET OF CHARTS AND MAPS
1. Plat of Claim 1901
2. Plat of Claim of the Dividend Consolidated
3. Plat of Claim of the India, Besse No.1, Republic, Snow
storm
4. Plat of Claim of Clipper, Summit, Jump off, Comstock,
Peerless, Starlight
5. Plat of Claim of the Fria Lode.
6. Plat of the Claim Juanita.
7. Plat of the Claim dividend
8. Plat of the Claim Galena
9. Plat of the Claim Lelan-Dividend Consolidated
RESUME
Willard D PYE
PERSONAL DATA
Willard Dickison Pye
Ottico Addreg Home Addreu
Bom
3418 N forgeus Ave. Tuc on, Arizona B5710 341a1 N. Forgous
Ave. Tucson, Arizons 85716
Februay 20, 1915
TRAINING {Collego and Univenity)
Oberlin College, Oberlin, Ohio
Califomia Imtituta of Tochnoiogy, Pa adena
Univenity of ChicZio, Ph,D, 1842
FIELDS OF SPECIALIZATiON
Undorgr duau
Graduato (M S } G ophysa ana tconomic w~~ ^, ,w,
__~~_
Graduate IPh O ) Potroleum, Ore Oepoitt, nd S
dimentation
SCHOLASTIC HONORS
G ology nd Mrthematics majon; Phyia and Chomisvry minoru
G ooh~~nia and Ecnnomic GKlnav lore d-~~ ts}
Pr~~ident, Geology Club, 1934-35
Phi i3eta Kapp^, 1935
Virgil tCirkham follow hip in G ology lUnivonity ct Chic go)
194042
PROFESSIONAL LICENSES
Arizon~~ Stats Board of Technial Rogistntlon {Conwlting
Geologist) No 4033
Californb Stato iBo rd of R"istntion hr G ologins No 2554
REFERENCES
Who s Who in Anwrics
American M n of Sciencs
Who s Who in Amorican Educ tion
Varioul oil, geological, and other directories
POSITIONS
Consulting Geo'ogin full time 1970present; al o, tor short
periods at various times trom 19351970.
Protecor of Geology, Department of Geolo9y, Univer ity of
Ari20na, Tucson, Ari20na, 19571970.
Chairman and Protessor, Oeputment of Geology and Geography,
Nonh State Univorsity, Fargo, North Dakou, 1947-57.
Ex cutive S creury, Ydlow tona-8ighom Research Association,
1964 55.
National Sciansc Foundation Research Association Research Northern
Great Plains, 1953 54.
Research Geolo3ht, Princeton Univorsity, 1953 64.
Oirector, Elk BaJn Geological Summor Fiald Camp, 195-354.
The Texu Company, Rocky Mounuin Division Rese rch Geologin
sp geological problems, 194B47.
The Texa Company, irs chup Idaho Uuh Oinrict, 194346.
Nstional Defense Research Corporation {N D R Cl In chuge
clxitied research, for Chemical Wartare Servics, 194243.
Illinois Goological Survey, Research A"inant, 194042.
Universty ot Chicago, Innructor, 1940 42.
Carter 011 Comp ny, Geologist, 193740 INow put ot EXXON
corporationl
U S Soil Con~~vation Service, Sedim nt tion R~~rch, 1936 37.
California Institute ot Technology, Gtaduate Innructor,
193537.
Shell Oil Company, G ophysicist, 193d.
Oberiln Collega, Laboratory Assinant, 193335.
OTHER NON COMMERCIAL ACTIVITIES lslected~~
Arizona Oil and Gg Commiuion, Advi or, 1984e1970
National htrol um Council, Committo on Futurw Patrol um
Raourc~~ ot tho United Sutet, Southarn Artzona and N w
Moxico di trict: a1 o, revhwer ot pwn on Ari20n^, Ut h, W~~m
Colorado, Wnt rn New Mzxico vsd Nav da19B9-1970.
Direetor, Arizono 011 and Gg A"ociation, 1961pr~~ont;
Przident 19654 6
Director, Intornatlonal Geophysic l Y"r (I G.Y } Auron rnd
Airglow studies, Nonhorn Grost Plains, 19 9-67.
Oirwstor, Nonh Dakou Innituu of Region l Studia, 195B-57.
Sccr ury nd Oiractor, Red Riv r Valley Investrnont fund, 1957
68.
Prwident, Northwan Imnton R~~rch, 1956 67.
Ode~~au nd consultant to Notional Scienco Foundation conf
ronco on 9 ology in collogos with rnall goology daputm nu,
1953.
SOCzETY MEMi3ERSitiPS {Scientific and Profession l - both
current and formerl
National and Regional
Americ n Association of Petroleum Gcologists
Amerian Instituto ot Mining and Metallurgical Engineers
Geological Society ol Ameria
S ismological Society ot America
Sigme Xi
Society of Economic Pal ontologists and Mineralogists
Socioty of Exploretion Geophy icists
SOCIETY OFflCES AND COMMITTEES
Amerian Association of Petroleum Geologists
Committee on Str tigraphic Correlations, 1959P63
Carbonavv Rock Sub-Comminee, of Reseerch Comminee, 1959 61
Comminee tor Preservetion of Samples and Cores, 1959v60
Research Committee on Subsurf ce Aeservoir Conditions, 1948
51
American Geologlal Institute
.
Ch irmen, Glo# ry Comminee on Sedimentation, 1951 i ChairmFn,
Glossary Committe~ on Paleopogr phy, 1951 5B Chairman, Educ
tion l Committee for North end South C>akots nd Montana, 1950
54 Arizonz Geological Society Geological Society of America,
Cordilleran Section
Chairman, Reginr tion and Arranpmenn Committee, 1958 Jolnt
Meeting Editor, Slratigraphic Pap n, 1959 Joint M"ting
Guidenook field Trip L"der (Stratigraphic Trip}, 1959 Joint M
edng Arizons Oil and Gas Associ tlon Oirector, 1Nit present
P"sidznt, 19B646
Ch irmn vzrious committez iSpe king, Memb nhip, Public
Rcbtions, etc} 19d1 pr"
C11airman, Arizonc Mlnerel Informstion Pl nning Comminee,
196244
Soci~ ot Economic Paleontolouins and Minersloqistx
Rnurch Comminee, 1957 81
Cozchairman, R"eerch Fund Comminee, 195940
Steelilig Committn repre#nting Society ot Economic
Paleontologiru nd Mlneraloqin to
Anwric n G ological Innituu Glo~ry Committn, 195:} 6B
Mlscell~~neous
Chairm n Re eJrch Committoe, Amorican Associ tion ot
Univorsity Protecon, 1951-52
Fiek Trip Lucier, N w Moxico G oiogical SocietY, 81ack Mew
Trip, 1958
Resurch Committoo, Nonh Dakota G ological SocietY, 1951 53
Chairmen, Ro~~rch Committee, Wyoming Goologic l Society,
194di*68
PU8 LICATIONS ,
Author of approximatelY 50 public tions on various topics
including, oil and 9a, coal, helium, oil shaies, metalilc and
non moulilc mining, wdimontuion, stratigraph8~~ p
loogeological nd t ctonic tudie, drililng and ro#rvoir
engineerlng, 9 ophYsia and rolaud topicx
TRAVEL
Geological work and/or tr vd throughout the United St tes and
mo t ot tho provinces ot Canada Geoologic i work in M xico,
nonhwestern South Amorica, and travol and goologial work
through out Europo, Nou nd Mlddb Eut nd Nonh Atrica
Gewra D. Pa~~a5~~r
GEOLA31CAL CONSULTANT
Souttl 208 View Place
Liberty Lakes WA 99019
(509)2556152
R E S U M E
Age- 56 Health Excellent
Education: Bachelor of Science - January 1960
Arizona State University - Major - Geology
Brigham-Young University - Post Graduate Studies:
Accounting & Business
Management
CURRENT:
GEOLOGICAL CONSULTANT (1977-Present)
As a consultant, and in some instances as owner/
operator, professional efforts have been centered around the
following:
l- Consultant for several Major and Junior mining companies
at various exploration, development, and production levels of
involvement regarding surface, underground and offshore
precious and base metal deposits as well as industrial
minerals, energy fuels, and mill tailings recovery
undertakings.
Bear Creek Mining (Kennecott) Pegasus Gold, Corp.
U.S.Borax & Chemical Corp. Montoro Gold, Ltd.
Columbia International, Corp. ASARCO, Incorporated
Brush Prairie Minerals, Inc. Zortman Mining, Co.
Cominco American Res. Landusky Mining, Co.
2- Arranged for joint venture projects between companies,
most noteworthy of which is the Kennecott-ASARCO JV, Troy
Mine, Montana, which was subsequently put into operation and
currently leads the nation in silver production.
3- As consultant, introduced U.S.Borax to the stratabound
CuAg potentials in the Cabinet Mountains of western Montana,
where subsequent land acquisition and drilling efforts have
resulted in defining the largest known silver reserve in the
world. Currently being developed by Noranda.
4- Overseas consulting assignments and independent mineral
assessments have been undertaken in; Costa Rica (placer
Gold); New Zealand and Australia (mineral sands-titanium,
zircon, monazite, and precious metals, including offshore
occurrences; also laterite nickel prospects as well as lode
and placer gold deposits), China (PRC) (gold-bearing mill
tailings recovery program and diamond deposit examinations);
Colombia (platinum and gold placers); Fiji (lode and placer
gold occurrences); Egypt (mineral sandsbeach environments);
Jordan and Israel (stratabound Cu-Ag
deposits); Republic of the Philippines (gold---lode, placer
and mill tail recovery, sulfur deposits, chromitebeach sand
and lode occurrences; Canada (stratabound and massive sulfide
occurrences of base and precious metals in British Columbia);
Mexico (precious metal mill tailings recovery projects,
porphyry copper occurrences, lode and placer gold deposits).
5- Contributions in consulting/contracting capacities in the
above stated situations may be summarized as:
A- Making property acquisitions via claim staking,
formulation of joint ventureships, & negotiations with
property owners, companies and government agencies.
B- Supervised the technical data gathering relative to
borehole drilling, bulk sampling, geological mapping,
surveying, sampling, preliminary feasibility parameters,
environmental conditions, contributed "Objectivity, Use of
Proceeds, and Project" data for underwriting prospectuses and
coordinated metallurgical input with regards to product
characteristics, costs and expectations.
C- Provided preliminary mine-mill design sequences.
D- Provided economic evaluation, base-line data preliminary
and final feasibility studies.
E- Liaison and agency between U.S.Companies foreign
Governments.
6- Personally acquired mineral properties which wee
subsequently vended to major companies for advancement.
A- Gold Hill Deposit-WA ....Noranda
B- Boyd Allotments-Spokane Indian ReservationWA Clear Peak
Project-MT Essex Project-NV Rock Creek Project-MT ....all to
U.S.Borax
C- Nancv Creek Proiect-WA . Pnprny Fuels. Core
D- Mankado Mines-MT ...Pacific Coast Mines
E- Cerro Gordo Mine-CA Vulture Mine-AZ German Gulch Project-
bsT ...all to Pegasus Gold
F- Alliance Nuclear Unit-Indian ReservatiOn-WA to Minatome
Corporation.
G- American Kootenai Mine-MT Jumbo Group-MT to ASARCO,
Incorporated.
H- Tribal Allotments-Indian Res.-WA ...Denison Mines.
7- ENVIRONMENTAL CONTAMINATION ASSESSMENTS: Conducted
research and applied bench-scale testing to the extraction of
precious metals from sewage sludge phoenix, AZ). Submitted
proposals and data relative to sampling river sediments for
the Savannah River Project clean-up and predredging
evaluations along the Inland Waterway (South Carolina,
Georgia). Reported on mine tailings clean-up undertakings at
California millsites.
PAST PERSONAL BUSINESS VENTURES:
PRECISION CUSTOM MILLING: Co-Owner
Financed and built a custom sawmill in Montana to process,
under contract, cedar products for St. Regis Paper Company.
CONTINENTAL NUCLEAR, INC.: Co-Owner Discovered,
developed and mined selling ore to Atlas Minerals.
SPOKANE BULLION CORP.: Co-Owner
Buyers, sellers and refiners of precious metal concentrates,
scrap, and dore'.
GEO-VISUAL SYSTEMS, INC. Owner
Provided consulting and contracting services of geotechnical
and environmental nature to Christensen Diamond Products,
Shannon & Wilson and Pacific Gas & Electric Co. relative to
site evaluations for proposed nuclear power installations in
Washington and Oregon. Primarily structural interpretations
gleaned from oriented drill cores, slope stability studies,
and surface mapping for contamination assessments.
Invented and developed a CCTV device, utilized for in-hole
structural orientation -- calculated and reported on
fiveline, digital readout in "real-time".
Discovered, developed and mined a copper-rich scheelite
deposit in Granite County, Montana, the ores of which were
processed and concentrated through a mill leased and operated
by my company with concentrates being sold to Phillips Bros.
Provided equipment and personnel for contract service to the
mining and environmental industries which involved the
collection of soil and water samples for in-field processing
by means of a direct-volatilization, analytical mechanism and
procedure for determining Mercury accumulations & ultimate
anomaly definition.
a uranium deposit in Utah,
Provided detailed outline approach to the U.S.Forest Service
personnel (Kootenai N.F.-Montana) relative to the use of
portable seismic equipment, drilling approaches, reserve
estimation techniques and quality determinations in
ascertaining the viability of aggregate deposits.
SANDPIPER TECHNOLOGIES, LTD. (Current) Consultant
Providing unique drilling contract services to the mining,
geotechnical, and environmental communities. Such services
rely on the employment of a state-of-the-art sonic drill
which is capable of extracting a 4" diameter core in
unconsolidated sediments to a depth of 200'. The unit is
highly portable (total weight 225@ with the heaviest
component being under 85#), requires no drill muds or
additives (as no rotation is enlisted), penetration rates
exceeding l0'/min., all-climate operation, on-shore as well
as off-shore applications, and as the drill does not have a
specific cutting surface, a measure of safety is added when
drilling in proximity of buried cables, tanks, pipes,etc. The
service is utilized in defining placer-aggregate deposits,
tailings sites, soil sampling for contamination assessments,
sampling for integrity testing, drilling water
wells , locating bedrock, installation of probes and
piezometers. Recently conducted tailings drill programs on:
the Walker Mine tailings site, CA; for chromite beach sand
accumulations in the province of Isabella, Philippines; E
beach renourishment sources, Charleston, S.C.
EMPLOYMENT RECORD: (l960-l977)
CONGDON & CAREY (CoCa Mines)
Project Manager Hog Heaven District, MT Exploration and
development of silver properties. Generation of data for
feasibility reports. Regional exploration for property
acquisitions.
ASARCO, INCORPORATED:
Project Manager
Spar Lake Mine, MT
Directed feasibility and environmental studies relative to a
production mode. Supervised engineers and consultants in
providing data for the first EIS application in the State of
Montana under there enacted legislation pertaining to mining.
Also held public hearings and negotiations with various
federal and state agencies related to these matters. Directed
pre-mine development work and made private land acquisitions
for ancillary usage. Managed satellite exploration efforts on
similar deposits.
BEAR CREEK MINING COMPANY (Kennecott) Project Manager
Spar Lake Mine, MT
Supervision of geologists, engineers, contractors,
geophysicists and consultants in: reconnaissance exploration;
underground and surface mapping and sampling; surveying and
application for land patenting; underground adit development,
winze sinking, rock mechanic studies, slot development and
bulk sampling. Provided initial mine development and
production sequence. Compiled data for preliminary
feasibility studies, ore reserve calculations, costing
estimates and initial environmental parameters.
Transferred from .....
Senior Mine Geologist Tintic Division, UT
Initiated diamond drilling programs. Supervised junior
geologists in underground mapping, sampling and grade control
efforts. Conducted monthly metal forecasting and
metallurgical accounting for new concentrator. Open-pit
mapping and slope stability studies at the Bingham pit.
Involved in the lay-out, design and implementation of the new
Trixie mine shaft and underground development work.
KENNECOTT COPPER CORPORATION:
SUNSHINE MINING COMPANY:
. . .
KERR-McGEE CORPORATION:
Mine Geologist
Coeur d' Alene Dist.ID Supervision and lay-out of
underground drill programs. Underground and surface mapping
and sampling. Core logging, ore reserve estimation, claim
staking and property submittal examinations and evaluations.
Mine Geologist
Ambrosia Lake Dist.NM Underground mapping and sampling.
Ore reserve estimations.
Supervision of underground grade control and long-hole
drilling programs. Regional hydrological and residual soil
research work relative to uranium exploration.
Geoge DZ Hennessey
Souh 208 View Place
Lib rty Lake, Washington 9901Y
Tel-509-255-6152
Phelps Dodge Contract
January 2, 1995
Mr. James A. AshpoDe
Black Diamond Mining Co.
8026 W. Aster Dr.
Peoria, Arizona 85381
Dear Mr. Ashpole,
Please find attached two copies of our agreement to purchase
up to 6,000 tons per month of your precious metal bearing
flux at our Hidalgo Smelter, located near Playas, New Mexico,
following successful completion of a 1,000 ton test shipment.
Please sign and date both copies of this agreement and return
one original copy to me.
Once we have received the signed agreement you will need to
coordinate delivery directly with Mr. Bill Mitchell, Hidalgo
Smelter Superintendent, or Mr. Byron Belew, Hidalgo General
Foreman. Hidalgo's telephone number is (505)436-2211.
Very Truly Yours,
/s/ D.K. Farquhar
D. K. Farquhar
Raw Materials Director
Phelps Dodge Mining Company
attachments cc: W>rM RC
DIWSION OF PHELPS OODGF CORPORA non
i@
PllELPS DODGE MINING COitiPANY 2600 NORDl CENTRAL A VENUE
PllOEMX. AZ 85004
PURCHASE CONTRACT SHIPPER: Black Diamond /lfizlirtg Co.-lilr.
James A. Asilpole
ADDRESS: 8026 EV. Aster Dr., Peoria, Arizona 85381
MATERIAL:
ANALYSIS:
DELIVERY
PAYMENT
CHARGES
Siliceous Fluxing Ore
Au oz/ton S %
Ag . oz/ton Fe %
Cu % CaO %
SiO, % Al203 %
Pb % F %
Zn % Cl %
F.O.B. Hidalao Smelter, Phelps Dodge Mining Company. Truck
haulage is ssceptable within smelter determined quantities.
Drop bottom cars SP series 464 thru 467 or equivalent may
also be acceptable upon agreement by Phelps Dodge .
Gold:
Silver:
CoDper:
SiO2:
Fe:
CaO:
Al203
RAll'A1A7ERl,tLSDlRECrOR, D. K FARQU11.4R
Pf/Fl PS DODGE MIMING CO11PAM: MORENCI SRANCII
452/ 57'A JE IIIG111\'.4 } 191
,t10RENC/, ARIZON.4 85540
DATE:January 2, 1 995
As %
Sb %
Bi %
Cd %
If assay certificates are exchanged, payment shall be made
within 30 days after the date of the exchange of assays. If
assays are not exchanged, the Phelps Dodge assay results will
be used for the settlement and payment shall be made within
30 days after the shipment is weighed and sampled at the
Smelter. If a sample is sent to umpire, settlement will be
delayed until after receipt of the umpire results.
Deduct 0.03 tr. oz per dry ton or 1 O% of the gold content,
whichever is greater, and pay for 95% of balance at the
weekly average Handy and Harmon quotation in Metals Week: for
the week ending Friday in which the shipment is received .
Deduct 0.5 oz per dry ton or 10% of the silver content,
whichever is the greater, and pay for 95% of the balance at
the weekly average Handy & Harmon quotation in Metals Week
for the week ending Friday in which the shipment is received.
Deduct 10 Ibs. per dry ton and pay for 90% of the balance at
the average U.S. Prod. Ref. quotation in Metals Week less 1 5
per pound of copper, for the week ending Friday in which
the shipment is received.
Treatment Charge: O% of the payable gold, silver and copper
content.
Ore less than 75% SiO2 will be charged at $1.OO per unit (1
percentage point = 20 Ibs.) fractions in proportion.
Above 6%, charge excess at $ 0.30 per unit, fractions in
proportion.
Above 3%, charge excess at $ 0.30 per unit, fractions in
proportion.
Above 6%, charge excess at $ 1.00 per unit, fractions in
proportion.
- -2
Determination for the following impurities shall be made on a
weighted monthly composite sample.
Pb: Above 0.3%, charge excess at $ 0.30 per unit,
fractions in proportion.
Zn: Above 0.3%, charge excess at $ 0.30 per unit,
fractions in proportion.
As: Above 0.3%, charge excess at $ 0.30 per unit,
fractions in proportion.
Sb: ) Combined,
Bi: ) Above 0.2%, charge excess at $ 8.00 per unit,
fractions in proportion.
Cd: )
F: Above 0.05%, charge excess at $ 2.00 per lb.,
fractions in proportion.
Ci: Above 0.05%, charge excess at $ 2.00 per lb.,
fractions in proportion.
H22: Above 10 %, charge excess at $ 0.30 per unit,
fractions in proportion.
Above purchase terms are subject to the following non-
economic section of this contract.
SECTION II- NON- ECONOM IC
TERMS
QUANTITY
WEIGHING,
SAMPLING. &
ASSAYING
This agreement will be in force from January 2, 1995 until
terminated by Phelps Dodge Mining Company, Termination will
be effective thirty (30) days after written notice is given
to the shipper by Phelps Dodge. All terms of this Contract
are subject to periodic review and renegotiation by the
parties.
Basic weight units will be troy ounces, avoirdupois pounds,
and dry short tons. The word unit will mean 1 percentage
point (1.0%), or 20 Ibs.
The Shipper will be advised by Phelps Dodge on a monthly
basis of the quantity to be delivered during each calendar
month and the lot size for sampling and settlement purposes.
This contract is for up to 6,000 tons/month, following
successful completion of a 1,000 ton test shipment.
Weighing, sampling, moisture determination and assaying will
be conducted in accordance with standard practices at the
Smelter after receipt of material at the Smelter. The Shipper
shall
have the right to be present, or have his representative
present, at the weighing and sampling
If the Shipper notifies the Hidalqo Smelter, Phelps Dodge
Mining Company, in writing, prior to receipt by the Smelter
of the siliceous material, that Shipper wishes to exchange
assays, Phelps Dodge shall deliver to Shipper a one-quarter
split of the sample of the shipment taken by the Smelter and
the Supplier shall cause his sample split to be assayed by a
reputable and qualified assayer. The Shipper, on receipt of
his assay certificate, shall present same to the Branch
controller or his representative, who shall then present at
that time the Smelter s assay certificate for comparison. If
the variation between the two certificates do not exceed the
following splitting limits:
cu =
Ag =
Au =
Pb =
Zn
As =
Sb =
Bi =
F =
Cl =
SiO2 =
A1203 =
CaO
Fe
0.1 5%
O .1 5 oz/ton
0.010 oz/ton
0.05 %
0.2%
0.4%
0.4%
0.1%
0.005 %
0.0 1 %
0.5%
0.5%
0.5% = 0.5%
then the settlement will be established on the average
between the respective assays. In the case of the variation
exceeding the splitting limits, a mutually acceptable umpire
shall be chosen from the following assayers:
Mountain States Research & Development, Tucson
Metallurgical Labs, San Francisco
American Analytical, Tucson
Skyline Labs, Tucson
The umpire s assay result shall be final, if it is not higher
than the highest result or lower than the lowest result of
the Shipper and Smelter assay certificates. if the umpire s
sssay is higher tl an the highest or lower than the lowest
results of the Shipper and Smelter assay certificates,
settlement shall be based on the assay nearest to the umpire
s. Cost of the umpire analysis shall be borne by the party
whose assay result is the furthest from the umpire s.
WITHHOLDING
If any third party should make claim to any of the siliceous
material or the proceeds from the sale thereof, payment shall
be withheld until such time as the dispute has been resolved
by:
(i)
(ii)
WARRANTIES
Entry of a final judgment by a court or a final award in
arbitration determining the respective rights of the
claimants to the siliceous material or the proceeds from the
sale thereof, or
Mutual agreement among the claimants releasing and
discharging Phelps Dodge from any and all liability in
connection with the purchase of and payment for said
siliceous material .
The Shipper warrants that it has the right to mine and ship
siliceous material to the Hidalg_ Smelter, Phelps Dodge
Mining Company, hereunder, and that it will have good title
to all siliceous material delivered to the Hidalqo Smelter,
Phelps Dodge Mining Company, and Shipper agrees to indemnify
and hold harmless the Hidalqo Smelter, Phelps Dodge Mining
Company, from any and all claims, demands, obligations, and
liabilities of any kind whatsoever that may be asserted
against the Hidalqo Smelter, Phelps Dodge Mining Company, for
or on account of siliceous material delivered hereunder, or
the purchase thereof.
FORCE MAJEURE
Either party hereto shall be excused from performance during
any period such performance is prevented by governmental
action, war, fire, flood or other force majeure beyond the
control of such party, or by strike, lockout, or failure of
transportation facilities, and the Hidalqo Smelter, Phelps
Dodge Mining Company, shall not be required to order, accept,
or receive any siliceous material hereunder during any period
when the operations of the Hidalqo Smelter, Phelps Dodge
Mining Company, or any smelter to which such material has
been shipped or is to be shipped, are suspended or curtailed
on account of any such case.
The time for making payments for siliceous material sampled
during a period when force majeure has been declared shall be
extended by a period of time equivalent to the number of days
for which force majeure was in effect.
NOTICE
All notices shall be deemed to have been given upon delivery
in person or upon deposit thereof in the United States mall,
registered or certified mall, postage prepold, return receipt
requested; enclosed in a sealed envelope addressed to the
party at the address set forth above or to such other address
as a party shall have designated by written notice to the
other. Any notice of change of address shall not be deemed
given until actually received by the party entitled to
receive such notice.
Phelph Dodge Signatures
James Ashpole Signatures
EMTEC REPORT
QUIT CLAIM DEED
EXHIBIT 4
SCHNEPF ELLSWORTH APPRAISAL GROUP
Real Estate Appraisers and Constiltants
April 22, 1996
Mr. James Ashpole
8026 W Aster Dr.
Peoria, 85345
RE; The Ashpole Tennessee prOperty
Dear Mr Ashpole:
This letter will serve to update you regarding my progress on the
valuation/consulting assignment of the above referenced properties.
To date, two trips have been taken to Tennessee. The first trip occurred between
January 3 1 and February 2 of this year I was accompanied by Mr. James Ashpole
and
Mr Sean Lassauro. The objective during this first trip was to research 10 Land
Grants issued by the State of Tennessee. The research indicated that the Land
Grants were issued between 1835 and 1837. Details on six of the Land Grants
were obtained during this visit. Information obtained included metes and
bounds legal descriptions of the properties, original owners names, Want
numbers, state archive map entry numbers and original land surveys prepared
on the properties In addition, copies of Deed's transferring the property to
the name of James Ashpole were obtained. Records indicated the Deeds to
Mr. Ashpole were recorded on September 21, 1981.
This original trip also included a visit to the State of Tennessee Comptrollers
Office mapping section. This office contains a collection of assessor's
records from various counties. County assessor's maps were obtained at this
time. Because the legal descriptions were written in archaic terms (poles and
chains were typically used as units of measurement) and because they were
often benchmarked against natural landmarks, it was not possible to identify
the properties with any higher degree of accuracy at that point in time.
The second trip occurred between February 26 and March 1. I was accompanied
by Mr.James Ashpole. by this time I had identified with a higher degree of
accuracy, the location of five of the six land grants. During this trip we
inspected the following five parcels:
# Grant# County
1 4939 Coffee
2 4965 Grudy
3 3699 Bledsoe/Cumberland
4 4738 Fentress
5 4739 Fentress
All the properties except Coffee County are generally vacant, tree covered,
rolling hills and mountainous sites The Coffee County parcel is in an area of
rolling hill,although much of this acreage is improved with pasture land.
Roughly 20% of the forested land are pine trees with the balance forested
with maple, oak popular and dogwood, among others. The properties are also
crossed with natural streams and rivers and contains numerous wildlife.
Access to all the properties is via paved county roads and utilities and
public services are available to all sites.
In addition to the inspection of the properties, I gathered economic and
sales data. A preliminary estimate suggests that the values will range
between $500 and $2,000 per acre with an average value in the $1,000 per acre
range. The original claims ranged between 3,281 and 3,000 acres is size.
The research now focuses on the obtaining of clear title. I am in the process of
correlating property lines from the original legal descriptions to the
current tax parcel assessor's maps. This portion of the research is not yet
complete. There are over 100 pages of documents and data that has to be
correlated. The research to date indicated the properties are falling into
three general categories; I) approximately 1/3 of the properties appear to be
divided per tax records into parcels less than 100
acres in size; 2) approximately 1/3 of the properties appear to be divided per
tax records into large parcels (300 acres plus) and 3) the remaining 1/3 of the
properties appear to be in the name of the state.
I have contacted attorneys in three of the counties who specialize in title
searches and are familiar with disputed land grants and a major firm in
Nashville that reportedly has extensive experience in land grants. In
addition I have contacted two title companies and ask for their opinion
regarding the process of obtaining clear title to the properties. I also have
information on the other five claims than needs to be
researched. Once I have obtained more information on the appropriate approach
regarding the title searches and have completed the additional research on the
remaining land grants, a third trip to Tennessee is planned.
Respectfully submitted,
/S/ Larry D. Schnepf
Larry D. Schnepf, MAl
P.0. BOX 2829 Mesa, AZ 85214~ (602)497-1113. fax (404892-7390
INSET MAP OF TENNESSEE
EXHIBIT 5
Inga A. Cortright
Certified Public Accountant
INDEPENDENT AUDITOR'S REPORT
I have audited the accompanying balance sheet of Black Diamond Mining, Corp, as
of March 31, 1996 This financial statement is the responsibility of the
Company's management, My responsibility is to express an opinion of this
financial statement based On my audit, I conducted my audit in accordance
with generally accepted auditing standards, Those standards require
that 1 plan and perform the audit to obtain reasonable assurance about
whether the balance sheet is free of material misstatement An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the balance sheet An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall balance sheet presentation, I believe that my
audit Of the balance sheet provides a reasonable basis for my opinion,
In my opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of Black Diamond Mining, Crop as of
March 31, 1996, in conformity with generally
accepted accounting principles.
/S/ Igna Cortright
May 3, 1996
Black Diamond Mining, Corp.
Balance Sheet
March31, 1996
ASSETS
Current Assets:
Cash $ 23,843
Property (Note 2)
Patented mining claims 25,500,000
TOTAL ASSETS $25,523,843
liabilities AND STOCKHOLDERS' EQUITY
Current Liabilities:
Payable to stockholders $ 23,843
Long-term debt (Note 3) 25,000
Total Liabilities 48,843
Stockholders' Equity:
Common Stock, $ 1 par value per share:
Authorized 100,000 shares;
Issued and Outstanding 51,000 51,000
Additional paid in capital (mining claim) $25,424,000
Total Stockholders' Equity $23,475,000
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $25,523,843
The accompanying notes are an integral part of this financial
statement,
Black Diamond Mining, Corp.
Notes to Financial Statement
March31, 1996
Summary of significant accounting policies and organization
Organization
Black Diamond Mining, corp (the Company) was incorporated on March 18, 1994,
under
the laws of the State of Arizona, The Company has chosen December 31 as its
fiscal year
end
Method of Accounting
Assets, liabilities and stockholders' equity are recognized on a modified cash
basis for financial
presentation purposes.
Income taxes
No provision for income taxes has been made as of the balance sheet date,
Property
Patented mining claims have been contributed to the Company by its
stockholders,
The
property held by Black Diamond was acquired by James A and Catherine Ashpole in
October
1994 for a reported $ 25,500,000 The patented mining claims were acquired in
exchange
for a combination of cash and stock, As of November 9, 1995, title to the
patented mining claim was held by Mr. and Mrs., Ashpole James A, Ashpole and
his wife have now
contributed the patented mining claims to Black Diamond,
Public records indicate that federally mandated annual assessment work has been
completed on the patented mining claims.
The subject property was appraised by Schnepf Ellsworth Appraisal Group on
November 9,
1995, Estimated ore reserves are stated at $291,200,000, estimated production
costs at
$34,665,000, with a net potential (estimated) ore reserve at $256,535,000.
The stated market value, according to the appraisal, was $35,000,000, The
appraisal was signed by Larry D Schnepf, MM.
Purchase Contract
Phelps Dodge Mining Company has entered into a contract with Black Diamond
Mining, Corp. for the delivery of up to 6,000 tons per month of Siliceous
Fluxing Ore to its Hidalgo Smelter in New Mexico. The contract is opened
ended "until terminated by Phelps Dodge Mining Company." The contract can be
terminated with a thirty day written notice,
Black Diamond Mining, Corp.
Notes to Financial Statement
March 31, 1996
Long term debt - Recorded lien on patented mining claims
A deed of trust, dated October 18, 1993 and recorded in Yavapai County,
Arizona on September 13, 1994, was given to secure an indebtedness in the
original principal amount of $ 25,000, The named trustor is Omnistar, Inc~;
the named trustee and beneficiary is Betty Davis,
Since neither Black Diamond nor James Ashpole was a party to the transaction
resultingin the deed of trust, no terms for repayment have been stated in
these financial statements.
