SECURITIES AND EXCHANGE COMMISSION
Washington, DC
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report: JUNE 26, 1997
GOLDEN EAGLE INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Colorado 0-23726 84-1116515
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(State of other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
4949 South Syracuse Street, Suite 300, Denver, Colorado 80237
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 694-6101
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Item 1. Changes in Control of Registrant
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None
Item 2. Acquisition or Disposition of Assets
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None
Item 3. Bankruptcy or Receivership
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None
Item 4. Changes in Registrant's Certifying Accountant
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None
Item 5. Other Events
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None
Item 6. Resignation of Directors
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None
Item 7. Financial Statements, Pro Forma Financials and Exhibits
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Financials: None.
Exhibits: Letter to Shareholders sent with copies of 1996
Form 10-KSB as an Annual Report.
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 thereunto duly authorized.
Date: June 26, 1997 GOLDEN EAGLE INTERNATIONAL, INC.
By: /S/ MARY A. ERICKSON
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Mary A. Erickson, Secretary
2
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Golden Eagle International, Inc.
4949 S. Syracuse St., Ste. 300 , Denver, CO 80237
(303) 694-6101, (303) 694-6021 (fax)
June 23, 1997
Dear Shareholder:
I would like to introduce myself as well as update you on three critical
points regarding your ownership of shares in Golden Eagle International, Inc.
("the Company").
First, my name is Terry C. Turner. I was appointed by the Company's Board
of Directors as a Director, President and CEO on February 14, 1997. For more
than a year prior to that time, from January 1996 until my appointment, I
represented the Company in Bolivia as its attorney. The Company hired me at that
time because I had the distinction of being the only attorney residing in
Bolivia who was admitted to practice law in both the United States (Utah) and
Bolivia (first and only North American attorney admitted to practice law in that
country). Also, I had 13 years of experience working in Bolivian mining--with
significant experience in the Tipuani Mining District where the Company's
operations are located. During that period of representation, I worked with the
Company's management in Denver, Colorado, and the Company's subsidiary's
management in La Paz, Bolivia, on important legal and administrative issues
regarding contract negotiations and doing general business in Bolivia. My resume
is discussed below in more detail, or is available in the Company's 1996 Form
10-KSB Annual Report which should accompany this letter. If you did not receive
a copy of the Company's Form 10-KSB, please write or phone the Company at its
address above in Denver, Colorado, to request a copy.
The three critical points on which I would like to update you as a
shareholder in the Company are the obvious three that every shareholder has a
right to know:
1. Recent History: Where has the Company been?
2. State of Operations: Where is the Company currently?
3. Strategy for Growth: Where is the Company going?
I have to ask you at the outset to forgive the encyclopedic nature my
response may appear to be in answering these three questions - my preference
would have been to have had our first introduction be a short, courteous one.
However, the Company has accomplished some incredible things in the recent past,
is carrying out a clearly-defined operating program currently, and has some
interesting strategic growth plans for the future; about all of which you have a
right to be informed.
In addition, the recent Bre-X scandal, regarding a Vancouver-based gold
exploration company, has rocked the entire mining and business community
worldwide and is on the mind and lips of every person with whom I speak in both
North and South America. It has brought to our attention the importance of every
serious mining company taking more vigorous steps to disclose any and all
material information to its shareholders - and the public in general - so that
they may make informed investment decisions. Obviously, all mining companies,
even the majors, will now be held to a new, higher standard of scrutiny by the
regulatory agencies, institutional investors, the investing public, and the
mining industry's own professionals. The Company's Board of Directors and
management have discussed this fact at great length and believe that this new
scrutiny will be positive for the Company's current and future shareholders.
Golden Eagle International, Inc. is committed to meeting this new, higher
standard of scrutiny.
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Letter to Shareholders
June 23, 1997
Page 2
With regard to the above discussion, please take very careful note of
the following:
This letter should not be relied upon by itself to make informed
investment decisions. Any and all investment decisions should also be
based upon a full and complete review of the disclosures contained in
the Company's Form 10-QSB Quarterly Reports, and Form 10-KSB Annual
Reports, in addition to discussions with independent professionals
after their review of the reports referred to above. These reports
will be provided to any interested party, upon request, and at no
charge.
To date, the Company has generated no revenue, while incurring
significant operating losses, and is considered a "development stage
company."
This letter is not a solicitation to buy, nor an offer to sell, any
security.
The intent of this letter is to provide the Company's shareholders
with information regarding the Company's management's assessment of
the Company's recent and current activities, as well as management's
strategic planning for the future. Management may, or may not, have
accurately assessed the Company's activities; and may, or may not, be
able to implement its strategic planning for the future. Each
shareholder, or potential shareholder, must evaluate management's
position based on the disclosures contained in the Company's reports
referred to above.
I. Recent History: Where Has The Company Been?
-------------------------------------------
In 1994 and 1995 the Company experienced several failed attempts to acquire
gold and copper mining properties in North America. Those attempts are discussed
in detail in the Company's 1994, 1995 and 1996 Form 10-KSB Annual Reports.
This letter will focus on the Company's successful negotiation of mining
rights on 2,004 hectares (4,810 acres) of mining concessions owned by the United
Cangalli Gold Mining Cooperative, Ltd. ("United Cangalli") in Cangalli, Bolivia,
beginning in the latter months of 1995.
The following is a comprehensive historical explanation, in chronological
order, of the events relating to the acquisition of the mining rights,
subsequent operations in Bolivia, and other significant events regarding the
Company:
A. Initial Reconnaissance of the Cangalli Area Within the Tipuani Mining
District and Pre-Feasibility Report.
In October 1995, the Company's management began reviewing mining
opportunities in Bolivia. The Cangalli area had been presented with
strong credentials. Historically, the Cangalli area, which lies in the
heart of the Tipuani Mining District, had been the largest
gold-producing area in Bolivia. Government estimates, and those of
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Letter to Shareholders
June 23, 1997
Page 3
geologists writing on the subject(1), put the gold production of the
Tipuani Mining District during its known history at 1,000 metric tons
(32,150,000 troy ounces ["ozt"]). (The Company's management was unable
to verify these estimates as being accurate and has not relied upon
them, but believes that they were made in good faith after an
evaluation of all of the known records and information.)
In late 1995, the Company contracted an independent consulting firm
from Denver, Colorado, to perform a site evaluation and gather
sufficient information to make a recommendation to the Company's Board
regarding the site's potential feasibility as an exploration and
development target. The consulting firm's initial report was positive
and a full pre-feasibility report was commissioned by the Company in
December 1995.
The independent consultant's pre-feasibility report was presented to
the Company in January 1996(2). That report evaluated the Cangalli
area very positively and calculated potential mineralization at two
points within the United Cangalli concessions: the open-pit prospect
at Chaco and the Cangalli Shaft underground workings.(3) The
calculations for those two points were as follows:
Potential Mineralization
Site Name in Troy Ounces of Gold
--------- ----------------------
Chaco 109,996 ozt
Cangalli Shaft 5,413,505 ozt
The report indicated that these two sites were among at least 15 other
gold-bearing sites within the United Cangalli concessions. (The
Company cannot assure that this report is accurate, nor that the
mineralization stated can be economically mined. The report was
produced by an independent consulting firm which was responsible for
its accuracy. However, the Company's management did conclude that the
report was a very strong indicator of a large, gold-bearing deposit,
and a mineralized trend suggesting geological continuity.)
B. Letter of Intent, Formation of a New Subsidiary and Private Contract.
After receiving the favorable pre-feasibility report, the Company's
management negotiated the terms of an understanding and signed an
initial Letter of Intent with the Board of Directors of the United
Cangalli Gold Mining Cooperative on January 19, 1996, in Cangalli,
Bolivia. Within days management had formed Golden Eagle Bolivia
Mining, S.A. ("GEBM"), a Bolivian company in which the Company
initially owned a 74% interest. The Company later acquired an
additional 19% from its Bolivian partners, to own a total of 93%.
- ---------------
(1) Technical Geological Report on the Gold Deposits at Cangalli, Bolivia, G.
Paravicini, M.A., Eng. April 1997; pp. 4, 9.
(2) The Gold Deposits of the Tipuani Basin, Bolivia, with Proposed Development
and Mining of the Cangalli and Chaco Deposits; A.F. Trites; January 1996.
(3) Id., pp. 21, 34.
<PAGE>
Letter to Shareholders
June 23, 1997
Page 4
On January 25, 1996, the officers of the newly-formed GEBM signed a
private contract with United Cangalli for exclusive mining rights to
the 2,004 hectares (4,810 acres) owned by United Cangalli. The
significant terms of that Contract were:
i. a 25-year term, with an option for an additional 25-year term;
ii. an 18% gross royalty on all gold recovered payable to United
Cangalli;
iii. a commitment by GEBM to rehabilitate and operate the Cangalli
Shaft;
iv. a commitment by GEBM to invest a minimum of $3 million in the
exploration and development of the concessions within 420 days
from the signing of the Contract;
v. a commitment by GEBM to loan, interest-free, $100,000 to United
Cangalli to assist in satisfying several of its pending
obligations, with repayment to GEBM from United Cangalli's gross
royalty on production;
vi. a commitment by GEBM to grant to United Cangalli, without further
obligation of repayment, $100,000 to assist in satisfying pending
obligations;
vii. all ownership of equipment and machinery brought on-site for the
exploration and mining of the concessions remains vested in GEBM
until GEBM either withdraws because of a lack of feasibility,
completes its 25-year term and elects not to exercise its option,
or exercises its option and completes another 25-year term;
viii. a voluntary commitment on GEBM's part to cooperate with United
Cangalli, and the Cangalli village leadership, to improve
fundamental health and medical treatment in the area; to review
and improve the overall sanitary conditions relative to the
potable water and sewer systems; and to contribute to upgrading
the standard of education in the village.
I am recounting the history behind the signing of the contract with
United Cangalli, and the contract's significant terms, even though
that information is contained in the Company's 1996 Form 10-KSB Annual
Report, because I believe that a more detailed explanation is
warranted.
First, I am often asked why this opportunity still existed in Bolivia,
and why a small gold exploration and mining company from Denver,
Colorado was the one to find it and secure the mining rights.
I believe the answer is found in the idiosyncracies of mining
cooperatives in Bolivia. The Tipuani Mining District had been labeled
for several decades as "No Man's Land" for traditional mining
companies precisely because gold mining cooperatives owned such a high
percentage of the mining concessions. The cooperatives, made up of
between 15 to 118 members, with little or no administrative expertise,
<PAGE>
Letter to Shareholders
June 23, 1997
Page 5
were judged to be difficult organizations with which to work. Each
member was equal to the other in rank, vote and authority. In
addition, world politics during the 60's, 70's and 80's created a
tendency in these cooperatives toward socialism and away from
free-market concepts.
When private mining companies did enter into joint-venture agreements
with the cooperatives, the terms were almost always: 1) the
cooperative received 50% of the gold production for putting in the
property; 2) a 1- or 2-year contract term; and 3) the cooperative kept
any equipment and machinery at the expiration of the short contract
term. Significantly, these private companies were not required to, and
therefore never did, invest anything back into the development of the
community or its infrastructure. For that reason the Tipuani Mining
District is still extremely underdeveloped today despite the many
millions of ounces of gold which have been mined there.
In late 1995, the Company's management - principally the Company's
President at the time, Ronald A. Knittle, and the Corporate Secretary
and one of the Directors, Mary A. Erickson - had the vision to see,
and the courage to pursue, this mining opportunity in light of
changing world and local politics which would allow participation by
American private enterprise. They also knew that United Cangalli, even
with 118 members, was one of the oldest, most well-organized, and
stable cooperatives in the Tipuani Mining District. However, the most
important point by far was their attitude toward the people of United
Cangalli and the Cangalli village. Their voluntary commitment, on the
Company's behalf, to include contract language providing for
cooperation with the cooperative members to improve their daily living
conditions, and that of their families, left United Cangalli's Board
of Directors deeply impressed, and resulted in a great deal of
flexibility on other significant contract terms.
As an example, a 25-year contract period, and an option for an
additional 25-year period, are unheard of in the District. Such terms
allow the Company the ability to plan exploration and mining efforts
well into the future.
An 18% gross royalty, while high by North American standards, is a
very modest royalty in the District. In fact, if the property proves
up in accordance with the initial reports and sampling results, the
royalty will have been a small ongoing price to pay.
Also, the negotiation of a minimal initial investment on the loan and
grant funds for United Cangalli, which pursuant to the contract have
been stretched out over the first year and into the second, was
another reasonable feature of the contract.
In retrospect, after 14 years of experience in Bolivia and several
specific cases of negotiating with cooperatives, I believe that the
foregoing analysis is the answer to the question of why this
opportunity still existed, and why the Company was able to seize the
moment.
If you ever have the opportunity to meet Mr. Knittle or Ms. Erickson,
you might want to thank them for their important accomplishment on
behalf of the Company and its shareholders. Mr. Knittle is no longer
with the Company; however, Ms. Erickson, after recently serving
several months as the Company's President, has accepted an appointment
again as Corporate Secretary and continues to serve as one of the
Company's Directors.
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Letter to Shareholders
June 23, 1997
Page 6
C. Changes in Company Management During 1996.
Ronald A. Knittle, who had served as a Director, President and CEO of
the Company since November 1994, resigned from those positions in May
1996. As stated above, Mr. Knittle was instrumental in the
negotiations that resulted in the acquisition of the United Cangalli
mining rights.
Mr. Knittle is now working independently to address the serious
medical, health, education and housing needs in Bolivia that he
experienced first-hand while working there.
Ronald Sparkman was appointed interim President in May of 1996 and
served until July 4, 1996.
Mary A. Erickson, then serving as Corporate Secretary, was appointed
as President on July 4, 1996 and served in that capacity until
February 14, 1997. She has again assumed the position of Corporate
Secretary. Although it may seem to be a repetition of the praise for
Ms. Erickson already given above regarding the acquisition of the
mining rights on the United Cangalli concessions, I think that the
Company's shareholders should be aware of Ms. Erickson's additional
contributions to the Company's welfare during her term as President.
During some very critical times in the key development stage of the
Cangalli properties, Ms. Erickson was able to secure loans to the
Company, often only by providing her personal guarantee. To obtain the
most recent bank line of credit of $1 million approved for the Company
in the first quarter of 1997, Ms. Erickson had to pledge the majority
of her personal stock in the Company.
However, not even the pledge of her stock equals the investment of
time and personal energy that I watched her make to:
i. bring the Company's reporting requirements current;
ii. oversee, long distance, the re-negotiation, improvement and
execution of a new contract with United Cangalli;
iii. administer the formation of the Company's new subsidiary in
Bolivia, Eagle Mining of Bolivia, Ltd, eliminating a number of
issues bearing on GEBM and the original contract with United
Cangalli;
iv. engineer a $1 million mining equipment acquisition in Bolivia for
stock, leaving the Company's much-needed cash intact; and,
v. initiate a comprehensive exploration program on the Cangalli
concessions.
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Letter to Shareholders
June 23, 1997
Page 7
D. Workings in the Cangalli Shaft Establish Both Lateral Walls of the
Paleo-Canal.
On September 18, 1996, the Company issued a Form 8-K Current Report
indicating that the Company's subsidiary had "reached the Paleo-canal
inside its exploratory shaft on the Cangalli prospect in Bolivia." The
Paleo-canal is sometimes also referred to as the Paleo-channel, the
Paleo-tipuani or the Ancient River Bed. This ancient course of the
Tipuani River was filled with the conglomerate material known as
Cangalli. An independent mining engineer and geophysicist retained by
the Company to study the Cangalli concessions described the
Paleo-canal and its subsequent refilling as follows:
"Over the Paleozoic Basement lies the Cangalli Formation of the
late Tertiary Age-Miocene-Pliocene, named after the village on
the Tipuani River where this conglomerate, generally hardened,
forms the surrounding hills where United Cangalli has its
concessions, and Golden Eagle's subsidiary its center of
operations. The thickness of the Cangalli varies from 500 to
2,500 m (1,640 ft. to 8,202 ft.)."(4)
The importance of this event was the confirmation of the subsidiary's
mining labors directed toward reaching the floor of the Paleo-canal.
For over 50 years, miners in the Tipuani Mining District have sought
to reach the floor of the Paleo-canal in various locations along its
course. The Company's consulting mining engineer/geophysicist explains
why in his recent report:
The ore grades mined were usually very high - from a few tens of
grams to many troy ounces per cubic meter. As much as 125 kg.
(4,019 ozt) of coarse gold have been recovered from as little as
eight m3 (10.5 y3) of gravel found in a pocket in a small
bedrock depression. This was based on information well-documented
in the Aramayo Company records. This company also reported that
in l944, at Tujojahuira, a single sample yielded 112 kg. (3,600
ozt) of gold in 12 m(3) (15.7 y3) of material."(5)
E. Company Formed New Majority-Owned Operating Subsidiary.
On October 2, 1996, the Company formed a new majority-owned operating
subsidiary, Eagle Mining of Bolivia, Ltda.. ("Eagle Mining"). The
Company owns 84% of the new subsidiary's stock; Mary A. Erickson,
former President and current Corporate Secretary and Director, owns
3%; and Rene Velasquez, Eagle Mining's President, owns 13%.
F. Company's Newly-Formed Operating Subsidiary Entered Into a Public
Contract with United Cangalli.
In October of 1996, Eagle Mining assumed GEBM's contract rights and
renegotiated its contract with United Cangalli. The new contract was
protocolized, or recorded, with the Notary of Mines in La Paz on
November 11, 1996. The new contract provides for a gross royalty of
18% of the gold production for United Cangalli, as it did previously.
However, all other performance dates were changed so that Eagle Mining
commited to complete first-phase exploration and open one work front,
in addition to the Cangalli shaft, by April 20, 1997; to open two
additional work fronts by December 6, 1997; and to invest a minimum of
$3 million in the project.
- --------------
(4) Technical Geological Report on Gold Deposits at Cangalli, Bolivia; G.
Paravicini, M.A., Eng,; April, 1997; p. 13.
(5) Id., p.10.
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Letter to Shareholders
June 23, 1997
Page 8
The Company has recently opened an additional workfront in the
Cangalli open pit and is working toward its $3 million commitment. To
date, the Company has expended substantial sums toward this
commitment, including the acquisition of $1 million worth of recovery
and other mining equipment. With additional funding sources obtained
earlier this year through private stock purchases and the extension of
a $1 million line of credit from a Texas bank, we believe this
commitment has, in large part, been met.
In addition, Eagle Mining committed to provide to United Cangalli
$200,000 for reduction of United Cangalli's prior obligations;
$100,000 in the form of a loan and $100,000 in the form of a grant.
Eagle Mining completed funding of the $100,000 loan to United Cangalli
prior to year-end 1996, and as of this date has substantially
completed the additional $100,000 grant.
G. Company's Management Commissioned an Additional Independent Geological
Resource and Mining Feasibility Study of the Concessions Under
Contract.
In early December 1996, the Company commissioned Guido Paravicini,
M.A., Eng., a Bolivian mining engineer and geophysicist, to carry out
the following tasks relative to the gold deposits at Cangalli, in the
Tipuani Mining District of Bolivia:
i. Review the geological literature and studies regarding the
region, the Tipuani Mining District, and the local area
surrounding Cangalli;
ii. Conduct field studies of the local geology, along with conducting
a sufficiently-in-depth sampling program to verify the mineral
resources and reserves on the claims owned by the United Cangalli
Gold Mining Cooperative, which are controlled under contract by
Golden Eagle's Bolivian subsidiary;
iii. Recommend further exploration and confirmation work to be carried
out and appropriate mining methods to be employed; and
iv. Verify Golden Eagle's subsidiary's rights to legally mine the
claims under study.
Mr. Paravicini holds a Bachelor's Degree in Humanities (Mathematics)
from the University of Santiago, Chile; a Bachelor's Degree in Mining
Engineering from the Technical University of Oruro, Bolivia; and a
Master's Degree in Geophysics from Washington University in St. Louis,
Missouri. In addition, he has received certificates from Havard
University in Geology and Geophysics; Michigan State University in
Communications; the United States Agency for International Development
in Geophysics; the Japanese International Cooperation Agency in Mining
& Metalurgy; and a Diploma of Merit in Geology from the United States
Geological Survey.
Mr. Paravicini was Chief Exploration Geologist for 19 years for the
National Bolivian Mining Corporation ("Comibol") specializing in gold
and tin exploration.
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Letter to Shareholders
June 23, 1997
Page 9
On January 20, 1997, Mr. Paravicini issued a summary report of his
findings, "Summary Geological Report on the Gold Deposits at Cangalli,
Bolivia". Subsequently, Mr. Paravicini issued a full report on his
findings, "Technical Geological Report on the Gold Deposits at
Cangalli, Bolivia"; G. Paravicini; April, 1997. This report's most
significant finding stated:
"The resources previously estimated for the concessions under
Golden Eagle's subsidiary's control at Cangalli were calculated
with a conservative average grade of .500 g/m3 (0.012 ozt/y3).
This calculation, on the basis of the sampling program shown in
this Report, will have to be increased by approximately 28 times,
or to an average grade of 14.049 g/m3 (0.34 ozt/y3). Using the
definitions set out above, and the overwhelming evidence of
geologic continuity, it is this author's opinion that the portion
of the Cangalli claims that has been studied, which would have
been in any event less than half of the claims under contract,
contains an Indicated Resource of 60,771,704 ozt of gold and an
Inferred Resource of 111,414,800 ozt of gold."(6)
(The Company cannot assure that this report is accurate, nor that the
resources stated can be economically mined. The report was produced by
an independent consulting mining engineer/geophysicist who was
responsible for its accuracy. However, the Company's management did
conclude that the report was a very strong indicator of a large,
gold-bearing deposit, and a mineralized trend suggesting geological
continuity. Mr. Paravicini owns no stock or options in Golden Eagle
and is paid a fee for his professional services.)
II. State of Operations: Where Is The Company Currently?
-----------------------------------------------------
Since its inception Golden Eagle International, Inc. has been a
"development stage company". In particular, during the five quarters since the
Company's first Bolivian subsidiary signed a contract for the mining rights on
the United Cangalli concessions, January 25, 1996, the Company has been in the
mode of mine expansion and rehabilitation in the Cangalli Shaft, and exploration
and site development for an open pit prospect. The Company has now been informed
by the managment of its Bolivian subsidiary, Eagle Mining of Bolivia, Ltd.
("Eagle Mining"), that full-scale production will commence from the Cangalli
Shaft and from the Chaco open pit in the third quarter of 1997. The following is
a summary of some of the recent events which have occurred in the first two
quarters of 1997:
A. Changes in Company Management During 1997.
Terry C. Turner. On February 14, 1997, the Company's Board of
Directors appointed me, Terry C. Turner, 44, as a Director, President
and CEO. I received a B.A. in Political Science and a B.A. in Spanish
in 1977 from the University of Utah. I received a Juris Doctorate in
1980 from Brigham Young University. I am a member of the Utah State
Bar and am admitted to practice in the State and Federal Courts of
Utah, and the 10th Circuit Court of Appeals. I am also a member of the
Bolivian College of Lawyers (Bolivian Bar Association) and am the
first American attorney admitted to practice law in Bolivia.
- ---------------------
(6) Technical Geological Report on the Gold Deposits at Cangalli, Bolivia; G.
Paravicini; April, 1997. p. 32.
<PAGE>
Letter to Shareholders
June 23, 1997
Page 10
From 1980 to 1983 I practiced law with a firm in Salt Lake City, Utah.
From 1983 to my appointment with Golden Eagle I worked with several
mining companies in Bolivia as an officer, general counsel or outside
counsel. From January 1996 until my appointment with the Company in
February 1997, I was corporate counsel in Bolivia for the Company and
its subsidiaries. For more complete information, please consult the
Biographical Information section of the Company's Form 10-KSB Annual
Report for 1996.
Mac DeLozier, 53, was appointed by the Company's Board of Directors as
Executive Vice President for Bolivia in May 1997. Mr. DeLozier
graduated from Oklahoma State University in 1966 with a B.A. in
History, a B.A. in Political Science and a B.A. in Languages. Mr.
DeLozier began a 31-year association with Bolivia in 1966 when he
joined the Peace Corps and was assigned to Bolivia. After serving five
years in the Peace Corps, he entered a successful 18-year career as a
cattle rancher in Bolivia's Amazon drainage. Mr. DeLozier has also
managed a gold mine (1980-81), served as the general purchasing agent
for the American Embassy in Bolivia (1981-85), and most recently, has
been the International Sales Representative in Bolivia for Toyota,
Chevrolet and Hyundai (1989-97).
B. Formation of a Technical Advisory Board.
In May 1997, the Company's Board of Directors formed a Technical
Advisory Board to assist the Company with the evaluation, exploration
and operation of its current Bolivian property, and any future
acquisitions. This Advisory Board will initially consist of three
members with broad backgrounds and extensive experience with major
mining companies. They are as follows:
Max S. Staheli. Mr. Staheli received a B.A. in Finance and an MBA from
the University of Utah. He has worked for KPMG Peat, Marwick & Co. in
Honolulu, Hawaii in the late 60's, and nine years as a manager with
Atlantic Richfield Co. (1973-82); however, his most recent corporate
experience contributes most notably to Golden Eagle's future. Mr.
Staheli spent the last 14 years with Barrick Gold Corporation, most
recently as their Controller of South American Operations
headquartered in Lima, Peru. Mr. Staheli developed and implemented
administrative policies and procedures for Barrick's launch into South
America. He also successfully built the corporate structure for
Barrick's extensive exploration and development program, which
included Bolivia. Mr. Staheli was instrumental in the rapid growth of
Barrick Gold Corporation in the South Amercan market between 1994-96.
Ronald L Atwood, Ph.D. Dr. Atwood received a B.S. in Metallurgical
Engineering , and a Ph.D. in Metallurgy from the University of Utah.
He has published nine papers on various aspects of metallurgy. He
holds numerous patents in the field of extractive metallurgy. Dr.
Atwood has been a professor of metallurgy at Michigan Tech (1972-74)
and the University of Idaho (1974-75). Dr. Atwood has served on the
board of Newmont Exploration, as well as Chief Metallurgist for Foote
Mineral (1975-82), Director of Research for Newmont Gold (1986-87) and
Newmont Metallurgical Services (1987-89), all divisions of Newmont
Mining. Dr. Atwood currently serves as Vice President of Bolivian
Copper Chemical Company, S.A., in La Paz, Bolivia, which has recently
entered into an agreement with an Australian resource company for the
development of a large copper deposit in Bolivia.
<PAGE>
Letter to Shareholders
June 23, 1997
Page 11
Donald M. Hausen, Ph.D. Dr. Hausen received a B.S. in Geology from
Idaho State College, an M.S. in Geology from the University of Oregon,
and a Ph.D. in Geology from Columbia University in New York. He has
served as the Chairman of the Process Mineralogy Commitee of the
SME-AIME on several occasions. Dr. Hausen is a member of the
Mineralogic Society of America; Society of Economic Geologists; CIM;
Ore. Geol. Reviews (Editorial Advisory Board); and the International
Congress of Applied Mineralogy. Dr. Hausen has worked for the U.S.
Army Corp of Engineers, U.S. Bureau of Mines, Atomic Energy Commision,
Union Carbide Nuclear Company, Newmont Exploration Limited (Chief
Mineralogist, 1964-87), and Newmont Metallurgical Services (Chief
Mineralogist, 1987-90).
Dr. Atwood has already made a site visit to the Cangalli property
(June 4-10, 1997), has reviewed the current exploration and mining
underway, and has made recommendations on the installation of a new
fine gold recovery circuit.
C. $1 Million Line of Credit.
During the first quarter of 1997 the Company was approved for a $1
million line of credit by a bank in Houston, Texas. The same bank
issued a $240,000 bridge loan to the Company in February 1997. At the
beginning of the second quarter of 1997, disbursements were made to
the Company on the line of credit and the bridge loan was paid off
completely at that time.
D. Company's Regulatory Filings Current.
The Company filed with the Securities and Exchange Commission its
required Form 10-KSB Annual Report for 1996 and its Form 10-QSB
Quarterly Report for the first quarter of 1997 within their respective
extension periods. In addition, all 1996 quarterly reports and amended
1995 10- QSBs have been filed with the SEC. The Company is current in
all of its regulatory reporting requirements and expects to remain so
in the future, with timely filing on all subsequent reports.
E. Significant Equipment Purchases.
The Company, or its subsidiary, Eagle Mining, has made the following
significant equipment purchases:
i. $1 Million San Silvestre Acquisition. On September 18, 1996, the
Company initiated the acquisition of $1 million worth of mining
equipment and a recovery plant located in Bolivia in exchange for
$20,000 in cash and convertible debentures which could be
converted into the Company's common stock. The transaction was
closed on February 10, 1997. The Company acquired an
electro-generator; two large air compressors; two mine drills;
ore cars; mine rail; a jaw crusher; a 4 x 4 ball mill; an apron
feeder; a classifier; a static thickener; a Reichert spiral
concentrator; two centrifugal bowl concentrators; a vibrating
table concentrator; various pumps; electrical panels and support
equipment; a conical ball mill; an amalgamator; various sets of
tools; mine ventilators with sleeves; radios and support
equipment; a mine hoist; and various mine supplies.
<PAGE>
Letter to Shareholders
June 23, 1997
Page 12
ii. Two Bulldozers. In early April 1997, Eagle Mining purchased two
used D85 Komatsu bulldozers in excellent condition and
transported them on-site. Since their arrival at the mine, the
two bulldozers have been improving the infrastructure by
repairing roads destroyed during the rainy season which ended in
April. In addition, the two bulldozers have opened up the Chaco
open pit site, preparing the pad location for the recovery plant
and other necessary infrastructure work, fulfilling the contract
requirements.
iii. Diamond Core Drill Acquisition. In early May 1997, the Company
purchased in Bolivia an Atlas Copco Diamec 252 Diamond Core Drill
in anticipation of beginning its reserve confirmation core
drilling schedule on the Cangalli property. A current reserve
confirmation program, which has been underway since the end of
April 1997, is using the results from 1,000 trench samples to
establish six initial target drill sites for a projected 2,000
meters (6,560 feet) of diamond core drilling. These six
"perimeter" holes will permit more detailed geological mapping
and the projection of an in-fill drilling schedule.
F. The Floor of the Paleo-canal, Development Work and Projected
Production During Third Quarter.
The Company announced the discovery of the Paleo-canal in September
1996, and has been working on its floor since April 1997. Drifts have
now been cut up and down the length or strike of the canal itself and
the decline ramp leading from the consolidated mine workings at Level
-237 down to the floor workings (approximately -280) have now been
widened to facilitate production. In addition, a mine hoist has been
installed at the beginning of the decline ramp and rail has been
installed to the canal floor.
The combination of these mining factors, and the initial results from
ore sampling by the on-site engineers in the paystreak on the
Ordovician Bedrock at both levels -237 and -280 (an average of 21.145
g/m3 [0.52 ozt/y3] of gold in preliminary sampling),(7) has led Eagle
Mining's management to project production from the Cangalli Shaft,
beginning in the third quarter 1997, of 54.4 kilograms (1,700 ozt) of
gold per month, with an increase by the end of the fourth quarter to
81.6 kilograms (2,550 ozt) of gold per month. (This projection assumes
production of 25 days per month at 100 m3 [180 tons] per day
initially, escalating to 150 m3 [270 tons] per day by the end of the
fourth quarter 1997. In addition, the subsidiary's management assumes
the installation of an improved gold recovery plant, which is on-site
and currently being installed, by the beginning of the third quarter
1997. Further, sampling yield averages rarely are consistent
throughout a prospect's volume of material, and the Company will, in
all probability, experience substantially lesser yields in production
as opposed to sampling yields.)
- --------------
(7) Technical Geological Report on the Gold Deposits at Cangalli, Bolivia; G.
Paravicini; April, 1997. p.28.
<PAGE>
Letter to Shareholders
June 23, 1997
Page 13
With a projected sales price of $350 per ozt, gross sales would begin
at $595,000 per month and rise to $893,000. Production costs per troy
ounce have still not been projected by Eagle Mining's management due
to numerous undetermined factors. (Please note that the Company cannot
guarantee that its subsidiary will reach its projections, nor that any
net revenues would result from any gross sales amounts. These
projections assume operation and that no major operating difficulties
will be encountered. However, there is a probability that operating
difficulties will be encountered which could affect these estimates.
Further, these are internal projections and should not be used as a
basis for making any investment decision.)
III. Strategy for Growth: Where Is The Company Going?
------------------------------------------------
The Company's strategy for growth could be summarized in one word:
diversification. The Company's Board and management have concluded that the
Company must be growing in three areas, and that the Company cannot afford to
"have all of its eggs in one basket" in any one of those areas:
A. Exploration.
i. Potential Mineralization. The Company's most recent report
indicates significant mineralization on the Cangalli concessions.
Because the numbers are so large, management has chosen to view
them as "a very strong indicator of a large, gold-bearing
deposit, and a mineralized trend suggesting geological
continuity." However, that statement is just the beginning. That
is why the Company immediately requested that Mr. Paravicini
assemble a team of exploration geologists in April 1997 to
follow-up on his initial findings with a program of 1,000 trench
samples and the establishment of six perimeter diamond core
drilling sites. Once that study is completed, the in-fill
drilling can begin, until the mineralization projections are
proven up into resources or reserves.
ii. Two More Open Pit Sites. The Company is required by contract to
open up two additional work fronts by December 6, 1997. Our
exploration program, while accommodating the "big picture" on
proving up overall reserves, must also focus on providing smaller
production targets for immediate development.
B. Future Production Plans
i. The Cangalli Shaft. Production will begin here within the next
few weeks. Because of the higher production costs associated with
underground mining, the goal will always be to move away from the
shaft toward open pit, bulk mining if circumstances permit.
However, the shaft has now reached its destination - the floor of
the Paleo-canal - and we would like to see the production numbers
meet everyone's expectations.
ii. Three Open Pits. Three open pits, or work fronts, are required
"to be opened" by the Company's subsidiary's contract with United
Cangalli. Currently, the Chaco open pit is "open" and is
projected to begin producing during third quarter 1997.
Obviously, by December, in the end of the fourth quarter 1997,
two more sites must be "opened". This is actually a positive
requirement for the Company since it meets our diversification
goals.
<PAGE>
Letter to Shareholders
June 23, 1997
Page 14
C. Property Acquisition.
i. Properties Within the Area of Influence. The Company currently
controls 2,004 hectares (4,810 acres) in Cangalli, Bolivia. It is
not management's intention to become overly-preoccupied with
acquiring adjacent properties; however, several have been offered
and it may be prudent to acquire a substantial buffer or area of
influence around our current control area.
ii. The Precambrian Shield. The Company has been approached about
gold properties in the Precambrian Shield in eastern Bolivia.
Currently, there is a gold rush going on in that region. Several
Vancouver-based companies have fairly large landholdings and are
publishing very impressive numbers. Again, in keeping with the
goal of diversification, Company management will continue to
evaluate these possibilities as they present themselves.
As I said at the beginning, please accept my apology for the encyclopedic
nature of this letter. I believe that it is apparent that so many things have
been happening that one long discussion was necessary to get us back in
communication. From now on, I will keep it short and to the point.
We are excited about our project in Bolivia and about the prospects for
Golden Eagle's future. Thank you for your continuing support. Please contact me
with any questions or comments.
Warmest regards,
/S/ TERRY C. TURNER
---------------------------------------
Terry C. Turner
President & CEO
TCT/me
enclosure
