ROYAL SILVER MINES INC, SB-2, 1997-02-10

ROYAL SILVER MINES INC
SB-2, 1997-02-10
METAL MINING

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<PAGE> 1

As filed with the Securities and Exchange Commission on ___________________,
1997. Registration No. 333-_________________.

=============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
----------------------------------
FORM SB-2
REGISTRATION STATEMENT
Under
The Securities Act of 1933
---------------------------------

ROYAL SILVER MINES, INC.
- -----------------------------------------------------------------------------
(Exact name of Registrant specified in charter)

Nevada 7900 87-0306609
- -----------------------------------------------------------------------------
(State of (Primary Industrial (I.R.S. Employer
Incorporation) Classification) I.D.#)

10220 N. Nevada
Suite 230
Spokane, Washington 99218
Tel: (509) 466-3144
- -----------------------------------------------------------------------------
(Address, including zip code of principal place of business and telephone
number, including area code of Registrant's principal executive offices.)

Conrad C. Lysiak
Attorney and Counselor at Law
West 601 First Avenue, Suite 503
Spokane, Washington 99204
(509) 624-1475
- -----------------------------------------------------------------------------
(Name, address, including zip code and telephone number, including area code
of agents for service.)

Approximate date of commencement date or proposed sale to the public: As
soon as practicable after this Registration Statement becomes effective.

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, check the following box [x].

The Exhibit Index for this Registration Statement begins on sequential page
number _____.

=============================================================================
<PAGE>
<PAGE> 2

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
Proposed Proposed
Title of Maximum maximum
each class of offering aggregate
securities to Amount to be price per offering Amount of
be registered registered Share [1] price registration
fee
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Warrants 625,000 $0.01 $ 6,250 $ 1.90

Shares issuable
upon the exercise
of the Warrants 625,000 $1.50 $ 937,500 $ 284.09

Shares of Common
Stock of Mueller 166,000 $1.0625 $ 176,375 $ 53.45

- ---------------------------------------------------------------------------------
TOTAL REGISTRATION FEE $ 1,120,125 $ 339.44
- ---------------------------------------------------------------------------------
</TABLE>

[1] Estimated solely for the purpose of calculating the
registration fee.

The Registrant hereby amends this registration statement on
such date or dates as may be necessary to delay its effective date
until the Registrant shall file a further amendment which
specifically states that the registration statement shall
thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until this registration statement shall
be come effective on such date as the Commission, acting pursuant
to said Section 8(a), may determine.

<PAGE>
<PAGE> 3

ROYAL SILVER MINES, INC.

CROSS REFERENCE SHEET PURSUANT TO
RULE 404 (a) AND ITEM 501 (b) OF REGULATION S-B

Form S-B Item #
and Caption Caption in Prospectus
- -------------------------------------------------------------------
1 Front of Registration
Statement and Outside Front
Cover of Prospectus FACING PAGE; CROSS REFERENCE
SHEET; OUTSIDE FRONT COVER PAGE

2 Inside Front and
Outside Back Cover of
Pages of Prospectus INSIDE FRONT COVER PAGE;
OUTSIDE BACK COVER PAGE
3 Summary Information and
Risk Factors PROSPECTUS SUMMARY; RISK
FACTORS; THE COMPANY

4 Use of Proceeds PROSPECTUS SUMMARY; USE OF
PROCEEDS

5 Determination of
Offering Price OUTSIDE FRONT COVER PAGE; PLAN
OF DISTRIBUTION

6 Dilution DILUTION

7 Selling Securityholders NOT APPLICABLE

8 Plan of Distribution INSIDE FRONT COVER PAGE; PLAN
OF DISTRIBUTION

9 Legal Proceedings BUSINESS

10 Directors, Executive
Officers, Promoters
and Control Persons MANAGEMENT

11 Security Ownership of
Certain Beneficial
Owners and Management MANAGEMENT

12 Description of
Securities OUTSIDE FRONT COVER PAGE;
DESCRIPTION OF SECURITIES; PLAN
OF DISTRIBUTION

13 Interest of Named Experts
and Counsel LEGAL MATTERS; EXPERTS

<PAGE> 4

Form S-B Item #
and Caption Caption in Prospectus
- ------------------------------------------------------------------

14 Disclosure of Commission
Position on Indemnification
for Securities Act
Liabilities BUSINESS

15 Organization Within
Last 5 Years THE COMPANY; BUSINESS

16 Description of Business PROSPECTUS SUMMARY; BUSINESS

17 Management's Discussion
and Analysis or Plan of
Operation MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

18 Description of Property BUSINESS

19 Certain Relationships and
Related Transactions MANAGEMENT

20 Market for Common Equity
and Related Stockholder
Matters DIVIDEND POLICY; PRINCIPAL
SHAREHOLDERS; SHARES AVAILABLE
FOR FUTURE SALES

21 Executive Compensation MANAGEMENT

22 Financial Statements FINANCIAL STATEMENTS

23. Changes In and Disagreements
with Accountants on
Accounting and Financial
Disclosures NOT APPLICABLE

<PAGE> 5
PROSPECTUS
625,000 Warrants to Purchase
625,000 Shares of Common Stock and
791,000 Shares of Common Stock.

ROYAL SILVER MINES, INC.

This Prospectus relates to the sale of 625,000 Warrants to purchase
625,000 shares of Common Stock (the "Warrants") of Royal Silver Mines, Inc.
(the "Company") and 625,000 shares of Common Stock of the Company, $0.01 par
value (the "Common Stock"), which are offered by Mueller Trading
("Mueller"). The exercise price of each Warrant is $1.50. The Warrants can
be exercised at anytime after this offering is declared effective by the
Securities and Exchange Commission and will expire on September 30, 1998.
Beginning on the effective date of the offering, Mueller may offer the
Warrants and/or Common Stock for sale in regular market transactions or
through broker/dealers at prevailing market prices or otherwise from time to
time. The Company will receive the exercise price of each option, but will
not receive any of the proceeds of from the sale of the Warrants or Common
Stock.

Further, this Prospectus relates to the sale of 166,000 shares of the
Company's Common Stock offered by Israel A. Englander ("Englander").
Mueller and Englander are collectively hereinafter referred to as the
"Selling Shareholders."

The Warrants are not traded, however, the Common Stock is traded in the
over-the-counter market. Quotations for the Common Stock are published on
the Bulletin Board operated by the National Association of Securities
Dealers, Inc. (the "Bulletin Board") under the symbol "RSMI." On February 5,
1997, the closing per share bid price for the Company's Common Stock, as
reported on the Bulletin Board was 1. This price does not represent a
transaction price and there is no assurance that a significant quantity of
the Common Stock could be sold at this price.

FOR A DISCUSSION OF CERTAIN RISKS OF AN INVESTMENT IN THE COMMON STOCK
AND WARRANTS, SEE "RISK FACTORS."

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

THE COMPANY IS REQUIRED TO DELIVER AN ANNUAL REPORT TO SECURITY HOLDERS
PURSUANT TO SECTION 14 OF THE SECURITIES EXCHANGE ACT OF 1934, CONTAINING
AUDITED FINANCIAL STATEMENTS WITH A REPORT THEREON BY ITS INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS AS WELL AS QUARTERLY REPORTS FOR THE FIRST THREE
QUARTERS OF EACH FISCAL YEAR CONTAINING UNAUDITED FINANCIAL INFORMATION.

UNTIL ________________________, (NINETY DAYS AFTER THE EFFECTIVE DATE OF
THIS PROSPECTUS) ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE
REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF
DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS WITH RESPECT TO
THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

The date of this Prospectus is February 5, 1997.

<PAGE> 6
- ---------------------------------------------------------------------
PROSPECTUS SUMMARY
- ---------------------------------------------------------------------

THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS.

The Company ROYAL SILVER MINES, INC. (the "Company") formerly known as
Consolidated Royal Mines, Inc., and also, Royal Minerals,
Inc., is a U.S. mineral resource company incorporated
under the laws of the State of Utah. The Company is
engaged in the business of acquiring and exploring mineral
properties containing silver, gold, copper, and other
mineralization, with a primary emphasis on silver. See
"Business."

The Company's offices are located at 10220 N. Nevada,
Suite 230, Spokane, Washington 99218. The Company's
telephone number is (509) 466-3144.

The Offering Mueller is selling 625,000 warrants (the "Warrants") to
purchase 625,000 shares of common stock of the Company
and/or 625,000 shares of common stock underlying the
Warrants; and, Englander is selling 166,000 shares of
Common Stock. Mueller's and Englander's shares of Common
Stock are collectively referred to as the "Shares." See
"Description of Securities."
<TABLE>
<CAPTION>
50% of the 100% of the
Warrants Warrants
Exercised Exercised

<S> <C> <C>
Shares being Offered. . . 312,500 625,000
Shares Outstanding . . . . 10,649,854 10,649,854
Shares to be Outstanding . . . 10,962,354 11,274,854
Gross Proceeds from the
Exercise of the Warrants . . 468,750 937,500
Estimated Expenses of the Offering
including Selling Commissions . $ 15,000 $ 15,000
Net Proceeds to the Company After
Deducting Estimated Expenses . . $ 453,750 $ 922,500
</TABLE>

Use of Proceeds The net proceeds available to the Company upon
completion of this offering and after deducting the
commissions and estimated offering expenses will be
approximately $453,750 if 50% of the Warrants are
exercised and $922,500 if 100% of the Warrants are
exercised. The Company intends to use the proceeds
for working capital. The Company will not receive
any proceeds from the sale of the Warrants or sale
of the Shares. See "Use of Proceeds" and "Proposed
Business."

<PAGE> 7

Risk Factors Investment in the Warrants and/or Shares should be
considered highly speculative. The Company has no
current operating history and is subject to all of
the inherent risks of a developing business
enterprise. The Company is in need of additional
capital and has no revenues. There are non-arms
length transactions with affiliates involving
conflicts of interest. The Company does not
anticipate paying any dividends on its Common Stock.

Selected Financial
Information The Company has no operating history and maybe
considered a developmental enterprise. The Company
has no revenues and there is no assurance that the
Company will ever have material revenues or that its
operations will be profitable. The following
financial data summarizes certain information
concerning the Company is based upon the financial
statements and notes, thereto, contained in this
Prospectus. See "Financial Statements."

Balance Sheet as of September 30, 1996 (audited):

<TABLE>
<S> <C>
Assets
Current Assets . . . . . . $ 806,440
Total Assets . . . . . . . 5,605,357
Current Liabilities . . . . . 119,867
Stockholders' Equity . . . . . 5,485,490
Total Liabilities
& Stockholders' Equity. . . . . . 5,605,357
Net Tangible Book Value Per Share . . . $ 0.52
</TABLE>

- ---------------------------------------------------------------------
RISK FACTORS
- ---------------------------------------------------------------------

THE SECURITIES BEING OFFERED INVOLVE A HIGH DEGREE OF RISK AND,
THEREFORE, SHOULD BE CONSIDERED EXTREMELY SPECULATIVE. THEY SHOULD NOT
BE PURCHASED BY PERSONS WHO CANNOT AFFORD THE POSSIBILITY OF THE LOSS OF
THEIR ENTIRE INVESTMENT. PROSPECTIVE INVESTORS SHOULD READ THE ENTIRE
PROSPECTUS AND CAREFULLY CONSIDER, AMONG THE OTHER FACTORS AND FINANCIAL
DATA DESCRIBED HEREIN, AND THE FOLLOWING RISK FACTORS:

1. Recent Status as a Public Reporting Company. The Company
became a fully reporting public company on January 23, 1995. The Company
has no current operating history and is subject to all risks inherent in
a developing business enterprise. The likelihood of success of the
Company must be considered in light of the problems, expenses,
difficulties, complications, and delays frequently encountered in
connection with a new business in general and those specific to the
natural resource industry and the competitive and regulatory environment
in which the Company will operate.

<PAGE> 8

2. Exploration Stage Company. Mineral exploration, particularly
for gold and silver, is highly speculative in nature, frequently is
nonproductive, and involves many risks, often greater than those involved
in the discovery of mineralization. Such risks can be considerable and
may add unexpected expenditures or delays to the Company's plans. There
can be no assurance that the Company's mineral exploration activities
will be successful or profitable. Once mineralization is discovered, it
may take a number of years from the initial phase of drilling until
production is possible, during which time the economic feasibility of
production may change. A related factor is that exploration stage
companies use the evaluation work of professional geologists,
geophysicists, and engineers for estimates in determining whether to
acquire an interest in property or to commence exploration or development
work. These estimates generally rely on scientific estimates and
economic assumptions, and in some instances may not be correct, and could
result in the expenditure of substantial amounts of money on a property
before it can be determined whether or not the property contains
economically recoverable mineralization. The economic viability of a
property cannot be determined until extensive exploration and development
has been conducted and a comprehensive feasibility study performed. The
Company currently does not have any such feasibility studies, and has not
yet prepared feasibility studies on any of its properties. Moreover, the
market prices of any minerals produced are subject to fluctuation, which
may negatively affect the economic viability of properties on which
expenditures have been made. The Company is not able to determine at
present whether or not, or the extent to which, such risks may adversely
affect the Company's strategy and business plans.

3. Lack of Revenue. The Company needs additional capital but
currently has no revenues. Substantial expenditures are required to
establish ore reserves through drilling, to determine metallurgical
processes to extract the mineralization from the ore and, in the case of
new properties, to construct mining and processing facilities. The
Company lacks a constant and continual flow of revenue. The Company
currently holds certain royalty interests in several mining properties
previously sold, but there is no assurance that the Company will receive
royalty payments, or that the Company will otherwise receive adequate
funding to be able to finance its exploration activities. The Company is
looking for revenue sources on an on-going basis, but there can be no
assurance that such sources can be found or that, if available, the terms
of such financing will be commercially acceptable to the Company.
Because of the Company's need for additional capital to fund its present
operations, to complete the acquisition of certain mineral rights, and to
provide for further exploration and development, the lack of consistent
revenue could be a detrimental factor in the progress of the Company.

4. Realization of Investments in Mineral Properties and Additional
Capital Needs. The ultimate realization of the Company's investments in
mineral properties is dependent upon the success of future property
sales, the existence of economically recoverable reserves, the ability of
the Company to obtain financing or make other arrangements for
development and upon future profitable production. The Company expects
to finance its operations for Fiscal 1997 through the sale of equity
securities, joint venture arrangements (including project financing), and
the sale of interests in mineral properties. The Company does not have
<PAGE> 9

sufficient capital of its own to explore and develop its mineral
properties and there can be no assurance that the Company will be
successful in obtaining the required funds to finance its long-term
capital needs.

5. Retention and Attraction of Key Personnel. The Company's
success will depend, in large part, on its ability to retain and attract
highly qualified personnel. The Company's success in retaining its
present staff and in attracting additional qualified personnel will
depend on many factors, including its ability to provide them with
competitive compensation arrangements, equity participation and other
benefits. There is no assurance that the Company will be successful in
retaining or attracting highly qualified individuals in key management
positions.

6. Regulatory Concerns. Environmental and other government
regulations at the federal, state and local level pertaining to the
Company's business and properties may include: (a) surface impact; (b)
water acquisition; (c) site access; (d) reclamation; (e) wildlife
preservation; (f) licenses and permits; and, (e) maintaining the fees for
unpatented mining claims. See "Business - Government Regulation and
Environmental Concerns."

7. Working Capital Deficits; Accumulated Deficit; Working Capital
Deficit; Auditor's Report. Although it commenced operations more than
two years ago, the Company remains in the development stage. At
September 30, 1996, the Company had a working capital of $686,573 and an
accumulated deficit of $3,057,817, which deficits and losses are expected
to continue for the foreseeable future. The Company's operations are
subject to numerous risks associated with the mining industry.

8. Exercise Price Arbitrarily Determined. The exercise price of
the shares underlying the Warrants was established arbitrarily by the
Company and Mueller. There is no direct relationship between the
exercise price and the assets or shareholders' equity of the Company of
any other criterion of value. Further, since the Company has not
retained an underwriter in connection with this offering, the exercise
price has not been determined by negotiation with an underwriter.

9. Risk Relating to Partial Exercise of Warrants. In the event
only a small portion of the Warrants are exercised, the Company will
receive only a small portion of the proceeds that it may need to complete
its planned activities. There is a risk to those investors who do
exercise their Warrants where only a small portion of such Warrants are
exercised that the lack of contemplated working capital so resulting
could have a materially detrimental impact on the financial condition of
the Company.

10. Reliance Upon Directors and Officers. The Company is wholly
dependent, at the present, upon the personal efforts and abilities of its
Officers and Directors who exercise control over the day to day affairs
of the Company. There can be no assurance as to the volume of business,
if any, which the Company may succeed in obtaining, nor that its proposed
operations will prove to be profitable. See "Proposed Business" and
"Management."

<PAGE> 10

11. Indemnification of Officers and Directors for Securities
Liabilities. The Bylaws of the Company provide that the Company may
indemnify any Director, Officer, agent and/or employee as to those
liabilities and on those terms and conditions as are specified in the
Nevada Business Corporation Act. Further, the Company may purchase and
maintain insurance on behalf of any such persons whether or not the
corporation would have the power to indemnify such person against the
liability insured against. The foregoing could result in substantial
expenditures by the Company and prevent any recovery from such Officers,
Directors, agents and employees for losses incurred by the Company as a
result of their actions. Further, the Company has been advised that in
the opinion of the Securities and Exchange Commission, indemnification is
against public policy as expressed in the Securities Act of 1933, as
amended, and is, therefore, unenforceable.

12. Cumulative Voting, Preemptive Rights and Control. There are no
preemptive rights in connection with the Company's Common Stock. The
shareholders purchasing in this offering may be further diluted in their
percentage ownership of the Company in the event additional shares are
issued by the Company in the future. Cumulative voting in the election
of Directors is not provided for. Accordingly, the holders of a majority
of the shares of Common Stock, present in person or by proxy, will be
able to elect all of the Company's Board of Directors. See "Description
of the Securities."

13. Public Shareholders will Suffer the Greatest Losses if the
Company is Unsuccessful. If the Company's future operations are
successful, the present shareholders will realize substantial benefits
from the Company's growth. If the Company's future operations are
unsuccessful, the persons who purchase the Warrants and Shares offered
hereby will sustain the principal losses of such cash investment. See
"Dilution."

14. Potential Future Sales Pursuant to Rule 144. Approximately
10,772,732 shares of Common Stock presently issued and outstanding of
which 7,553,481 shares are "Restricted Securities" as that term is
defined in Rule 144 promulgated under the Securities Act of 1933, as
amended. In general, under Rule 144, a person (or persons whose shares
are aggregated) who has satisfied a two year holding period, may sell
within any three month period, an amount which does not exceed the
greater of 1% of the then outstanding shares of Common Stock or the
average weekly trading volume during the four calendar weeks prior to
such sale. Rule 144 also permits the sale of shares, under certain
circumstances, without any quantity limitation, by persons who are not
affiliates of the Company and who have beneficially owned the shares for
a minimum period of three (3) years. Hence, the possible sale of these
restricted shares may, in the future dilute an investors percentage of
free-trading shares and may have a depressive effect on the price of the
Company's securities and such sales, if substantial, might also adversely
effect the Company's ability to raise additional equity capital. See
"Description of Securities - Shares Eligible for Future Sale."

<PAGE> 11

15. No Dividends. The holders of the Common Stock are entitled to
receive dividends when, as and if declared by the Board of Directors out
of funds legally available therefore. To date, the Company has not paid
any cash dividends. The Board does not intend to declare any dividends
in the foreseeable future, but instead intends to retain all earnings, if
any, for use in the Company's business operations. As the Company will
be required to obtain additional financing, it is likely that there will
be restrictions on the Company's ability to declare any dividends. See
"Dividend Policy" and "Description of Securities."

16. No Market for the Warrants. There is no market for the
Warrants and none is expected to ever develop. See "Description of the
Securities - Market for the Company's Securities."

17. Warrantholders May be Unable to Exercise Warrants. For the
life of the Warrants, the Company will attempt to maintain a current
registration statement on file with the Securities and Exchange
Commission relating to the shares to Common Stock issuable upon exercise
of the Warrants. If the Company is unable to maintain a current
registration statement on file, the Warrantholders will be unable to
exercise the Warrants and the Warrants may become valueless. The Company
will bear the costs related to the preparation and filing of a post-
effective amendment to its registration statement. The Company's ability
to maintain a current registration statement will be predicated upon its
financial condition.

FOR ALL OF THE AFORESAID REASONS AND OTHERS SET FORTH HEREIN, THE
PURCHASE OF THE SHARES OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
ANY PERSON CONSIDERING AN INVESTMENT IN THE SHARES OFFERED HEREBY SHOULD
BE AWARE OF THESE AND OTHER FACTORS SET FORTH IN THIS PROSPECTUS. THE
SHARES SHOULD BE PURCHASED ONLY BY PERSONS WHO CAN AFFORD TO ABSORB A
TOTAL LOSS OF THEIR INVESTMENT IN THE COMPANY AND HAVE NO NEED FOR A
RETURN ON THEIR INVESTMENT.

- ---------------------------------------------------------------------
CAPITALIZATION
- ---------------------------------------------------------------------

The following table sets forth the capitalization of the Company as
of September 30, 1996, as adjusted to reflect the exercise of 50% of the
Warrants and 100% of the Warrants. This table should be reviewed in
conjunction with the financial statements of the Company and the notes
thereto included elsewhere in this Prospectus. See "Financial
Statements."

<PAGE>
<PAGE> 12
<TABLE>
<CAPTION>
September 30, 1996
As Adjusted for the As Adjusted for the
Exercise of 50% of Exercise of 100% of
Actual Warrants Pro Forma the Warrants Pro Forma
<S> <C> <C> <C>
Stockholder's Equity:
Common Stock $0.01 par value
40,000,000 shares authorized
10,649,854 shares outstanding $ 106,499
10,962,354 shares outstanding $ 109,624
(50% of Warrants Exercised)
11,274,854 shares outstanding $ 112,749
(100% of Warrants Exercise)

Paid-In Capital $ 8,436,808 $ 8,887,433 $ 9,338,058

Accumulated Deficit-Estimate $(3,057,817) $(3,057,817 $(3,057,817)
---------- ---------- -----------
TOTAL STOCKHOLDERS' EQUITY $ 5485,490 $ 5,939,240 $ 6,392,990
---------- ---------- ----------
</TABLE>

- ---------------------------------------------------------------------
DILUTION
- ---------------------------------------------------------------------

As of September 30, 1996, the Company had 10,649,854 shares of
Common Stock outstanding with a net tangible book value of approximately
$0.52 per share.

Assuming the exercise of all of the Warrants (625,000 at $1.50 per
warrant) and assuming no other changes to the Company's financial
position, the net tangible book value of the Company would be $6,392,990
or approximately $0.57 per share. This represents an immediate dilution
of $0.05 per share to new investors and an immediate increase in the net
tangible book value of shares held by present shareholders of $0.02 per
share.

Assuming the exercise of 50% of the Warrants (312,500 at $1.50 per
Warrant), and assuming no other changes to the Company's financial
position, the net tangible book value of the Company would be $5,939,240
or approximately $0.54 per share. This represents an immediate dilution
of $0.02 per share to new investors and an immediate increase in the net
tangible book value of shares held by present shareholders of $0.02 per
share.

"Net tangible book value" is the amount that results from
subtracting the total liabilities, deferred costs, and intangible assets
of the Company from its total assets. "Dilution" is the difference
between the public offering price and the net tangible book value of the
shares immediately after the offering. Additionally, dilution is
calculated based on book value of the Company's assets, which may not
necessarily reflect the actual market value of such assets.

<PAGE> 13

The following table illustrates the per share dilution:

<TABLE>
<CAPTION>
Assuming 50% Assuming 100%
of the Warrants of the Warrants
Exercised Exercised
<S> <C> <C>
Exercise Price per Share . . . $ 1.50 $ 1.50
Net tangible book value per share
before Warrants Exercised . . . $ 0.52 $ 0.52
Increase per share attributable
to existing investors . . . . $ 0.02 $ 0.05
Net tangible book value per
share after Warrants Exercised . . $ 0.54 $ 0.57
Dilution of net tangible book
value per share of Warrants exercised . $ 0.02 $ 0.05
</TABLE>

- ---------------------------------------------------------------------
SELECTED FINANCIAL DATA
- ---------------------------------------------------------------------

The selected financial data presented below has been derived from
the financial statements of the Company, which financial statements have
been examined by Williams & Webster, P. S., independent public
accountants, as indicated in their report included elsewhere herein. The
information below should be read in conjunction with the Company's
Financial Statements and the notes thereto, and "Management's Discussion
and Analysis of Financial Condition and Results of Operations." For the
reasons set forth in the "Prospectus Summary - Risk Factors" the
information shown below may not be indicative of the Company's future
results of operations.

<TABLE>
<CAPTION>
September September November
30, 1996 30, 1995 30, 1994
(Audited) (Audited) (Audited)
<S> <C> <C> <C>
Statement of Operations and
Accumulated Deficit Data:

Revenues $ 0 $ 0 $ 0
Operating Expenses $ 2,045,082 $ 962,735 $ 211,796
Net loss $(2,045,082) $ (962,735) $ (211,796)
Net Loss per share $ (0.22) $ (0.15) $ (0.03)

Balance Sheet Data:
Work Captial
(Deficit) $ 686,573 $ (665,274) $ 25,754
Total Assets $ 5,605,357 $ 4,056,698 $ 366,620
Long-term Debt $ 5,485,490 $ 3,235,376 $ 276,321
Stockholders' Equity

</TABLE>

<PAGE> 14

- ---------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- ---------------------------------------------------------------------

The following discussion should be read in conjunction with the
consolidated financial statements and notes thereto.

General

The accompanying consolidated financial statements include those of
Celebration Mining Company ("Celebration") and the Company, which was
formerly known as Consolidated Royal Mines, Inc. before the
Reorganization. All significant intercompany accounts and transactions
have been eliminated. The accounting of financial statements following
the Reorganization also required a change in fiscal year-end date,
namely, from November 30 (Celebration's) to September 30 (the Company's).

The financial statements account for the Reorganization using the
purchase method of accounting. See "Note 1 to the Financial Statements."
Celebration is treated as the acquiring company for financial reporting
purposes because its shareholders constitute greater than 50 percent of
the combined shareholder group. In conformity with generally accepted
accounting principles and the Company's accounting policy, Celebration is
recognized as the predecessor entity. Consequently, Celebration's
assets and liabilities were not adjusted in the accompanying financial
statements. The financial statements for the period from the inception
of Celebration on February 17, 1994 to November 30, 1994 (Fiscal 1994) do
not include the balance sheet data or results of operations of
Consolidated Royal Mines, Inc.

There is considerable risk in any mining venture, and there can be
no assurance that the Company's operations will be successful or
profitable. From inception of the Company to September 30, 1996, the
Company has an accumulated deficit of $3,057,817. Exploration for
commercially minable ore deposits is highly speculative and involves
risks greater than those involved in the discovery of mineralization.
Mining companies use the evaluation work of professional geologists,
geophysicists, and engineers in determining whether to acquire an
interest in a specific property, or whether or not to commence
exploration or development work. These estimates are often based on
scientific estimates and economic assumptions, and in some instances
result in the expenditure of substantial amount of money on a property
before it is possible to make a final determination as to whether or not
the property contains economically minable ore bodies. The economic
viability of a property cannot be finally determined until extensive
exploration and development work, plus a detailed economic feasibility
study, has been performed. Also, the market prices for mineralization
produced are subject to fluctuation and uncertainty, which may negatively
affect the economic viability of properties on which expenditures have
been made.

<PAGE> 15

As of September 30, 1996, $4,785,665 of the Company's total assets
of $5,605,357 are investments in mineral properties for which additional
exploration is required to substantiate or determine whether they contain
ore reserves that are economically recoverable. The realization of these
investments is dependent upon the success of future property sales, the
existence of economically recoverable reserves, the ability of the
Company to obtain financing, the Company's success in carrying out its
present plans or making other arrangements for development, and upon
future profitable production. The ultimate outcome of this matter cannot
be determined at this time; accordingly, no provision for any asset
impairment that may result, in the event the Company is not successful in
developing or selling these properties, has been made in the Company's
financial statements.

Liquidity and Capital Resources

The change in working capital from a negative $665,274 at September
30, 1995 to a positive $686,573 at September 30, 1996 was due to the
successful conversion of $570,920 of debt into 406,050 shares of common
stock as well as the successful placement of 1,949,332 shares of common
stock for $2,958,314 in cash. The Company's cash balance increased
significantly from $151,698 at September 30, 1995 to $688,716 at
September 30, 1996. However, during fiscal 1996 the Company continued to
incur more in expenses as a result of increased activity in evaluating
and acquiring mineral properties.

The Company has estimated that it will need capital resources of
approximately $40,000 per month to meet its estimated expenditures for
the ensuing twelve months. The Board of Directors has instructed
management to consult with experienced financial and investment advisory
firms to formulate arrangements for such capital fund raising.
Currently, the Company is pursuing various alternatives, including the
possible private placement of equity.

The Board of Directors reasonably believes that the Company is able
to engage in nearly any size operation or scope of mining activity
depending on the circumstances and merits of each proposed operation or
mining activity. Accordingly, the Board has not limited the size of
operation or scope of project which it believes is reasonable for
management to consider in achieving the Company's business plan.
Therefore, management has been authorized to consider and review all
reasonable proposals and, upon satisfactory assessment, to then make a
specific determination as to an estimated range of funding amounts that
each such proposal reasonably might require.

<PAGE> 16

Inasmuch as the eventual project, operation or mining activity could
be of any size and scope, management is not able at this time to provide
a detailed listing or exact range of operation costs, including increases
in general and administrative expense, if any. However, the Company
plans to fund any increases in general and administrative expense
principally from joint venture revenues or funds it may receive from debt
or equity financing. Funds required to finance the Company's exploration
and development of mineral properties are expected to come primarily from
joint venture participant contributions with the remainder provided by
funds generated from such joint venture and other lease or royalty
arrangements.

The Company consistently has made full and timely payment of its
expenses, in particular to the various governmental payees it interacts
with, and has met its obligations to the entities which provide its
personnel, office space, and equipment needs. The Company currently is
seeking alternate sources of working capital sufficient to increase the
funding of additional general and administrative expenses that may become
necessary as the Company's business plan develops, and to continue
meeting its ongoing payment obligations for its leases to governmental
bodies.

Results of Operations Fiscal 1996 as compared to Fiscal 1995.

General and administrative expenses increased from $543,644 during
fiscal 1995 to $1,835,548 during fiscal 1996. The increase is
principally due to additional staff and outside technical and
environmental consultants and legal fees associated with the Company's
due diligence related to the Bunker Hill Mine option. As a result, from
Fiscal 1995, to Fiscal 1996, the net loss increased from $(750,939) to
$(2,045,082) and the net loss per share increased from $(0.12) to
$(0.22).

The Company is unable to fully determine the impact of its current
lack of adequate operating capital. Other than as described herein, in
particular with respect to the option to purchase the Bunker Hill Mine,
the Company has determined not to incur and does not have any commitments
or plans for material capital expenditures during Fiscal 1997 for which
it does not have a reasonably available source or basis for making
payment. For additional information regarding the Company's present
commitments and plans for which it does have reasonably definable and
available payment sources, for example the option to purchase the Bunker
Hill Mine.

It is uncertain what the scope or impact will be of the Company's
decision to restrict capital expenditures. On the one hand, if the
Company were to continue such restriction, the likely effect might be
adverse to the preservation of its assets and capital base, thereby
narrowing the scope of plans for future operations and constricting
liquidity. On the other hand, if the Company were to discontinue such
restriction without an increase in sustained cash flow, the likely effect
of that might be an increase in accumulated deficits which could be
adverse to the Company's financial condition with respect to liabilities
and stockholders' equity. Therefore, the Company's plan for the next

<PAGE> 17

twelve months is to closely monitor its capital expenditures while it
pursues a joint venture participant or other sources of capital for
financing operations.

Fiscal 1995 as compared to Fiscal 1994.

General and administrative expenses increased from $211,796 during
Fiscal 1994 to $543,644 during Fiscal 1995. The increase was principally
due to an increase in the amount of stock issued to officers, directors,
and a consultant as compensation for services and bonus. As a result,
from Fiscal 1994 to Fiscal 1995, the net loss increased from $(211,796)
to $(750,939) and the net loss per share increased from $(0.09) to
$(0.17), respectively.

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USE OF PROCEEDS
- ---------------------------------------------------------------------

The proceeds from the exercise of the Warrants offered hereby will
be approximately $453,750 if the 50% of the Warrants are exercised and
$922,500 if the maximum number of Warrants are exercised. The Company
will not receive any proceeds from the sale of the Warrants or sale of
the Shares.

The Company intends to utilize the proceeds from the exercise of the
Warrants for working capital.

The figures set forth above are estimated and cannot be calculated
precisely at the present time. Until required for working capital, the
net proceeds may be invested temporarily in short-term obligations such
as certificates of deposit issued by banks and short term government
obligations. The Company reserves the right to amend the use of
proceeds, by vote of a majority of the Board of Directors.

It is anticipated that the maximum estimated proceeds from the
exercise of the Warrants will not be sufficient to fund operations for a
period of approximately twelve (12) months. It is, however, impossible
to predict what additional expenses may be since the costs of operations
associated with development stage companies frequently involve
unanticipated expenditures. Management currently believes that the
Company will require additional capital. If the Company should be unable
to meet currently unanticipated expenses, the Company expects that it
will have cash requirements for working capital which will have to be met
through bank indebtedness or through the private or public sale of the
Company's debt or equity securities. There can be no assurance that the
Company would be able to obtain such financing or that such financing, if
available, would be on terms and conditions acceptable to the Company.
If the Company were unable to obtain needed funds, it could be forced to
curtail or cease its activities. See "Risk Factors - Need for Additional
Financing."

<PAGE> 18

- -------------------------------------------------------------------------
DIVIDEND POLICY
- -------------------------------------------------------------------------

The Company has never paid a cash dividend on its Common Stock and
does not expect to pay a cash dividend in the foreseeable future, but
intends to devote all funds to the operations of its business. See "Risk
Factors - No Dividends Anticipated."

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GLOSSARY
- -----------------------------------------------------------------------

Acid Mine Drainage Acidic run-off water from mine waste dumps and
mill tailings ponds containing sulfide
minerals. Also refers to ground water pumped
to surface from mines.

Adit An opening driven horizontally into the side of
a mountain or hill for providing access to a
mineral deposit.

Alteration Any physical or chemical change in a rock or
mineral subsequent to its formation. Milder
and more localized than metamorphism.

Anticline An arch or fold in layers of rock shaped like
the crest of a wave.

Assay A chemical test performed on a sample of ores
or minerals to determine the amount of valuable
metals contained.

Backfill Waste material used to fill the void created by
mining an orebody.

BALL MILL A steel cylinder filled with steel balls into
which crushed ore is fed. The ball mill is
rotated, causing the balls to cascade and grind
the ore.

Basement Rocks The underlying or older rock mass. Often
refers to rocks of Precambrian age which may be
covered by younger rocks.

Base Metal Any non-precious metal (e.g. copper, lead,
zinc, nickel, etc.).

Bedding The arrangement of sedimentary rocks in layers.

Block Caving An inexpensive method of mining in which large
blocks of ore are undercut, causing the ore to
break or cave under its own weight.

<PAGE> 19

Breccia A rock in which angular fragments are
surrounded by a mass of fine-grained minerals.

Bulk Mining Any large-scale, mechanized method of mining
involving many thousands of tons of ore being
brought to surface per day.

Cathode A rectangular plate of metal, produced by
electrolytic refining, which is melted into
commercial shapes such as wirebars, billets,
ingots, etc.

Chalcocite A sulfide mineral of copper common in the zone
of secondary enrichment.

Channel Sample A sample composed of pieces of vein or mineral
deposit that have been cut out a small trench
or channel, usually about ten cm wide and two
cm deep.

Chute An opening, usually constructed of timber and
equipped with a gate, through which ore is
drawn from a stope into mine cars.

Complex Ore An ore containing a number of minerals of
economic value. The term often implies that
there are metallurgical difficulties in
liberating and separating the valuable metals.

Cone Crusher A machine which crushes ore between a gyrating
cone or crushing head and an inverted,
truncated cone known as a bowl.

Concentrate A fine, powdery product of the milling process
containing a high percentage of valuable metal.

Conglomerate A sedimentary rock consisting of rounded,
water-worn pebble or boulders cemented into a
solid mass.

Contact A geological term used to describe the line or
plane along which two different rock formations
meet.

Core The long cylindrical piece of rock, about an
inch in diameter, brought to surface by diamond
drilling.

Crosscut A horizontal opening driven from a shaft and
(or near) right angles to the strike of a vein
or other orebody.

<PAGE> 20

Cut-and-fill A method of stopping in which ore is removed in
slices, or lifts, and then the excavation is
filled with rock or other waste material
(backfill), before the subsequent slice is
extracted.

Cyanidation A method of extracting exposed gold or silver
grains from crushed or ground ore by dissolving
it in a weak cyanide solution. May be carried
out in tanks inside a mill or in heaps of ore
out of doors.

Decline An underground passageway connecting one or
more levels in a mine, providing adequate
traction for heavy, self-propelled equipment.
Such underground openings are often driven in
an upward or downward spiral, much the same as
a spiral staircase.

Development Work carried out for the purpose of opening up
a mineral deposit and making the actual ore
extraction possible.

Development Drilling Drilling to establish accurate estimates of
mineral reserves.

Diamond Drill A rotary type of rock drill that cuts a core of
rock that is recovered in long cylindrical
sections, two centimeters or more in diameter.

Dilution (mining) Rock that is, by necessity, removed along with
the ore in the mining process, subsequently
lowering the grade of the ore.

Dip The angle at which a vein, structure or rock
bed is inclined from the horizontal as measured
at right angles to the strike.

Disseminated Ore Ore carrying small particles of valuable
minerals spread more or less uniformly through
the hose rock.

Dore Unparted gold and silver poured into molds when
molten to form buttons or bars. Further
refining is necessary to separate the gold and
silver.

Drift A horizontal underground opening that follows
along the length of a vein or rock formation as
opposed to a cross-cut which crosses the rock
formation.

<PAGE> 21

Drill-Indicated Reserves The size and quality of a potential orebody as
suggested by widely spaced drill holes; more
work is required before reserves can be
classified as probable or proven.

Due Diligence The degree of care and caution required before
making a decision; loosely, a financial and
technical investigation to determine whether an
investment is sound.

Electrolytic Refining The process of purifying metal ingots that are
suspended as anodes in an electrolytic bath,
alternated with refined sheets of the same
metal which act as starters or cathodes.

Environmental Impact
Study A written report, compiled prior to a
production decision, that examines the effects
proposed mining activities will have on the
natural surroundings.

Epithermal Deposit A mineral deposit consisting of veins and
replacement bodies, usually in volcanic or
sedimentary rocks, containing precious metals,
or, more rarely, base metals.

Exploration Work involved in searching for ore, usually by
drilling or driving a drift.

Face The end of a drift, crosscut or stope in which
work is taking place.

Fissure An extensive crack, break or fracture in rocks.

Float Pieces of rock that have been broken off and
moved from their original location by natural
forces such as frost or glacial action.

Flotation A milling process in which valuable mineral
particles are induced to become attached to
bubbles and float, and others sink.

Footwall The rock on the underside of a vein or ore
structure.

Fracture A break in the rock, the opening of which
allows mineral bearing solutions to enter. A
"cross-fracture" is a minor break extending at
more-or-less right angles to the direction of
the principal fractures.

Free Milling Ores of gold or silver from which the precious
metals can be recovered by concentrating
methods without resort to pressure leaching or
other chemical treatment.

<PAGE> 22

Galena Lead sulfide, the most common ore mineral of
lead.

Gossan The rust-colored capping or staining of a
mineral deposit, generally formed by the
oxidation or alteration of iron sulfides.

Grab Sample A sample from a rock outcrop that is assayed to
determine if valuable elements are contained in
the rock. A grab sample is not intended to be
representative of the deposit, and usually the
best-looking material is selected.

Grade The average assay of a ton of ore, reflecting
metal content.

Hangingwall The rock on the upper side of a vein or ore
deposit.

Head Grade The average grade of ore fed into a mill.

Heap Leaching A process involving the percolation of a
cyanide solution through crushed ore heaped on
an impervious pad or base to dissolve minerals
or metals out of the ore.

High Grade Rich ore. As a verb, it refers to selective
mining of the best ore in a deposit.

Host Rock The rock surrounding an ore deposit.

Hydrometallurgy The treatment of ore by wet processes (e.g.,
leaching) resulting in the solution of a metal
and its subsequent recovery.

Intrusive A body of igneous rock formed by the
consolidation of magma intruded into other
rocks, in contrast to lavas, which are extruded
upon the surface.

Lagging Planks or small timbers placed between steel
ribs along the roof of a stope or drift to
prevent rocks from falling, rather than to
support the main weight of the overlying rocks.

Lens Generally used to describe a body of ore that
is thick in the middle and tapers towards the
ends.

Level The horizontal openings on a working horizon in
a mine; it is customary to work mines from a
shaft, establishing levels at regular
intervals, generally about 50 meters or more
apart.

<PAGE> 23

Limestone A bedded, sedimentary deposit consisting
chiefly of calcium carbonate.

Lode A mineral deposit in solid rock.

Metamorphic Rocks Rocks which have undergone a change in texture
or composition as the result of heat and/or
pressure.

Mill A processing plant that produces a concentrate
of the valuable minerals or metals contained in
an ore. The concentrate must then be treated
in some other type of plant, such as a smelter,
to affect recovery of the pure metal.

Milling Ore Ore that contains sufficient valuable mineral
to be treated by the milling process.

Mineable Reserves Ore reserves that are known to be extractable
using a given mining plan.

Mineral A naturally occurring homogeneous substance
having definite physical properties and
chemical composition and, if formed under
favorable conditions, a definite crystal form.

Mineralized Material
or Deposit A mineralized body which has been delineated by
appropriate drilling and/or underground
sampling to support a sufficient tonnage and
average grade of metal(s). Under SEC standards,
such a deposit does not qualify as a reserve
until a comprehensive evaluation, based upon
unit cost, grade, recoveries, and other
factors, conclude economic feasibility.

Muck Ore or rock that has been broken by blasting.

Native Metal A metal occurring in nature in pure form,
uncombined with other elements.

Net Profit Interest A portion of the profit remaining after all
charges, including taxes and bookkeeping
charges (such as depreciation) have been
deducted.

Net Smelter Return A share of the net revenues generated from the
sale of metal produced by a mine.

Open Pit A mine that is entirely on surface. Also
referred to as open-cut or open-cast mine.

Ore Material that can be mined and processed at a
positive cash flow.

<PAGE> 24

Ore Pass Vertical or inclined passage for the downward
transfer of ore connecting a level with the
hoisting shaft or a lower level.

Orebody A natural concentration of valuable material
that can be extracted and sold at a profit.

Ore Reserves The calculated tonnage and grade of
mineralization which can be extracted
profitably; classified as possible, probable
and proven according to the level of confidence
that can be placed in the data.

Oreshott The portion, or length, of a vein or other
structure, that carries sufficient valuable
mineral to be extracted profitably.

Oxidation A chemical reaction caused by exposure to
oxygen that results in a change in the chemical
composition of a mineral.

Participating Interest A company's interest in a mine, which entitles
it to a certain percentage of profits in return
for putting up an equal percentage of the
capital cost of the project.

Patent The ultimate stage of holding a mineral claim
in the United States, after which no more
assessment work is necessary because all
mineral rights have been earned.

Patented Mining Claim A parcel of land originally located on federal
lands as an unpatented mining claim under the
General Mining Law, the title of which has been
conveyed from the federal government to a
private party pursuant to the patenting
requirements of the General Mining Law.

Pillar A block of solid ore or other rock left in
place to structurally support the shaft, walls
or roof of a mine.

Porphyry Any igneous rock in which relatively large
crystals, called phenocrysts, are set in a
fine-grained groundness.

Precambrian Shield The oldest, most stable regions of the Earth's
crust, the largest of which is the Canadian
Shield.

Prospect A mining property, the value of which has not
been determined by exploration.

<PAGE> 25

Proven and Probable
Mineral Reserves Reserves that reflect estimates of the
quantities and grades of mineralized material
at a mine which the Company believes could be
recovered and sold at prices in excess of the
cash cost of production. The estimates are
based largely on current costs and on projected
prices and demand for such mineralized
material. Mineral reserves are stated
separately for each such mine, based upon
factors relevant to each mine. Proven and
probable mineral reserves are based on
calculations of reserves provided by the
operator of a property that have been reviewed
but not independently confirmed by the Company.
Changes in reserves represent general
indicators of the results of efforts to develop
additional reserves as existing reserves are
depleted through production. Grades of ore fed
to process may be different from stated reserve
grades because of variation in grades in areas
mined from time to time, mining dilution and
other factors. Reserves should not be
interpreted as assurances of mine life or of
the profitability of current or future
operations.

Propable Reserves Resources for which tonnage and grade and/or
quality are computed primarily from information
similar to that used for proven reserves, but
the sites for inspection, sampling and
measurement are farther apart or are otherwise
less adequately spaced. The degree of
assurance, although lower than that for proven
reserves, is high enough to assume continuity
between points of observation.

Proven Reserves Resources for which tonnage is computed from
dimensions revealed in outcrops, trenches,
workings or drill holes and for which the grade
and/or quality is computed from the results of
detailed sampling. The sites for inspection,
sampling and measurement are spaced so closely
and the geologic character is so well defined
that size, shape, depth and mineral content of
reserves are well established. The computed
tonnage and grade are judged to be accurate,
within limits which are stated, and no such
limit is judged to be different from the
computed tonnage or grade by more than 20
percent.

Raise A vertical or inclined underground working that
has been excavated from the bottom upward.

<PAGE> 26

Rake The trend of an orebody along the direction of
its strike.

Reclamation The restoration of a site after mining or
exploration activity is completed.

Recovery The percentage of valuable metal in the ore
that is recovered by metallurgical treatment.

Replacement Ore Ore formed by a process during which certain
minerals have passed into solution and have
been carried away, while valuable minerals from
the solution have been deposited in the place
of those removed.

Reserves That part of a mineral deposit which could be
economically and legally extracted or produced
at the time of the reserve determination.
Reserves are customarily stated in terms of
"Ore" when dealing with metalliferous minerals.

Resources The calculated amount of material in a mineral
deposit, based on limited drill information.

Rib Samples Ore taken from rib pillars in a mine to
determine metal content.

Rockbolting The act of supporting openings in rock with
steel bolts anchored in holes drilled
especially for this purpose.

Rockburst A violent release of energy resulting in the
sudden failure of walls or pillars in a mine,
caused by the weight or pressure of the
surrounding rocks.

Rock Mechanics The study of the mechanical properties of
rocks, which includes stress conditions around
mine openings and the ability of rocks and
underground structures to withstand these
stresses.

Room-and-Pillar Mining A method of mining flat-lying ore deposits in
which the mined-out area, or rooms, are
separated by pillars of approximately the same
size.

Rotary Drill A machine that drills holes by rotating a
rigid, tubular string of drill rods to which is
attached a bit. Commonly used for drilling
large-diameter blastholes in open pit mines.

<PAGE> 27

Royalty An amount of money paid at regular intervals by
the lessee or operator of an exploration or
mining property to the owner of the ground.
Generally based on a certain amount per ton or
a percentage of the total production or
profits. Also, the fee paid for the right to
use a patented process.

Run-of-Mine A loose term used to describe ore of average
grade.

Sample A small portion of rock or a mineral deposit,
taken so that the metal content can be
determined by assaying.

Secondary Enrichment Enrichment of a vein or mineral deposit by
minerals that have been taken into solution
from one part of the vein or adjacent rocks and
redeposited in another.

Shaft A vertical or steeply inclined excavation for
the purpose of opening and servicing a mine.
It is usually equipped with a hoist at the top
which lowers and raises a conveyance for
handling personnel and materials.

Shear or Shearing The deformation of rocks by lateral movement
along unnumberable parallel planes, generally
resulting from pressure and producing such
metamorphic structures as cleavage and
schistosity.

Shrinkage Stopping A stopping method which uses part of the broken
ore as a working platform and as support for
the walls of the stope.

Siderite Iron carbonate, which when pure, contains 48.2%
iron; must be roasted to drive off carbon
dioxide before it can be used in a blast
furnace. (Roasted product is called sinter.)

Skarn Name for the metamorphic rocks surrounding an
igneous intrusive where it comes in contact
with a limestone or dolomite formation.

Solvent Extraction-Electrowinning
G(SX/EW) A metallurgical technique, so far applied only
to copper ores, in which metal is dissolved
from the rock by organic solvents and recovered
from solution by electrolysis.

Sphalerite A zinc sulfide mineral; the most common ore
mineral of zinc.

<PAGE> 28
Step-out Drilling Holes drilled to intersect a mineralization
horizon or structure along strike or down dip.

Stockpile Broken ore heaped on surface, pending treatment
or shipment.

Stope Underground excavation from which ore has been
extracted either above or below mine level.

Stratigraphy Strictly, the description of bedded rock
sequences; used loosely, the sequence of bedded
rocks in a particular area.

Strike The direction, or bearing from true north, of a
vein or rock formation measured on a horizontal
surface.

Stringer A narrow vein or irregular filament of a
mineral or minerals traversing a rock mass.

Stripping Ratio The ratio of tons removed as waste relative to
the number of tons or ore removed from an open
pit mine.

Sublevel A level or working horizon in a mine between
main working levels.

Sulfide A compound of sulfur and some other element.

Tailings Material rejected from a mill after more of the
recoverable valuable minerals have been
extracted.

Tailings Pond A low-lying depression used to confine
tailings, the prime function of which is to
allow enough time for heavy metals to settle
out or for cyanide to be destroyed before water
is discharged into the local watershed.

Trend The direction, in the horizontal plane, or a
linear geological feature (for example, an ore
zone), measured from true north.

Troy Ounce Unit of weight measurement used for all
precious metals. The familiar 16-ounce
avoirdupois pound equals 14.583 Troy Ounces.

Unpatented Mining Claim A parcel of property located on federal lands
pursuant to the General Mining Law and the
requirements of the state in which the
unpatented claim is located, the paramount
title of which remains with the federal
government. The holder of a valid, unpatented
lode mining claim is granted certain rights
including the right to explore and mine such
claim under the General Mining Law.

<PAGE> 29

Vein A mineralized zone having a more or less
regular development in length, width and depth
which clearly separates it from neighboring
rock.

Volcanogenic A term used to describe the volcanic origin of
mineralization.

Vug A small cavity in a rock, frequently lined with
well-formed crystals. Amethyst commonly forms
in these cavities.

Wall Rocks Rock units on either side of an orebody. The
hanging-wall and footwall rocks of an orebody.

Waste Barren rock in a mine, or mineralized material
that is too low in grade to be mined and milled
at a profit.

Winze An internal shaft.

Zone of Oxidation The upper portion of an orebody that has been
oxidized.

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BUSINESS
- -------------------------------------------------------------------------
General

Royal Silver Mines, Inc. (the "Company"), formerly known as
Consolidated Royal Mines, Inc., and also, Royal Minerals, Inc., is a U.S.
mineral resource company incorporated under the laws of the State of
Utah. The Company is engaged in the business of acquiring and exploring
mineral properties containing silver, gold, copper, and other
mineralization, with a primary emphasis on silver. Prior to September
30, 1995, the Company acquired all of the outstanding securities of
Celebration Mining Company ("Celebration"), a development stage company,
pursuant to a share exchange agreement and plan of reorganization
("Reorganization"). Unless indicated differently by the context, all
references to the Company herein shall refer to Royal Silver Mines, Inc.,
the corporate entity that resulted from the business combination of
Consolidated Royal Mines, Inc. and Celebration.

Prior to the Reorganization, Celebration was a non-public, closely
held Washington corporation. It was formed in February 1994 to identify
and acquire mineral properties for subsequent exploration and
development, if warranted, through equity financing and joint venture
arrangements. The Reorganization has been accounted for as a purchase by
Celebration of the Company. Celebration was treated as the acquiring
company for financial reporting purposes because its shareholders
constituted greater than 50 percent of the combined shareholder group at
the time of reorganization. In conformity with generally accepted
accounting principles and the Company's accounting policy, Celebration is
recognized as the predecessor entity. Consequently, Celebration's assets
and liabilities were not adjusted in the accompanying financial

<PAGE> 30

statements. On the other hand, for purposes of reporting statutory and
corporate authority, the Company is deemed to be the acquiring
corporation, and Celebration is now a wholly-owned subsidiary of the
Company. Prior to the Reorganization, the Company had been a majority-
owned subsidiary of Centurion Mines Corporation ("Centurion").
Currently, however, Centurion holds an approximate 14 percent shareholder
interest in the Company and is an affiliate and related party of the
Company.

The Company operates its business as an exploration stage company,
meaning that it intends to receive income from property sales, joint
ventures, or other business arrangements with larger companies, rather
than developing and placing its properties into production on its own.
There currently are several business arrangements, joint venture
prospects, and potential property sales from which the Company expects to
receive income. The Company has owned royalty interests in properties
situated in Utah's Gold Belt. There has been and is no assurance that
the Company will receive royalties from these properties; it received no
royalty income during the fiscal year ended September 30, 1996 ("Fiscal
1996").

The Company currently has no revenues. At September 30, 1996, the
Company's accumulated deficit was $3,057,817. Although it has recurring
losses from operations, the Company has increased its operating capital
and improved its financial condition and ability. Regarding its losses
from operations, the Company cannot assure that it will be able to fully
carry out its plans as budgeted without additional operating capital. At
September 30, 1996, the Company had a cash balance of $688,716 and
working capital of $686,573, as compared to a cash balance of $151,698
and a working capital deficit of $665,274 at September 30, 1995. The
Company will need capital resources of approximately $40,000 per month to
meet its estimated expenditures for the ensuing twelve months. The Board
of Directors has instructed management to consult with experienced
financial and investment advisory firms to formulate arrangements for
such capital fund raising. Currently, the Company is pursuing various
alternatives, including, if necessary, the private placement of stock.

During the twelve months ended September 30, 1996, the Company
placed 1,949,332 shares of its common stock for $2,958,314 in cash. The
Company also issued 406,050 shares of its common stock in lieu of
outstanding debt. The stock was issued at $1.50 per share for a total
value of $609,075. At the end of September, 1996, the Company reached an
agreement with Centurion, a related affiliate, for an option to purchase
or assign up to 800,000 shares of the Company's common stock, presently
owned by Centurion and representing approximately seven and one-half
percent of currently outstanding shares, at an exercise price of $1.75
per share. The re-purchase option, which is assignable to third parties,
expires October 1, 1998.

As discussed in greater detail below in the section entitled
"Business - The Company's Strategy and Business Plan," a substantial
portion of the Company's assets consist of investments in mineral
properties for which additional exploration is required to determine if
they contain mineralization that is economically recoverable. The
realization of these investments is contingent to a large extent upon the

<PAGE> 31

success of the Company's property transactions as a whole, the existence
of economically recoverable metals and other mineralized material, the
ability of the Company to obtain financing or make other arrangements for
development, and upon future profitable production. The likelihood and
extent to which these contingencies may be material is uncertain, and the
Company cannot assure that the outcome of these uncertain events will not
have a material impact and result in adverse consequences to the Company.
If the Company does not receive suitable financing or funds from its
present or future business arrangements to develop these properties, and
continues to suffer losses from operations, the Company will revise its
business activities accordingly.

History

The Company was incorporated in Utah on April 6, 1969 as Royal
Resources, Inc. for the purpose of acquiring and developing mineral
properties. The Company changed its name to Royal Minerals, Inc., on
January 6, 1983, and became a public company in July 1984. The Company
complied with the Securities and Exchange Commission reporting
requirements until August 1986, at which time the Company filed Form 15
with the Commission and suspended further reporting requirements. On
January 31, 1992, Centurion owned 82.3 percent of the Company's common
stock. See "Business - Centurion's Acquisition and Control of the
Company." Also on January 31, 1992, the Company shareholders authorized
a 5-for-1 reverse stock split, and on March 4, 1994, authorized a 4-for-1
reverse stock split of the common stock of the Company. On March 17,
1994, the Company changed its name to Consolidated Royal Mines, Inc. On
November 22, 1994, the Company filed a registration statement on Form 10
and renewed its reporting requirements, effective January 23, 1995.
During the fourth quarter of Fiscal 1995, the Company revised its
business plan to concentrate on the acquisition of silver properties.
That change in focus prompted Consolidated Royal Mines, Inc. and
Celebration Mining Company to implement the Reorganization, which closed
on August 8, 1995, and to change the Company's name to Royal Silver
Mines, Inc., effective September 18, 1995.

Strategy and Business Plan

Management believes that control of land and mineral rights is the
key ingredient for financial success in the exploration and development
phases of the mining business. Previously, the Company had concentrated
its main exploration efforts in the northern Utah Gold Belt because of
that area's history of profitable metal production and because of the
Company's exploration experience in the western United States. After the
Reorganization, the Company acquired a number of significant mineral
properties focusing on silver resources. The Company expects to
concentrate its main exploration efforts during Fiscal 1997 in Idaho's
Coeur d'Alene Mining District and to a much lesser extent in the Lakeview
Mining District, and Utah's Ashbrook Mining District where the Company
owns a 25% interest in the Vipont Mine property. The Company was
involved in a joint venture in Australia through an agreement between
Celebration and an Australian company. A deep test exploration hole was
drilled in search of a buried massive sulfide target; however the hole
encountered only weak mineralization.

<PAGE> 32

The Company's corporate strategy is directed toward the acquisition
of land positions for the exploration of mineralization in established
mining districts that have had large and profitable production histories.
This approach is referred to in the mining industry as headframe geology,
which is defined as concentrating efforts near previously known,
profitable ore deposits. The Company does not currently have sufficient
capital of its own to carry out its strategy and business plan.

The Company's plan of operation for fiscal 1997 is to proceed with
its exploration efforts and to seek business arrangements that, in
conjunction with the funds of other companies or business entities, will
provide sufficient funding to meet the initial expenditures required for
the exploration of mineralization on such properties and to acquire land
positions or other interests in mineral properties. It expects in this
way to achieve an increase in the value of its assets and to obtain
production income with less risk of its own funds for development
expenditures and capital investment in production facilities. As a
consequence of the Company's plans, management expects a reversal of the
current trend of diminishing cash flow. However, because it currently
does not have sufficient capital, if the Company is not successful in
obtaining suitable joint venture commitments and funds, there is no
assurance that the Company otherwise will obtain the capital it would
need to achieve its business plan. During September 1996, the Company
completed its initial due diligence review and signed a revised option
agreement with the Placer Mining Corporation of Kellogg, Idaho, to
purchase a 100 percent ownership interest in the Bunker Hill Mine, a
silver-lead-zinc mine in Shoshone County, Idaho. The Bunker Hill Mine is
the largest mine in northern Idaho's historic Coeur d'Alene Mining
District, which currently has four major silver mines in production. The
Bunker Hill Mine has produced over 35 million tons of ore over a one
hundred year period.

Under the terms of the option, the Company can acquire the mine by
making payment through one of two alternative purchase arrangements: the
Company may either (1) pay $7 million and issue 500,000 shares of its
restricted common stock to Placer Mining on or before May 10, 1997; or
(2) pay $4 million and issue 500,000 shares to Placer Mining on or before
May 10, 1997, and then pay an additional $3.5 million on or before May
10, 1998. Under either alternative, Placer Mining will retain a 2-3/4
percent net smelter return royalty on the property. The Company intends
to raise the necessary funds via equity and/or debt financing, or through
a possible joint venture with a major partner.

The Bunker Hill Mine, which was originally discovered in 1881, was
last operated on a large scale in 1990. Placer Mining has reestablished
small production of high grade lead-silver ore from stopes on 10 level
and 11 level, but has lacked the requisite capital to properly redevelop
the mine. In order to achieve the necessary economies of scale, and to
benefit from low cost, bulk underground mining methods, the Company's
engineers believe that a capital investment in excess of $50 million will
be required over and above the purchase price. However, the Company
believes that if the technical due diligence is favorable and the ongoing
environmental issues can be satisfactorily resolved, an investment of
that magnitude may be possible to obtain.

<PAGE> 33

The Board of Directors reasonably believes that the Company is able
to engage in nearly any size operation or scope of mining activity
depending on the circumstances and merits of each proposed operation or
mining activity. Accordingly, the Board has not limited the size of
operation or scope of project which it believes is reasonable for
management to consider in achieving the Company's business plan.
Following that direction, management of the Company pursued a vigorous
and fruitful program during the last quarter of fiscal 1995, acquiring
interests in seven distinct parcels of mineral property. Further,
management has been authorized to consider and review all reasonable
proposals and, upon satisfactory assessment, to then make a specific
determination as to an estimated range of funding amounts that each such
proposal reasonably might require.

By further direction of the Board of Directors, management may enter
into new mining arrangements with joint venturers, partners, or other
third parties. Such arrangements may be multi-party ventures to which
the Company will contribute stock, cash, and/or mineral interests. In
such arrangements, the Company's participation in revenues and profits,
if any, will be reduced. At this time, the Company has no agreement or
understanding with any third parties for the formation of a joint venture
mining operation other than those described herein. The Company will
encounter significant competition from firms currently engaged in the
mining industry. In general, all of these companies are substantially
larger than the Company, and have substantially greater resources and
operating histories. See "Risk Factors." Management, together with such
professional advisors which the Company deems appropriate, will
investigate prospective properties through on-site examination, reviewing
available geologic reports or publications relating to the property, and
a general field reconnaissance to secure preliminary information
regarding characteristics of the property. If, from such preliminary
reviews, management deems it advisable to further investigate the
property, the Company may determine the condition of title and ownership
by using abstractors or title companies, and may obtain a preliminary
feasibility study by one or more geologists, mining engineers, or
accountants. If, after the foregoing preliminary investigation,
management determines that the property does not meet the Company's
acquisition criteria, efforts to acquire the property will be abandoned,
in which case costs incurred in conducting the investigation would not be
recoverable. It should be noted, however, that the Company has only a
limited amount of funds available for working capital which could be used
for future exploration expenditures. Thus, if future exploration is
desired, additional funds would be needed. Only a limited amount of such
funds have currently been identified and there can be no assurance that
such funds would be available at an acceptable cost, if at all.

Inasmuch as the eventual project, operation or mining activity could
be of any size or scope, management is not able at this time to provide
more exact amounts or a detailed listing of operation costs, including
increases in general and administrative expense, if any. However, the
Company plans to fund any increases in general and administrative expense
principally from joint venture revenues, fees it may receive, or
additional funds it may receive from debt or equity financing. Funds <PAGE>
<PAGE> 34

required to finance the Company's exploration and development of mineral
properties are expected to come primarily from joint venture participant
contributions with the remainder provided by funds generated from such
joint venture and other lease or royalty arrangements.

Management has budgeted approximately $480,000 for fiscal 1997 for
general and administrative expenses and other operating costs. To date,
the Company has made full and timely payment of its expenses, in
particular to the various governmental payees it interacts with, and has
met its obligations to the entities and contractors that provide its
personnel, office space, and equipment needs. The Company currently is
seeking additional sources of working capital sufficient to continue its
present level of funding its general and administrative expenses and meet
ongoing payment obligations for its leases to governmental bodies.
Operating costs are largely dependent upon the level of exploration and
development activity engaged in, which, in turn, is dependent upon
availability of funds. The Company has determined not to incur any
operating costs related to exploration and development until sufficient
funds are available for payment.

Private Placements

In July 1995, the Company completed a private placement of 8,700
shares through two Regulation S offerings, both at a price of $2.00 per
share, for a total of $17,400. During September 1995, the Company
completed a private placement of 179,000 shares of common stock through
a domestic offering at a price of $1.50 per share for a total of $241,650
after expenses. During the twelve months ended September 30, 1996, the
Company placed 1,949,332 shares of its common stock for $2,958,314 in
cash. The Company also issued 406,050 shares of its common stock in lieu
of outstanding debt of $570,919, plus accrued interest. The stock was
issued at $1.50 per share for a total value of $609,075.

On January 30, 1997, the Company sold 200,000 Units at $0.75 to
Britannia Holdings Limited ("Britannia"). Each Unite consisted of one
share of Common Stock, and one Warrant. Each Warrant allows Britannia to
purchase one share of Common Stock at $1.25 per share. The Warrants
expire two years from issuance. The Company also granted Britannia the
option to purchase 335,000 Units on or before February 14, 1997 and
800,000 Units on or before March 3, 1997. The Units were sold pursuant to
Reg. S of the Securities Act of 1933.

Competition

The mining industry is very competitive. There is a high degree of
competition to obtain favorable mining properties and suitable mining
prospects for drilling, exploration, development and mining operations.
The Company encounters competition from a handful of other similarly-
situated mining companies in the silver mining industry in connection
with the acquisition of properties capable of profitably producing silver
and other mineralization. The Company is unable to ascertain the exact
number of such competitor companies, however, the Company believes that
with the acquisition of significant properties in the Coeur d'Alene
Mining District of Northern Idaho its competitive position for exploring
and developing such properties for silver mineralization should improve.
<PAGE> 35

Nevertheless, the Company may be unable to acquire attractive mining
properties on terms it considers acceptable. Accordingly, there can be no
assurance that the Company's programs will yield commercially minable
reserves.

Transactions with Centurion.

The Company has disclosed pertinent information and financial data
with respect to its transactions with Centurion. See "Certain
Transactions."

Patents, Trademarks, Licenses, Franchises.

The Company does not own any patents, trademarks, licenses,
franchises, or concessions, except for patented mining claims granted by
governmental authorities and private land owners. See "Glossary."

Seasonability.

The Company's business is generally not seasonal in nature except to
the extent that weather conditions at certain times of the year may
affect the Company's access to its properties.

Government Regulation and Environmental Concerns.

The Company is committed to complying and, to its knowledge, is in
compliance with all governmental and environmental regulations. The
Company's activities are subject to extensive federal, state and local
laws and regulations controlling not only the mining of and exploration
for mineral properties, but also the possible effects of such activities
upon the environment. Permits from a variety of regulatory authorities
are required for many aspects of mine operation and reclamation. The
Company cannot predict the extent to which future legislation and
regulation could cause additional expense, capital expenditures,
restrictions and delays in the development of the Company's properties,
including those with respect to unpatented mining claims.

The term "unpatented mining claim" refers to a mining claim on
federal lands which has not been converted into full fee ownership in the
name of a private person or entity. The process of converting ownership
was established under the (U.S.) General Mining Law of 1872, as amended
(the "General Mining Law"), and requires that certain conditions be met.
Once met, and all other requirements are satisfied, the U.S. government
transfers ownership of the underlying property (held to that point in the
public trust) to the private person or entity by granting fee simple and
conveying full private ownership of the subject mineral property,
including mineral rights, surface, subsurface and appurtenant rights,
subject to any vested and accrued water rights. The act of granting full
fee ownership is accomplished by a duly endorsed instrument referred to
as a "patent." Until such time as a mining claim on federal land may be
"patented," the claim is deemed an "unpatented mining claim" and
ownership is held in the public trust by the U.S. government subject to
existing federal mining laws and other applicable statutory or regulatory
provisions as may be implemented by the federal bureaucracy.

<PAGE> 36

In 1992, the U.S. Congress passed a number of amendments to the
General Mining Law which governs mining claims and related activities on
federal lands. A holding fee of $100 and a filing assessment of $35 per
claim was imposed upon unpatented mining claims located on federal lands.
Since 1992, a variety of legislation has been proposed to further amend
the General Mining Law. The proposed legislation would, among other
things, impose royalties and add requirements affecting reclamation,
environmental controls, and restoration. Although such legislative
proposals are not currently in effect, the likelihood or extent of
subsequent enactments is not presently known and the potential impact on
the Company as a result of future congressional action cannot be
predicted.

The Company's activities are not only subject to extensive federal,
state, and local regulations controlling the mining of and exploration
for mineral properties, but also the possible effects of such activities
upon the environment. Future legislation and regulations could cause
additional expense, capital expenditures, restrictions and delays in the
development of the Company's properties, the extent of which cannot be
predicted. Also, as discussed above, permits from a variety of
regulatory authorities are required for many aspects of mine operation
and reclamation. In the context of environmental permitting, including
the approval of reclamation plans, the Company must comply with known
standards, existing laws and regulations that may entail greater or
lesser costs and delays depending on the nature of the activity to be
permitted and how stringently the regulations are implemented by the
permitting authority. While it is possible that the costs and delays
associated with the compliance of such laws, regulations, and permits
could become such that the Company would not proceed with the development
or operation of a mine, the Company is not presently aware of any
material environmental constraint affecting its properties that would
preclude the economic development or operation of any specific property,
other than those relating to the Bunker Hill Mine.

At present, the Company does not have any environmental control
facilities. Thus, the Company has not made any material capital
expenditures for environmental controls, other than the nominal costs of
preparing the plans and contingencies for such environmental controls,
measures and facilities as may be required in its future activities.

As the Company becomes more active on its properties, it is
reasonable to expect that compliance with environmental regulations will
substantially increase costs to the Company. Such compliance may include
feasibility studies on the surface impact of the Company's proposed
operations; costs associated with minimizing surface impact; water
treatment and protection; reclamation activities, including
rehabilitation of various sites; on-going efforts at alleviating the
mining impact on wildlife; and permits or bonds as may be required to
ensure the Company's compliance with applicable regulations. It is
possible that the costs and delays associated with such compliance could
become so prohibitive that the Company may decide to not proceed with the
exploration, development, or mining operations on any of its mineral
properties.

<PAGE>
<PAGE> 37

Specifically as it relates to the Company's option to purchase the
Bunker Hill Mine, the Company has endeavored to assess the environmental
issues, including preexisting conditions such as acid water mine drainage
and related treatment efforts, and the impact of these and other issues
that may arise pertaining to environmental protection requirements and
areas of concern, some of which are tailings pond construction, mine
waste rock disposal, etc. Discussions with the State of Idaho and the
EPA have been ongoing and continue. The Company expects to complete a
full review and determination of the environmental impact and
requirements to bring the mine to an economically productive level.

Future costs of compliance may depend upon the extent and type of
exploration and testing required. Moreover, there is no assurance that
the Company will be able to comply with requirements imposed on future
development, or that the Company will be able to economically develop
operating mines under such regulations. Therefore, management is not
able to estimate those amounts at this time.

Employees.

The Company has five employees. The Company arranges for much of
its work through contracts with various consultants. The Company may
contract with additional consultants from time to time, as required by
its operations. Consultants are treated as independent contractors.

Centurion's Acquisition and Control of the Company.

In October 1991, Centurion entered into negotiations with the
officers and directors of the Company for the acquisition and control of
the Company. In November 1991, Centurion's Board of Directors approved
this acquisition. Subsequently, Centurion entered into subscription and
investment agreements with several of the Company's principal
shareholders, whereby Centurion exchanged 174,743 restricted shares of
Centurion stock and $1,600 cash for shares of the Company's common stock
constituting 37.2 percent ownership of the Company's outstanding shares.
On January 10, 1992, the Company's Board of Directors authorized the
exchange of 100,000 post-split shares of the Company's common stock for
approximately 4,196 acres of unpatented mining claims and state and
private mineral leases from Centurion. On January 31, 1992, at the
Company's annual shareholders meeting, the shareholders authorized the
purchase of approximately 17,000 acres of mining properties from
Centurion for 1,250,000 post-split shares of the Company's common stock.
This acquisition of shares gave Centurion an 82.3 percent controlling
interest in the Company. Because of the changes in the control of
shareholdings brought about by the Reorganization with Celebration,
Centurion currently holds approximately 14 percent of the Company's
outstanding common stock. Of this, the Company has been granted an
assignable option to repurchase up to half of Centurion's position at a
price of $1.75 at any time prior to October 1, 1998.

Subsidiaries

The Company currently has one subsidiary, Celebration Mining Company
("Celebration"), of which the Company currently is the sole shareholder.
Celebration was incorporated in the State of Washington in February 1994.
<PAGE> 38

Reorganization with Celebration.

In May and June 1995, the Company's management began negotiations
with management of Celebration regarding a merger or other reorganization
plan of the two companies. On June 28, 1995, the boards of directors of
both companies approved a reorganization and the companies signed an
agreement based on a share exchange. The Company would acquire 100
percent of Celebration's interest in the Vipont Mine Joint Venture, the
Crescent Mine Lease, the Australia Joint Venture, and the option rights
to acquire up to 50 percent of the mineral rights on the Prospect Mine
Property in Madison County, Montana.

The Celebration shareholders approved the Reorganization and share
exchange agreement at an August 8, 1995 shareholder meeting. In exchange
for 100 percent of the issued and outstanding Celebration shares, the
Company agreed to issue to the Celebration shareholders 4,143,750 shares
of the Company's common stock that together would represent ownership of
63 percent of the Company's shareholdings outstanding immediately
following the Reorganization. Also, the Company agreed to honor all of
the stock rights held by various Celebration shareholders and which were
subject to certain conditions and events.

Some of those stock rights had been granted contingent upon the
repayment of notes, and others had been granted as options under
consultant agreements. In total, those stock rights permitted the
purchase or receipt of approximately 1,755,000 additional shares of the
Company's common stock. If all of the shares underlying various stock
rights were added to the initial group of 4,143,750 shares exchanged in
the Reorganization, that would result in a total issuance from the share
exchange of approximately 5,898,750 shares, or 71 percent ownership by
the Celebration shareholders. However, to date, none of the overhanging
stock rights have been or are expected to be exercised.

In December 1995, stock rights to receive approximately 190,795
shares were extinguished when the Company converted debt of $570,919 in
principal, plus interest, by issuing common stock. The noteholders of
that debt amount received approximately 406,050 shares in full
satisfaction of the debt.

Termination or Intent to Acquire Fausett International.

On October 18, 1995, the Company entered into an agreement with
Fausett International, an Idaho corporation, which the Company proposed
acquiring as an 81 percent-owned consolidated subsidiary. However, as of
the date of this filing, management has determined not to pursue this
acquisition because of changes in Fausett International's financial
circumstances, and a projected reduction in its operations.

<PAGE>
<PAGE> 39

ACQUISITION AND DISPOSITION OF MINERAL PROPERTIES.

Properties.

On January 10 and January 31, 1992, the Company obtained from
Centurion a total of 23,300 acres of unpatented mining claims, state and
private mineral leases in exchange for the equivalent of 1,350,000 post-
split shares of the Company's common stock.

During the nine months ended September 30, 1992, the Company sold
unpatented mining claims and state and private mineral lease properties
to Kennecott Copper Corporation, a Unit of RTZ, London ("Kennecott").
The Company sold four unpatented mining claims (80 acres) to Kennecott in
January 1992, for $100,000 retaining a five percent production royalty.
In July 1992, the Company sold approximately 16,880 acres of mining
claims and state and private mineral leases to Kennecott for $250,000
retaining a 2 1/2 percent production royalty.

On September 30, 1992, Kennecott purchased 6,320 acres of mining
claims for $250,000, on which the Company retained a 2 1/2 percent
production royalty.

- ---------------------------------------------------------------------
MANAGEMENT
- ---------------------------------------------------------------------

The following table sets forth the name, age and position of each
Officer and Director of the Company:

Name Age Position

Howard M. Crosby 44 President and a member of the Board
of Directors

Robert E. Jorgensen 43 Executive Vice President, Treasurer
and a member of the Board of
Directors

Thomas Henricksen 49 Secretary and a member of the Board
of Directors

Jerry Stacey 52 Vice President of Operations

John Ryan 35 Vice President of Corporate
Development

Spenst Hansen 63 Member of the Board of Directors

Ronald Kitching 66 Member of the Board of Directors

James W. Prier 49 Member of the Board of Directors

<PAGE> 40

The authorized number of directors of the Company is presently fixed
at ten. Each director serves for a term of one year that expires at the
following annual shareholders' meeting. Each officer serves at the
pleasure of the Board of Directors and until a successor has been
qualified and appointed. There are no family relationships, or other
arrangements or understandings between or among any of the directors,
executive officers or other person pursuant to which such person was
selected to serve as a director or officer.

Set forth below is certain biographical information regarding each
director and executive officer of the Company:

Howard M. Crosby - President and a member of the Board of Directors.

Since February 1994, Mr. Crosby is the President and a member of
the Board of Directors. Since 1989, Mr. Crosby has been president of
Crosby Enterprises, Inc., a family-owned business advisory and public
relations firm. From September 1992 to May 1993, Mr. Crosby was employed
by Digitran Systems, Inc., of Logan, Utah, in the marketing department.
In May of 1993, Mr. Crosby entered into a business consulting
relationship with Centurion Mines Corporation, and has served as
president and director of Mammoth Mining Company and Gold Chain Mining
Company, both Centurion subsidiaries. In July, 1992, Mr. Crosby filed a
Chapter 13 petition for bankruptcy. The reorganization plan was approved
in October 1992. Mr. Crosby received a B.A. degree from the University
of Idaho in 1974.

Robert E. Jorgensen - Executive Vice President, Treasurer and a member of
the Board of Directors

Since August 1995, Mr. Jorgensen has been the Executive Vice
President, Treasurer and a member of the Board of Directors of the
Company. Mr. Jorgensen has served as vice-president, secretary and
director of Celebration Mining Company, a Nevada public company. From
1987 to 1991, Mr. Jorgensen was an investment broker and owner of RCL
Northwest, Inc., a regional investment firm. Mr. Jorgensen was a broker
with Cohig & Associates, Inc., from January 1992 to May 1992. In May
1992, Mr. Jorgensen retired from the brokerage business and has since
been a private investor. Mr. Jorgensen filed for protection under
Chapter 7 of the Bankruptcy Code in August 1992. Mr. Jorgensen received
a degree in Business Administration from the University of Idaho.

Thomas Henricksen - Secretary and a member of the Board of Directors

Since February 5, 1997, has been the Secretary and a member of the
Board of Directors of the Company. Mr. Henricksen is a professional
geologist who is currently working as an independent consulting geologist
specializing in precious and base metal exploration projects in North and
South America. From 1991 to July 1996, Mr. Henricksen was regional
manager for Kennecott Exploration, where he was responsible for
overseeing all exploration activities in Alaska and the Pacific
Northwest. Prior to working for Kennecott, Mr. Henricksen was senior
geologist for U.S. Borax from 1977 to 1991. Mr. Henricksen holds a Ph.D.
in economic geology from Oregon State University and a B.S. degree in
geology from the University of Wisconsin-Oshkosh.

<PAGE> 41

Jerry Stacey - Vice President of Operations.

Since August 1995, Mr. Stacey has been the Vice President of
Operations. Mr. Stacey is a professional mining engineer with over 20
years experience in open pit and underground mining. Between 1974 and
1981, Mr. Stacey worked in senior supervisory positions as a Shift
Foreman for the Anaconda Company; as mine superintendent for Day Mines at
the Sherman Mine, mining 1,000 tons per day of silver ore; as mine
manager for Choctaw Mining supervising the construction and operation of
a tungsten mine and mill complex; as mine manager for Mountain Mineral's
barite mines in British Columbia; and as a mine manager at the Goodnews
Bay platinum placer operation. In 1981, Mr. Stacey formed General Mine
Services Corp., a mine consulting and contracting firm for junior mining
and exploration companies, where he continued as CEO until 1994, when he
joined with Celebration Mining Company and has continued full time as
Vice President of Operations with the Company. His current
responsibilities focus on the engineering, design, installation, and
operation of complete mine and metallurgical plants involving base and
precious metals and industrial minerals. Mr. Stacey received a B.S.
Degree in Mining Engineering from Montana Tech in 1974 while working in
Butte, Montana mines.

John Ryan - Vice President of Corporate Development

Since September 1996, Mr. Ryan has been Vice President of Corporate
Development. Mr. Ryan is a professional mining engineer. Mr. Ryan has
served as a consultant in mine engineering services, and will continue in
these activities during his tenure, as well as, engage in other matters
in accordance with the direction and assignment of the Board of
Directors. In addition to his professional degree in Mining Engineering,
which he received from the University of Idaho, Mr. Ryan also holds a
juris doctorate (J.D.) law degree from the Boston College School of Law.

Spenst Hansen - Member of the Board of Directors.

Since November 1991, Dr. Hansen has served as a member of the Board
of Directors of the Company. Dr. Hansen is a registered professional
geologist in California (#2067) and Idaho (#38). Dr. Hansen has been
principally employed by Centurion Mines Corporation since November 1984,
where he is currently President, Chief Executive Officer, Director and
Chairman of the Board of Directors. Dr. Hansen has worked on mining
projects in the western United States for more than 20 years. From 1982
to 1989, he also conducted an independent geophysical and geologic
contracting business as a sole proprietorship under the name Axis
Geophysics Company. Dr. Hansen still retains ownership of this company.
Dr. Hansen received the following degrees: a Ph.D. degree in geology
from the University of Missouri, Columbia, Missouri; a Masters degree in
mining engineering from the Missouri School of Mines, Rolla, Missouri;
and a Bachelor of Science degree in geological engineering from the
University of Utah, Salt Lake City, Utah.

<PAGE> 42

Ronald Kitching - member of the Board of Directors.

Since August 1995, Mr. Kitching has been a member of the Board of
Directors of the Company. Prior to his retirement five years ago, Mr.
Kitching was involved in the mining industry for over 35 years holding
various positions, including serving as president of Overland Drilling
Company, an Australian exploration drilling company, and as co-founder of
Glindeman-Kitching Enterprises, an exploration drilling company. Mr.
Kitching has served as a director for Celebration Mining Company since
May 1994.

James W. Prier - member of the Board of Directors.

Since August 1995, Mr. Prier has been a member of the Board of
Directors. Mr. Prier has been active in the Canadian resource industry
for the past 14 years as a principal and through his consulting firm,
James Prier & Associates, Ltd. From 1986 to 1990, Mr. Prier was
associated with Energex Minerals, Ltd., a natural resource company listed
on the Toronto Stock Exchange, serving as vice-president of corporate
development from 1987 to 1990. While with Energex, Mr. Prior
participated in the development, evaluation and sale of an open-pit gold
deposit in northern British Columbia and the subsequent acquisition of a
Houston-based oil and gas company. Mr. Prier was a founding director of
Minerex Resources Ltd., a gold producer listed on the Toronto Stock
Exchange. He served as Vice President of corporate development for Black
Swan Gold Mines Ltd., a Toronto Stock Exchange listed resource company,
from 1991 to 1993. He is a principal and director of Argosy Mining
Corp., a Vancouver-based resource company engaged in a US$8.5 million
diamond exploration joint venture in Zimbabwe and Tanzania. Mr. Prier is
a director and corporate secretary of Urandel Minerals Corporation,
listed on the Vancouver Stock Exchange. Prior to 1979, Mr. Prier was a
financial analyst for a private Ontario investment group.

Indemnification

The Company's Bylaws provide that the Company's directors and
officers will be indemnified to the fullest extent permitted by the
Nevada Corporation Code, however, such indemnification shall not apply to
acts of intentional misconduct; a knowing violation of law; or, any
transaction where an officer or director personally received a benefit in
money, property, or services to which to the director was not legally
entitled.

The Company has been advised that in the opinion of the Securities
and Exchange Commission indemnification is against public policy as
expressed in the Securities Act of 1933, as amended, and is, therefore,
unenforceable.

<PAGE> 43

- ---------------------------------------------------------------------
CERTAIN TRANSACTIONS
- ---------------------------------------------------------------------

Certain of the directors and/or officers of the Company also serve
as directors and/or officers of other companies involved in natural
resource exploration and development and, consequently, there exists the
possibility for such directors and officers to be in a position of
conflict. Any decision made by such directors and officers involving the
Company, as the case may be, will be made in accordance with their duties
and obligation to deal fairly and in good faith with the Company and such
other companies. In addition, such directors and officers are required
to declare and refrain from voting on any matter in which such directors
and officers may have a conflict of interest. In this respect, Howard
Crosby, who was the President of Celebration and of the Company at the
time of the Reorganization, refrained from voting on any matter related
to the Reorganization or any other matter pertaining to both companies.

The Company has engaged in transactions with its officers, directors
and principal shareholders, including the issuance of the initial shares
of the Company. Such transactions may be considered as not having
occurred at arm's length. The Company may be engaged in transactions
with management and others involving conflicts of interest, including
conflicts on salaries and other payments to such parties, as well as
business opportunities which may arise. In this regard, the directors of
the Company are involved in other companies and may have conflicts of
interest in allocating time between the Company and other entities to
which they are affiliated.

Relationships and Transactions Pertaining to the Company.

From time to time, at the Company's request, Centurion may, at its
discretion, provide funds to the Company or pay certain expenses
directly. The Company is current in its payments to Centurion and
management intends to continue the immediate repayment to Centurion as
expenses are incurred.

During Fiscal 1994, the Company carried over the previous balance
owed by Centurion of $5,055 and loaned Centurion $8,075, resulting in
cumulative total advances made by the Company to Centurion of $13,130.
Also during Fiscal 1994, Centurion accrued $54,335 of the Company's
taxes, loaned $83,700 to the Company, and paid $140,932 of the Company's
expenses (including certain land costs), resulting in total advances made
by Centurion to the Company of $278,967. Centurion repaid these and
previous amounts by paying certain of the Company's expenses and by
transferring to the Company $467,236 of mineral properties. Thus, for
Fiscal 1994 transactions between the Company and Centurion, including
balance carryovers, the net cumulative result was a balance of $265,838
owed by the Company to Centurion.

<PAGE> 44
During Fiscal 1995, Centurion made net total advances to the Company
of $38,086. The net result was a balance of approximately $300,000 owed
by the Company to Centurion, which the Company repaid prior to the end of
Fiscal 1995 by issuing 200,000 shares of its common stock to Centurion at
the then prevailing market price of $1.50 per share. At September 30,
1995, and at September 30, 1996, the Company owed $289 to Centurion.

Relationships and Transactions Pertaining to Celebration.

In May 1994, Celebration issued, pursuant to Board resolution, an
aggregate of 1,000,000 shares of common stock to Extol International
Corporation, an affiliate of Howard M. Crosby, an officer and director of
the Company, and 500,000 shares of Common Stock to Robert Jorgensen, an
officer and director of the Company, in exchange for a transfer of the
rights under an option on the Montana Property. Messrs. Crosby and
Jorgensen are considered founders of the Company. The Company has not
received a fairness opinion or other valuation of the rights transferred
in exchange for the shares issued to Mr. Jorgensen and Extol
International Corporation. The cost basis of the rights under the
Montana Property was estimated to be $4,000. The perceived value of the
shares issued was determined as of the time of transfer by Messrs.
Crosby and Jorgensen as sole officers and directors of the Company. The
determination was not based on arms length negotiations. In June 1994,
the Company repaid to Crosby Enterprises, Inc., an affiliate of Howard M.
Crosby, $20,000 for funds advanced on the Montana Property prior to the
transfer of the rights under the option to the Company.

In August 1994, Celebration issued 100,000 shares of Common Stock to
Ronald Kitching, a director, as compensation for his services as a
director. Messrs. Crosby and Jorgensen also received compensation from
the Company as executive officers.

In August 1994, Thomas Miller, a director of Celebration up to
August 8, 1995, received options to purchase up to 400,000 shares as
compensation for his consulting services in field exploration management
through August 1995. Mr. Miller was also an officer, director and
principal shareholder of United Silver Mines, Inc., the Company's Joint
Venture Partner on the Vipont Property and its subsidiary, Bannock Silver
Mining Company.

- ---------------------------------------------------------------------
MANAGEMENT REMUNERATION
- ---------------------------------------------------------------------

Summary Compensation.

The following table sets forth the compensation paid by Royal during
each of the last three fiscal years to its Chief Executive Officer, and
to the other four most highly compensated officers and executive
officers, but only if the total annual salary and bonus of any such
executive officer exceeded $100,000 for Fiscal 1995 (the "Named Executive
Officers"). This information includes the dollar value of base salaries,
bonus awards and number of stock options granted, and certain other
compensation, if any.

<PAGE> 45
<TABLE> SUMMARY COMPENSATION TABLE
<CAPTION>
Compensation
Annual Compensation Long Term Awards Payouts
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Secur-
Restric- ities
Other ted Under- LTIP All
Annual Stock lying Pay Other
Name & Compen Award Options/ Outs Compen
Position Year Salary Bonus sation ($) [1] SAR's(#) ($) sation
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Crosby 1996 $78,000 $0 $0 $ 0 0 $0 $0
President 1995 $48,000 $0 $0 $ 0 0 $0 $0
1994 $16,000[2] $0 $0 $40,000 0 $0 $0
1993 $0 $0 $0 $ 0 0 $0 $0

Named Exective
Officers
- ------
None n/a n/a n/a n/a n/a n/a n/a n/a
</TABLE>

[1] The above shares were issued for Directors fees, for service to the
Company. No awards were made for service to Celebration.

[2] This represents salary received as an officer of Celebration, $4,000
per month, beginning with June 1994.

Other than the Company's Stock Option and Award Plan, there are no
retirement, pension, or profit sharing plans for the benefit of the
Company's officers and directors.

Option/SAR Grants Table.

Information concerning individual grants of stock options, whether
or not in tandem with stock appreciation rights ("SARs"), and
freestanding SARs made during Fiscal 1996 to the CEO and each of the
Named Executive Officers, if any, is reflected in the table below.

<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN FISCAL 1996
Potential Realizable
Value at Assumed Alterative to
Annual Rates of Stock (f) and (g)
Price Appreciation Grant Date
Individual Grants for Option Term Value
(a) (b) (c) (d) (e) (f) (g) (h)
Number of Percent of
Securities Total Options/ Grant
Underlying SARs Granted Exercise Expira- Date
Options/SAR to Employees or Base tion Present
Name Granted (#) in Fiscal Year Price Date 5%($) 10%($) Value $
<S> <C> <C> <C> <C> <C> <C>
Crosby 0 0 n/a n/a n/a n/a n/a

Named Executive
Officers
None n/a n/a n/a n/a n/a n/a n/a

</TABLE>

<PAGE> 46

Aggregated Option/SAR Exercises and Fiscal 1996 Year-End Option/SAR
Value Table. The following table sets forth certain information with
respect to each exercise, if any, of stock options and SARs during Fiscal
1996 by the CEO and each of the Named Executive Officers, if any, and the
Fiscal 1996 year-end value of unexercised options and SARs. The dollar
values in columns (c) and (e) are calculated by determining the
difference between the fair market value of the underlying stock and the
exercise price or base price of the options at exercise or Fiscal 1996
year-end, respectively. The stock's fair market value on September 30,
1996 was $1.1875 per share. There are no outstanding option awards to
management. Even if there were, it is possible they might never be
exercised. Actual gains realized, if any, on stock option exercises and
Common Stock holdings are dependent on the future performance and value
of the Common Stock and overall stock market conditions. There can be no
assurance that projected gains and values would be realized.

<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN FISCAL 1996
AND OPTION/SAR VALUES AT SEPTEMBER 30, 1996

(a) (b) (c) (d) (e)
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs
at FY-End (#) at FY-End($)
Dollar
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise (#) Realized($) Unexercisable Unexercisable
<S> <C> <C> <C> <C>
Crosby 0 $0 0/0 0/0

Executive
Officers

None n/a n/a n/a n/a

</TABLE>

Long-Term Incentive Plan Awards.

The Company does not have any formalized long-term incentive plan
(excluding restricted stock, stock option and SAR plans) that provides
compensation intended to serve as incentive for performance to occur over
a period longer than one fiscal year, whether such performance is
measured by reference to financial performance of the Company or an
affiliate, the Company's stock price, or any other measure.

Compensation of Directors.

Directors receive for their services a retainer fee payable in
shares of the Company's Common Stock, currently at the rate of 2,500
shares per quarter of completed service. During Fiscal 1996, 150,000
shares were awarded to directors as compensation. The Board has not
implemented a plan to award options, authorized under the Company's Stock
Option and Award Plan and none have been granted. There are no

<PAGE> 47

contractual arrangements with any member of the Board of Directors, other
than the employment and salary arrangements for compensating two of its
members for their service as executive officers: Howard Crosby as
President and CEO, and Robert Jorgensen as Executive Vice President and
Treasurer.

Compensation Committee Interlocks and Insider Participation.

There are no compensation committee interlocks. With respect to
insider participation, Howard Crosby, Hal Cameron and Carlos Chavez,
participated in deliberations of the Company's Board of Directors during
Fiscal 1996, concerning executive officer compensation.

Board of Directors Report on Executive Compensation.

The following is a summary of the Board of Directors Report:

It is the Board's responsibility to review and set compensation
levels of the executive officers of the Company, evaluate the performance
of management and consider management appointments and related matters.
All decisions are decisions of the full Board. The Board considers the
performance of the Company and how compensation paid by the Company
compares to compensation generally in the mining industry and among
similar companies. In establishing executive compensation, the Board
bases its decisions, in part, on achievement and performance regarding
broad-based objectives and targets relating to the continued acquisition
of favorable silver properties and the progress of exploration and
development of such properties, as well as the Company's financial
performance.

For Fiscal 1996, the Company's executive compensation policy
consisted of two elements: base salary and stock awards. The policy
factors which determine the setting of these compensation elements are
largely aimed at attracting and retaining executives considered essential
to the Company's long-term success. The granting of stock is designed as
an incentive for executives to keep management's interests in close
alignment with the interests of shareholders. The Company's executive
compensation policy seeks to engender committed leadership to favorably
posture the Company for continued growth, stability and strength of
shareholder equity.

The Company paid salaries to its officers for the fiscal year-ended
September 30, 1996, as follows:

<TABLE>
<S> <C>
Howard Crosby, $78,000 yearly
President

Robert Jorgensen, $72,000 yearly
Executive Vice President
and Treasurer

Jerry Stacey, $70,000 yearly
Vice President of Operations

<PAGE> 48

John Ryan, $48,000 yearly
Vice President of Corporate
Development
</TABLE>

These amounts were approved by the Board in recognition of the work
and efforts and in completing the acquisition of a large number of silver
mining properties prior to the end of Fiscal 1996.

Further, the Board recognized the significant role of these four
individuals in managing the Company's principal office in Spokane,
Washington and in raising funds for the Company's exploration and
development activities. Finally, the Board of Directors took into
account the reasonableness of these salaries in comparison with Executive
salaries within the mining region. On the basis of the above factors,
the Board determined that these salaries were proper and fitting. No
other officers received a salary during Fiscal 1996.

With respect to stock awards during Fiscal 1996, the Board of
Directors did not change the amount of shares, 2,500 per quarter, which
each director is entitled to receive as partial compensation for service
to the Company.

The Board believes that executive compensation during Fiscal 1996
substantially reflects the Company's compensation policy.

On January 8, 1997, the Company filed a Form S-8 Registration
Statement with the Commission registering 831,775 shares of Common Stock
for resale by certain shareholders of the Company. The Form S-8 is
incorporated herein by reference as if set forth in full.

- ---------------------------------------------------------------------
PRINCIPAL SHAREHOLDERS
- ---------------------------------------------------------------------

Security Ownership of Certain Beneficial Owners and Management.

The following table sets forth as of October 4, 1996, the beneficial
ownership of Common Stock with respect to: (1) All persons known to the
Company to be the beneficial owners of more than five percent of the
outstanding shares of Common Stock (the "Principal Shareholders"); (2)
Each director and director nominee of the Company; (3) Each Named
Executive Officer (as that term is defined in the section entitled
"Executive Compensation," below) who is listed in the "Summary
Compensation Table," below; and, (4) All directors and executive officers
as a group. At October 4, 1996, the number of shares of common stock of
the Company issued and outstanding was 10,649,854.

Common Stock Beneficially Owned No. of Shares Percent of
Class
1. Name and Address of
Principal Shareholders
<S> <C> <C>
Centurion Mines Corporation 1,537,267 14.4%
331 South Rio Grande, Suite 201
Salt Lake City, UT 84101
Howard Crosby 632,500[1] 5.9%
105 N. First, Suite 232
Sandpoint, ID 83864
James Kontes 635,000[2] 5.6%
P.O. Box 112
Firth, ID 83236
Thomas Miller 600,000[3] 5.3%
2508 Zinfadel Dr.
Rancho Cordova, CA 95670
Robert E. Jorgensen 595,000[4] 5.5%
2719 W. Strong Rd.
Spokane, WA 99208

2. Directors
Howard Crosby 632,500 5.9%
Robert E. Jorgensen 595,000 5.5%
Ronald Kitching 157,500 1.4%
Hal Cameron 48,028[5] *
Spenst Hansen 106,100[5] *
Carlos M. Chavez 20,000 *
Thomas Henricksen 0 *

3. Named Executive Officers (Excluding
Any Director Named Above)

Jerry Stacy 20,500 *
John Ryan 22,500 *

4. All Directors and Executive Officers
as a Group (8 Persons) 1,602,128 15.0%
</TABLE>

All shares are owned beneficially and of record, unless otherwise
noted. Percentage ownership of less than 1% is marked with an asterisk
(*).

[1] Mr. Crosby is a director, executive officer and 50% shareholder of
Extol International Corp., a privately-held Washington corporation.
As a 50% shareholder, Mr. Crosby holds indirect beneficial ownership
of one-half of the restricted shares retained by Extol following the
closing of the share exchange with Celebration. Also, the Board
approved the release of a previously authorized grant of 200,000
restricted shares to Crosby Enterprises, Inc. for its work in
putting together for the Company no fewer than five major business
proposals, culminating in the reorganization with Celebration. Mr.

<PAGE> 50
Crosby holds indirect beneficial ownership of those restricted
shares as a director, executive officer and majority shareholder of
Crosby Enterprises, a private, closely-held Washington corporation.
Mr. Crosby holds all remaining shares in his name, 15,000 shares of
which he received in Fiscal 1995 as partial compensation for his
service as a director and executive officer.

[2] Mr. Kontes owns 35,000 issued and outstanding shares, but received
options to purchase 600,000 restricted shares in exchange for the
options he had held in Celebration. None of these options have been
exercised, but are exercisable within 60 days. For purposes of
reporting beneficial ownership herein, the securities underlying Mr.
Kontes' options are deemed outstanding and have been added to the
10,649,854 actual shares outstanding to compute the percentage
owned.

[3] Mr. Miller does not own any of the actual shares that are
outstanding, but received options to purchase 600,000 restricted
shares in exchange for the options he had held in Celebration. None
of these options have been exercised, but are exercisable within 60
days. For purposes of reporting beneficial ownership herein, the
securities underlying Mr. Miller's options are deemed outstanding
and have been added to the 10,649,854 actual shares outstanding to
compute the percentage owned.

[4] The Company notes that in addition to the awards of shares for his
service as a director and officer of the Company, Mr. Jorgensen
initially received 550,000 restricted shares as part of the share
exchange with Celebration.

[5] Messrs. Cameron and Hansen resigned as officers and directors of the
Company on January 25, 1997.

The following table sets forth the Common Stock ownership of each
person known by the Company to be the beneficial owner of five percent or
more of the Company's Common Stock, each director individually and all
officers and directors of the Company as a group. Each person has sole
voting and investment power with respect to the shares of Common Stock
shown, and all ownership is of record and beneficial.

- ---------------------------------------------------------------------
DESCRIPTION OF THE SECURITIES
- ---------------------------------------------------------------------

The Company is presently authorized to issue up to 40,000,000 shares
of its $0.01 par value Common Stock. Presently 10,772,732 shares are
issued and outstanding and 625,000 additional shares will be issued if
the maximum number of Warrants are exercised at $1.50 per Warrant. The
holders of the Company's Common Stock are entitled to one vote per share
on each matter submitted to a vote at any meeting of shareholders.

<PAGE> 51

Rights of Common Stock Shareholders

Shares of Common Stock do not carry cumulative voting rights and,
therefore, a majority of the outstanding Common Stock will be able to
elect the entire Board of Directors and, if they do so, minority
shareholders would not be able to elect any members to the Board of
Directors. See "Capitalization" and "Risk Factors - Cumulative Voting,
Preemptive Rights and Control."

Shareholders of the Company have no preemptive rights to acquire
additional shares of Common Stock or other securities. The Common Stock
is not subject to redemption and carries no subscription or conversion
rights. In the event of liquidation of the Company, the shares of Common
Stock are entitled to share equally in corporate assets after
satisfaction of all liabilities. The shares of Common Stock, when
issued, will be fully paid and non-assessable.

There are no outstanding options, warrants or rights to purchase
shares of the Company's Common Stock, other than as disclosed herein.

Shares Eligible for Future Sale

Upon completion of this offering the Company will have outstanding
11,085,232 shares of Common Stock if the 50% of the Warrants are
exercised and 11,397,732 shares of Common Stock if the maximum number of
Warrants are exercised. The 625,000 shares, issued pursuant to the
exercise of the Warrants will be freely tradeable without restriction or
further registration under the Securities Act of 1933, as amended (the
"Act"). Of the remaining 10,772,732 shares 3,219,251 are freely
tradeable without restriction and 7,553,481 are "restricted" securities
as defined in Rule 144 of the Act. See "Plan of Distribution."

In general, under Rule 144, a person (or persons whose shares are
aggregated) who has satisfied a two (2) year holding period may sell in
ordinary market transactions through a broker or with a market maker,
within any three (3) month period a number of shares which does not
exceed the greater of one percent (1%) of the number of outstanding
shares of Common Stock or the average of the weekly trading volume of the
Common Stock during the four calendar weeks prior to such sale. Sales
under Rule 144 require the filing of Form 144 with the Securities and
Exchange Commission. If the shares of Common Stock have been held
for more than three (3) years by a person who is not an affiliate, there
is no limitation on the manner of sale or the volume of shares that may
be sold and no Form 144 is required. Sales under Rule 144 may have a
depressive effect on the market price of the Company's Common Stock.

Transfer Agent

The Company's Transfer Agent is:

OTC Stock Transfer
2310 East 2100 South
Salt Lake City, Utah 84115
(801) 485-5555

<PAGE> 52

The Company's common shares are traded on the Bulletin Board
operated by the National Association of Securities Dealers, Inc. under
the symbol RSMI. The prices listed below were obtained from the National
Quotation Bureau, Inc., and are the highest and lowest bids reported
during each fiscal quarter for the period December 31, 1994, through
September 30, 1996. These bid prices are over-the-counter market
quotations based on interdealer bid prices, without markup, markdown, or
commission and may not necessarily represent actual transactions:

<TABLE>
Fiscal Quarter Ended High Bid ($) Low Bid ($)
- -------------------- ------------ -----------
<S> <C> <C>
December 31, 1994 4.125 3.000
March 31, 1995 2.500 1.125
June 30, 1995 3.750 0.875
September 29, 1995 3.124 2.750
December 31, 1995 2.87 2.43
March 31, 1996 2.75 2.25
June 30, 1996 2.94 1.62
September 30, 1996 2.12 1.00

</TABLE>

On February 5, 1997, the average of the high bid and low ask
quotation for the Company's common shares as quoted on the NASDAQ
Bulletin Board was $1.0625.

The approximate number of holders of common stock of record on
February 5, 1997, was 390.

Since its inception, the Company has not paid any dividends on its
common shares. The Company does not anticipate that dividends will be
paid in the foreseeable future.

Market for the Company's Securities

There is no market for the Warrants and none is expected to develop.
See "Risk Factors - No Market for the Warrants."

- ---------------------------------------------------------------------
PLAN OF DISTRIBUTION
- ---------------------------------------------------------------------

The distribution of the Warrants and/or Common Stock offered by the
Selling Shareholders may be effected by one or more transactions that may
take place in the over-the-counter market, including ordinary brokers'
transactions, privately negotiated transactions, or through sales to one
or more dealers for resale of such securities as principals, at market
prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices. Usual and customary or
specifically negotiated brokerage fees or commissions may be paid by The
Selling Shareholders.

<PAGE> 53

All proceeds from the exercise of the Warrants will be immediately
available for use by the Company. The Company will not receive any
proceeds from the sale of the Warrants or the sale of the Shares.

SEC 15(g) of the Securities Exchange Act of 1934.

The Company's Shares are covered by Section 15g of the Securities
Exchange Act of 1934, as amended, that imposes additional sales practice
requirements on broker/dealers who sell such securities to persons other
than established customers and accredited investors (generally
institutions with assets in excess of $5,000,000 or individuals with net
worth in excess of $1,000,000 or annual income exceeding $200,000 or
$300,000 jointly with their spouses). For transactions covered by the
Rule, the broker/dealer must make a special suitability determination for
the purchase and have received the purchaser's written agreement to the
transaction prior to the sale. Consequently, the Rule may affect the
ability of broker/dealers to sell the Company's securities and also may
affect the ability of purchasers in this offering to sell their shares in
the secondary market.

Section 15(g) also imposes additional sales practice requirements on
broker/dealers who sell penny securities. These rules require a one page
summary of certain essential items. The items include the risk of
investing in penny stocks in both public offerings and secondary
marketing; terms important to in understanding of the function of the
penny stock market, such as "bid" and "offer" quotes, a dealers "spread"
and broker/dealer compensation; the broker/dealer compensation, the
broker/dealers duties to its customers, including the disclosures
required by any other penny stock disclosure rules; the customers rights
and remedies in causes of fraud in penny stock transactions; and, the
NASD's toll free telephone number and the central number of the North
American Administrators Association, for information on the disciplinary
history of broker/dealers and their associated persons.

- ---------------------------------------------------------------------
LITIGATION
- ---------------------------------------------------------------------

The Officers and Directors of the Company certify that to the best
of their knowledge, neither the Company nor any of its Officers and
Directors are parties to any legal proceeding or litigation. Further,
the Officers and Directors know of no threatened or contemplated legal
proceedings or litigation. None of the Officers and Directors have been
convicted of a felony or none have been convicted of any criminal
offense, felony and misdemeanor relating to securities or performance in
corporate office. To the best of the knowledge of the Officers and
Directors, no investigations of felonies, misfeasance in office or
securities investigations are either pending or threatened at the present
time.

<PAGE> 54

- ---------------------------------------------------------------------
LEGAL MATTERS
- ---------------------------------------------------------------------

Legal matters in connection with the Common Stock of the Company to
be issued in connection with the offering will be passed upon for the
Company by Conrad C. Lysiak, Attorney and Counselor at Law, West 601
First Avenue, Suite 503, Spokane, Washington 99204.

- ---------------------------------------------------------------------
EXPERTS
- ---------------------------------------------------------------------

The financial statements of the Company appearing in this Prospectus
and the Registration Statement have been examined by the accounting firm
of Williams & Webster, P.S., Certified Public Accountants, 601 West
Riverside, Suite 1970, Spokane, Washington 99201, as indicated in its
report contained herein. Such financial statements are included in this
Prospectus in reliance upon the said report, given upon such firm's
authority as an expert in auditing and accounting.

- ---------------------------------------------------------------------
ADDITIONAL INFORMATION
- ---------------------------------------------------------------------

The Company has filed with the Securities and Exchange Commission,
450 Fifth Street, N.W. Washington D.C. 20549, a registration statement
under the Act, as amended with respect to the Units offered hereby. This
Prospectus does not contain all of the information set forth in the
registration statement, exhibits and schedules thereto. For further
information with respect to the Company and the Units, reference is made
to the registration statement, exhibits and schedules, copies of which
may be obtained from the Commission's principals officers in Washington,
D.C., upon payment of the fees prescribed by the Commission.

<PAGE> 55

ROYAL SILVER MINES, INC.
(A Development Stage Company)

Audited Financial Statements

September 30, 1996 and 1995

<PAGE>
<PAGE> 56

C O N T E N T S

Independent Auditors' Reports . . . . . . . F-1

Balance Sheets . . . . . . . . . . F-2

Statements of Operations . . . . . . . . . F-3

Statements of Stockholders' Equity . . . . . . . F-4

Statements of Cash Flows . . . . . . . . F-10

Notes to the Financial Statements . . . . . . . F-13

<PAGE> 57

Williams & Webster, P.S.
Certified Public Accountants
Seafirst Financial Center
601 W. Riverside, Suite 1970
Spokane, WA 99201-0611
Tel: (509) 838-5111
Fax: (509) 624-5001

The Board of Directors
Royal Silver Mines, Inc.
(A Development Stage Company)
Spokane, Washington

INDEPENDENT AUDITOR'S REPORT

We have audited the accompanying balance sheet of Royal Silver Mines, Inc. (a
development stage company) as of September 30, 1996, and the related
statements of operations, shareholders' equity, and cash flows for the year
then ended, and from inception on February 17, 1994 through September 30,
1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Royal Silver Mines, Inc. as
of September 30, 1996, and the results of their operations and their cash
flows for the year then ended and from inception on February 17, 1994 through
September 30, 1996 in conformity with generally accepted accounting
principles.

Williams & Webster, P.S.
Certified Public Accountants
Spokane, Washington
December 13, 1996

F-1
<PAGE> 58
ROYAL SILVER MINES, INC.
(A Development Stage Company)
BALANCE SHEETS
<TABLE> <CAPTION>
September 30, September 30,
<S> 1996 1995
ASSETS <C> <C>
CURRENT ASSETS
Cash $ 688,716 $ 151,698
Note receivable 100,000 -
Interest receivable 333 -
Prepaid expenses 17,391 4,350
__________ ___________
TOTAL CURRENT ASSETS 806,440 156,048
__________ ___________
MINERAL PROPERTIES 4,785,665 3,869,515
PROPERTY AND EQUIPMENT
Furniture and equipment 15,802 11,629
Less - accumulated depreciation (2,809) (589)
__________ ___________
TOTAL PROPERTY AND EQUIPMENT 12,993 11,040
__________ ___________
OTHER ASSETS
Deferred debt issuance costs, net - 19,736
Organization costs, net 259 359
__________ ___________
TOTAL OTHER ASSETS 259 20,095
__________ ___________
TOTAL ASSETS $ 5,605,357 $ 4,056,698
========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 25,135 $ 60,026
Payable to related parties 289 289
Accrued expenses 34,443 90,088
Notes payable 60,000 670,919
__________ __________
TOTAL CURRENT LIABILITIES 119,867 821,322
__________ ___________
LONG-TERM DEBT - -
COMMITMENTS AND CONTINGENCIES - -
SHAREHOLDERS' EQUITY
Common stock, $.01 par value;
40,000,000 shares authorized,
10,649,854 and 7,757,063 shares
issued and outstanding,
respectively 106,499 77,571
Additional paid-in capital 8,436,808 4,120,540
Deficit accumulated during
development stage (3,057,817) 962,735
__________ ___________
TOTAL SHAREHOLDERS' EQUITY 5,485,490 3,235,376
__________ ___________
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 5,605,357 $ 4,056,698
========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE> 59
ROYAL SILVER MINES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Period From
February 17,
1994
Ten months (inception)
Year ended ended through
September 30, September 30, September 30,
1996 1995 1996
_____________ _____________ _____________
<S> <C> <C> <C>
REVENUES $ - $ - $ -
___________ ___________ _____________
GENERAL AND ADMINISTRATIVE EXPENSES

Mineral leases 8,123 843 8,965
Depreciation and amortization 35,736 59,822 98,069
Officers and directors compensation 492,715 209,733 831,948
Other administrative expenses 1,298,975 273,246 1,652,006
___________ __________ ___________

Total expenses 1,835,548 543,644 2,590,988
___________ ___________ ___________

OPERATING LOSS (1,835,548) (543,644) (2,590,988)
___________ ___________ ___________
OTHER EXPENSES
Interest expense (9,534) (62,557) (72,091)
Loss on disposition of assets (200,000) (144,738) (344,738)
___________ ___________ ___________
Total other expenses (209,534) (207,295) (416,829)
___________ ___________ ___________

NET LOSS $(2,045,082) $ (750,939) $(3,007,817)
=========== =========== ===========

NET LOSS PER COMMON SHARE $ (0.22) $ (0.17) $ (0.53)
=========== ========== ==========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 9,221,191 6,342,816 5,596,841
=========== =========== ===========

</TABLE>

The accompanying notes are an integral part of these financial statements.

F-3
<PAGE> 60
ROYAL SILVER MINES, INC.
(A Development Stage Company)
STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
Total
Common Stock Additional
Number Paid-in Accumulated Stockholders
of Shares Amount Capital Deficit Equity
___________ ___________ ___________ ___________ ____________
<S> <C> <C> <C> <C> <C>
Balance
02/17/94 - $ - $ - $ - $ -
_________ ________ __________ __________ __________
Issuance in
May 1994
of shares
at $.002
per share
to officers
and directors
in exchange
for assignment
of mining
property
option 2,250,000 22,500 (18,500) - 4,000
Issuance in
July 1994 of
shares for
cash at $.402
in private
placement, net
of costs 1,050,000 10,500 411,116 - 421,616
Issuance in
August 1994
of shares to
a director
in exchange
for services,
valued at
$.417 per
share 150,000 1,500 61,000 - 62,500
Net loss for
the year
ended
November
30, 1994 - - - (211,796) (211,796)
_________ ________ __________ __________ _________
Balance,
November
30, 1994 3,450,000 34,500 453,616 (211,796) 276,320
_________ ________ __________ __________ ________

</TABLE>

The accompanying notes are an integral part of these financial statements.

F-4
<PAGE> 61

ROYAL SILVER MINES, INC.
(A Development Stage Company)
STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT) (Continued)
<TABLE>
Total
Common Stock Additional
Number Paid-in Accumulated Stockholders
of Shares Amount Capital Deficit Equity
___________ ___________ ___________ ___________ ____________
<S> <C> <C> <C> <C> <C>
Balance, forward
November
30, 1994 3,450,000 34,500 453,616 (211,796) 276,320
--------- -------- ---------- ---------- ---------
Issuance of
shares in
debt offering
at $.03
per share 416,250 4,163 9,712 - 13,875
Issuance of
shares for
mineral
properties
valued at
$1.00 per
share 262,500 2,625 259,875 - 262,500
Issuance of
shares for
cash at $1.00
per share 15,000 150 14,850 - 15,000
Stock issuance
costs - - (58,202) - (58,202)
Issuance of
shares to
acquire
Consolidated
Royal Mines,
Inc. at $.15
per share 2,434,563 24,346 335,750 - 360,096
Issuance of
shares to
directors and
employees for
services at
prices ranging
from $2.00
to $2.50
per share 12,750 127 29,473 - 29,600
_________ ________ __________ ________ _________
Balance
forward 6,591,063 65,911 1,045,074 (211,796) 899,189
_________ ________ __________ ________ _________

</TABLE>

The accompanying notes are an integral part of these financial statements.

F-5
<PAGE> 62
ROYAL SILVER MINES, INC.
(A Development Stage Company)
STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT) (Continued)
<TABLE>
<CAPTION>
Total
Common Stock Additional
Number Paid-in Accumulated Stockholders
of Shares Amount Capital Deficit Equity
___________ ___________ ___________ ___________ ____________
<S> <C> <C> <C> <C> <C>
Balance,
forward 6,591,063 65,911 1,045,074 (211,796) 899,189
_________ ________ ___________ __________ _________

Issuance of
shares in
exchange for
mineral
properties
at prices
ranging
from $3.13
to $3.25
per share 800,000 8,000 2,530,126 - 2,538,126
Issuance of
shares for
cash at
prices
ranging from
$1.50 to
$2.00 per
share 166,000 1,660 247,340 - 249,000
Issuance of
shares in
exchange for
debt at $1.50
per share 200,000 2,000 298,000 - 300,000
Net loss for
the ten
months ended
September
30, 1995 - - - (750,939) (750,939)
__________ ________ __________ _________ _________
Balance,
September 30,
1995 7,757,063 $ 77,571 $4,120,540 $(962,735) $3,235,376
__________ ________ __________ _________ _________
Issuance of
shares for
cash at
$1.50 per
share 1,176,832 11,769 1,754,010 - 1,765,779
__________ ________ __________ _________ _________
Balance
forward 8,933,895 89,340 5,874,550 (962,735) 5,001,155
__________ ________ __________ _________ _________

</TABLE>
<TABLE>

The accompanying notes are an integral part of these financial statements.

F-6
<PAGE> 63

ROYAL SILVER MINES, INC.
(A Development Stage Company)
STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT) (Continued)
Total
Common Stock Additional
Number Paid-in Accumulated Stockholders
of Shares Amount Capital Deficit Equity
___________ ___________ ___________ ___________ ____________
Balance,
forward 8,933,895 89,340 5,874,550 (962,735) 5,001,155
__________ ________ __________ _________ __________
Issuance of
shares to
directors and
employees for
services at
$1.50
per share 222,700 2,227 331,823 - 334,050
Issuance of
shares in
exchange for
debt and accrued
interest
at $1.50
per share 406,050 4,060 605,015 - 609,075
Issuance of
shares for
cash at
$2.20
per share 150,000 1,500 328,500 - 330,000
Issuance of
warrants
for cash
at $.05 per
warrant - - 41,068 - 41,068
Issuance of
shares for
cash at
$1.62 per
share 65,000 650 104,650 - 105,300
Issuance of
shares for
cash to
directors and
employees
at prices
ranging
from $1.62
to $2.08 per
share 107,500 1,075 181,175 - 182,250
__________ ________ __________ _________ __________
Balance
forward 9,885,145 98,852 7,466,781 (962,735) 6,602,830
__________ ________ __________ _________ __________

The accompanying notes are an integral part of these financial statements.

F-7
<PAGE> 64
ROYAL SILVER MINES, INC.
(A Development Stage Company)
STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT) (Continued)

Total
Common Stock Additional
Number Paid-in Accumulated Stockholders
of Shares Amount Capital Deficit Equity
___________ ___________ ___________ ___________ ____________
Balance,
forward 9,885,145 98,852 7,466,781 (962,735) 6,602,830
__________ ________ __________ _________ __________
Issuance of
shares for
cash at
$0.75 per
share 200,000 2,000 147,985 - 149,985
Issuance of
shares for
cash at $1.70
per share 250,000 2,500 422,500 - 425,000
Cancellation
of 35,000
shares
received in
exchange for
return of
mining
property (35,000) (350) (109,025) - (109,375)
Payment to
Centurion Mines
for option to
repurchase
stock - - - (50,000) (50,000)
Issuance of
shares for
joint venture
in mining
property
at $1.50
per share 100,000 1,000 149,000 - 150,000
Repurchase of
25,000 shares
issued for
joint venture
at $1.40
per share (25,000) (250) (34,750) - (35,000)
__________ ________ __________ _________ __________
Balance
forward 10,375,145 103,752 8,042,491 (1,012,735) 7,133,508
__________ ________ __________ _________ __________

The accompanying notes are an integral part of these financial statements.

F-8
<PAGE> 65
ROYAL SILVER MINES, INC.
(A Development Stage Company)
STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT) (Continued)

Total
Common Stock Additional
Number Paid-in Accumulated Stockholders
of Shares Amount Capital Deficit Equity
___________ ___________ ___________ ___________ ____________
Balance,
forward 10,375,145 103,752 8,042,491 (1,012,735) 7,133,508
__________ ________ __________ _________ __________
Issuance of
shares for
mining
property
at $1.50
per share 20,000 200 29,800 - 30,000
Issuance of
shares to
noteholders
for extension
of notes
at $1.50
per share 39,375 394 58,669 - 59,063
Issuance of
shares for
services at
$1.50 per
share 215,334 2,153 320,848 - 323,001
Stock
issuance
costs - - (15,000) - (15,000)
Net loss for
the year
ended
September
30, 1996 - - - (2,045,082) (2,045,082)
__________ ________ __________ _________ __________
Balance,
September 30,
1996 10,649,854 $106,499 $ 8,436,808 $ (3,057,817) $ 5,485,490
========== ======== =========== =========== ==========

The accompanying notes are an integral part of these financial statements.

F-9
<PAGE> 66
ROYAL SILVER MINES, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
From
February 17,
For the year For the Ten 1994 (Inception)
Ended Months Ended Through
September 30, September 30, September 30,
1996 1995 1996
______________ ______________ ______________
Cash flows from operating
activities:
Net loss $ (2,045,082) $ (750,939) $ (3,007,817)
______________ ______________ ______________
Adjustments to reconcile
net loss to net cash used
by operating activities:
Depreciation and
amortization 35,736 59,822 100,616
Issuance of common stock
for services 657,051 29,600 749,151
Write-off of joint
venture costs 150,000 - 150,000
Changes in assets and liabilities:
Note receivable (100,000) - (100,000)
Interest receivable (333) - (333)
Prepaid expenses (13,041) 22,627 (17,391)
Other assets 19,836 (23,137) (3,801)
Accounts payable (34,891) 53,727 25,135
Accrued expenses (55,645) 90,088 34,443
Payable to
related parties - 300,289 300,289
______________ ______________ ______________
Net cash used in operating
activities (1,386,369) (217,923) (1,769,708)
______________ ______________ ______________
Cash flows from investing
activities:
Purchase and development of
mineral properties (979,043) (455,418) (1,604,836)
Purchase of
fixed assets (4,173) (11,629) (15,802)
______________ ______________ ______________
Net cash provided used in
investing activities (983,216) (467,047) (1,620,638)
______________ ______________ ______________

The accompanying notes are an integral part of these financial statements.

F-10
<PAGE> 67
ROYAL SILVER MINES, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS (Continued)

From
February 17,
For the year For the Ten 1994 (Inception)
Ended Months Ended Through
September 30, September 30, September 30,
1996 1995 1996
______________ ______________ ______________
Cash flows from financing
activities:
Stock issuance and offering
costs (15,000) (58,202) (144,835)
Proceeds received on
long-term debt - 675,000 675,000
Payments made on
notes payable (40,000) (74,206) (114,206)
Issuance of common stock
for cash 2,958,314 264,000 3,659,814
Payment for option to re-
purchase stock (50,000) - (50,000)
Issuance of common
stock for accrued
interest 38,158 - 38,158
Issuance of common stock for
extension of notes payable
maturation 59,063 - 59,063
Payment for return of stock
issued for mining property
interest (35,000) - (35,000)
Payment of joint
venture costs (50,000) - (50,000)
Issuance of warrants
for cash 41,068 - 41,068
______________ ______________ ______________

Net cash provided by financing
activities 2,906,603 806,592 4,079,062
Net increase - cash $ 537,018 $ 121,622 $ 688,716
______________ ______________ ______________

Cash, beginning
of period 151,698 30,076 -

Cash, end of period $ 688,716 $ 151,698 $ 688,716
============= ============ ============

The accompanying notes are an integral part of these financial statements.

F-11
<PAGE> 68
ROYAL SILVER MINES, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS (Continued)

From
February 17,
For the year For the Ten 1994 (Inception)
Ended Months Ended Through
September 30, September 30, September 30,
1996 1995 1996
______________ ______________ ______________

Supplemental cashflow disclosure:

Income taxes $ - $ 250 $ 350
Interest $ 5,715 $ 17,683 $ 23,398

Non-cash financing activities:
Common stock issued for
services rendered $ 657,051 $ 29,600 $ 749,151
Common stock issued
for mineral
properties $ 180,000 $ 2,800,626 $ 2,980,626
Common stock issued for
exchange for debt $ 570,917 $ 313,875 $ 922,950
Common stock issued in
acquisition of
Consolidated Royal
Mines, Inc. $ - $ 360,096 $ 360,096
Option rights acquired
in exchange for a
payable $ - $ - $ 79,000
Common stock issued for
assignment of mining
property options $ - $ - $ 4,000

The accompanying notes are an integral part of these financial statements.

F-12
<PAGE> 69
ROYAL SILVER MINES, INC.
(A Development Stage Company)
Notes to the Financial Statements
September 30, 1996

NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS.

Royal Silver Mines, Inc. (Royal) was incorporated in April of 1969 under the
laws of the State of Utah primarily for the purpose of acquiring and
developing mineral properties. Royal conducts its business as a "junior"
natural resource company, meaning that it intends to receive income from
property sales or joint ventures with larger companies.

Celebration Mining Company (Celebration), currently a wholly-owned subsidiary
of Royal was incorporated for the purpose of identifying, acquiring,
exploring and developing mining properties. Celebration was organized on
February 17, 1994 as a Washington Corporation. Celebration has not yet
realized any revenues from its planned operations.

On August 8, 1995, Royal and Celebration completed an Agreement and Plan of
Reorganization whereby the Company issued 4,143,750 shares of its common
stock and 1,455,000 warrants in exchange for all of the outstanding common
stock of Celebration. Pursuant to the reorganization the name of the Company
was changed to Royal Silver Mines, Inc. Immediately prior to the Agreement
and Plan of Reorganization, the Company had 2,375,463 common shares issued
and outstanding.

The acquisition was accounted for as a purchase by Celebration of Royal,
because the shareholders of Celebration control the company after the
acquisition. Therefore, Celebration is treated as the acquiring entity.
There was no adjustment to the carrying value of the assets or liabilities of
Royal in the exchange as the market value approximated the net carrying
value.

Royal is the acquiring entity for legal purposes and Celebration is the
surviving entity for accounting purposes.

The $4,785,665 cost of mineral properties included in the accompanying
balance sheet as of September 30, 1996 is related to exploration properties.
The Company has not determined whether the exploration properties contain ore
reserves that are economically recoverable. The ultimate realization of the
Company's investment in exploration properties is dependent upon the success
of future property sales, the existence of economically recoverable reserves,
the ability of the Company to obtain financing or make other arrangements for
development and upon future profitable production. The ultimate realization
of the Company's investment in exploration properties cannot be determined at
this time and, accordingly, no provision for any asset impairment that may
result, in the event the Company is not successful in developing or selling
these properties, has been made in the accompanying financial statements.

The Company is actively seeking additional capital and management believes
the properties can ultimately be sold or developed to enable the Company to
continue its operations. However, there are inherent uncertainties in mining
operations and management cannot provide assurances that it will be
successful in this endeavor. Furthermore, the Company is in the development
stage as it has not realized any significant revenues from its planned
operations.

F-13
<PAGE> 70
ROYAL SILVER MINES, INC.
(A Development Stage Company)
Notes to the Financial Statements
September 30, 1996

NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.

Accounting Method.

The Company's financial statements are prepared using the accrual method of
accounting.

Loss Per Share.

Loss per share was computed by dividing the net loss by the weighted average
number of shares outstanding during the year The weighted average number of
shares was calculated by taking the number of shares outstanding and weighing
them by the amount of time they were outstanding.

The outstanding warrants were not included in the computation of loss per
share because the exercise price of the outstanding warrants is higher than
the market price of the stock, thereby causing the warrants to be
antidilutive.

Cash Equivalents.

The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.

Mineral Properties.

Costs of acquiring, exploring and developing mineral properties are
capitalized by project area. Costs to maintain the mineral rights and leases
are expensed as incurred. When a property reaches the production stage, the
related capitalized costs will be amortized, using the units of production
method on the basis of periodic estimates of ore reserves. Mineral
properties are periodically assessed for impairment of value and any losses
are charged to operations at the time of impairment.

Should a property be abandoned, its capitalized costs are charged to
operations. The Company charges to operations the allocable portion of
capitalized costs attributable to properties sold. Capitalized costs are
allocated to properties sold based on the proportion of claims sold to the
claims remaining within the project area.

Concentration of Risk.

The Company maintains its cash accounts in primarily one commercial bank in
Spokane, Washington. Accounts are guaranteed by the Federal Deposit
Insurance Corporation (FDIC) up to $100,000. The Company's cash balance
exceeds that amount by $588,716 at September 30, 1996.

F-14
<PAGE> 71
ROYAL SILVER MINES, INC.
(A Development Stage Company)
Notes to the Financial Statements
September 30, 1996
Provision For Taxes.

At September 30, 1996, the Company had net operating loss carryforwards of
approximately $3,130,000 that may be offset against future taxable income
through 2011 No tax benefit has been reported in the financial statements as
the Company believes there is a 50% or greater chance the net operating loss
carryforwards will expire unused. Accordingly, the potential tax benefits of
the net operating loss carryforwards are offset by a valuation allowance of
the same amount.

Recently Issued Accounting Standards.

In March 1995, the Financial Accounting Standards Board issued a new
statement titled "Accounting for Impairment of Long-Lived Assets." This new
standard is effective for years beginning after December 15, 1995 and would
change the Company's method of determining impairment of long-lived assets.
Although the Company has not performed a detailed analysis of the impact of
this new standard on the Company's financial statements, the Company does not
believe that adoption of the new standard will have a material effect on the
financial statements.

In October 1995, the Financial Accounting Standards Board issued a new
statement titled "Accounting for Stock-Based Compensation " (FAS 123). The
new statement is effective for fiscal years beginning after December 15,
1995.

FAS 123 encourages, but does not require, companies to recognize compensation
expense for grants of stock, stock options, and other equity instruments to
employees based on fair value. Companies that do not adopt the fair value
accounting rules must disclose the impact of adopting the new method in the
notes to the financial statements. Transactions in equity instruments with
non-employees for goods or services must be accounted for on the fair value
method. The Company currently intends to adopt the fair value accounting
prescribed by FAS 123. However, the Company intends to continue its analysis
of FAS 123 to determine its ultimate effect in the future.

Restatement.

The restatement of the financial statements have resulted in certain changes
in presentation which have no effect on the net losses or shareholder's
equity for September 30, 1995 or the year then ended.

NOTE 3 - MINERAL PROPERTIES.

Utah Mining Property Joint Venture.

In October 1994, Celebration and United Silver Mine, Inc., (United ) entered
into a joint venture agreement, whereby Celebration could acquire up to an
80% interest in a mining property located in the State of Utah. Under the
terms of the agreement, United contributed real properties for an initial 75%
interest in the joint venture, and Celebration was to remove all liens
associated with the real properties by paying $175,000 to a bank which was
the primary lien holder for its initial 25% interest in the venture.

F-15
<PAGE> 72

ROYAL SILVER MINES, INC.
(A Development Stage Company)
Notes to the Financial Statements
September 30, 1996

NOTE 3 - MINERAL PROPERTIES (Continued).

Celebration expended $175,000 to purchase the aforementioned promissory note.
The property was auctioned in a public auction in May, 1995 and by virtue of
Celebration's first position lien, Celebration was able to successfully bid
the full amount of the underlying promissory note. Although additional
expenditures have been made on the property through September 30, 1996, no
further funds toward the joint venture have been expended by Celebration,
which owns an undivided 25% interest in the property.

Shoshone County Idaho Mineral Lease.

In February 1995, Celebration entered into an agreement to acquire a fifty-
year renewable mineral lease on a property in Shoshone County, Idaho. The
mining property consists of twelve patented claims and associated Idaho state
leases. In connection with this lease, Celebration paid $50,000 and issued
175,000 shares of common stock. In addition, 10,000 shares were issued to a
new director for his assistance in obtaining this lease. Celebration
subsequently paid $950,000 for the option of extending its lease for an
additional forty-nine years. When, and if, the property achieves gross sales
of $40,000,000, Celebration will be obligated to pay an additional .5%
royalty on future sales. Furthermore, beginning after September 1, 1995, and
at such time as the average price of silver has reached $6.00 per ounce for
a 30-day period, Celebration is obligated to spend not less than $2,000,000
during the subsequent 36 months to de-water and repair the mine. Thereafter,
Celebration will be required to maintain the mine in a condition to allow it
to be put into production within sixty days. There are certain claims by the
U.S. Environmental Protection Agency and the County on this property for
which the lessor is obligated to pay. In the event these claims are not
satisfactorily resolved, they may effect Celebration's rights to the
property.

Australian Mineral Property Joint Venture.

In March 1995, Celebration entered into a joint venture agreement with an
Australian company for exploration of a certain mineral property in
Australia.

Under the original terms of the joint venture agreement, Celebration acquired
a 10% interest by paying $100,000 in April 1995. No additional funds where
paid or required to be paid subsequent to the initial payment.

Washington and Idaho Mineral Properties.

During the year ended September 30, 1995, Celebration purchased through the
issuance of 800,000 shares of its common stock, various mineral properties
located in the States of Washington and Idaho. The mineral properties were
recorded at the fair market value of the shares paid on the date of issuance
ranging from $3.13 to $3.25 per share for a total purchase price of
$2,538,126.

F-16
<PAGE> 73
ROYAL SILVER MINES, INC.
(A Development Stage Company)
Notes to the Financial Statements
September 30, 1996

NOTE 3 - MINERAL PROPERTIES (Continued).

In May 1996, the Company sold back the Frisco Standard Silver Mine to its
original seller in exchange for the same price (35,000 shares of Royal stock)
received by the seller when the mine was purchased. The shares received were
cancelled and no gain or loss was recorded on the transaction.

The Company's proposed future mining activities will be subject to laws and
regulations controlling not only the exploration and mining of mineral
properties, but also the effect of such activities on the environment.
Compliance with such laws and regulations may necessitate additional capital
outlays, affect the economics of a project, and cause changes or delays in
the Company's activities.

The total mineral properties at September 30, 1996 are classified as follows:

Mineral properties under joint ventures $ 366,510
Other mineral properties 4,419,155
____________
Total Mineral Properties $ 4,785,665
============

The Company's mineral properties are valued at the lower of cost or net
realizable value.

NOTE 4 - PROPERTY AND EQUIPMENT.

Property and equipment are recorded at cost. Major additions and
improvements are capitalized. Minor replacements, maintenance and repairs
that do not increase the useful life of the assets are expensed as incurred.
Depreciation of property and equipment is determined using the straight-line
method over the expected useful lives of the assets of five years.

NOTE 5 - INTANGIBLE ASSETS.

Deferred debt issuance costs and organization costs are recorded at cost.
Amortization of these intangible assets is determined using the straight-line
method over the expected useful lives of the assets as follows:

Description Useful Lives
___________________________ ____________
Deferred debt issuance costs 1 year
Organization costs 5 years

NOTE 6 - COMMON STOCK.

During the year ended November 30, 1994, Celebration issued 1,500,000 shares
of common stock to directors for services rendered, valued at $.003 to $.625
per share, which is the fair market value of the shares on the date of
issuance.

F-17
<PAGE> 74
ROYAL SILVER MINES, INC.
(A Development Stage Company)
Notes to the Financial Statements
September 30, 1996

NOTE 6 - COMMON STOCK (Continued).

During the year ended September 30, 1995, the Company issued 12,750 shares of
common stock to directors and employees for services rendered, valued at
prices ranging from $2.00 to $2.50 per share, which is the fair market value
of the shares on the date of issuance.

During the year ended September 30, 1995, Celebration issued 975,000 shares
of common stock in exchange for mineral properties (See Note 3) and sold
176,000 shares of common stock for $264,000 cash.

The Company issued 200,000 shares of its common stock during the year ended
September 30, 1995 in lieu of outstanding debt that was owed to Centurion
Mines Corporation (Centurion), a related entity. The stock was issued at
$1.50 per share in payment of $300,000 of the then outstanding debt (See Note
10). The Company also issued 277,500 shares in connection with the issuance
of notes payable (See Note 9). (See also the disclosure in Note 1).

During the year ended September 30, 1996, the Company sold 1,949,332 shares
of its common stock for $2,958,314 in cash. The Company also issued 222,700
shares to directors and employees for services rendered valued at $1.50 per
share, which is the fair market value of the shares on the date of issuance.

Also during the year ended September 30, 1996, the Company issued 100,000
shares of its common stock for a joint venture in a mining property and
20,000 common shares for a mining property (See Note 12). The stock issued
was valued at $1.50 per share, which is the fair market value to the shares
at the date of issuance.

In the same twelve-month period, the Company also issued 406,050 shares of
its common stock in payment of outstanding debt of $570,917 and accrued
interest of $38,158. The stock was issued at $1.50 per share for a total
value of $609,075. In addition, the Company issued 39,375 shares of common
stock to noteholders for extending the maturity date of their loans. Again,
the shares were valued at $1.50 each, which is the fair market value of the
shares when issued.

NOTE 7 - COMMON STOCK OPTIONS AND WARRANTS.

In January 1992, the shareholders of Royal approved a 1992 Stock Option and
Stock Award Plan under which up to ten percent of the issued and outstanding
shares of the Company's common stock could be awarded based on merit of work
performed. As of September 30, 1996, 12,750 shares of common stock have been
awarded under the Plan.

Also during the year ended September 30, 1996, the Company issued 215,334
shares of its common stock for services received. The shares were valued at
$1.50 per share, which is the fair market value of the shares at the date of
issuance.

F-18
<PAGE> 75
ROYAL SILVER MINES, INC.
(A Development Stage Company)
Notes to the Financial Statements
September 30, 1996

NOTE 7 - COMMON STOCK OPTIONS AND WARRANTS (Continued).

Celebration, prior to the exchange agreement with Royal, had granted
securities to certain shareholders which represented rights to purchase or
receive shares of Celebration's common stock. These options were assumed by
the Company after the merger at a rate of 1.5 shares for each option still
outstanding. Thus, the Company has granted options, with varying conditions
and requirements, to purchase a total of 1,455,000 shares of its common
stock.

There are 255,000 of the stock options exercisable at $1.50 per share which
expire March 21, 2000. The remaining 1,200,000 stock options are exercisable
at $0.93 per share and expire on August 31, 2001. As of September 30, 1996,
none of these options have been exercised.

On January 9, 1996, the Board of Directors approved the issuance of warrants
to two of its officers to purchase a total of 300,000 shares for a purchase
price of $2.50 per share, exercisable from the date of issuance until January
9, 1999.

On March 22, 1996, the Board of Directors approved the issuance of warrants
to an investor to purchase 625,000 shares of common stock of the Company in
partial completion of a private placement of stock. These warrants are
exercisable until September 30, 1998, at a price of $1.50 per share, which is
67% of the closing price on March 22, 1996.

On April 10, 1996, following the close of the second quarter of fiscal 1996,
the Board of Directors authorized the issuance of 420,666 warrants to
unaffiliated investors as part of the private placement of stock. These
warrants are exercisable until April 12, 1997 at prices ranging from $2.50 to
$2.625 per share. As of September 30, 1996, 320,666 warrants have been
issued (but not exercised) for a total amount of $41,068.

NOTE 8 - ADDITIONAL PAID-IN CAPITAL.

The following is a summary of additional paid-in capital at September
30, 1996 and September 30, 1995:

September 30, September 30,
1996 1995
_____________ _____________
<S> <C> <C>
Applicable to:
Common stock $8,395,740 $4,120,540
Stock warrants 41,068 -
__________ __________
$8,436,808 $4,120,540
========== ==========

F-19

<PAGE> 76
ROYAL SILVER MINES, INC.
(A Development Stage Company)
Notes to the Financial Statements
September 30, 1996

NOTE 9 - NOTES PAYABLE.

In February 1995, Celebration raised $555,000 through the issuance of
promissory notes. During the second quarter ended March 31, 1996, $470,000
of the total amount plus accrued interest of $29,265 was converted into
332,800 shares of the Company's common stock, leaving an amount owing of
$85,000, which was further reduced by cash payments to $60,000 at September
30, 1996.

The notes bear interest at 10% per annum and will be due on the earlier of
January 1, 1997 or the closing of any public offering of equity securities by
the Company. The note holders also received 277,500 shares of Celebration's
common stock. A 10% commission was charged by an underwriter on the sale of
almost all of the notes.

In April 1995, Celebration raised $120,000 in 10% convertible debentures. In
late 1995, $105,000 of the total amount plus accrued interest of $4,810 was
converted into 73,250 shares of the Company's common stock, leaving an amount
owing of $15,000. During the third quarter ended September 30, 1996, this
remaining $15,000 plus accrued interest was paid.

NOTE 10 - RELATED PARTY TRANSACTIONS.

After receiving advances from a related party for payment of operating
expenses, the Company approved the issuance of 200,000 shares of common stock
in payment of $300,000 of the then outstanding balance (See Note 6). The
balance outstanding at September 30, 1996 was $289.

NOTE 11 - FUTURE LEASE OBLIGATIONS.

The Company is obligated under its lease arrangements to make additional
lease payments subsequent to September 30, 1996 as follows:

Year Ended
September 30, Amount
_____________ _________
1997 $ 9,440
1998 4,500
1999 4,500
2000 and thereafter 22,500
_________
Total $ 40,940
=========

NOTE 12 - OPTIONS WITH PLACER MINING CORPORATION.

In April 1996, the Company entered into an option with Placer Mining
Corporation ("Placer") of Kellogg, Idaho whereby the Company could acquire a
joint venture interest in the Bunker Hill Mine, a silver-lead-zinc mine in
Shoshone County, Idaho. After issuing 100,000 shares valued at $1.50 per
share and spending a non-refundable $50,000 on this option, the Company
elected to renegotiate this option agreement and entered into a second option
agreement with Placer on September 18, 1996.
F-20
<PAGE> 77
ROYAL SILVER MINES, INC.
(A Development Stage Company)
Notes to the Financial Statements
September 30, 1996

NOTE 12 - OPTIONS WITH PLACER MINING CORPORATION (Continued).

In the second agreement, the Company paid $100,000 in September 1996 for the
nonassignable option of acquiring a 100% interest in the Bunker Hill Mine.
In order to exercise this option, the Company must issue 500,000 shares of
its common stock to Placer by May 10, 1997 and pay Placer either $7,000,000
by that date or $4,000,000 by that date and $3,500,000 by May 10, 1998.
Under the terms of this agreement, the Company will pay Placer a 2 3/4% net
smelter return royalty in perpetuity with stipulated annual advance minimum
royalty payments to Placer ranging from $100,000 (in 1999) to $250,000 (in
years 2002 through 2010). All advance minimum royalties paid are to be
credited against actual production royalties.

At September 30, 1996, the Company had expended $101,715 in option and
related expenses toward the purchase of the Bunker Hill Mine. These costs
are included in the cost of mineral properties (Note 3) on the Company's
balance sheet.

NOTE 13 - STOCK OPTION AGREEMENT WITH CENTURION MINES CORPORATION.

In September 1996, the Company executed an agreement with Centurion Mines
Corporation ("Centurion") whereby the Company acquired an option from
Centurion to purchase up to 800,000 shares of its common stock held by
Centurion for the exercise price of $1.75 per share during the two-year
period ending September 30, 1998. The cost of this two-year stock purchase
option was $50,000, which was paid by the Company and charged to
stockholders' equity (accumulated deficit).

At September 30, 1996, no shares were acquired from Centurion under this
option agreement.

F-21
<PAGE> 78

UNTIL __________, 1997, (NINETY DAYS AFTER THE EFFECTIVE DATE OF THIS
PROSPECTUS) ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE
REQUIRED TO DELIVER A PROSPECTUS.

TABLE OF CONTENTS

Prospectus Summary . . ROYAL SILVER MINES, INC.
Risk Factors . . .
Capitalization . . . 625,000 Warrants to Purchase
Selected Financial Data . 625,000 Shares of Common Stock
Management's Discussion . and 791,000 Shares of Common
and Analysis of Stock Underlying the Warrants
Financial Condition and
Results of Operations .
Use of Proceeds . .
Dividend Policy . .
Glossary . . .
Business . . . . __________________________
Management . . . PROSPECTUS
Certain Transactions . __________________________
Management Remuneration .
Principal Shareholders . DATED: ___________________
Description of the Securities
Plan of Distribution . . ROYAL SILVER MINES, INC.
Litigation . . . 10220 North Nevada
Legal Matters . . . Suite 230
Experts . . . . Spokane, Washington 99218
Additional Information . (509) 466-3144
Financial Statements . F-1

No dealer, salesman or any other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus in connection with the offer contained in this Prospectus and, if
given or made, such information must not be relied upon as having been
authorized by the Company. Neither the deliver nor any sale made hereunder
shall, under any circumstances, create any implication that there has been no
change in the affairs of the Company since the date hereof. This Prospectus
does not constitute an offer to sell or the solicitation of an offer to buy
an security other than the shares of Common Stock offered by this Prospectus,
nor does it constitute an offer to sell or a solicitation of an offer to buy
the shares of Common Stock by anyone in any jurisdiction in which such offer
or solicitation is not authorized or in which the person making such offer or
solicitation is not qualified to do so, to any person to whom it is unlawful
to make such offer or solicitation.

<PAGE> 79

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 22. Indemnification of Directors and Officers.

The only statutes, charter provisions, bylaws or other arrangements
under which any controlling person, Director or Officer of the Registrant is
insured or indemnified in any manner against liability which he may incur in
his capacity as such are set forth below.

The Nevada Revised Statutes provides for indemnification where a person
who was or is a party or is threatened to be made a party to any threatened,
pending or contemplated action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than action by or in right of a
corporation), by reason of fact he is or was a Director, Officer, employee or
agent of a corporation or serving another corporation at the request of the
corporation, against expenses (including attorneys' fees), judgments, fines,
and amounts paid in settlement, actually and reasonably incurred by him if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interest of the corporation and, with respect to criminal
action or proceeding, had no reasonable cause to believe his conduct
unlawful. Lack of good faith is not presumed from settlement or nolo
contendere plea. Indemnification of expenses (including attorneys' fees)
allowed in derivative actions except in the case of misconduct in performance
of duty to corporation unless the Court decides indemnification is proper.
To the extent any such person succeeds on the merits or otherwise, he shall
be indemnified against expenses (including attorneys' fees). Determination
that the person to be indemnified met applicable standards of conduct, if not
made by the Court, is made by the Board of Directors by majority vote of
quorum consisting of the Directors not party to such action, suit or
proceeding or, if a quorum is not obtainable or a disinterested quorum so
directs, by independent legal counsel or by the stockholders. Expenses may
be paid in advance upon receipt of undertakings to repay unless it shall
ultimately be determined that he is entitled to be indemnified by the
corporation. The Corporation may purchase indemnity insurance. In so far as
indemnification for liability arising from the Securities Act of 1933 may be
permitted to Directors, Officers or persons controlling the Company, it has
been informed that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable.

<PAGE> 80

ITEM 23. Other Expenses of Issuance and Distribution.

The following table sets forth all expenses in connection with the
issuance and distribution of the shares being registered. All the amounts
shown are estimates, except the registration fee.

</TABLE>
<TABLE>
Minimum Maximum
<S> <C> <C>
Registration Fee - SEC . $ 339.44 $ 339.44

Printing and Engraving . 2,000.00 2,000.00

Legal Fees and Disbursements 5,000.00 5,000.00

Accounting Fees . . 5,000.00 5,000.00

Transfer Agent Fees . . 1,000.00 1,000.00

Blue Sky Fees and Expenses 1,660.56 1,660.56

TOTAL . . . . $ 15,000.00 $ 15,000.00

</TABLE>

<PAGE> 81
ITEM 24. Recent Sales of Unregistered Securities.

The following table set forth information as to recent sales of the
Registrant's Common Stock since the formation of the Registrant, all of which
shares were not registered under the Securities Act of 1933, as amended:

<TABLE>
<CAPTION>
Amount of
Shares Consideration Date of
Name of Owner Acquired Cash/Other Sale
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
144 "RESTRICTED" SECURITIES

Spenst Hansen 20,000 Director Services 01/01/94
4734 South 2700 West
Salt Lake City, UT 84127

James Kontes 10,000 Director Services 01/01/94
P. O. Box 112
Firth, ID 83236

H. E. Cameron 10,000 Director Services 01/01/94
331 South Rio Grande
Suite 208
Salt Lake City, UT 84101

Alan Seelos 10,000 Director Services 01/01/94
150 South 600 East
#5-B
Salt Lake City, UT 84102

A. Franklin Adams & 10,000 Officer Services 01/01/94
M. Lee Adams
5738 South Redwood Road
#127
Salt Lake City, UT 84123

Barry F. Katona 10,000 Director Services 01/01/94
331 South Rio Grande
Suite 208
Salt Lake City, UT 84101

Crosby Enterprises,
Inc. 400,000 Finder's Fee 02/02/94
105 North First Mining Property
Suite 232 Acquisition and
Sandpoint, ID 83864 Montanore

Keystone Surveys, Inc 400,000 Finder's Fee 02/02/94
331 South Rio Grande Mining Property
Suite 208 Acquisition and
Salt Lake City, UT 84101 Montanore

Spenst Hansen 100,000 Officer and 03/17/94
4734 South 2700 West Director Services
Salt Lake City, UT 84127

Hal E. Cameron 50,000 Director Services 03/17/94
331 South Rio Grande
Suite 208
Salt Lake City, UT 84101

Alan Seelos 50,000 Director Services 03/17/94
150 South 600 East
#5-B
Salt Lake City, UT 84102
<PAGE> 82

James C. Kontes 50,000 Director Services 03/17/94
P. O. Box 112
Firth, ID 83236

Barry F. Katona 50,000 Director Services 03/17/94
331 South Rio Grande
Suite 208
Salt Lake City, UT 84101

Howard Crosby 5,000 Director Services 04/01/95
105 North First Avenue
Suite 232
Sandpoint, ID 83864

Spenst Hansen 2,500 Director Services 04/01/95
4734 South 2700 West
Salt Lake City, UT 84127

E. Hal Cameron 5,000 Director Services 04/01/95
331 South Rio Grande
Suite 208
Salt Lake City, UT 84101

Laroy Orr 2,500 Officer Services 04/01/95
1020 Adams Avenue
Ogden, UT 84404

Carlos M. Chavez 5,000 Director Services 05/01/95
815 Yale Avenue
Salt Lake City, UT 84105

R. Allison Carman 1,000 Consulting Services 05/01/95
4287 South 4580 West
Salt Lake City, UT 84120

Howard Crosby 5,000 Director Services 06/30/95
105 North First Avenue
Suite 232
Sandpoint, ID 83864

Spenst Hansen 2,500 Director Services 06/30/95
4734 South 2700 West
Salt Lake City, UT 84127

E. Hal Cameron 5,000 Director Services 06/30/95
331 South Rio Grande
Suite 208
Salt Lake City, UT 84101

Laroy Orr 2,500 Officer Services 06/30/95
1020 Adams Avenue
Ogden, UT 84404

Extol Inter-
national Corp. 425,000 Officer/Director 06/28/95
105 North First Services and
Suite 232 Founding Stock
Sandpoint, ID 83864

Extol Inter-
national Corp. 1,075,000 Officer/Director 06/28/95
105 North First Services and
Suite 232 Founding Stock
Sandpoint, ID 83864

Lovon Fausett 37,500 Mining Property 06/28/95
P. O. Box 968 Acquisition
Osburne, ID 83849

<PAGE> 83

Fausett International 187,500 Mining Property 06/28/95
P. O. Box 968 Acquisition
Osburne, ID 83849

William Jacobson 37,500 Mining Property 06/28/95
P. O. Box 631 Acquisition
Mullen, ID 83846

Robert E. Jorgensen 200,000 Officer/Director 06/28/95
10220 Nevada Services and
Suite 230 Founding Stock
Spokane, WA 99218

Robert E. Jorgensen 550,000 Officer/Director 06/28/95
10220 Nevada Services and
Suite 230 Founding Stock
Spokane, WA 99218

Craig C. Condron 12,000 Basis is $0.42 06/28/95
7205 West Kendick Road per share, as
Nine Mile Falls, WA 99026 adjusted for splits

Craig C. Condron
& Linda Condron 18,750 Basis is $0.42 06/28/95
7205 West Kendick Road per share, as
Nine Mile Falls, WA 99026 adjusted for splits

Brush Prairie Minerals 25,000 Mining Property 08/30/95
905 North Pines Road Acquisition
Suite A
Spokane, WA 99206

Washington Mining Co. 200,000 Mining Property 08/30/95
905 North Pines Road Acquisition
Suite A
Spokane, WA 99206

Conjecture Silver
Mines, Inc. 80,000 Mining Property 08/30/95
6619 North Cedar Road Acquisition
Suite A
Spokane, WA 99208

Centurion Mines
Corporation 50,000 Debt Conversion 08/31/95
P. O. Box 2365 at $1.50 per share
Salt Lake City, UT 84110

Joyce & Welson Stump
Living Trust 3,000 $1.50 per share 09/05/95
1313 Campbell
Toledo, OH 43607

<PAGE> 84
Carl F. Peterson 10,000 $1.50 per share 09/06/95
27670 Groesbeck Hwy
Roseville, MI 48066

IRA F/B/O
Israel A. Englander 166,000 $1.50 per share 09/07/95
c/o Millennium Partners
111 Broadway
New York, NY 10006

Laroy Orr 2,500 Consulting Services 11/20/95
1020 Adams Avenue
Ogden, UT 84404

Craig C. Condron 18,334 Note Conversion 12/29/95
7205 West Kendick Road
Nine Mile Falls, WA 99026

Elite Discount
Health Foods 18,334 Note Conversion 12/29/95
6700 West Charleston
Las Vegas, NV 89102

Joseph A. Tedesco 18,334 Note Conversion 12/29/95
3904 South Ridgeview
Spokane, WA 99206

Binder 1989 Trust 18,334 Note Conversion 12/29/95
276 East Hillcrest Drive
Suite 203
Thousand Oaks, CA 91360

Peter H. Morkill 18,334 Note Conversion 12/29/95
13212 Bracken Fern Drive
Gig Harbor, WA 98332

F. E. Hambleton 73,334 Note Conversion 12/29/95
920 N.W. View Ridge Court
Camas, WA 98607

Bruce W. Franklin 18,334 Note Conversion 12/29/95
3631 Brookside Drive
Bloomfield, MI 48302

Robert H. Laugen 7,334 Note Conversion 12/29/95
15904 North Scribner Branch Road
Spokane, WA 99207

Howard Stang 7,334 Note Conversion 12/29/95
20307 North Little Spokane Drive
Colbert, WA 99005

Michael L. Wallach 18,334 Note Conversion 12/29/95
12117 Riverwood
Spokane, WA 99218

Paul H. Swy 7,334 Note Conversion 12/29/95
290 Substation Road
Temperance, MI 48182

Robert C. Roosen Trust 18,334 Note Conversion 12/29/95
2756 North Green Valley Parkway
Suite 700
Henderson, NV 89104

Invest L'Inc Bridge
Fund 18,334 Note Conversion 12/29/95
1901 North Rosette Road
Suite 1030
Schauburg, IL 60195

<PAGE> 85

Charles W. Wafer 36,666 Note Conversion 12/29/95
17684 Los Morros
Rancho Sante Fe, CA 92067

Gregg Longmeier 7,334 Note Conversion 12/29/95
16008 North Dalton Road
Spokane, WA 99208

Frances G. Strickfaden 18,334 Note Conversion 12/29/95
4212 Wellington Drive
Fort Collins, CO 80526

Reisha Forshpan 7,334 Note Conversion 12/29/95
3177 Dona Marta Drive
Studio City, CA 91604

John P. Bender 7,334 Note Conversion 12/29/95
1194 Eagle Nest Court
Milton, MI 48381

James F. O'Connell 7,334 Note Conversion 12/29/95
400 South Jefferson
Suite 450
Spokane, WA 99204

Charles Wafer 22,000 Basis is $0.42 as 12/29/95
17684 Los Morros adjusted for splits
Rancho Santa Fe, CA 92067

D. R. Shipman 22,000 Basis is $0.42 as 12/29/95
716 LaSalle Street adjusted for splits
Ottowa, IL 61350

Dennis W. Garland & 11,000 Basis is $0.42 as 12/29/95
Alice C. Garland adjusted for splits
13801 North Riverbluff Land
Spokane, WA 99208

Leonard M. Tweten 22,000 Basis is $0.42 as 12/29/95
1301 Spring Street adjusted for splits
#273
Seattle, WA 98104

Frances G. Strickfaden 18,750 Basis is $0.42 as 01/11/96
4212 Wellington Drive adjusted for splits
Fort Collins, CO 80526

Fred Hoeppner 12,000 Basis is $0.42 as 01/19/96
1573 South Unita Way adjusted for splits
Denver, CO 80231

Edward A. Gray 7,500 Basis is $0.42 as 01/29/96
11419 115th Lane N.E. adjusted for splits
Kirkland, WA 98033

Edward Gray 3,750 Note Extension 03/20/96
11419 115th Lane N.E.
Kirkland, WA 98033

Paul Brown 9,375 Note Extension 03/20/96
11709 North Fairwood Drive
Spokane, WA 99218

D.R. Shipman 9,375 Note Extension 03/20/96
716 LaSalle Street
Ottowa, IL 61350

<PAGE> 86

Dennis Garland 9,375 Note Extension 03/20/96
13801 N. Riverbluff Lane
Spokane, WA 99208

Howard Crosby 40,000 $1.62 per share 07/23/96
105 North First Avenue
Suite 232
Sandpoint, ID 83864

Robert Jorgensen 17,500 $1.62 per share 07/23/96
2719 West Strong Road
Sandpoint, ID 83864

Spenst Hansen 40,000 $1.62 per share 07/23/96
4734 South 2700 West
Salt Lake City, UT 84127

Centurion Mines
Corporation 100,000 $1.50 per share 07/23/96
P. O. Box 2365
Salt Lake City, UT 84110

John Ryan 10,000 $1.62 per share 07/23/96
619 Lunceford Lane
Couer d'Alene, ID 83814

Ben Pellum 50,000 $1.62 per share 07/23/96
3864 South 1845 West
#E204
West Valley, UT 84119

Keystone Surveys 15,000 $1.62 per share 07/23/96
331 South Rio Grande
Suite 208
Salt Lake City, UT 84101

Cohig & Associates 15,000 Finder's Fee 07/29/96
6300 South Syracuse Way Mining Property
Suite 430
Englewood, CO 80111

REGULATION "S" SECURITIES

Metallurgical Refining 3,700 $1.70 per share 07/18/95
P. O. Box 81 Australian JV
Brisbane Market
QLD 4106 Australia

Ages, (AUST) Pty, Ltd. 5,000 $1.70 per share 07/18/95
463 Savages Road Australian JV
Brookfield
Queensland 4609 Australia

Delten Trading, S.A. 200,000 $1.50 per share 10/04/95
60 Market Street
Belize City, Belize

CJC Holdings Pty, Ltd. 20,000 $1.50 per share 12/20/95
16 Ord Street
Western Perth
Western Australia

James Oleynick 50,000 $1.50 per share 12/20/95
1500 - 700 West Georgia Street
Vancouver, B.C.
Canada V7Y 1J1

<PAGE> 87
James W. Prier,
ITF RRSP 15,000 $1.50 per share 12/20/95
1715 - 750 West Pender Street
Vancouver, B.C.
Canada V6C 2T8

Jonathan A. Rubenstein 50,000 $1.50 per share 12/20/95
205 - 10711 Cambie Road
Richmond, B.C.
Canada V6X 3G5

Internation Consultant 25,000 $1.50 per share 12/29/95
475 Keith Road
West Vancouver, B.C.
Canada V7T 1L6

Killeba Holdings, Ltd. 200,000 $1.50 per share 01/11/96
102 Langeherrentaise Street
Antwerten 2018 Belgium

Shelley Mason 20,000 $1.50 per share 03/14/96
3441 Dundas Street
Vancouver, B.C.
Canada V5K 1R5

Pacific Int'l
Securities 34,000 $1.50 per share 04/01/96
1500 - 700 West Georgia Street
Vancouver, B.C.
Canada V7Y 1J1

Jim Oleynick 34,000 $1.50 per share 04/01/96
1500 - 700 West Georgia Street
Vancouver, B.C.
Canada V7Y 1J1

Thomas E. Rafael
& RRSP 23 5,000 $1.50 per share 04/20/96
475 Keith Road
West Vancouver, B.C.
Canada V7T 1L6

Stephen Katz 50,000 $1.50 per share 04/04/96
1758 West 4th Avenue
Vancouver, B.C.
Canada

Int'l Consultants 41,000 $1.50 per share 05/06/96
475 Keith Road
West Vancouver, B.C.
Canada V7T 1L6

Rush & Company 150,000 $2.20 per share 05/14/96
100 Wall Street
New York, NY 10005

Siegler & Co 250,000 $1.70 per share 07/01/96
Nominees for Femitage Global
Mining Investment Fund, Ltd.
Chemical Bank
Ground Floor/Receiving Window
4 New York Plaza
New York, NY

Newark Sales Corp. 200,000 $0.75 per share 08/19/96
377 Langleleem Street
Antwerten 2018 Belgium

<PAGE> 88

* With respect to these shares of Common Stock issued by the Company, the
Company believes that these transactions did not involve any public
offering, in as much as all these shares were issued to the Company's
founders, officers, directors and others, who purchased the shares for
investment purposes only and not with a view to further public
distribution. Further, no commissions were paid to any persons in
connection with such sales, no advertising of any nature was made in
connection with the sale of said shares, all Company information was
made available to said purchasers, and said purchasers were required to
execute a subscription agreement restating the aforementioned, among
other things. Accordingly, the Company believes that the aforementioned
transactions were exempt from registration pursuant to Section 4(2) or
Regulation S of the Securities Act of 1933, as amended.

<PAGE> 89

ITEM 25. Exhibits.

The following documents are incorporated herein by reference from the
Registrant's Form 10, as filed with the Securities and Exchange Commission.

Number Document
- ---------------------------------------------------------------------
3.1 Articles of Incorporation.

3.2 Articles of Amendment.

3.3 Amendment to Articles of Incorporation Limiting Director Liability.

3.4 Bylaws.

10.1 Sale of Mining Properties By Centurion Mines Corporation to Royal
Minerals, Inc. - June 1992 through September 1993.

10.2 Deed with Reservation of Mineral Royalty - January 1992 to
Kennecott.

10.3 July 1992 Purchase and Sale Agreement of 16,880 acres to Kennecott.

10.4 July 1992 Kennecott Option to Purchase 6,320 acres.

10.5 Deed and Assignment with Reservation of Mineral Royalty - August
1992 (16,880 acres) to Kennecott.

10.6 Deed and Assignment with Reservation of Mineral Royalty - December
1992 (6,320 acres) to Kennecott.

The following documents are incorporated herein by reference from the
Registrant's Current Report on Form 8-K, dated August 8, 1995, as filed with
the Securities and Exchange Commission:

2.01 Agreement and Plan of Reorganization.

3.05 Articles of Share Exchange (Utah).

3.06 Articles of Share Exchange (Washington).

4.01 Subscription and Investment Agreement.

4.02 Stock Purchase Option Certificate.

19.01 Material Furnished to Celebration Securityholders.

20.01 Letter from Royal to Share Exchange Securityholders.

The following documents are incorporated herein by reference from the
Registrant's Form S-8 Registration Statement filed with the Commission on
July 17, 1995.

4.1 1995 Stock Option and Stock Award Plan with Amendment No. 1 to the
Plan.

<PAGE> 90

The following documents are included as exhibits hereto:

5.1 Opinion of Conrad C. Lysiak.

10.7 Vipoint Joint Venture Agreement.

10.8 Option to Joint Venture with Placr Mining Corporation, dated April
19, 1996.

10.9 Amendment to Option to Joint Venture with Placer Mining Corproation
dated the _____ day of July, 1996.

10.10 Exploration Agreement and Purchase/Joint Venture Option.

10.11 Purchase Agreement with Imperial Energy Corp.

24.1 Consent of Williams and Webster, P.S.

24.2 Consent of Conrad C. Lysiak.

All other schedules and exhibits are omitted, as the required
information is not applicable or is not present in amount sufficient to
require submission of the schedule or because the information required is
included in the financial statements and notes thereto.

<PAGE> 91

ITEM 26. Undertakings.

A. The undersigned Registrant hereby undertakes:

To provide to the Underwriters, if any, at the closing specified in the
Underwriting Agreement certificates in such denominations and registered in
such names as required by the Underwriter to permit prompt delivery to each
purchaser.

B. The undersigned registrant hereby undertakes:

1. To file, during any period in which offers or sales are being made,
a post effective amendment to this registration statement:

(a) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;

(b) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the registration statement; and,
(c) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.

2. That, for the purpose of determining any liability under the
Securities Act of 1933, as amended, each such post-effective amendment shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

3. To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination
of the offering.

C. Insofar as indemnification for liabilities arising under the securities
Act of 1933 may be permitted to Directors, Officers and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a Director, Officer or
controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by a Director, Officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Act and shall be governed by the final
adjudication of such issue.

<PAGE> 92 SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing of this Form SB-2 Registration Statement
and has duly caused this Form SB-2 Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in Spokane, Washington,
on this 5th day of February, 1997.

ROYAL SILVER MINES, INC.

BY: /s/ Howard M. Crosby, President

KNOW ALL MEN BY THESE PRESENT, that each person whose signature appears
below constitutes and appoints Howard M. Crosby as true and lawful
attorney-in-fact and agent, with full power of substitution, for his and in
his name, place and stead, in any and all capacities, to sign any and all
amendment (including post-effective amendments) to this registration
statement, and to file the same, therewith, with the Securities and Exchange
Commission, and to make any and all state securities law or blue sky filings,
granting unto said attorney-in-fact and agent, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
about the premises, as fully to all intents and purposes as he might or could
do in person, hereby ratifying the confirming all that said attorney-in-fact
and agent, or any substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this Form
SB-2 Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:

Signature Title Date

/s/ Howard M. Crosby President and a member February __, 1997
Howard M. Crosby of Directors

/s/ Robert E. Jorgensen Executive Vice President February __, 1997
Robert E. Jorgensen Treasurer and a member
of the Board of Directors

/s/ Thomas Henricksen Secretary and a member February __, 1997
Thomas Henricksen of Board of Directors

/s/ Jerry Stacey Vice President of February __, 1997
Jerry Stacey Operations

/s/ John Ryan Vice President of February __, 1997
John Ryan Corporate Development

/s/ Spenst Hansen Member of the Board February __, 1997
Spenst Hansen of Directors

/s/ Ronald Kitching Member of the Board February __, 1997
Ronald Kitching of Directors

/s/ James W. Prier Member of the Board February __, 1997
James W. Prier of Directors

</TABLE>

<PAGE> 1

TABLE OF CONTENTS

Page
ARTICLE I - DEFINITIONS . . . . . . 1

ARTICLE II - VENTURE NAME AND PRINCIPAL OFFICE
Section 2.1 Venture Name . . . . . 4
Section 2.2 Principal Office . . . . 4
Section 2.3 Term of Venture . . . . 4

ARTICLE III - PURPOSE OF VENTURE . . . . 4
Section 3.1 Purpose and Powers of the Venture . 4

ARTICLE IV - CONTRIBUTIONS OF PARTICIPANTS . . 5
Section 4.1 Contribution of Vipont . . . 5
Section 4.2 Contribution of Celebration . . 5

ARTICLE V - ALLOCATION OF DEDUCTIONS . . . 9
Section 5.1 Allocation of Deductions . . . 9

ARTICLE VI - DISPOSITION OF PRODUCTION . . . 9
Section 6.1 Distributions and Sharing of Revenues 9
Section 6.2 Disposition of Production . . 10
Section 6.3 Taking in Kind . . . . . 10
Section 6.4 Refinery . . . . . . 10

ARTICLE VII - MANAGEMENT COMMITTEE . . . . 11
Section 7.1 Organization and Composition . . 11
Section 7.2 Decisions . . . . . . 11
Section 7.3 Meetings . . . . . . 11
Section 7.4 Action Without Meeting . . . 11

ARTICLE VIII - MANAGER . . . . . . 12
Section 8.1 Appointment . . . . . 12
Section 8.2 Powers and Duties of Manager . . 12
Section 8.3 Standard of Care . . . . 15
Section 8.4 Resignation; Deemed Offer to Resign 15
Section 8.5 Payments to Manager . . . . 16
Section 8.6 Transaction With Affiliates . . 16

ARTICLE IX - RELATIONSIP OF THE PARTICIPANTS . . 17
Section 9.1 No Partnership . . . . . 17
Section 9.2 State and Federal Income Taxes . 17

ARTICLE X - WITHDRAWAL AND TERMINATION . . . 17
Section 10.1 Terminaiton by Expiration on Agreement 17
Section 10.2 Termination by Deadlock . . . 18
Section 10.3 Withdrawal . . . . . 18
Section 10.4 Continuing Obligations . . . 18
Section 10.5 Disposititon of Assets on Termination 19
Section 10.6 Right - Venture Data After Termination 19
<PAGE> 2

ARTICLE XI - ACQUISITIONS WITHIN AREA OF INTEREST . 19
Section 11.1 General . . . . . . 19
Section 11.2 Notice to Non-acquiring Participant 20
Section 11.3 Option Exercised . . . . 20
Section 11.4 Option Not Exercised . . . 20

ARTICLE XII - ABANDONMENT AND SURRNDER OF PROPERTIES 21
Section 12.1 Abandonment or Surrender of Property 21

ARTICLE XIII - TRANSFER OF INTEREST . . . 21
Section 13.1 General . . . . . . 21
Section 13.2 Limitations on Free Transferability 21
Section 13.3 Preemptive Right . . . . 22
Section 13.4 Exceptions to Preemptive Right . 23

ARTICLE XIV - FISCAL YEAR AND ACCOUNTING . . 24
Section 14.1 Fiscal Year Accounting . . . 24
Section 14.2 Audit . . . . . . 25

<PAGE> 3

VIPONT MINE VENTURE AGREEMENT
VIPONT MINE VENTURE
This Amended Agreement made and entered into and effective
as of the _____ day of March 1996, between VIPONT INC., A Nevada
corporation ("Vipont") and CELEBRATION MINING COMPANY, a
Washington corporation ("Celebration"), supersedes, replaces, and
restates in its entirety any prior agreements between Vipont and
Celebration.
RECITALS
A. Vipont and Celebration jointly own the property known
as the Vipont Mine, including 53 patented mining claims located
in the Ashbrook Mining District, Box Elder County, State of Utah,
which Property is more fully described in Exhibit A.
B. Vipont and Celebration desire to develop the Vipont
Mine and to put the mine into production by first developing the
underground mine and then developing the open pit mine.
NOW, THEREFORE, in consideration of the covenants and
agreements contained herein, Vipont and Celebration agree as
follows:
ARTICLE I
DEFINITIONS
"ASSETS" means the Properties, Products and all other real
and personal property, tangible and intangible, held for the
benefit of the Participants hereunder.

<PAGE> 4
"BUDGET" means a detailed estimate of all costs to be
incurred by the Participants with respect to a program and what
money is required and how it is to be spent.
"COSTS" means all costs required to develop underground and
open pit mines and put them into production, build a mill, leach
pads, power lines, buy equipment, ect.
"CO-MANAGER" means each manager has equal authority and say
in all matters of the Venture.
"DEVELOPMENT" means work undertaken to open up ore bodies,
such as sinking shafts, driving drifts, cross-cuts, raises,
winzes, and stope preparation.
"EXPLORATION" means the work involved in looking for ore;
may include surface and/or underground geology, drilling,
sampling, trenching, geological testing, or a host of other ore
finding methods.
"CONTRIBUTION" means that contribution each Participant has
made or agrees to make pursuant to Sections 4.1 and 4.2.
"FULL UNDERGROUND PRODUCTION" means the mining and removal
of ores at a minimum tonnage rate as to produce the best economic
cash flow for the benefit of the venture without jepordizing the
designed life of the mine. This rate is yet to be determined
through sound mine design and economic studies.
"JOINT ACCOUNT" means that account maintained in accordance
with the Accounting Procedure showing the charges and credited
accruing to the Participants.

<PAGE> 5
"MANAGEMENT COMMITTEE" means the committee established under
Section 7.2.
"MINING" means the process of extracting and producing the
ore from underground deposits by stoping, drifting, raises, or
other openings, and extracting and producing ore from surface
open-pit mineral deposits.
"NET SMELTER RETURN", (NSR) means the amount of money
received from the smelter or refining after they deduct all of
their processing charges. In addition to these charges, there
can be freight and umpire assaying charges deducted.
"OPERATIONS" means the activities carried out under this
Agreement.
"PARTICIPANT" and "PARTICIPANTS" means the persons or
entities that from time to time have Participating Interests.
"PARTICIPATING INTEREST" means the percentage interest each
participant has in the production costs and in the division of
net proceeds from minerals or products produced from mining.
Where fully funded and operational the Property (Exhibit A) will
be owned 80% by Celebration and 20% by Vipont and the
Participation Interest will be divided 80% to Celebration and 20%
to Vipont.
"PRODUCTS" means all ores minerals, and mineral resources
produced from the Properties under this Agreement.

<PAGE> 6
"PROPERTY" means those interests in real property described
more fully in Exhibit A and incorporated herein by reference, and
all other interests in real property within the Area of Interest
as described in Exhibit A which are acquired and held subject to
the Agreement.
"TRANSFER" means sell, grant, assign, encumber, pledge, or
otherwise commit or dispose of.
"VENTURE" means the business arrangement of the Participants
under this Agreement.
ARTICLE II
VENTURE NAME AND PRINCIPAL OFFICE
Section 2.1 Venture Name
The name of the Venture between Vipont and Celebration shall
be the VIPONT MINE VENTURE. Any business of the Venture may be
conducted under such name as permitted by law and under such
variations as the Management Committee shall unanimously
designate.
Section 2.2 Principal Office
The initial principal office of the Venture shall be N.
10220 Nevada, Suite 230, Spokane, Washington 99218. However, the
Venture Participants shall conduct business at such locations as
may, from time to time, be determined by the Management
committee.

<PAGE> 7
Section 2.3 Term of Venture
The Venture shall be effective from the date of signing this
amended Agreement and shall continue in existence until December
31, 2025, unless sooner terminated pursuant to this Agreement or
the dissolutions provisions of applicable statutes.
ARTICLE
PURPOSE OF VENTURE
Section 3.1 Purposes and Powers of the Venture
The purpose of the Venture shall be to invest in, explore
for, and engage in the business of mining silver, gold and other
metals, principally on the property located in the State of Utah,
known as the VIPONT SILVER MINE. Such activities may be
accomplished through, but not limited to:
(a) Completing the Miller cross-cut (6850 Level) by driving
it an additional 1700 feet to the Vipont Limestone, and then
developing drifts and raises from this level to the Phelan and A-
level cross-cuts.
(b) Constructing, equipping, and operating facilities for
the milling and processing of mineral ores, and the sale of the
end products of the milling and processing operations.
(c ) Conducting of geological, geophysical and other
exploring investigations on the Property and in the Ashbrook
Mining District.
(d) Drilling new areas, reopening old areas.

<PAGE> 8
ARTICLE IV
CONTRIBUTIONS OF PARTICIPANTS
Section 4.1 Contribution of Vipont
Vipont contributes to the Venture Assets its mineral rights
in the Property, to accomplish the purposes of the Agreement.
Vipont will also contribute geological and mining expertise to
the Venture. Vipont will not contribute any capital funds under
its Contribution. Vipont will also contribute 30% of its
participating interest to celebration providing terms specified
in paragraph (e) of this section are fulfilled.
Section 4.2 Contribution of Celebration
Celebration, in addition to contributing all its mineral
rights on the property identified in Exhibit A, will contribute
and be responsible for 100% of the funding necessary for the
purposes of the Venture, including but not limited to funds
necessary to put the underground mine and open-pit mines into
production as specified in paragraph 4.3 (e) of this section.
Section 4.3 Celebration shall make its contributions to the
Venture in the manner and timing outlined in paragraphs (a)
through (h) below:
(a) Celebration shall, no later than ______________, make
an unsecured loan to Vipont in the amount of $300,000, which
shall be due in 15 years, together with 5% simple interest, in
substantially the same form as Exhibit B attached hereto. Said
loan and accrued interest shall be repaid only out of Vipont's
interest from ore sales from production below the 6500 foot level
<PAGE> 9
of the mine, and from no other source of revenue from Vipont. In
the event there is no production of ore below the 6500 foot level
while Celebration is a Participant in the Venture, Vipont shall
be relieved of its obligation to pay the note and accrued
interest.
(b) If the loan has been made to Vipont in accordance with
the terms of paragraph 4.3(a) above, Vipont and Celebration will
each own 50% of the Property and each have an equal, individual
interest in the Property as tenants in common; however, Vipont
shall reserve for itself for a term of 60 years the surface
grazing rights on the Property.
In addition, representatives of Vipont may have access to
the Property at any time, during exploration, development
production or when the property may be idle.
(c ) Celebration's failure to make the loan to Vipont as
specified in paragraph (4.3a) above shall be deemed to be an
immediate withdrawal of Celebration from the Vipont Mine Venture
Agreement and the additional 25% ownership of the Property shall
not be conveyed to Celebration.
(d) In order to receive an additional 30% Property
ownership, Celebration shall expend by June 1, 2001, at least
$4,000,000 toward property development, which shall include but
not be limited to the following:
(i) Completing the Miller cross-cut for an additional
1700 feet, which shall be run at least 10' x 10' in the clear.

<PAGE> 10
(ii) Approximately 3000 feet of drifting on the 6850
foot level.
(iii) Production and service raise to the Phelan
Level, and rehabilitate escapeways to A-Level.
(iv) At least two production drifts, preferably three,
for the above raise. These drifts will be approximately 800 feet
each.
(v) Underground drilling, sampling, mapping and
assaying.
(vi) Road improvements and surface rehabilitation for
the support of all mining and milling activities.
(vii) Any and all environmental remediation efforts
deemed necessary by the State of Utah or the United States
Government to be meet compliance with said regulatory agencies.
(viii) Permitting, underground mine planning and
floatation mill study and planning, open-pit mine planning,
metallurgical testing, drilling and surface geological work.
These costs not to exceed $400,000.
(ix) Administrative overhead expenses will be allowed
up to a maximum of 10% of the total direct expense not to exceed
$400,000.
(e) If Celebration expends the $4,000,000 towards
underground mine development in paragraph 4.3(d) above by June 1,
2001, it will be entitled to an additional 30% Property
ownership, bringing its total ownership to 80%.

<PAGE> 11
(f) If Celebration does not expend $4,000,000 by June 1,
2001, on underground mine development as specified in paragraph
4.3(d) above, Celebration shall not be entitled to the additional
30% Property ownership, but a linear apportioned, pro-rated
amount that reflects the level of expenditure vested toward the
total of $4,000,000. In other words, if Celebration expends
$2,000,000 by June 1, 2001, then Celebration would earn an
additional 15% Property ownership bringing total ownership in the
Vipont Mine to 65%.
At that time, management of the Venture shall vest solely
with Vipont, and the Management Committee shall be dissolved
immediately. Vipont shall then have, in it's sole discretion,
full authority to operate the Property, lease the Property, or
dispose of part or all the Assets of the Venture, except
Celebration's undivided interest in the Property and the
Property's assets.
(g) In the event the terms and conditions specified in
paragraphs 4.3(d) and 4.3(e) above are met, Celebration shall
provide all funds required to bring the mine into Full
Production.
These funds shall be used to build a mill, to purchase
additional equipment, power lines, secure building permits,
construct tailing dams and impoundments, and to provide
sufficient working capital to sustain the mine and milling
operations for at least four months until Product sold has a cash
return to the Venture.

<PAGE> 12
(h) Once Full Production commences from underground mining,
all costs associated with mining, milling, transportation and
selling of the ores shall be deducted from revenues derived from
ore sales. Celebration shall be responsible for 80% of the costs
and shall receive 80% of the profits after deductions, and Vipont
will be responsible for 20% of the costs and shall receive 20% of
the profits after deductions. If the Vipont Mine Venture is
operating at a loss and Vipont cannot make it's 20% contribution
toward costs, then all costs will be carried forward and charged
against future profits.
Costs may be calculated on a tonnage or ounces basis.
Revenues and distributions will be in accordance with Section
6.1.
ARTICLE V
ALLOCATION OF DEDUCTIONS
Section 5.1 Allocation of Deductions
To the extent permitted or required by law, depletion,
depreciation deductions, and credits for Federal Income Tax
purposes shall be allocated as follows:
(a) Until Celebration has complied with and completed the
terms and conditions outlined in paragraph (e) of Section 4.3
above, all deductions shall be 50% to Celebration and 50% to
Vipont on a yearly basis.
(b) Upon Celebration's compliance with, and completion of,
the requirements outlined in paragraph (e) of Section 4.3, all
future deductions for income tax purposes shall be allocated 20%
<PAGE> 13
to Vipont and 80% to Celebration, beginning with the Venture's
fiscal year immediately following the fiscal year in which
Celebration completes its compliance with the terms and
conditions outlined in paragraph (e) of Section 4.3 above.
ARTICLE VI
DISPOSITION OF PRODUCTION
Section 6.1 Distributions and Sharing of Revenues
After the underground mine has been in Full Production for
four months and total monthly operating costs and expenses have
been determined, a working capital and contingency fund, fixed
equivalent to four times the most recent total monthly operating
costs and expenses, will be established and maintained by the
Manager of the Venture before and net revenues are distributed.
Thereafter, net revenues will be distributed 80% to Celebration
and 20% to Vipont.
Section 6.2 Disposition of Production
The Participants, if they so choose, may market shipments of
concentrates, dore, crude ore or precipitates, for future
processing as combined shipments, and then divide the Net Smelter
Return (NSR) payments according to their respective Participating
Interests in the Venture, or they may market their respective
shares individually as outlined in Section 6.3.
In any event, the working capital and contingency fund will
be maintained by the Manager of the Venture during mine
production as specified in Section 6.1.

<PAGE> 14
Section 6.3 Taking in Kind
Each Participant may take in kind and separately market its
share of all Products in accordance with its Participating
Interest. Any extra expenditure incurred in the taking in kind
of products for separate disposition by any Participant of its
proportionate share of Products, shall be borne by such
Participant. The Manager shall give the Participants notice at
least 10 days in advance of the delivery date upon which their
respective shares of Products will be available.
Section 6.4 Refinery
If the Venture builds a refinery, Participants will have the
option of taking their respective shares in kind as ounces of
silver or gold as they choose, providing the terms of Section 6.1
has been satisfied.
ARTICLE
MANAGEMENT COMMITTEE
Section 7.1 Organization and Composition
The Venture shall be governed by a Management Committee to
determine overall policies, objectives, procedures, methods and
actions under the Agreement. The Management Committee shall be
composed of four members. At the Participation Level of 50%
Celebration and 50% Vipont, each participant shall appoint two
members each. At the Participation Level of 75% or more for
Celebration and 25% or less for Vipont, then Celebration will
have three appointed members and Vipont will have one member to
the Management Committee. Each member shall have one vote.

<PAGE> 15
Section 7.2 Decisions
All decisions of the Management Committee shall be made by
majority vote, except for the approval of annual programs and
budgets for operations and non-budgeted capital expenditures,
which will require the unanimous approval of the Management
Committee.
Section 7.3 Meetings
The Management Committee shall hold regular meetings at
least annually in Spokane, Washington, or at other mutually
agreed places. The Manager shall give thirty (30) days notice to
the Participants of such regular meetings. Additionally, either
Participant may call a special meeting upon thirty (30) days'
notice to the Manager and the other Participants. In case of
emergency, reasonable notice of a special meeting shall suffice.
There shall be a quorum if at least on member representing each
Participant is present. Each notice of a meeting shall include
and itemized agenda prepared by the Manager tin the case of a
regular meeting, or by the Participant calling the meeting in the
case of a special meeting, but any matters may be considered with
the consent of all Participants. The Manager shall prepare
minutes of all meetings and shall distribute copies of such
minutes to the Participants within thirty (30) days after the
meeting. The minutes, when signed by all the participants, shall
be the official record of the decisions made by the Management
Committee and shall be binding on the Manger and Participants.

<PAGE> 16
Section 7.4 Action Without Meeting
In lieu of meetings, the Management Committee may hold
telephone conferences, so long as all decisions are confirmed in
writing and mailed to participants within 3 days of the telephone
conference.
ARTICLE VIII
MANAGER
Section 8.1 Appointment
As soon as the terms and conditions of Sections 4.3 (a) and
(b) are satisfied, Celebration shall be the Manager with
management responsibility for Operations. Celebration hereby
agrees to serve until it resigns as provided in Section 8.4.
Until the terms and conditions of Sections 4.3 (a) and (b) are
satisfied, the Venture shall be managed by the Participants
acting as Co-Managers.
Section 8.2 Powers and Duties of Manager
Subject to the terms and provisions of the Agreement, the
Manager shall have the following powers and duties which shall be
discharged in accordance with adopted Programs and Budgets:
(a) The Manager shall manage and direct Operations in
accordance within Management Committee directives.
(b) The Manager shall implement the decisions of the
Management Committee to carry out adopted Programs, and shall
promptly advise the Management Committee if it lacks sufficient
funds to carry out its responsibilities under the Agreement.

<PAGE> 17
(c) The Manager shall purchase or otherwise acquire all
material, supplies, equipment, water, utility, and transportation
services required for Operations, cash purchases and acquisitions
to be made on the best terms available.
(d) The Manager shall conduct such title examinations and
cure such title defects as may be advisable in the reasonable
judgement of the Manager.
(e) The Manager shall: (i) make or arrange for timely
disbursement of all payments required by leases, licenses,
permits, contracts, and other agreements related to the Venture;
(ii) pay all taxes, assessments and like charges on Operations
and Assets except state and federal income taxes determined or
measured by a Participant's sales revenue or net income.
(f) The Manager shall: (i) apply for all necessary
permits, licenses, and approvals; (ii) comply with applicable
Federal, State and local laws and regulations; (iii) notify
promptly the Management Committee of any allegations or the
existence of substantial violation(s) thereof; and (iv) prepare
and file all reports or notices required for Operations. Until
the mine is in Full Production and the terms and conditions
Sections 4.3 (a), (b), (e), (g) and (h) are satisfied, the non-
managing Participant shall work with the Manager (as Co-Manager)
on permits, licenses and approvals required by the state, county
or federal government.

<PAGE. 18
(g) The Manager shall prosecute and defend, but shall not
initiate without consent of the Management Committee, all
litigation or administration proceedings arising out of
Operations. The non-managing Participant shall approve in
advance any settlement involving payments, commitments, or
obligations in excess of $1,000 in cash or value.
(h) The Manager shall provide insurance of the benefit of
the Venture and the Participants.
(i) The Manager may dispose of Venture Assets, whether by
abandonment, surrender, or sale or other transfer, in the
ordinary course of business. However, without prior unanimous
authorization from the Management Committee, the Manager shall
not dispose of Venture Assets in any one transaction having a
value in excess of $5,000, or any number of transactions having
an aggregate value of $20,000 in any Venture fiscal year.
(j) The Manager shall, in the best interests of the
Venture, carry out its responsibilities pursuant to the Agreement
through agents, Affiliates, or independent contractors.
Contracts over $5,000 must be approved unanimously by the
Management Committee.
(k) The Manager shall perform or cause to be performed
during the term of the Agreement all assessment and other work
required by law in order to maintain the unpatented mining claims
include within the Properties.

<PAGE> 19
(l) If authorized by the Management Committee, the Manager
may locate, amend or relocate any unpatented mining claim, mill
site, or tunnel sites.
(m) The Manager shall keep and maintain all required
accounting and financial records pursuant to the Accounting
Procedure and in accordance with customary cost-accounting
practices in the mining industry.
(n) The Manager shall keep the Management Committee advised
of Venture Operations by submitting in writing to the Management
Committee; (i) monthly progress reports which include statements
of expenditures and comparisons of such expenditures to the
adopted Budget; (ii) periodic summaries of data acquired; (iii)
copies of reports concerning Operations; (iv) a detailed final
report within thirty (30) days after completion of each Program
and Budget, which shall include comparisons between actual and
budgeted expenditures and comparisons between the objectives and
results of Programs; and (v) such other reports as the Management
Committee may request. Manager shall provide monthly, quarterly
and yearly productions and financial statements of operations and
supply a copy to Vipont within thirty (30) days. These
statements should reflect in reasonable detail the charges and
credits to the joint account during the period being reported
along with development, mining as per tons, ounces, or pounds
produced and recovered.

<PAGE> 20
Section 8.3 Standard of Care
The Manager shall at all times act to protect and preserve
the title and interests of the Venture and its assets. The
Manager shall also conduct all Operations in a good, workmanlike
and efficient manner, in accordance with sound mining and other
applicable industry standards and practices, and in accordance
with the terms and provisions of leases, licenses, permits,
contracts, and other agreements pertaining to Venture Assets.
Section 8.4 Resignation: Deemed Offer to Resign
The Manager may resign upon one (1) month's prior notice to
the other Participant, in which case the other Participant may
elect to become the new Manager by notice to the resigning
Participant within thirty (30) days after receipt of the notice
of resignation. If any of the following shall occur, the Manager
shall be deemed to have offered to resign, which offer may be
accepted in writing by the other Participant within ninety (90)
days of either such deemed offer or the other Participant's
notice of such offer whichever comes first:
(a) The Participating Interest of the Manager becomes less
than fifty-one percent (51%) after June 1, 1999; or
(b) The Manager fails to perform a material obligation
imposed upon it under the Agreement and such failure continues
for a period of sixty (60) days after notice from the other
Participant demanding performance; or
(c ) The Manager fails to pay, or contest in good faith, the
Venture's bills within sixty (60) days after they become due.

<PAGE> 21
Section 8.5 Payments to Manager
The Manager will receive an administrative charge against
gross receipts of five percent (5%) against the Venture Account
to reimburse the Manager from it's home office overhead. The
above five percent (%) charge shall be in lieu of any management
fee.
Section 8.6 Transactions With Affiliates
If the Manager engages Affiliates to provide services
pursuant to the Agreement, it shall do so on terms no less
favorable than would be the case with unrelated persons in
arm's-length transactions.
ARTICLE IX
RELATIONSHIP OF THE PARTICIPANTS
Section 9.1 No Partnership
Nothing contained in this Agreement shall be deemed to
constitute the creation of any mining, commercial or other
partnership. Neither Participant shall have any authority to act
for or to assume any obligation or responsibility on behalf of
the other Participant, except as otherwise expressly provided in
the Agreement.
Section 9.2 State and Federal Income Taxes
The Participants also agree that, to the extent permissible
under applicable law, their relationship shall be treated for
state income purposes in the same manner as it is for federal
income tax purposes. Each Participant shall be responsible for
its respective state and federal income tax filing and the tax
liability thereof.

<PAGE> 22 ARTICLE X
WITHDRAWAL AND TERMINATION
Section 10.1 Termination by Expiration on Agreement
This Agreement shall terminate as expressly provided in the
Agreement, unless earlier terminated by written agreement of the
Participants.
Section 10.2 Termination by Deadlock
If the Management Committee fails to unanimously adopt an
annual Program and Budget within four (4) months after the
expiration of the latest adopted annual Program and Budget,
either Participant may elect to terminate the Agreement by giving
notice of termination to the other Participant.
Section 10.3 Withdrawal
A Participant may elect to withdraw as a Participant from
this Agreement by giving notice to the other Participant of the
effective date of withdrawal, which shall be the later of the end
of the then current Program and Budget, or at least thirty (30)
days after the date of the notice. Upon such withdrawal, this
Agreement shall terminate, and the withdrawing Participant shall
be deemed to have transferred to the remaining Participant,
without cost, and free and clear of royalties, liens, or other
encumbrances arising by, through, or under such withdrawing
Participant of ties share of liabilities to third persons
(whether such accrues before or after such withdrawal) arising
out of Operations conducted prior to such wihtrawal. For
purposes of this Section, the withdrawing Participant's share of
such liabilities shall be equal to its Participating Interest at
the time such liability was incurred.
<PAGE> 23
Section 10.4 Continuing Obligations
On termination of this Agreement under Sections 10.1 or
10.2, the Participants shall remain liable for continuing
obligations hereunder until final settlement of all counts and
for any liability, whether it accrues before or after
termination, if it arises out of Operations during the term of
this Agreement.
Section 10.5 Disposition of Assets on Termination
Promptly after termination under Sections 10.1 or 10.2, the
Management Committee may authorize the Manger to take action
necessary to wind up the activities of the Venture, and all
costs and expenses incurred in connection with the termination of
the Venture shall be expenses chargeable to the Venture. The
Manager shall give its best efforts to see that Venture Assets
are liquidated as promptly as consistent with obtaining a fair
value therefor. Proceeds from Venture Assets shall first be
paid, applied, or distributed in satisfaction of all liabilities
owed to the Participants. Before distributing any proceeds or
Venture Assets to Participants, the Manager shall have the right
to segregate and reserve from distribution, amounts which, in the
Manager's reasonable judgement, are necessary to discharge
continuing obligations or to purchase for the account of
Participants, bonds or other securities for the performance of
such obligations. Thereafter, any remaining proceeds and all
other Venture Assets shall be distributed to the Participants, in
proportion to their respective Participating Interests. No
Participant shall receive a distribution of any interest in

<PAGE> 24
Products or proceeds from the sale thereof if such Participant's
Participating Interest therein has been terminated pursuant to
this Agreement.
Section 10.6 Right to Venture Data After Termination
After Termination of this Agreement pursuant to Sections
10.1 and 10.2, each Participant shall be entitled to copies of
all information acquired hereunder before the effective date of
termination not previously furnished to it, but a terminating or
withdrawing Participant shall not be entitled to any such copies
after any other termination or withdrawal.
ARTICLE XI
ACQUISITIONS WITHIN AREA OF INTEREST
Section 11.1 General
Any interest or right to acquire any interest in real
property within the Area of Interest acquired during the term of
this Agreement by or on behalf of a Participant or any Affiliate
shall be subject to the terms and provisions of this Agreement.
Section 11.2 Notice to Non-acquiring Participant
Within sixty (60) days after the acquisition of any interest
or the right to acquire any interest in real property wholly or
partially within the Area of Interest the Participant shall
notify the other Participant of such acquisition. The acquiring
Participant's notice, shall describe in detail the acquisition,
the lands and minerals covered thereby, the cost thereof, and the
reasons why the acquiring Participant believes that the
acquisition of the interest is in the best interests of the
Participants under this Agreement. In addition to such notice,

<PAGE> 25
the acquiring Participant shall make any and all information
concerning the acquired interest available for inspection by the
other Participant.
Section 11.3 Option Exercised
If, within sixty (60) days after receiving the acquiring
Participant's notice, the other Participant notifies the
acquiring Participant of this election to accept a proportionate
interest in the acquired interest equal to it's Participating
Interest, the acquiring Participant shall convey to the Venture,
by special warranty deed, its title and /or interest therein.
The acquired interest shall become a part of the Venture
Properties for all purposes of this Agreement immediately upon
the notice of such other Participant's election to accept the
proportionate interest therein. Such other Participant shall
promptly pay to the acquiring Participant its proportionate share
(as measured by its Participating Interest) of the latter's
actual out-of-pocket acquisition costs.
Section 11.4 Option Not Exercised
If the non-requiring Participant does not give such notice
within the sixty (60) day period set forth in Section 11.3, the
acquired interest shall not become a part of the Venture
Properties or be subject to this Agreement.
ARTICLE XIII
ABANDONMENT AND SURRENDER OF PROPERTIES
Section 12.1 Abandonment or Surrender of Property
The Management Committee may unanimously authorize the
Manager to surrender or abandon part or all of the Venture

<PAGE> 26
Properties. If the Management Committee authorized any such
surrender or abandonment over the objection of a Participant, the
Participant that desires to abandon or surrender shall assign to
the objecting Participant, all of the abandoning or surrendering
Participant's interest in the Property to be abandoned or
surrendered, and the abandoned or surrendered property shall
cease to be part of the Venture Properties.
ARTICLE XIII
TRANSFER OF INTEREST
Section 13.1 General
A Participant shall have the right to Transfer to any
Participant or third party all or any part of its interest in or
to this Agreement, its Participating Interest, or the Venture
Assets solely as provided in this Article.
Section 13.2 Limitations of Free Transferability
The transfer right of a Participant in Section 13.1 shall be
subject to the following terms and conditions: no transferee of
all or any part of the interest of a Participant in this
Agreement, any Participant Interest, or the Assets shall have the
rights of a Participant unless and until the transferring
Participant has provided to the other Participant notice of the
Transfer, and except as provided in Section 13.3 (c ), the
transferee, as of the effective date of the Transfer, has
committed in writing to be bound by this Agreement to the same
extent as the transferring Participant.

<PAGE> 27
Section 13.3 Preemptive Right
Except as otherwise provided in Section 13.4, if a
Participant desires to Transfer all of or part of it's interest
in the Agreement, and Participating Interest, or the Assets, the
other Participants shall have a preemptive right to acquire such
interest as provided in this Section.
(a) A Participant intending to Transfer all or any part of
its interest in this Agreement, any Participating Interest, or
the Assets shall promptly notify the other Participant of its
intentions. The notice shall state the price and all other
pertinent terms and conditions of the intended Transfer, and
shall be accompanied by copy of the offer or contract for sale.
The other Participant shall have ninety (90) days from the date
such notice is delivered to notify the transferring Participant
whether it elects to acquire the offered interest at the same
price and on the same terms and conditions as set forth in the
notice. If it does so elect, the Transfer shall be consummated
promptly after notice of such election is delivered to the
transferring Participant.
(b) If the other Participant fails to so elect within the
period provided for in Section 13.3 (a), the transferring
Participant shall have sixty (60) days following the expiration
of such period to consummate the transfer to a third party at the
price and on terms no more favorable than those offered by the
Transfer to a third party at a price and on terms no more
favorable than those offered by the transferring Participant to
the other Participant in the notice required in Section 13.3 (a).

<PAGE> 28
(c) If the transferring Participant fails to consummate the
Transfer to a third party within the period set forth in Section
13.3 (b), it must reinitiate, and comply with, all of the
procedures set forth in this Section 13.3.
(d) If the Transfer is the grant of a security interest by
mortgage, deed of trust, pledge, lien or other encumbrance of any
interest in this Agreement, any Participating Interest, or the
Assets, to secure a loan or other indebtedness of a Participant
in a bona fide transaction, such security interest shall be
subordinate to the terms of the Agreement and the rights and
interests of the other Participant hereunder. Upon an
foreclosure or other enforcement of rights in the security
interest, the acquiring third party shall be deemed to have
assumed the position of the encumbering Participant with respect
to this Agreement and the other Participant, and it shall comply
with and be bound by the terms and conditions of this Agreement.
(e) If a sale or other commitment of disposition of
Products or proceeds from the sale of Products by a Participant
upon distribution to it creates in a third party a security
interest in Products ro proceeds therefrom prior to such
distribution, such sales, commitment, or disposition shall be
subject to the terms and conditions of this Agreement.
Section 13.4 Exceptions to Preemptive Right
Section 13.3 shall not apply to the following:
(a) Transfer by a Participant of all or any part of its
interest in this Agreement, and Participating Interest, or the
Assets to an Affiliate;

<PAGE> 29
(b) Incorporation of a Participant, or a corporate merger,
consolidation, amalgamation or reorganization of a Participant by
which the surviving entity shall possess substantially all of the
stock, or all the property rights and interests, and be subject
to substantially all of the liabilities and obligations of that
Participant.
ARTICLE XIV
FISCAL YEAR AND ACCOUNTING
Section 14.1 Fiscal Year Accounting
The fiscal year of the Venture shall end on December 31, and
the books of the Venture shall be kept on a cash accrual or other
basis as the Management Committee shall determine, and shall
further be kept in accordance with accounting principles employed
by the Venture for State and Federal Income Tax purposes.
Section 14.2 Audit
The books of the Vipont Mine Venture shall be audited
annually by a certified public accounting firm unanimously
designated by the Management Committee. This audit will be
completed within forty-five (45) working days of the end of the
fiscal year.
ARTICLE XV
CONFIDENTIALITY
Section 15.1 General
The financial terms of this Agreement and all information
obtained in connection with the performance of this Agreement
shall be the exclusive property of the Participants and, except
as provided in Section 15.2, shall not be disclosed to any third
<PAGE> 30
party or the public without the prior written consent of all
Participants, which consent shall not be unreasonable withheld.
Section 15.2 Exceptions
The consent required by Section 15.1 shall not apply to a
disclosure:
(a) to an Affiliate, consultant, contractor, or
subcontractor that has a bona fide need to be informed; or
(b) to any third party to whom the disclosing Participant
contemplates a Transfer of all or any part of its interest in or
to this Agreement, its Participating Interest, or the Assets; or
(c ) to a governmental agency or to the public which the
disclosing Participant believes in good faith is required be
pertinent law or regulation or the rules of any stock exchange.
In any case to which this Section 15.2 is applicable, the
disclosing Participant shall give notice to the other Participant
concurrently with the making of such disclosure. As to any
disclosure pursuant to Sections 15.2 (a) or (b), only such
confidential information as such third party shall have a
legitimate business need to know shall be disclosed and such
third party shall first agree in writing to protect the
confidential information form further disclosure to the same
extent as the Participants are obligated under this Article.
Section 15.3 Duration of Confidentiality
The provisions of this Article XV shall apply during the
term of this Agreement and for two years following termination of
this Agreement pursuant to Sections 10.1 or 10.2, and shall
continue to apply to any Participant who withdraws, who is deemed
<PAGE> 31
to have withdrawn, or who Transfers its Participating Interest,
for two years following the date of such occurrence.
ARTICLE XVI
GENERAL PROVISIONS
Section 16.1 Notices
All notices, payments, and other required communications
("Notices") to the Participants shall be in writing, and shall be
addressed respectively as follows:
Thomas F. Miller, President Howard M. Crosby, President
Vipont, Inc. Celebration Mining Company
Section 16.2 Changes of Address
Any Participant may change its notice address by notifying
other Participants as provided in Section 16.1 above.
Section 16.3 Waiver
The failure of a Participant to insist on the strict
performance of any provision of this Agreement or to exercise any
right, power or remedy upon a breach hereof shall not constitute
a waiver of any provision of the Agreement of limit the
Participant's right thereafter to enforce any provision or
exercise any right.
Section 16.4 Integration
This Agreement is the entire Agreement between the
Participants with respect to the subject matter hereof and
supersedes all prior agreements with respect thereto. No
alterations, modification or interpretation hereof shall be
binding unless made in writing and duly executed by the
Participants.

<PAGE> 32
Section 16.5 Disputes
Any controversy of claim arising out of or relating to this
Agreement or the breach thereof shall be settled by arbitration
in accordance with the rules of the American
Arbitration Association, and any award made shall be final and
binding upon the parties hereto, and judgment on the award
rendered by the Arbitrator(s) may be entered in any Court having
jurisdiction thereof.
Section 16.6 Governing Law
This Agreement shall be governed by and interpreted in
accordance with the laws of the Stat of Utah, except for its
rules pertaining to conflicts of laws.
Section 16.7 No Title Encumbrances
There shall be no liens, mortgages, or any secured title
encumbrance placed on the surface or mineral rights, deed or
title of the Property except by written agreement by all
Participants.
Section 16.8 Hold Harmless
Vipont agrees to hold Celebration Mining Co. and it's
affiliated Companies harmless from any actions taken against the
Vipont Mining Co. or the Vipont Mine for any and all pre-existing
conditions that were set forth by operations and actions of and
by Vipont Mining Company, Bannack Mines, Inc., or their Officers
and Directors on the Vipont Mine property and mine access, that
may, in any reason, have a delitreous effect on Celebration and
it's affiliates.

<PAGE> 33
Section 16.9 Further Assurances
Each of the Participants agrees to take, from time to time,
such actions and execute such additional instruments as may be
reasonably necessary or convenient to implement and carry out the
intent and purpose of the Agreement.
Section 16.10 Successors and Assigns
The Agreement shall be binding upon and inure to the benefit
of the respective successors and permitted assigns of the
Participants.
Section 16.11 Memorandum
At the request of any Participant, a Memorandum or short
form of this Agreement, as appropriate, which shall not disclose
financial information contained herein, shall be prepared and
recorded by Manager. This Agreement shall not be recorded.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
ATTEST: VIPONT, INC.
___________________________ BY _________________________________

ATTEST: CELEBRATION MINING COMPANY
___________________________ BY _________________________________

<PAGE> 1

OPTION TO JOINT VENTURE

This agreement is dated this 19th day of April, 1996, by and
between Royal Silver Mines, Inc., a Utah corporation (Royal) and
Placer Mining Corporation, a Nevada Corporation (Placer) for the
purpose of granting Royal an option to enter into a joint venture
with Placer for the development of the Bunker Hill Mine in
Shoshone County, Idaho.

CONSIDERATION

Upon signing of this agreement, Royal will pay to Placer the sum
of $50,000 and issue to Placer a total of 100,000 shares of
restricted common stock of Royal. This payment and issuance of
shares will be non-refundable in the event that, upon completion
of the due diligence period, Royal does not proceed with the
Joint Venture.

OPTION PERIOD, DUE DILIGENCE

This option period will commence with the signing of this
agreement and continue until Monday, July 22, 1996. During this
period, Royal will, at its sole expense, undertake the necessary
due diligence with respect to title of mining claims, analysis of
geological and engineering data, and environmental review of the
project. On or before June 5, 1996, Royal agrees to place
$1,000,000 cash and 1,000,000 shares of Royal restricted common
stock into a trust account to be released to Placer upon
execution of a Joint Venture Agreement satisfactory to both
parties on or before July 22, 1996.

JOINT VENTURE AGREEMENT

The parties hereby agree that upon satisfactory completion of the
due diligence period, they will enter into a Joint Venture
Agreement, with the following specific provisions.

Initial Contributions:

Placer as its initial contribution shall contribute its mining
rights to the Bunker Hill Mine property.

Royal as its initial contribution will pay the aforementioned
$1,000,000 and issue 1,000,000 Royal common shares to Placer.
Royal agrees that it will prepare and file a registration
statement on form S-3 or other available form to remove the
restriction from the 1,000,000 shares plus the 100,000 option
shares at the earliest practical date. This payment to Placer
will give Royal a 7 1/2 percent interest in the Joint Venture.

<PAGE> 2
Subsequent Contributions:

On or before July 22, 1997, Royal will contribute $6,000,000 in
cash to the Joint Venture Account, to be spent for the benefit of
the property in accordance with the management committee
recommendations. With this contribution, Royal's interest in the
Joint Venture shall increase to 12 1/2 percent. It is Royal's full
intent to accelerate partial payment of these funds to the Joint
Venture, and it is agreed that a pro-rata vesting of Joint
Venture percentage interest will be granted for partial payments
to the Joint Venture Account.

On or before July 22, 1998, Royal will contribute an additional
$8,000,000 in cash to the Joint Venture Account, as above. With
this contribution, Royal's interest in the Joint Venture shall
increase to 25 percent.

On or before July 22, 1999, Royal will contribute an additional
$11,000,000 in cash to the Joint Venture Account, and with this
contribution Royal's interest in the Joint Venture shall increase
to 51 percent.

On or before July 22, 2000, Royal will contribute an additional
$15,000,000 in cash to the Joint Venture Account to increase its
interest to 80 percent.

Royal may, at its option, make its contributions ahead of
schedule to accelerate its vesting in the Joint Venture, subject
to the approval of Placer for two years.

Management Committee:

It is agreed by the parties that the Joint Venture Agreement will
form a management committee of 3 members to oversee the
expenditure of funds and the development of the mine for the
benefit of the Joint Venture. Until such time as Royal has
contributed $40,000,000 in cash to the Joint Venture Account,
Placer shall have two members on the committee and Royal one.
Once $40,000,000 or more has been contributed by Royal to the
Joint Venture Account, then Royal shall have two members and
Placer one.

EXCEPTIONS

It is agreed by the parties that production of specimen crystals
for sale to the collector market will be excluded from the Joint
Venture and will remain the exclusive property of Placer for a
period of 5 years. Thereafter, the split will be 80-20.

It is further agreed that revenues from the sale of Colloidal
Silver will remain the exclusive property of Placer for a period
of three years. Thereafter, the split will be subject to
negotiation between the parties.

<PAGE> 3

FORMAL AGREEMENT CONTEMPLATED

It is understood and agreed by the parties that this OPTION TO
JOINT VENTURE AGREEMENT is preliminary and will be superseded by
a formal Joint Venture Agreement which will incorporate the terms
outlined here.

IN WITNESS HEREOF, each of the parties has executed this
Agreement as of the day and year first above written.

Royal Silver Mines, Inc. Placer Mining Corporation

________________________________ _____________________________
Its President Its _________________________

<PAGE> 1

This agreement is dated the _____ of July, 1996 and amends that
certain agreement signed on the 19th of April, 1996 between Royal
Silver Mines, Inc.(Royal), a Utah corporation and Placer Mining
corporation (Placer), a Nevada corporation and entitled "Option
to Joint Venture."

In that, Royal and Placer entered into the above agreement in
contemplation of signing a Joint Venture agreement between the
parties; and

In that, Royal and Placer agreed to a option and due diligence
period of 90 days to commence on April 19, 1996 and end on July
22, 1996 such that Royal could ascertain title to mining claims,
analyze geological and engineering data, and conduct an
environmental review of the project; and

In that, Royal has been unable to fully accomplish the necessary
due diligence which Royal management believes the company must
accomplish to faithfully enter the contemplated Joint Venture,
and

In that, Royal previously paid Placer the sum of $50,000 and
100,000 shares of Royal common stock as consideration for this
option and due diligence period, and

In that, Royal and Placer both agree that it is in the best
interest of both parties to continue to pursue the contemplated
Joint Venture,

Therefore, the option to Joint Venture agreement is modified to
provide an additional days for Royal to conduct its
due diligence, such period to commence immediately upon signing
of this amendment and to end at midnight on _________________,
1996. All other terms of the Option to Joint Venture agreement
will remain the same.

By signing below, both parties acknowledge that past
consideration exchanged and the continuing possibility of a
future business relationship are adequate consideration for this
amendment.

IN WITNESS HEREOF, each of the parties has executed this
Agreement as of the day and year first written above.

ROYAL SILVER, MINES, INC. PLACER MINING CORP.

BY: ___________________________ BY: __________________________
Its President Its President

Williams & Webster, P.C.
Certified Public Accountants
Seafirst Financial Center
601 West Riverside
Suite 1970
Spokane, Washington 99201-0611
(509) 838-5111
FAX (509) 5001

Consent of Certified Public Accountants

Board of Directors
Royal Silver Mines, Inc.
Spokane, Washington

We consent to the use of our report dated December 13, 1996, on
the financial statements of Royal Silver Mines, Inc. As of
September 30, 1996, and the inclusion of our name under the
headings "Selected Financial Data" and "Experts" in the Form SB-2
Registration Statement filed in February 1997.

/s/ Williams & Webster, P.S.
Williams & Webster, P.S.
Spokane, Washington

February 6, 1997

CONSENT

I HEREBY CONSENT to the inclusion of my name in
connection with the Form SB-2 Registration Statement filed with the
Securities and Exchange Commission as attorney for the registrant,
Royal Silver Mines, Inc. and to the reference to my firm under the
subcaption "Legal Matters."

DATED this 7th day of February, 1997.

Yours truly,

/s/ Conrad C. Lysiak

<PAGE>

CONSENT

I HEREBY CONSENT to the inclusion of my name in
connection with the Form S-8 Registration Statement to be filed
with the Securities and Exchange Commission as attorney for the
Issuer, IGG International, Inc., and to the reference to my firm
under the subcaption "Opinion of Counsel."

DATED this 2nd day of May, 1996.

Yours truly,

Conrad C. Lysiak<PAGE>

CONSENT

I HEREBY CONSENT to the inclusion of my name in
connection with to the Form 20-F to be filed with the Securities
and Exchange Commission as attorney for the Registant, U. S.
Technologies Inc.

DATED this 14th day of April, 1995.

Yours truly,

Conrad C. Lysiak<PAGE>

CONSENT

I HEREBY CONSENT to the inclusion of my opinion, dated
October 17, 1986 (Exhibit 4.1) regarding the legality of the of the
securities previously registered by the Registrant, Charge, Inc.
This consent is limited to said opinion only.

DATED this 16th day of April, 1991.

Yours truly,

CONRAD C. LYSIAK, P.C.

BY: ______________________________
Conrad C. Lysiak
<PAGE>

CONSENT

I HEREBY CONSENT to the inclusion of my name as an expert
in connection with Amendment No. 2 to the Form S-1 Registration
Statement of IAS Communications, Inc., filed with the Securities
and Exchange Commission.

DATED this day of December, 1995.

Yours truly,

Jack Parsons

<PAGE>

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the incorporation by reference in this
registration statement of Globesat Holding Corp. on Form S-8 of our
report dated December 5, 1995, of our audits of the financial
statements of Globesat Holding Corp., as of September 30, 1993,
1994 and 1995 and for the years then ended, which report is
included in the Form 10, SEC File No. 0-17322.

Schvaneveldt and Company

Salt Lake City, Utah
January 19, 1996

<PAGE> 1

CONRAD C. LYSIAK
Attorney and Counselor at Law
601 West First Avenue
Suite 503
Spokane, Washington 99204
(509) 624-1478
FAX (509) 747-1770

February 7, 1997

Securities and Exchange Commission
450 Fifth Avenue N.W.
Washington, D. C. 20549

RE: Royal Silver Mines, Inc.

Gentlemen:

Please be advised that, I have reached the following
conclusions regarding the above offering:

1. Royal Silver Mines, Inc., (the "Company") is a duly and
legally organized and exiting Utah state corporation, with its
registered office located in Salt Lake City, Utah and its
principal place of business located in Spokane, Washington. The
Articles of Incorporation and corporate registration fees were
submitted to the Utah Secretary of State's office and filed with
the office on April 6, 1969. The Company's existence and form is
valid and legal pursuant to the representation above.

2. The Company is a fully and duly incorporated Utah
corporate entity. The Company has one class of Common Stock at
this time. Neither the Articles of Incorporation, Bylaws, and
amendments thereto, nor subsequent resolutions change the
non-assessable characteristics of the Company's Common Shares of
stock. The Common Stock previously issued by the Company is in
legal form and in compliance with the laws of the State of Utah,
and when such stock was issued it was fully paid for and
non-assessable. The warrants and/or Common Stock to be sold
under this Form SB-2 Registration Statement are likewise legal
under the laws of the State of Utah, and the said Warrants and
Common Stock, when exercised, will be legally issued, fully paid
for and non-assessable.

3. To my knowledge, the Company is not a party to any legal
proceedings nor are there any judgments against the Company, nor
are there any actions or suits filed or threatened against it or
its officers and directors, in their capacities as such, other

<PAGE> 2
Securities and Exchange Commission
RE: Royal Silver Mines, Inc.
February 7, 1997

than as set forth in the registration statement. I know of no
disputes involving the Company and the Company has no claim,
actions or inquires from any federal, state or other government
agency, other than as set forth in the registration statement. I
know of no claims against the Company or any reputed claims
against it at this time, other than as set forth in the
registration statement.

4. The Company's outstanding shares are all common shares.
There are no liquidation preference rights held by any of the
Shareholders upon voluntary or involuntary liquidation of the
Company.

5. The directors and officers of the Company are
indemnified against all costs, expenses, judgments and
liabilities, including attorney's fees, reasonably incurred by or
imposed upon them or any of them in connection with or resulting
from any action, suit or proceedings, civil or general, in which
the officer or director is or may be made a party by reason of
his being or having been such a director or officer. This
indemnification is not exclusive of other rights to which such
director or officer may be entitled as a matter of law.

6. All tax benefits to be derived from the Company's
operations shall inure to the benefit of the Company.
Shareholders will receive no tax benefits from their stock
ownership, however, this must be reviewed in light of the Tax
Reform Act of 1986.

7. By director's resolution, the Company authorized
the issuance of up to 625,000 Warrants to purchase 625,000 shares
of Common Stock and 625,000 shares of Common Stock, and, further
the issuance of 166,000.

The Company's Articles of Incorporation presently provide
the authority to the Company to issue 40,000,000 shares of Common
Stock, $0.01 par value. Therefore, a Board of Directors'
Resolution which authorized the issuance for sale of up to
625,000 Warrants to purchase 625,000 shares of Common Stock and
625,000 shares of Common Stock thereunder, and the further
issuance of 166,000 shares of Common Stock, would be within the
authority of the Company's directors and would result in the
legal issuance of said shares.

Yours truly,

/s/ Conrad C. Lysiak