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> Shareholder Update: October 13, 2013
> From CEO Scott J. Francis
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> To all of Gold Horizons Mining’s esteemed shareholders I’d like to personally thank you for your patience and investment in the company and share with you the progress and great strides we have made this past year.
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> In November 2012 we broke ground on the Yuromayo processing plant. I am pleased to report the first 50-ton per day circuit has been completed. The operation is now running 24 hours a day, seven days a week and will continue doing so right through the expansion that will see the plant process 300 tons per day. We are currently processing 300 tons of mineral from our own Gloria mine. Our purpose here is two-fold. We are not merely processing the mineral to sell on the market; we are in fact monitoring the process to ensure it works efficiently assuring a minimum mineral recovery rate of 85%. We expect to harvest a few kilos of gold from this mineral. Depending on the concentration of gold here, once the plant is operating at maximum capacity we expect to produce 8 to 20 kilos of gold per month.
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> As I drove to the plant last Saturday night and entered our private canyon I saw the plant lights glowing from a distance against the dark night sky, I could hear the humming of the mills churning away at the mineral and for the very first time felt a tremendous excitement well up inside of me. I felt such satisfaction in knowing that this endeavor was beginning to show the unmistakable signs of SUCCESS.
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> I will not mislead you; it has been very challenging to say the least! I have been living in Peru for 19 months, relentlessly pushing forward on this project. During that time I have not once gone back to visit my home, family or friends and I have no plans to do so until I see both the mine and the processing facility running at 100% capacity.
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> The hard work is about to payoff but it is still too early to celebrate as we have not yet begun selling gold daily in the marketplace. The Yuromayo plant itself is forecasted to generate an operating profit of $900,000 per annum at present capacity. Fast forward to 200 tons per day it will net an operating profit eclipsing $5,000,000 per annum.
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> Numerous mineral samples have been reported as can be seen in the link below:
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> http://goldhorizonsmining.com/assays/
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> These assay results have exceeded all expectations.
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> Why I am so excited about our processing plant
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> Had I known two years ago what I know now I would have focused on the processing plant first and then developed the Gloria mine. There are a few dynamics at play here, which have in fact created a perfect storm for Gold Horizons Mining.
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> Location
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> Our processing plant is the first commercial plant in the Arequipa region. Our nearest competitors are several hundred kilometers on the coast in Chala. Arequipa is located between the Andes and the coast, nestled in the foothills of the Andes. Just above Arequipa, in the highlands are the very rich gold producing areas such as Puno, Juliaca and Cusco. There are no commercial processing plants in the highlands and these mines have few options but to transport their mineral to Chala for processing. The freight costs are an expensive proposition.
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> Strategically located in between the mines and the Chala plants our processing plant is but 5 kilometers from the Pan American Highway. This provides us with a competitive advantage over the Chala plants who still employ expensive diesel operated generators as a power source as opposed to ours being 1.5 kilometers from the the electric grid. We are in the process of connecting to the grid. These factors have had immediate effect as we are currently working with and negotiating with several mines and mining communities in the area.
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> To date we have signed a half dozen letters of intent with mines in the aforementioned area. The mineral concentrations from these mines are very rich. 2 to 5 ounces of gold per ton is typical in this region. Our fee to process this mineral increases as gold concentrations increase. For example, we charge over $350 per ton for mineral that has 2 ounces of gold/ton. These rich concentrations of gold increase our profit margins several hundred percent.
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> The Peruvian government cracks down on informal miners
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> The government estimates 20% to 30% of Peru’s yearly gold production is produced by informal miners. The government has been cracking down on these informal miners for the past year and is determined to bring them into the system where they can be regulated and more importantly taxed. Several hundred tons of gold each year slip through the cracks and are being sold without the government getting its share of tax revenues. Well the party is now over. Gold Horizons Mining has positioned itself perfectly to assist these informal miners providing them with cost effective solutions to this new regulatory environment.
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> Another factor worth mentioning is that most of the informal miners were using illegal methods (mercury) to process their mineral. The Peruvian government has come down hard on this environmental time bomb. Because of these new, hard hitting hurdles the informal miners must now navigate and due to our positioning and standing we are able to purchase their mineral at a considerable discount to market and still be more cost effective than our competitors.
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> The Peruvian government allies itself with processors to regulate the mining industry
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> It has become apparent of late that the Peruvian government is working with legal processing entities like our Yuromayo plant to better regulate the industry concerning mercury pollution generated by informal miners attempts at processing their own mineral and tax collection. The informal mining community has taken notice and this of course is of great benefit to our bottom line.
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> Previous Rights Offering
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> Earlier this year Gold Horizons Mining conducted a rights offering with its shareholders to raise funds to construct the Yuromayo processing plant as well as help fund the operations at the Gloria mine facility. As you can clearly see in the link below the funds were not spent frivolously but were put to effective use. There is no doubt the rights offering was value added to the company:
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> http://goldhorizonsmining.com/photo-gallery/
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> The majority of the funds raised were earmarked in the following way:
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> Purchasing the property for the plant
> Building an access road from the highway to the property
> Constructing the concrete foundation and retaining walls
> Transporting the tanks and mills to the plant
> Building the two ore bins
> Purchasing all the electrical motors and steel balls for the mills
> Hiring MBM Mining SAC to complete the fabrication and installation of the electrical motors
> Hiring electricians to fully wire the plant
> Purchasing two generators, 80 kw and 325 kw Caterpillar
> Support mining and processing plant monthly operations and payrolls
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> In light of the success of the previous rights offering we recognize that we still have work to do.
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> What you may or may not be aware of in the mining business is that mining operations that do not have their own processing facility must transport their mineral to a plant facility. Logically they wouldn’t have it processed then pay the costs to have the mineral disposed of and then pay a security company to ship the gold to market for sale. What actually occurs is that they sell their mineral at a discount to market to the processor. In our case the Yuromayo plant.
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> To take part in this very lucrative enterprise two components become necessary. The processing facility must have the onsite ability to test a broad sample of the mineral delivered to it to assess the concentration of gold in the mineral. Secondly, and no less important, the processing facility must have the cash flow to purchase the mineral from the miner.
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> Second Rights Offering
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> Gold Horizons Mining is now offering a second rights offering and is seeking to raise an additional €700,000 to be used for the following:
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> Resume mining operations in both the Blanca shaft and the Julia vein. Now that the Yuromayo plant is operational a steady flow of 50 tons per day of mineral is required to keep the plant at capacity. Payroll, explosives and the purchase of some additional mining equipment we estimate will have us producing 50 tons per day within 120 days thereby completely satisfying the daily mineral needs of the Yuromayo processing plant.
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> Although operations at the Yuromayo plant have begun we still need to complete the plant to bring it to full capacity of 300 tons/day. This includes completing the construction of the onsite laboratory and installing the lab equipment. Currently we are working with an offsite lab in Arequipa to provide us with daily analysis of our mineral in process. This is costly, time consuming and inefficient.
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> Let me explain.... Our processing plant operates continuously, meaning that the plant is always adding new mineral to the reaction process at the same pace as it discharges the processed mineral. This requires constant sampling and analysis of the mineral being processed to insure that we are not discharging precious gold into the tailings pond.
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> Currently the turn around time for our samples to be analyzed from the outside lab, which is 1.5 hours away from the plant, is eight hours. Furthermore, it is costly to be sending these samples everyday but until our onsite lab is completed we have no choice. Fuel and water make up approximately 60% of our processing plant cost. In summary, we are holding the mineral in the agitation tanks for up to eight hours longer than necessary due to not having a lab thereby increasing our cost per ton to process.
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> In addition to completing the lab we also have to pay within 3 to 4 days for the mineral we process from the local surrounding mines. However, we do not get paid until we have processed and sold the gold to a local mineral buyer and this takes several weeks before they issue the company a check. In Peru credit and invoicing is NOT on a 60 or 90-day cycle. Our accounts need to be zeroed out on a bi-monthly basis. Given the need to pay within 3 days for the mineral combined with paying our water and fuel bills bi-monthly a processing plant needs to have plenty of cash on hand to pay its bills immediately.
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> While we have several letters of intent with surrounding mines my experience has taught me that business is about good relationships and that does not happen overnight.
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> The mining business requires heavy front-end investment but offers tremendous reward. One place where we have a decided advantage is that Gold Horizons Mining in only three years is up and operating. Anyone familiar with the mining sector can attest to the fact that most start-ups haven’t even broken ground by year 5. With geological reports, feasibility studies and test drilling even a property that has the proven goods is about 7 years from actually beginning exploration.
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> For the next 4 weeks beginning October 15, 2013 the company will be offering its second rights offering on a "first come, first served" basis. Shares will be offered only to recorded shareholders at a discounted price of 0.40 euro cents per share with a warrant exercisable at 0.85 euro cents per share included for each share purchased. The warrants expire December 31, 2014. The funds raised from this offering will be used to bridge the gap between keeping the plant funded while it operates until it has received the proceeds from selling the gold impregnated carbon to a local mineral buyer as the company has done in the past.
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> Please contact Michael at: ir@goldhorizonsmining.com to answer any questions and to place your rights offering order.
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> Thank you once again for your investment in Gold Horizons Mining. I believe strongly that your investment in the company will pay off handsomely. I am here to make sure this happens.
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> Sincerely,
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> Scott J. Francis
> CEO
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