State of Affairs, Part I
Dear Fellow Shareholders,
I have been back in Bolivia for three weeks and will be in Argentina next week. As you know,
these are exciting times for our company – we have so many good projects, so much
opportunity. I want to use today’s Memo to bring you up-to-date on our mine in Bolivia and
will address the issues of gas and oil in the next Memo.
Our Escala contract with COMIBOL was consummated September 19, 2007 and within
weeks, we began cleaning up a mining site that had been dormant for 12, 13 years. The basic
infrastructure of several tunnels (or shafts) and a base camp was in place but had been neglect-
ed for more than a decade.
When I was in La Paz earlier in the month, I spent a couple of days with Jaime Arancibia
(General Manager of our mining subsidiary in Bolivia) and many of the senior members of his
staff. Dr. Arancibia and his team are the guys that tackled the task of reestablishing Bolivia’s
historic Escala Mine.
Despite delays in reaching some of our goals, I continue to be pleased with progress made at the
Escala – it’s been a long, hard year but we’ve succeeded in reopening this once abandoned
project. And we’re now ready to move to the next level: to bring the mine to full operation. In my
opinion, Escala represents an opportunity that is even greater than I originally envisioned. And
we’ll get there by continuing the work of re-developing our mine in a logical, methodical manner:
>>> Paul Baker has rejoined our team of consultants and begun the process of reviewing the
design specifications for the Escala’s proposed processing plant. Paul is experienced in mining in
Bolivia and other South American countries. As the holder of a patented plant design, he is also
uniquely qualified to evaluate our design.
>>> The plant design under consideration has a planned initial daily capacity of 100 tons,
expandable to 200 tons daily.
>>> Subject to the final plant design, the capital budget for Escala’s second year is pro-
jected to reach $1.6 million.
Because of the high degree of confidence I have in the budget prepared by Dr. Arancibia and
his team together with the confidence I have in Paul Baker’s ability to design a plant adequate
to our needs and within our budget, I have begun discussions with a group of three lenders to
obtain project financing for these capital improvements.
Through September 2008, Franklin has invested a little more than $300,000 in preparing the
Escala for redevelopment. Our September 2007 commitment to COMIBOL was a minimum
$200,000 investment during Phase I of the project. Despite the difficulties of the last few
weeks, Bolivia’s mining sector has continued moving forward and I look forward to
strengthening Franklin’s relationship with COMIBOL and Cooperativa Minera INTI.
And I look forward to Franklin becoming a larger and more integral partner in Bolivia’s rich
and historic mining industry.
Mining is an integral part of Bolivia’s history. Lead, zinc and silver have been mined in the
Sud Lipez Province, Department of Potosi since the Spanish colonial times. Our
Cooperativa partners are the mining families who’ve worked in and around Escala for multiple
generations. Franklin is not at Escala to “reinvent the wheel” – we’re here to provide the capital
and technology needed to restore the Escala to its proper place of mining productivity.
Once our processing plant is fully operational – 200 tons per day – the Escala’s daily operating
cost will be about $2,500 and will generate an estimated $10,000 per day gross revenue based
on today’s market. Under terms of our September 2007 agreement, the Escala’s gross profit is
shared by COMIBOL (30%), Cooperative Minera INTI Ltda (20%) and Franklin (50%).
The economic importance of mining in Bolivia cannot be understated. Total exports in 2007 just
released by the Ministerio de Mineria y Metalurgia include (US$):
Zinc $691,730,563
Silver $213,516,520
Tin $173,110,907
Gold $122,412,451
Other North American companies also recognize the opportunity for investing in Bolivia’s mining
industry.
>>> Apex Silver (The San Cristóbal) and Couer d’Alene (The San Bartolomé) have each spent
years developing their projects.
>>> Canada’s Pan American Silver has a major project pending at The San Vicente.
>>> Canada’s Atlas Precious Metals has just announced an agreement to open the
Karachipampa polymetallurgical processing plant by February 2009
>>> … other pending initiatives are being reported by BNAmericas to represent total
investments of roughly US$300 million.
The largest investment planned in Bolivia … an eight year, US$2.1 billion
project to develop and industrialize 50% of the El Mutún iron ore deposit.
I know that if we were talking in person, you’d probably want to say “… all that’s great,
but what’s the bottom line for Franklin?” And I would probably answer “… well, our
Escala contract has turned out to be an extremely valuable asset that is very near to being
self-sufficient and will very soon begin generating a reasonably attractive return for our
investment and your patience. As I stated in my Monday, September 15 announcement,
our staff geologists and engineers have identified 25 commercially viable veins between
1.5 and 2.0 meters wide. Each of these 25 veins appears to be fully mineralized and
surface measurements indicate their horizontal extensions are about 2 Km.”
Before I conclude, let me assure you that I still plan to release a detailed assessment of
the Escala’s potential value by the end of this month. Our latest laboratory analysis
reports are in and will be posted on the web-site as soon as all internal reviews are
complete.
On a housekeeping note, we’re working on a new web-site and expect it to be
available in mid-October. I believe you will find the new site is well organized,
more easily used.
\Sincerely,
William A. Petty, CEO
AI
