ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Effective October 1, 2010, GoldLand agreed to allow us to defer lease payments under December 31, 2011, and to extend the lease term by fifteen months.
In early 2011, we began construction of a smelter at our mill site. The smelter became operational in July 2011, although we still need to complete a building to house the smelter so that it can be used in the winter months.
Start-up mill salaries to the end of 2010 cost $425,238, and are estimated to be an additional $700,000 until November 2011 when project that we will have sufficient quantity of bullion dore bars for us to begin receiving regular revenues from our production. We believe that we have sufficient capital to finance this phase of development.
We closed on the purchase of our mill site in early December 2009, and began processing tailings into concentrate in May of 2010, and concentrate into bullion dore bars in July 2011.
Permitting for exploration of the Sinker Tunnel is underway with training for underground personnel and safety measures being installed as per the latest mining rules and regulations.
Confirmation Phase
We decided to expand the scope of the confirmation phase in order to obtain a National Instrument 43-101, which is a report developed by the Canadian Securities Administrators for mining companies. A National Instrument 43-101 is necessary for listing our common stock on any exchange overseen by the Canadian Securities Authority, including the Toronto Stock Exchange.
We have recently hired Mr. Roger Scammell, a geologist with many years of experience in the mining industry, as our President. Mr. Scammell and Engineering Northwest, Inc., a surveying firm, will perform the confirmation phase. Under the direction of our new president, the drillers and surveyors will perform their services with the help of Mr. William Earll, our general manager for our Idaho operations.
Another aspect of the confirmation phase will involve the development of a plan to use the Sinker Tunnel to mine the interior of the mountain on a year round basis. The plan will involve accessing and draining the mine shafts on the top of the mountain from the Sinker Tunnel, as well as relocating and collaring old shafts on the mountain. We estimate that the confirmation phase will take about 18 months, and will cost approximately $7,000,000. We began preliminary work on the confirmation phase in mid-2010.
Development Phase
The development phase involves transitioning the mine from processing tailings leftover from prior mining activities to extracting and processing raw ore from the mountain. We believe that full scale mining of raw ore will be profitable. In particular, historical records of mining on the site, and subsequent reports of the geology of the mountain, indicate that veins containing gold and silver extend much further vertically than could be mined when the site was last mined in the 1880’s.
We plan to install a transportation system in the Sinker Tunnel (either tire mounted trams, narrow gauge railway, or conveyor system) to move ore out of the Sinker Tunnel for transport to our mill site; and Additional improvements include housing, storage, food preparation facilities, generators for power, etc.
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