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On January 27, 1987, RGI reached an agreement with Resource Exploration and Development Company ("REDCO") of Reno, Nevada for an option to purchase a gold property near Prescott in Yavapai County, Arizona exercisable up to January 1, 1989. The option provides for payment by RGI of up to $300.000 in various installments over two years plus the retention of a 10 percent net profits interest by REDCO. This project is an advanced-stage gold property. Based on nine drill holes, REDCO has estimated ' that there are drill-indicated fold-bearing deposits of 150,000 tons with a weighted average grade of 0.07 to 0.075 troy ounces per short ton. Metallurgical testing to date supports recoveries of approximately 75 percent. The property is fully permitted for heap leaching. Initial plans for the project call for drilling, trenching and .. sampling to confirm the tonnage and grade of the deposits. Geologic projections indicate the possibility of expanding the size of the gold-bearing deposits. Other nearby gold exploration targets are also included in the option agreement. Later stages of the project include testing and studies to define the exact project size. Even though this mineral deposit has been delineated, there can be no assurance that a commercially viable ore deposit exists in the REDCO property until further drilling and final feasibility studies are completed. On February 25, 1987, the Company entered into an option to purchase a 10 percent interest in a producing gold mine in northwestern Nevada called the Hog Ranch Mine. This option was exercised. Effective March 18, 1987, the ('ompany acquired all the outstanding stock of Montagu Mining Investments Inc., a Delaware corporation, whose primary asset is a 10 percent interest in the Hog Ranch Joint Venture. The purchase price was $3.6 million cash plus ?OO,000shares of Royal's Common Stock. Financial statements for Montagu Mining Investments Inc. are presented as Appendix C. The Hog Ranch Joint Venture operates the Hog Ranch Mine in Washoe County, Nevada. This open cut heap leach gold mining property has been in operation since late 1966 and is currently producing gold at a rate of approximately 50,000 ounces per year. The operator and majority joint venture partner is Western Gold Fields, Inc. Montagu Mining Investments Inc. was purchased by Royal from Montagu Mining Investments Limited, an English corporation owned by Samuel Montagu Limited of London, England. After nine months from the closing date. Montagu Mining Investments Limited may require Royal [o file a registration statement relating to the 200,000 shares issued in the acquisition. The seller also has the right, in the period contntencing six monitis after the closing date and ending on the first anniversary of the closing date, to require Royal to purchase all or any part of its Royal shares at a purchase price of $4.50 per share. The Company is currently negotiating with a number of parties for the acquisition of additional gold mining properties. As of the date ol'the Proxy Statement, these negotiations are preliminary, but most of these negotiations have been based on using the Company's Common Stock as the principal means of payment for these properties. The Company also is negotiating with various persons for the sale of additional shares of its Common Stock for cash in order to raise additional capital for its gold mining business. In March and April 1967, the Company completed three sales, two involving the sale of 100,000 shares of Common Stock and one involving the sale of approximately 16,666 shares of Common Stock at $6.00 per share, to three individuals. The Company also has an agreement to sell an additional 16,666 shares of its Common Stock at the same price. Management has not determined to sell any specific number of shares or to raise a specific amount of capital at this time. The number of shares sold and the amount raised will depend on the particulars of any future negotiated transactions. The Company may include all or any portion of the shares of Common Stock that are issued pursuant to these transactions {together with other shares of restricted stock currently held by officers of the Company and others) in a registration statement under the Securities Act of 1933 that would permit such shares to be publicly traded.