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Colosseum California, Inc. will be the operator of the Colosseum <br />Mine which is scheduled to go into production in mid-1987. Once <br />in production, we estimate that the Colosseum Mine will produce <br />70,000 ounces (17,500 ounces to Royal's interest) of gold per year <br />at an average cost of $171 per ounce. The price of gold currently <br />is approximately $340 per ounce. The ore body on which the <br />company bases its projections and decision to proceed has been <br />well defined by extensive drilling. However, there remains a <br />deeper extension of the ore body which has yet to be drilled and <br />which provides a potential for increased gold reserves. The life <br />of the Colosseum Mine is estimated to be a minimum of seven and <br />one-half years. <br />Concurrent with our present efforts to expand Royal Resources' <br />oil and gas reserves, we plan to continue to build Royal's gold <br />reserves through additional acquisitions. Management is currently <br />exploring several alternatives for outside financing to help accomplish <br />this objective. Royal's gold interests are expected to be held in <br />a separate subsidiary company. <br />Sincerely, <br />ROYAL RESOURCES CORPORATION <br />Michael Owen <br />JC,hairman of the Board <br />VV . <br />K. W. Nickerson <br />President <br />May 20, 1986 <br />