February 2014 Shareholders´ Update

PROGRESS UPDATE

Dear Shareholders:

We wanted to update you on the progress made thus far in the final phase of the recovery field.  The contractors have completed the earthwork for the expansion, we have already received the impermeable membrane at the mine site with all of the necessary piping, and we have commenced with laying and welding the membrane in place as seen in the first photo below.

The second picture below shows earth-moving equipment on the recovery field making some improvements to an under-the-pile culvert.  Our contractors feel that the new concrete culvert will be more secure and better serve us in moving water from springs in the mine through the recovery field to the river below.

At the present time management has made arrangements for a second crusher to crush the gravel for the base of the recovery field so we will not have to discontinue crushing ore for placement on the pile.  While we are working on the expansion we continue to load the pile on the other end to provide some continuity to the leaching process, which is illustrated in the third picture.

All of these activities have been time and resource-intensive, but we are gratified that progress has been made quicker than was originally scheduled and we look forward to getting back to full production.

In light of all the progress we continue to make, many shareholders have inquired as to our ultimate exit. We continue to meet with prospective joint venture partners, purchasers, and investment bankers as we examine all alternatives available designed to bring us closer to a liquidity event once our expansion plans reach completion.  When we have anything concrete regarding these other potentialities, we will inform all of our shareholders.

Sincerely,

CLAVO RICO MANAGEMENT

December 2013 Shareholders´ Update

December 6th, 2013

INTERIM REPORT

During this year’s rainy season we have endured heavier than normal rainfall once again, and it is a credit to the skills of our mining team that we have still been able to show substantial progress during this period.  The profits generated from the sale of gold from July 2013 until the end of November have surpassed those from any other rainy or even dry season, and for the first time have allowed us to cash-flow in the hundreds of thousands of dollars for the last half of this year.

This brings us to two important benchmarks:  One is that we can be self-sustaining even during the worst of times, and indeed can still continue to build even during those times; the second is that the ADR plant is running consistently and efficiently enough to be able to process all of the ore that we can place on the recovery field.

We wanted to keep all of the shareholders up to date as we move into our final stages of completing our expansion plans which will get us to 1,000 ounces of gold production per month and bring the value to our investment as we have planned.  The purpose of this interim report is to announce that, in light of the above benchmarks, we are now ready to complete the expansion of the recovery field and increase the crushing operations to the desired 500 tons per day.

We have ordered a new portable crusher that will enable us to crush to the specification recommended by Kappes, Cassiday and Associates in their pre-expansion consultation of the concession, which the crusher previously used could not do on a consistent basis. Further, it has a greater crushing capacity than the one previously used.  Our agreement with the crusher owner should allow us to be much more cost-efficient since if it is not being used, we do not have to pay for its availability.

We have engaged the services of one of the largest engineering firms in Honduras to design, plan and supervise the construction of phase two of the recovery field.  The photo that accompanied the most recent Quarterly Report is reproduced here to give you an idea of what we are undertaking.  It shows the recovery field as it currently exists, shown from the perspective of our gold-bearing ponds.  We will bring the recovery field from its current end point all the way to the feet of the picture taker.  In addition, we will add height to the pond banks to enable us to store more water during the rainy season without running the risk of overflow.

The process of building the Clavo Rico mine into a world class production operation is continual, but one in which we are making  steady, incremental progress . We look forward to positioning the mine to be an attractive investment for future partners or purchasers.

Sincerely,

CLAVO RICO MANAGEMENT

October 2013 Shareholders´ Update

October 21, 2013

Dear Shareholders,

Management is pleased to be able to report to the shareholders the results of our operations for the third quarter of 2013.

For the quarter ending September 30, 2013, the Company has once again achieved record levels of production and sales of precious minerals.  In Q3 we sold 786 ounces of gold compared to sales of gold of 312 ounces in 2012 for the same period which represents an increase of 152%.  The sales of gold resulted in revenues $1,045,251 compared to revenue for the same quarter in 2012 of $349,089. 

In the third quarter of the year we also achieved our first full quarter of profitable operations by recording a profit of approximately $265,000 for the quarter compared to a loss from operations of approximately $400,911 in the same quarter of 2012.

Now that we have achieved profitable operations on a consistent basis, we have plans to expand the recovery field by moving to Phase Two of our planned expansion.  The initial construction phase will commence at the conclusion of this year’s rainy season in November and is scheduled to be completed in the first quarter of next year.  This will increase the capacity of the recovery field to 600,000 tons and allow us to now concentrate on increasing the crushing and loading operations to push our production to the levels originally intended.

Our intended target is to consistently produce above 1,000 ounces of gold per month, and also conduct a drilling program to establish proven reserves on the remainder of the concession before pursuing a liquidity event.  Preliminary exploratory sampling in other areas of the concession have indicated a high probability of substantial gold reserves, and we look forward to embarking on that phase of our expansion plan.

During our most recent visit to the mine site we took a number of photos to show the intended expansion areas. These photos show the area that will become the remainder of the recovery field.  The new membrane will be laid from the current recovery pile to and including the steps shown in the foreground of the first photo.  The mound covered in the foreground of the pictures is ore waiting to be crushed, and is protected from the daily rains so as to minimize the amount of mud generated during the crushing process. 

Although the rains have slowed us down somewhat our production has continued on pace through this season, which is our first full rainy season with all of our operations intact and we have been pleasantly surprised that production has kept pace during this traditional downtime.  The second photo shows the crusher, which will be moved over toward the old processing plant where the spent ore has been excavated to make more room for the increased field capacity.

We look forward to keeping you apprised of our progress as we move forward with the next stages of our expansion.

Sincerely,

CLAVO RICO MANAGEMENT

UPDATE: Recovery Pad October 2013

Clavo Rico -  A rare moment of lovely sunshine during the rainy season this year.

The photo below shows the progress made to the recovery pad as of early October 2013. 

August 2013 Shareholders´ Update

August 20th, 2013

Dear Shareholders,

The end of the second quarter has been marked as a time of turbulence and uncertainty in the global gold markets.  However as we at Clavo Rico examine the global trends in gold we are more than ever convinced that what we have built at our mine is bearing fruit for us in the way that we envisioned at the start of our expansion.

The World Gold Council has released its analysis of the second quarter.  Most of us will look only at the declined in gold prices and conclude that that decline is indicative of the declining value of our investment.  However, when you closely examine the elements of the gold price supports you are led to the opposite conclusion.

During the second quarter the demand for gold jewelry increased 37% in terms of tonnage and even though the price of gold declined sharply during the quarter, the dollar value of gold used for jewelry increased 20% year over year.  The usage of gold for technology remained relatively constant for the second quarter when compared to the second quarter of 2012.  The demand for gold jewelry was led again by China and India and to a lesser extent by the United States, where demand was also much stronger.  According to surveys conducted of consumers in India and China an overwhelming majority (62%-66%) of those surveyed believed that prices of gold would be higher in the coming years and that the current prices represented a buying opportunity.  Only 11% believed that prices would go lower.

The only area which showed a decline in gold demand was with short term gold investors.  This was driven largely by Exchange Traded Funds (ETF’s), among which Gold demand declined by 76%.  As investors viewed the US economy begin to recover, they fled to the next hottest thing leaving gold behind.  However, we should remember that those investors who pushed the price of gold to new heights were doing so as speculators and not as long-term value investors.  Their leaving will allow the markets to stabilize and the price of Gold to recover as demand continues to rise.

Finally, the supply of gold actually decreased during the quarter as well, driven mainly by a sharp decrease in gold from recycling activities.  During times of relatively high prices gold from recycling constitutes a significant portion of the gold supply.  For the last five years it has constituted approximately 40% of the gold supply and for the current quarter that fell to approximately 30% of the gold supply.  The supply of gold from mine production rose modestly during the quarter although many mining companies have decreased their employees in efforts to trim the costs of extraction. At Clavo Rico, our relatively low extraction costs allow us to remain profitable even during this period of economic recovery. 

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UPDATE- July-August 2013

The two most recent gold pours from the end of July.  We are waiting on the assays to be completed by the new Honduran government agency.

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UPDATE: Clavo Rico Mine Operations

This montage of clips shows the progress and the recent operations at the Clavo Rico Mine site, including the entire pad covered with the second layer of ore, the beginning of the third layer, and the new ADR plant in action.

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