EXECUTIVE SUMMARY

The Dakota oil boom created exciting and new strategic opportunities by using an innovative drilling method that exploits subterranean oil shale. A similar drilling method and system using a sonic drill has recently been patented with approval of 26 claims by the US Patent Office and describes the “key” to environmentally mine vast subterranean riches of gold, rare earths, gems, and other precious metals just below the surface to several hundred feet in depth.  The “key” solves the difficulty in recovering heavy valuables deep within the earth and describes, as one example, how to recover large gold nuggets (several inches in diameter) through a drill hole.  The complete subsurface mining process uses decade’s old proven technology to create an exciting mining opportunity to responsibly mine virgin gold and other valuables hundreds of feet below the surface.  This eco-friendly technology is called “Hydro-Mining”.

Hydro-Mining is currently in its “prototype” phase.  This causes hesitation in some investors; but, the opportunity to efficiently green mine rich virgin pockets of gold deep within the earth should overcome this hesitation and excite the possibilities of success.  Besides, a small part of the prototype development is the “sump trap/core barrel” recovery method that captures large nuggets and coarse gold at any drill depth. This is a methods application needing no new inventive apparatus and requires no construction funding.  It alone will verify in part the validity of the prototype and is half of the recovery process, both parts of which combine for high recovery rates of gold and other target resources.  Isolating the costs of just the prototype development and testing should use no more than 10% of total funding.  


We are seeking a 50% joint venture Investor for “Prototype Development” and “Gold Production”.

 The Investment will require $4,850,000 – $100,000 equity in common stock and a $4,750,000 loan.

A $6,000,000 “Original Interest Discount” note will be given for the loan. Pay back begins in two years with $282,500 monthly payments continuing for 24 months.  Total return on the loan and equity is $1,930,000 – more than 12.0% per year over four years.  Geodrilling Technology, Inc. (the patent owner) will assign its patents to URSA Gold Corporation for the other 50% ownership and $100,000 equity in common stock.

Forward Looking Projections and Statements

 

(Use caution – forward looking projections and statements have no validity in fact)

Management’s goals/objectives are described in the following with year (4) being the optimum goal.

YEAR (1)Goal Validate Hydro-Mining patents for production.  Legalize drilling rights on possible high-value target sites.  Set up and fund “Legal Entities” for Production:

(a) Form and fund URSA Gold CorporationInvestor has 50% equity.  This is a prototype development and royalty corporation with a 5% gross royalty in gold on all Hydro-Mining production.

(b) Form and fund Hydro-Mining Properties, LLCInvestor has 50% membership.  This is a legal entity for contracting, recording and cataloging mineral rights.  It is a royalty LLC with tax benefits.

(c) Form and fund Ursa Minor CorporationInvestor has 50% equity.  This is privately owned for mining high-value deposits (at least 1,000 ounces per month).

(d) Form and fund HERC Gold Corporation – Investor has no equity. Stockholders of record will be 50% members in Hydro-Mining Properties, LLC and 50% shareholders in URSA Minor Corp.

YEAR(2) – GoalConvert prototype to Beta Unit (Exploration Unit).  Locate high-value target property within Six Months.  Convert Beta Unit to Alpha Unit (Production Unit) – begin Mining Gold:

(a) First six months, URSA Gold will pay Ursa Minor for Beta Unit exploration.  Second six months Beta Unit converts to Alpha Unit mining 1,000 ounces per month.  Net withheld in retained earnings for purchase of more Beta Units. One Beta Unit is purchased for high value target exploration.

YEAR (3) – Goal Ursa Minor purchases Prototype from URSA Gold for $282,500 per month for 24 months.  Ursa Minor also purchases four Beta Units – converts three Beta Units to Alpha Units.  Production averages 4,000 ounces per month.  Franchise Mining Reviewed for Feasibility:

 Year (4) – The Optimum Year.

YEAR (4) – Goal Ursa Minor will have 5 Alpha Units mining high-value targets and producing at least 5,000 ounces per month.  One Beta Unit is in the field identifying replacement high-value targets as the Alpha Units will deplete their reserves from time to time. The Prototype will be paid off at the end of the year or sooner. The other units have no debt owing.

This vision having 5 Alpha Units in production will provide substantial excess profits to allow for gold distributions to shareholders of Ursa Minor Corporation.  Since Ursa Minor is a “C” corporation, a scenario with related companies is used to avoid double taxation.

In converting a single Beta Unit to an Alpha Unit, the following analysis of estimated revenue and costs based on conservative assumptions provides a one month prediction of possible shareholder distributions in Year 4:

 

 

One Month – One Alpha Unit
PRODUCTION IN DOLLARS [1] $1,000,000
Royalties:
Mineral Rights Owner (20%) [2] (200,000)
URSA Gold (5%) (50,000)
Mining Crew Bonus (10%) (100,000)
Hydro-Mining Properties, LLC (5%) [3] (50,000)
Total Royalties before Dividend Distribution
(400,000)
Contribution Margin 600,000
Direct Operating Cost and Administration (100,000)
UNALLOCATED MONTHLY NET FOR DISTRIBUTION
$ 500,000

Therefore, one Alpha Unit mining minimum high-value target property would have $500,000 in gold available for shareholder distribution per month .  Five Alpha Units in year (4) will have $2,500,000 per month available for shareholder distribution.  Assuming two months ($5,000,000) will be retained for Company expenses, including final payoff of the prototype, and operating costs for the one Beta Unit.  The other ten months will produce $25,000,000 in gold available for shareholder distribution.  That’s $12,500,000 for the Investor after receiving $6,780,000 in debt payoff on the original investment.  In essence, in year 4 the Investor will have doubled the original investment every year for the first 4 years and will more than quadruple the investment every year from then on.

The above projections are based on what management feels is achievable in the next four years; however, there are weak links in these projections:

1) Prototype efficiency may not materialize effectively to recover fine gold.  Recovery is then limited to “sump trap/core barrel” recovery requiring several ounces per yard for high-value target property.

 2) High value target property may not be found suitable for Hydro-Mining.  This is unlikely as we have many targeted properties already located with high confidence of much more than ½ ounce per yard. 

In order to recover the Investor’s $4,850,000 with interest, the prototype drill beginning in year 2 needs to be converted to a Beta Unit to locate a high-value property that will produce at least 1,000 ounces of gold per month.  This drill will then be converted to an Alpha Unit within eighteen months to produce 500 ounces net for six months   This 3,000 ounces will buy another Beta Unit and for the next two years, the prototype will produce $500,000 per month to pay off the Investor’s note at $282,500 monthly with an extra $217,500 used for Beta exploration.  The prototype drill is all that is needed to pay back the Investor.

This project was designed using the prototype drill to recover the Investors’ funding with interest paying more than 12% per year and providing substantial equity sharing in several profit centers. Hydro-Mining presents a new innovative green-mining technology that is far more exciting and creative than what has been presented here. The website www.ursagold.com is much more informative for those with vision.     

[1] One ounce of gold will be equivalent to $1,000 USA dollars.

[2] High-value property royalties increase 5% for every 1,000 ounces after the first 1,000 ounces per month.
[3] This is a variable royalty based on monthly production.
FOR FINANCIAL or INVESTMENT INQUIRY
Contact Tom Hice, CPA (Executive Vice-President) at the numbers listed below.

CONTACT INFORMATION

Gib Hice (President)
Expertise in technical detail, patent-pending application status, historical and future application of methods and apparatus evolution of Hydro-Mining:

Tele: (541) 582-3880
Cell: (541) 291-0529
Fax: (541) 582-3880
Email: audoc@q.com

 

Tom Hice,CPA
(Executive Vice-President)
Financial engineering expertise in fund raising, project development, mineral rights expansion, public marketing and equity building:

Tele: (541) 582-0803
Cell: (541) 621-2657
Fax: (541) 582-6052
Email: hicet@hicegold.com

 

Doug Devine (Vice President)
Expertise in advanced survey technology in satellite imagery, 3-D modeling, ultra-modern survey technology, and mapping development:

Tele: (541) 772-5777
Cell: (541) 944-1708
Email: DDevine@pacificsurvey.com