Shareholder report shows how a mining project can work out.

The following is taken from Starrex Mining Corporation’s shareholder report for the 6-months ended June 30 as an example of how a mining project can work out. Other partners in the mine are Saskatchewan Mining Development Corp. and Uranerz Canada.

In April, Starrex celebrated an historic milestone in its corporate annals. Our 35%-owned Star Lake/ 21-Zone Mine reached payout of its production financing — and Starrex promptly recorded significant profitability. It is appropriate to remind investor-shareholders that profitable operations are attained by very few Canadian mining companies. Starrex has joined a select circle. We are pleased to report that net profit for the three months ended J une 30 was $1.1 million for a share profit of 27.6 cents . These are cash earnings; no accruals, no receivables, no inventories.

Net profit for the six months ended June 30 was $1.3 million for a share profit of 32 cents .

Comparative 1987 results are not meaningful because the company’s gold production income did not commence until the project financing was repaid in April, during the period under review.

Company sales of gold futures contracts, expiring into early 1989, designed as a hedge to protect against gold prices declines, have insured a major proportion of our projected gold production income stream at substantially higher prices than the current market.

Working capital at June 30, substantially all cash and equivalents, was over $2.3 million — and is rising rapidly. Your management projects a working capital position in excess of $4 million by the year end.

Cash and/or stock dividends are under active consideration, depending on financial market conditions and investment commitments that may be made for new exploration or development projects.

During the 6-months period under review, the Star Lake mine and mill operated routinely and within budget projections. The more material operating statistics include: — The mill processed 38,000 long tonnes (41,800 short tons), equivalent to 210 long tonnes per day (230 short tons per day). — Millheads graded an average of 0.48 oz gold/short ton, modestly above drill-indicated reserves. — Gold production aggregated 18,760 oz; the Starrex share represented 6,576 oz. — Gold recovery averaged a more than respectable 93.1%, reflecting competent control of the mill circuit. — Unit gold production costs during the period was about US$148/oz; costs are expected to decline through the year-end due to limited requirements for further underground development and mining. — At June 30, the aggregate Joint Venture Participant’ equity in the Star Lake project was $18.1 million (unaudited). This figure includes about $1.2 million expended to date on the exploration and development of the Rush Lake Mine. — During the course of underground development at Rush Lake, shrinkage mining of future millfeed was initiated. At June 30, the Rush Lake surface stockpile aggregated over 2,000 tons.