The U.S. Department of Justice is investigating the alleged submission of certain fraudulent mining claims in west-central Montana involving American Gem (GEM-T), its former chairman, Gregory Dahl, and his wife, Stacia Dahl who was also a former employee.
The claims under investigation were submitted during Dahl’s term as chairman; he resigned in August 1997.
American Gem and its counsel are reviewing the matter.
Meanwhile, the company continues to lose money, though the flow of red ink has been slowed.
The company, which owns the Gem Mountain sapphire mining operation in western Montana, generated its first-ever positive cash flow from operations in the quarter ended Dec. 31, 1997 (its third quarter of fiscal 1998); the amount was US$177,000, compared with a loss from operations of US$1.9 million in the corresponding quarter of the previous year.
Nevertheless, the company struggled to sell its sapphires, and, as a result, racked up a loss from operations of US$260,000 in the third quarter. The loss in the corresponding quarter of fiscal 1997 was US$950,000.
American Gem’s third-quarter revenue was US$170,000, compared with US$95,000 in the corresponding quarter of fiscal 1997.
American Gem has completed a financial restructuring that involved the conversion of $11 million in debentures into 58 million shares. This transaction generated a net gain of US$4 million.
By late April, the company will decide whether to reopen the Gem Mountain operations. Production on a much smaller scale than in the past is among the options being considered.
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