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


1. Where on this planet can you locate gold paying an ounce to the yard or more?

There are thousands of locations from 30 feet to several thousand feet just below the surface. There is more gold below the surface than all that has been mined on the surface.

A few years ago an advertisement was placed in the California Mining Journal asking for difficult lode and placer deposits to test a new drill/mining process called Hydro-Mining. The advertisement was answered from all over the country including Bolivia in South America.

Just in Alaska the prospects are many to say the least. Some more notable prospects are on the Seward Peninsula including:

  1. The subterranean beach sands of Nome.

  2. Six sections of paying placer beginning at 20 feet below a frozen ice cap that is currently using hydraulic cannons, heavy equipment, and massive settling ponds.

  3. Eight miles of drifted and patented claims paying at least half of ounce a yard at 100+ feet.

  4. Coastal gold channels on the Bluffs (reality TV fame) at 60+ feet with gold expected to be more than substantial.

  5. Mud Creek with moving mud requiring mining a rich gold channel only accessible during the frozen winter. You can pan gold with a shovel in this channel.

  6. Lava caps covering ancient gold channels could easily be mined with this new process.



It should also be noted that the dredges of Alaska rarely dredged into bedrock and were chasing their gold down to bedrock. That gold could pay big results under the dredged tailings encompassing hundreds of square miles – just in Nome itself there were 85 dredges working at one time and these dredge fields are all over Alaska and in other states.

Moving more inland and just south of Fairbanks is the famous Valdez Creek. It is rumored that gold is paying 10 to 40 ounces per yard at 125 feet. Open pit mining is the current mining process with substantial restrictions and permitting requirements. It has taken ten years to mine ½ mile on one claim. Hydro-Mining could have done this in a month or two. There are several other claim owners on Valdez Creek that are very interested in this mining process.

Similkameen in Washington is another fabulous prospect with the deposit running under the Canadian border. Open pit mining is not permitted on these claims because of environmental concerns expressed by the BLM; however, on discussing the Hydro-Mining process with the BLM, they seemed to agree that Hydro-Mining would be an acceptable mining process for this area.

Northeastern Oregon around the Eagle Cap Wilderness area has many sites that will qualify for Hydro-Mining including identified prospects north of Halfway and others south of Baker. The Sumpter dredging fields are also located in this area where the dredge rarely got into bedrock and was operating around 35 feet. Southern Oregon and Northern California has many other prospects. As an example, California’s Death Valley has indicated hotspots for gold by drilled core samples. These spots are too small for a junior mining company because of costs but ideal prospects for Hydro-Mining.

Information from all the Western States and some of the Eastern States has possible leads for Hydro-Mining notwithstanding Canada and Mexico or the rest of the world for that matter. Of course these are inferred, indicated and a few measured resources. It seems that anyone interested in gold mining knows of a possible glory hole somewhere that cannot be mined due to depth of deposit and the problems associated with mining at depths.

Gold is not the only resource that can be mined with Hydro-Mining. Any valuable resource that can be accessed by sonic drilling could be mined with Hydro-mining – most notably the heavy resources like gold, platinum, rare earths, gem stones and even diamonds. Hydro-Mining is the key to a vast new industry that is capable of recovering these valuables without sacrificing the environment. Also, do not forget the use of stable platforms for Hydro-Mining lakes and the ocean beds while preserving the marine life.



2. Why have these rich deposits not been mined?

Some have been mined with open pits, hydraulic cannons, drifting, borehole mining; but, most have not due to environmental issues, permitting, and exorbitant costs.

Borehole mining has been the best bet for decades to recover these rich deposits but failed to do so on almost every level because of its inability to economically recover heavy resources – gold, rare earths, platinum, and more - at depths. Borehole mining is a drill/mining process that used a patent in 1932 where a water jet fragmented rock next to a borehole and then lifted the broken ore to the surface with a slurry pump. Subsequent patents in the 1960’s achieved water jet fragmentation of sandstone, limestone and shale at a rate of one cubic yard per second at depths to 350 feet creating 30 foot diameter cavities; but, still failed to economically lift “heavy” resources to the surface. (Please see “Dr. George Savanick’s; CHAPTER 22.4” menu button on this website for a history of borehole mining and its accomplishments for the last 80 years). To this day, mining companies are still testing to solve the problem of recovering heavy resources with borehole mining. After all, if it could be done, most problems with environmental issues and permitting would be solved and a new profitable industry would emerge. Well, patenting by the United States Patent and Trademark Office (USPTO) helps to vindicate that it can be done. Welcome to Hydro-Mining!



3. So, how do you mine these deposits?

To mine these virgin deposits and more, a new patented drill/mining process called Hydro-Mining will be used. It is eco-friendly, with minimal permitting, predictable costs, uses franchise management, is operated from the surface and has many highlights of interest.

Hydro-Mining -- Other Highlights of Interest

  • a proposed new and more efficient type of borehole mining process using ‘acoustic’ energy

  • allows for seismic data and core sampling analyses for short lead-time to precision mining

  • uses proven " sonic/acoustic" technology for increasing efficiency of subsurface jet mining

  • “proof of concept” demonstrates sonic/acoustic flow augmentation with ‘existing’ equipment

  • borehole mining uses at least 90% less water than comparable surface placer mining operation

  • Hydro-Mining filters and recycles water helping to remove natural and site toxic substances

  • higher recovery rate probability using sonically-energized pulsed jets in excavation/ recovery

  • Hydro-Mining requires no chemicals be added and no ‘fracking’ in the mining site

  • borehole mining produces minimal surface disturbance -- environmentally responsible

  • small-scale mobile operation with both small (hi-grade) and large reserve mining capability

  • Hydro-Mining is borehole-mining capable with extreme weather and varied terrain conditions

  • Hydro-Mining has no mining dust problem to mitigate and has modern processing adaptability

  • minimal reclamation cost, e.g. refilling and sealing mining cavity, access road remediation

  • 2 USPTO patents -- 8 Method's claims (~40 pages); 18 System's claims (~45 page document).




  • 4. In detail - what is Hydro-Mining?

    Hydro-Mining is an in situ “green mining” process that mines in place – meaning most of the mining takes place underground with little environmental disturbance.

    Until just recently the mining of gold and other valuable minerals has not presented any impressive advancement since heap leaching became profitable in the 1970’s. Heap leaching was special since it targeted micron gold with a new chemical recovery method that exposed vast new gold reserves for mining – although at great cost on multiple levels. But now another special advancement in mining, called Hydro-Mining (because it manages the efficient use of intensively jetted recycled water), has been designed to also target vast untapped reserves, including gold, rare earths, and other placer elements (called “heavies”). Hydro-Mining is a new and unique green mining process that integrates modern technology using acoustically pulsed energy, best mining practices and processes while minimizing environmental impact and costs.

    Two extensive patents (26 claims in total) that describe Hydro-Mining’s ‘attachable’ modern apparatus designs and methods using acoustically pulsed energy to mine valuable subsurface reserves -- have been allowed, even without a working prototype. Having been completely documented with decisive evidence, including proof of concept, and having been exhaustively cross-referenced (2.5 million hits) by the USPTO, the Hydro-Mining’s system and methods are now credibly established as being new, having a useful purpose, and having operativeness. As such, this new green mining process can be the ‘key’ that opens the gateway to vast untouched mineral resources with massive financial potential in both vertical and horizontal markets.

    Hydro-Mining fundamentally transforms a sonic core-drilling rig into a sonic jet-mining rig by integrating hi-tech specialized mining attachments, processing equipment and other mining innovations, new and established. Sonically pulsed water jets create an underground cavity while lifting up suspended lighter slurry to the surface (process #1) while simultaneously vortexing down larger heavies (e.g. gold nuggets as big as 8 inches wide) into a sump gold trap that is recovered (process #2) using a sonic core barrel. With mining finished the cavity is backfilled. Essentially, this process works to recycle clean water, has a high recovery rate, with no chemicals required and minimal surface disturbance.

    More specifically, Hydro-Mining is an *efficient type of borehole mining process that can both discover and recover deep gold placer deposits, using "wave energy" technology. This ‘green mining’ process can amplify acoustically pulsed high-pressure water jets and other innovations through a sonic drill rod delivery system that can mine a mineral deposit hundreds of feet deep through a small (e.g. 9 inch) borehole. Hydro-Mining can fracture, wash, disaggregate and agitate slurry (i.e. water/gravel mix) creating a deep underground biscuit-shaped cavity (e.g. 30 feet wide by 3 feet high), excavating an estimated 20 cubic yards/hour or more. “Light” slurry, including suspended flake gold, is forced up to the surface and separated with de-watering while heavier nugget-laden slurry gravitates into a floor-centered “gold trap” sump that is recovered as a concentrated core, containing heavies including gold, to the surface using a sonic core barrel. This occurs with a hydraulically-stabilized mining site.

    As an empirical borehole mining example -- a subsurface mining cavity is created by jetting in a gold-bearing placer deposit, 50 meters deep in water-infused placer with boulders on bedrock, 1 meter in height, 10 meters in diameter, during one 10 hour shift, and with three operators. This equates to mining about 78.5 cubic meters of virgin ground in 10 hours with minimal environmental impact. If each cubic meter pays 4.0 grams of gold, more than 10 ounces would feasibly be recovered in one 10 hour shift. That’s $10,000 per shift at $1,000 per ounce gold. If the ground pays 1 ounce per cubic meter - $78,500 per one shift which is almost $2m per month.

    The profit expectations are staggering in many known sites, including sites in Alaska, Washington and other states. But can this really work? An expert at the United States Patent & Trademark Office, in approving all claims for two patents, seems to relate, yes! Not only can this work, but it can create good sustainable jobs, directly and indirectly, and it can provide needed valuable resources for American industry. Economic reserves are available for recovery in known deposits, never before touched because of danger, regulation, economics and lack of an appropriate mining technology, which we now have.

    Hydro-Mining, which is a non-leaching non-fracking process, is designed to use multiple innovative concepts to achieve high production rates in difficult sites. It employs an innovative 2-stage recovery system to increase production probabilities. Production is a function of “jet-panning” sub-surface gold deposits in place, i.e. in situ, with slurry being stratified underground using sonic wave and hydraulic energies to generate vortex agitation, degrading slurry into density layers that are separately recovered. Density layers are more efficiently recovered in Hydro-Mining’s two separate steps, using a core barrel and surface processor, as compared to the usual one step that tries to completely empty a site. One new Hydro-Mining concept that facilitates surface processor recovery is a patented eductor coupling that helps extract lighter slurry up and out of deep deposits to the surface processor amplifying hydraulic lift within the “rod space”. As compared to other types of borehole mining/eductor system designs -- the Hydro-Mining system should use less energy and/or less water to operate because its system augments moving suspended slurry up by integrating eductor coupling jetting and hydraulic differential forces.

    As a further concept and extended benefit of Hydro-Mining’s attachable apparatus, the Hydro-Mining process combines the abilities of two complimentary sonic drill rig configurations, a **Beta Unit and **Alpha Unit to better ensure mining profitability and short lead time. Initially an underground rich gold deposit is identified and assessed for mining by a Beta Unit, including application of ***seismic mapping and core sampling capabilities. The deposit can then be recovered using a mining-dedicated Alpha Unit configuration. Once a site has been mined the Alpha Unit backfills the subsurface mining cavity with cleaned “light” slurry gravel, which has been stockpiled and analyzed for data-banking. Backfill-gravel is pumped back into the underground mining cavity stabilizing the mining site and is sealed, while leaving minimal surface evidence that mining has even occurred. Toxic material, (e.g. mercury, arsenic, lead), filtered from the site will be disposed as hazardous waste per regulatory policy, leaving ground water potentially cleaner after mining a site than before.

    Hydro-Mining is designed to provide quick recovery of deep natural treasure chests of gold from rich mining sites using an eco-friendly process that is the next evolving step in technologically-advanced green mining. In its essence Hydro-Mining simply presents a scaled-up better version of the tried-n-true traditional hand-held panning technique with added benefits, including commercial production from a small-scale operation. As a result many known but untouched rich mineral deposits of gold, platinum and other precious elements will soon become available for quick recovery using Hydro-Mining, providing a safe, environmentally-friendly and effective way to mine -- like never before.

    *Note: just one example demonstrating Hydro-Mining’s increased efficiency potential involves reducing water’s motive stream resistance to the nozzles by decreasing friction between the rod’s internal surface and the water column using “sonic/acoustic” resonance. The effect is considered similar to what occurs externally to the sonic rod where decreased ground resistance allows for faster drilling penetration. Thus, greater efficiency may be achieved (i.e. flow augmentation demonstrated in proof of concept) by generating less resistance to water flow internally allowing more net-energy to be transferred to the nozzle jet stream flux as compared to using a non-resonated jetting system.

    **Note: regarding the Beta Unit configuration, it is an exploration-dedicated Hydro-Mining configuration of a sonic core drilling rig, whereas the Alpha Unit is a jet-mining/processing plant configuration of a sonic core drilling rig. Configuration apparatus, which designate unit type, are adaptable and attachable to a sonic core drilling rig having a site-complimentary processor. A dedicated Beta Unit crew can be assigned to assess recoverable resource cost/benefit, including local community response, at multiple potential mining sites to facilitate Alpha Unit distribution.

    ***Note: regarding seismic mapping application of the Hydro-Mining’s exploratory Beta Unit-- the Beta Unit's proposed sonic mining system's geophysical mapping ability will improve “level of confidence” in a mining site's potential to a higher level of timely and economic reliability – augmenting site logistics and planning for subsequent Alpha Unit subsurface mining. Empirical site investigation will initially use the sonic head as a hydraulic actuator of a seismic wave source. A working unit will result in a low-frequency energy wave being emitted from the sonic underground assembly positioned hundreds of feet apart in relation to three or more other boreholes (i.e. a receiver array containing hydrophones) and a data receiver. Resultant refractory, reflective and other wave data will be recorded, analyzed and correlated with a core sampling profile analysis using existing technology to provide a 3-D subsurface geographic and geophysical representation for optimized subsurface target acquisition and logistical planning. This seismic tool, along with other Hydro-Mining sonic innovations, will result in modern mining operations trending towards new boundaries of mining evolution and profit.



    5. The core component of this process is the sonic drill. How is this different from using other drills?

    To begin with the sonic drill is extremely fast. It has attributes using acoustic energy that can reduce resistance in fluid flow and is much more adaptable to mining verses just drilling.

    Certain aspects of Hydro-Mining may seem to involve problems and limitations of “direct circulation drilling” (DCD) and “reverse circulation drilling” (RCD) systems, but these systems are considerably different from the fundamental aspects of sonic drilling, and even more so when considering that these drilling systems at best can only be superficially compared to a mining system -- some points for consideration:

    Hydro-Mining, using a sonic drill rig, is more extensive in potential scope as a drilling/mining system when compared to (DCD), and (RCD) systems and methods, but it obviously does have a few items in common with both drilling processes. The proposed Hydro-Mining process introduces a new concept with new benefits regarding discovery/drilling/excavation and extraction. Like DCD, Hydro-Mining injects fluid down the inner rod and extracts slurry through the adjacent annulus as a result of a pressure differential, but Hydro-Mining also uses eductor coupling jetting (creating pressure [Bernoulli principle] pulses using acoustic energy) to create accelerated slurry lift. RCD can also produce additional lift (e.g. 100 feet/min) using compressed air to suspend cuttings with upward extraction, but through the rod. Hydro-Mining can extract slurry (in addition to its hydraulic head’s pressure differential) using the innovative eductor coupling ‘manifold’ within the sonic rod string providing a multi-pronged approach to slurry extraction, while also providing additional slurry cleaning using localized vortex wave pressures generated by the eductors within the annulus, while helping to prevent annulus bridging/blockage. For additional mining efficacy, Hydro-Mining’s design transforms the proven sonic core barrel drilling component into a mining implement that quickly extracts heavier, larger materials from a sump trap. The sonic drilling has been proven to be very accurate, as will its associated mining capability, having other proven abilities such as using warm water, which can help erode clay clumps in the mining cavity and annulus, and working successfully in Arctic conditions within a tent structure (Parson's Lake).

    Hydro-Mining recycles water through a mining/processor de-watering circuit, which uses proportionate water filtration prior to reintroducing water to the jet pump, so that the water that recycles for jetting and re-enters an aquifer or water-table during mining can be cleaner than prior to mining. Neither DCD nor RCD does this. An effective and inexpensive innovative filter has been designed for complimentary Hydro-Mining use at the processor. Further, Hydro-Mining recovers a deposit using a sonic core barrel in addition to jetting excavation, thereby debris build-up with excavation beneath the borehole casing is by design and should consist of high-grade valuable concentrate layered deep within a debris pile (including a sump trap); such debris would usually block DCDs -- but not a sonic core barrel. Hydro-Mining efficiency produces recovery results (in part) as a function of removing suspended slurry from the cavity quickly, while gravity concentrates the heavies in the sump. Interfering boulders can be fractured, drilled, moved (jet pushed) and/or left in the mining chamber, but the area around them is agitated by vortex flux, jetting and inter-particulate contact forces on a centrally-directed sloping surface. There should be no need to remove boulders from a mining cavity with Hydro-Mining. However, boulder removal should present little challenge given that chamber inspection reveals embedded visible gold or another reason to do so.

    Another item for consideration, describes a benefit of Hydro-Mining where it should provide access to placer gold deposits in proximity to ‘slum’ layers (i.e. an unstable fine sand and silt layer that moves like quicksand when its vacuum seal is broken). Such layers can 'blast out' or 'run out' of a subterranean domain causing associated dangerous subsidence, a distinct and possibly deadly reality when multiple unsealed core-sampling boreholes penetrate a slum layer. With Hydro-Mining using one borehole, filled with water, a slum-associated placer deposit should remain stable (consistent to Pascal’s principle) and the deposit should be excavated and extracted without difficulty. In BC’s Caribou district an expensive (~$20m) slum freezing method is being developed to solve this problem – Hydro-Mining should logically be much more profitable, relatively cheaper, safer and faster.

    Rich deposits too small for the wealthy corporations and too complicated or dangerous for the small operation, are now potentially available to recover -- untouched valuable natural resources, (and not just beneath slum) -- because Hydro-Mining presents a technologically-advanced, evidence-based and a potentially more strategic mining approach when compared to other available mining/drilling processes.



    6. Okay, Hydro-Mining has methods and system patents with staggering profit potential, what now?

    Small mining companies, including some juniors have incredibly inefficient and weak managers that use best guess scenarios for decisions. Hydro-Mining is a much more exact process and will be governed by non-mining managers well versed in good business practices. They will use a franchise approach and sell Hydro-Mining Units as franchises to owner/operators.

    Hice Exploration and Royalty Corporation (HERC) is the “franchisor” and will manage all franchise units sold/leased to owner/operators (the franchisee) as Alpha Units. Franchise Units are Beta Units that become Alpha Units (the franchise) when assigned to a measured resource (mineral right) discovered and measured by the Beta Unit. Franchise owner/operators are crews that were trained with on-the-job training on Beta Units and other Alpha Units. The owner/operators will be offered the franchise by HERC upon financing approval by the IPO public corporation. The IPO will finance conversion of a Beta Unit owned by HERC to an Alpha Unit franchise owned by the owner/operators. In essence the IPO will trade a new Beta Unit for conversion of the used Beta Unit so HERC will always be deploying new Beta Units for testing and exploration. This will also expedite the beginning of Hydro-mining a new resource as a field Beta Unit can be converted more quickly.



    7. Who is HERC and exactly what does HERC do as the franchisor?

    To begin with, and using the IPO objective model, HERC will raise $4m in seed capital to begin the mining franchise process. The seed capital funds will be used to purchase a Beta drill and begin testing Alpha components and exploring for Alpha locations. It will also establish a public company for financing the Alpha Units and form a limited partnership to hold the mineral rights.

    HERC is an Alaska regular “C” corporation organized in January 2017 with its primary role to develop and manage a “franchise model” to Hydro-Mine subterranean mineral rights with prejudice for environmental concerns and profit incentives in sell/leasing equipment, gold royalties, and real estate mineral rights appreciation.

    The “franchise model” begins with HERC identifying a mineral location that can be responsibly Hydro-Mined. This mineral location includes many locations of heavy resources (precious metals, rare earths, gem stones, and more) within a few feet of the surface to thousands of feet in depth where the heavy mineral resource cannot be profitably mined using conventional wisdom and equipment. These untouched mineral locations are pervasive throughout the world - much like fast food franchises.

    Next, the franchise “operation” must be developed to duplicate the profit model to place in the multitude of locations identified in the feasibility studies. HERC is responsible for the feasibility study at each location and developing the profit model we call Hydro-Mining. Hydro-Mining itself is the process much like all that is included in a fast food building structure or kiosk where management, equipment, record keeping, and the operation in general is happening to accomplish the goals of the franchise contract.

    So HERC will develop the equipment, provide a measured resource location, and monitor franchise owner/operator and crew when Hydro-Mining these locations. The franchise contract will be made between HERC and the owner/operator. An IPO public corporation will finance the sale/lease of the Alpha Unit by paying HERC $3.4m for the conversion and receiving a $5m sale/lease contract with minimum payment of $150k per month and 4.0% interest. Upon receiving the $3.4m from the IPO, HERC will convert the Beta Unit in the field to an Alpha Unit and order a new Beta Unit from the manufacturer.

    HERC will be the franchisor of this mining franchise concept and will operate as such for five years from the inception of the seed capital funding. In five years the IPO public company will exercise its option to buy out HERC for $100m+. The option will be purchased upon the IPO going public for $8m so that HERC can initiate conversion or payoff to seed capital investors. If the seed capital investors take the payoff, the $3m will be used to perfect and test Alpha Unit design and purchase another Beta Unit.

    It is projected that in 5 years there will be 150 Alpha Units sold/leased paying royalties and in production. 150 Alpha units will have generated $240m in net profit for the IPO public company. HERC will have netted $75m in net profit plus a minimum of $75m in gold royalties to be paid to the Limited Partnership, others, and pay administration.



    8. What’s in it for me as a seed capital investor?

    The $4m in convertible debt, in the IPO objective model, is due within 24 months. It is issued with an original issue discount of $1m meaning the investor will receive $5m for a $4m investment at anytime within the 24 months if it is paid off. If the debt is converted to 20% equity with the IPO objective, the investor could receive $20m+ in five years as part of an exit strategy. The $20m+ is designed to be tax free.

    In 2015 the PATH Act signed into law a gain exclusion on original issue stock of $10m or ten times adjusted basis whichever is less for an investor in a Regular “C” Corporation if the investment is held for at least five years – this is the simplified version. It is called the Qualified Small Business Stock exclusion or QSB stock exclusion and is codified in IRS Code Section 1202. HERC is a qualified corporation designed to take advantage of this exclusion and is careful not to be considered a mining corporation – a corporation with a depletion allowance – as mining corporations cannot take advantage of this exclusion. It should be noted that HERC and the IPO public company are not in mining but in franchise business development. The limited partnership (LP) on the other hand will hold mineral rights and not be subject to the exclusion. It technically will not be related to HERC or the IPO.

    So, if the projections of 150 Alpha Unit franchises are in operation in five years, any original investor in HERC upon subsequent sale of QSB stock will be able to exclude from capital gain 10 times basis or $10m whichever is less. A $4m seed capital investor can exclude up to $10m. A 20% equity in a $100m sale will yield $20m with a $16m gain. So it might be wise to split the $4m seed investment between at least two investors; accordingly, the Private Placement Memorandum (PPM) will offer eight units at $500k each if investors would like to take advantage of the exclusion considering the forward looking projections on gain.

    Now, this is just the tip of the iceberg on “what’s in it for me”. Not only does an investor receive 20% equity in HERC, the investment group including friends and family will also share in their portion of HERC equity in the startup investment ($1m) in the IPO. The IPO will issue stock to HERC for $1m as seed capital which becomes an asset on HERC’s books. HERC will be sold to the IPO in five years and the initial stock holdings will add to the purchase price as negotiated in the original option contract when the IPO is formed. This original option price will be paid by the IPO to HERC for $8m which should take place within the first year of formation. The $8m is important as it can be used to pay off the $5m owed on convertible debt with $3m left over to test and perfect the Hydro-Mining Alpha Unit conversion and purchase another Beta Unit. On the other hand, why would a seed investor accept a $5m pay off after eight months when an IPO is willing to finance the entire franchise package? As a seed investor it would be wise to convert to 20% equity in HERC as HERC will have more assets than what is owed to the investor when the option is issued. Also if you convert, the $8m retained in HERC will allow for additional Beta Unit purchases and faster exploration for Alpha Unit locations. Keep in mind that each Alpha location is worth $500k to HERC and $1.6m to the IPO.

    To summarize, the seed investor has an equity holding in HERC and the IPO public company. HERC is the franchise Company and the IPO is the franchise turnkey equipment sale/leasing Company. When the IPO reviews a measured resource held by the LP (mineral rights limited partnership) and determines that the LP resource can pay for the Hydro-Mining equipment, the IPO will finance a HERC franchise to be sold to an owner/operator franchisee that has a contract with the LP. Why is this so complex? HERC cannot have a mineral interest and qualify for the QSB stock exclusion. The IPO public company cannot have a mineral interest and take advantage of an IPO expedient benefits made available by the “Jobs Bill, regulation A+; Tier II” for a $50m annual raise. So this is not an investment by the seed investor in a mining company but an investment in two companies with no ownership in a mineral interest – gold royalties paid to HERC are actually franchising fees paid on Alpha Unit production, not depletable mineral resources. The LP is an intangible holding company with benefits to be discussed later.

    The last but most intriguing benefit for a seed capital investor is being a part of a new emerging industry. There are all types of horizontal and vertical business opportunities that HERC and the IPO can explore for development and expand equity holdings. For example, the mining franchises (Alpha Units) will need $300k per month, or roughly 300 ounces of gold per month, to maintain their franchise contract. If 150 Alpha Units are recovering 300 ounces per month then gold for sale is $45m a month or $.5b a year in placer gold – figuring gold at $1,000 per ounce. Typically, after royalties and franchise fees are paid in gold the balance of the gold will be refined for working capital and income for the owner/operator franchisee.

    What if a cryptocurrency bank was established where deposits were made in cash equivalents in exchange for a gold cryptocurrency? The cash equivalents would then be used to buy placer gold from miners including the Hydro-Mining franchisees. The gold would not be refined but left in its natural state and be used to back the cryptocurrency. Of course this has already been tried except that the gold used was refined. The reason this does not work is refined gold is easily falsified by using tungsten that has a specific gravity close to gold. A way around this is to provide gold sheets like what is used in Asia. The problem with gold sheet is that someone has to make the gold sheets.

    If the financial markets collapse for whatever reason and the population is caught with worthless paper, how are people going to survive? If there is any place where placer gold is minable, people will flock to those areas and use self-mined placer gold for survival. Raw placer is easy to identify and very difficult to falsify. A small weighing scale that will measure specific gravity within a given volume will confirm its value. Placer gold will be the standard for trading commodities necessary for survival. Most people concerned about the faltering financial markets and no way to mine gold would be well advised to invest in placer gold (PG) cryptocurrency. After all, how would a retirement person survive with a bank deposit from a pension plan if the paper was essentially worthless – they could cash in their PG cryptocurrency for unrefined placer gold. Nome Bank of Alaska (NBofA) – not real - would be a good place for a PG Cryto Bank.

    Although this example might seem a little over the top, it does have some intriguing possibilities and why is it not being done today? The reason is there is not enough unrefined placer gold being mined to support the idea. However, Hydro-Mining could be the impetus to make this idea work. If it did work, the PG Crypto Bank could start dictating market value for placer gold that would be higher than refined gold and capture most of the placer gold that will be mined. In essence it will control the price of placer gold in the future making it more valuable than refined gold.

    An emerging business like Hydro-Mining has all kinds of possibilities to capitalize on business opportunities. A seed investor would be first in line to take advantage of some of the more interesting possibilities and the PG Crypto Bank could be one in the future; but, the most current possibility is recognizing the success of Hydro-Mining creating a “Gold Rush” for mineral rights.



    9. The placer gold cryptocurrency idea is unique, but explain how Hydro-Mining will create a Gold Rush?

    Hydro-Mining is a new process for mining deep placers that no one has been able to efficiently mine before. It will be fast, efficient, eco-friendly, mobile, operated by a small crew and can be had for nothing more than a franchise contract. The only thing missing is the mineral rights.

    If you recall history and the California, Yukon and Nome Alaska gold rush, people knew how to mine for gold but did not know where the gold was until word spread of a strike in these areas. That started the gold rush to acquire land (mineral rights) not only there but in many places around the world when word spread of gold just lying on the ground for the taking. Dreams of fortunes came true for some, real life adventures for others, and a foundation for wealth and pride came to America.

    Now step forward in time until about 30 years ago and perhaps recall the diamond discoveries in kimberlite domes in northern Canada. Two geologists worked for years prospecting for these domes and finally found one in the dead of winter. Their attempts at keeping it quiet did not last long and a land rush soon evolved into a mass migration of helicopters and diamond companies staking claims for diamonds. Anyone who had claims with possible diamond potential became rich. The point is, the word got out that diamonds were there for the taking and the fortune seekers moved in to claim the diamond prospects. Again, mining companies knew how to mine for diamonds, they just needed the diamond prospects and a land rush occurred.

    The early gold rushes had fortune seekers that only needed a dream, grub stake, and directions to the gold strike. Current fortune seekers are junior and big mining companies that are attracted, as one example, to micron gold recovery by heap leaching – proven reserves of micron gold became important in the 1970’s and again a land rush for micron gold occurred (e.g. Nevada’s Carlin trend) These companies use public money and accounting techniques to finance proving a measured resource to increase shareholder equity and capitalize on paper money. Some do produce profitable gold but are very government controlled, management oriented, and need years to prepare not to mention millions of dollars for development. In no way can people with a dream and a grubstake step into this realm.

    HERC enters the equation with known facts where tons of virgin gold is with a high probability of where the rest of it should be. All that is needed are people with a dream and a grubstake – HERC will provide the “Key – how to mine it” and then finance with a franchise for the grubstake. In other words, the old miners knew how to mine gold but did not know where it was until word of a gold strike leaked out. Modern miners know where the gold is (i.e. 150 feet down on bedrock) but have no knowledge how to mine it due to environmental issues and costs. HERC will teach them how to mine it and provide the financing. All ingredients (how to, where it is, grub stake) for a modern day land gold rush are now in play. The only question is, who owns the subterranean mineral rights? Strangely enough, if the mineral deposits are two deep or encumbered by some other restriction, even though the deposit may be substantial, probably no one owns it or if they do it has no real value.

    If Hydro-Mining can recover those deposits efficiently with little environmental disturbance and pay royalties to the owners, the property now has value and perhaps a lot of value based on a variable royalty. Since HERC will deploy a Beta Unit to drill at HERC’s cost if the property shows some confidence level of an economic value, all property with an inferred deep deposit has value simply by owning the mineral rights. There will be no costs incurred to Beta test it and if it has a measured resource of 10,000 ounces or more, it could be worth $1m in gold royalties to an owner of the mineral rights. A lot of drifted Alaska mining claims were paying at bedrock at least a half an ounce per yard at 75 feet to 100 feet. One reclaimed 40 acre state mining claim in Alaska will cost $45/year to own the claim. If there is evidence of drifting it is probably worth at least $1m in royalties to the owner of the 40 acre mineral rights. How about dredge tailings where hundreds of dredges were chasing the gold to bedrock? Probably more than a $1m in royalties per claim. The real value in this business proposal is in the mineral rights real estate that has no value without Hydro-Mining. So, how much is the Hydro-Mining process worth? Billions, let’s see.

    It should be noted that claiming mining claims is quite easy with the use of a computer, GPS and a staker person. An independent group with a helicopter could claim possibly a 1,000 claims during a mining season – if 10% of these claims were Alpha locations with the minimum amount of gold required for a franchise unit and gold at $1,000 per ounce, royalties at 10% would be $100m paid to the claim holders in gold. Cost for claim rights about $45,000. Staking about $100,000. Let’s see, $145,000 for $100,000,000 with no additional costs. How about the other 900 claims that are not current Alpha locations? All mineral content will be cataloged for future reference for price changes in commodities. So if gold goes to $2,000 per ounce, there’s another $100m in royalties if 100 additional claims become Alpha Unit locations because of the higher price of gold.

    It would behoove the seed investor and associates to start filing claims to register with the LP for Beta Unit testing. There is no other real estate investment that can give such high rates of return than deep placer claims that can be Hydro-Mined. This mineral claim real estate investment is about to happen. If you knew of a water shed with deep placers that could not be mined and therefore essentially worthless and not claimed, would you invest a few hundred dollars in filing it and staking it for a $1m return or more in gold? Of course you might have to sit on it for a decade or more but it would still be well worth it. Once the word gets out, placer claims will skyrocket even lode claims. The demand for Hydro-Mining Units will also skyrocket and fortunes will be made in franchising and also real estate. A seed capital investor will have this opportunity in a year or two when marketing the IPO public company and advertising this new mining process and the franchise concept. The $20m paid in the exit strategy will be dwarfed with real estate mineral interest royalty payments. This will happen and a new modern gold rush will take place with an abundance of gold feeding the American dream once again.



    10. O’kay, I’m interested. How do I become a seed capital investor?

    A few years ago, after applying for patents-pending status for Hydro-Mining, a complete PPM for a $5m “Preferred A and Common Stock” issue was prepared and presented on an older version of this website. This 102 page small print offering including forward looking financial statements and all disclosures required to project a somewhat rigid forecast of future expectations with a myriad of assumptions. It became apparent that no one read the document and if someone actually did read it their comprehension of the financial disclosures would equate to putting the pieces together that outlined the border of a 100,000 piece puzzle. The point is, why do a complete PPM on a business plan for a new industry when a border of the puzzle can be defined and agreed upon for all concerned before time and effort is put into completing the rest of the puzzle? What does this mean?

    It should be apparent that this is not a typical SEC defined offering that has a simple objective for use of the funds. This is a complex projection of a new innovative industry of what can be done with the exclusive rights and knowledge to mine mineral wealth – not just gold – throughout the world. It means the concept should first be visualized with the reasons why it should be this way. Then the reasons should be discussed to determine if there is a better way. The concept should evolve into a viable business plan that seed investors and business developers can visualize and then document in a non-contractual “Memorandum of Understanding” (MOU) for PPM preparation with forward looking statements assuming a “what if” scenario.

    It is very important that you as an investor can visualize the financial structure this investment proposes. The Hydro-Mining concept itself is difficult to understand but the financial structure is almost impossible to grasp because of the many variables requiring decisions to increase the best possible outcome for success as this industry grows. This is why a discussion detailing the concept is important. A few discussion points follow:

    1. Funding Method: Convertible debt is the norm these days. How about preferred and/or common stock, or other form of debenture? This should be discussed as to what is best for you as investors.
    2. Uses of Funds: There might be a better platform for the IPO and the LP funding from the $4m. Perhaps a reverse merger, Canadian offering, a typical “Regulation A” without the “Jobs Bill” might be better. How about the collateral insurance? Would you rather have more equity? Should more funding be used to have a Beta Unit and be working on converting an Alpha Unit?
    3. Loss Contingencies: What if the project fails for any number of reasons? Who has claims on the patents? Do you wish to have a loss alternative – collateral in a charitable contribution loss that you can have in your possession ($12.5m loss – See www.sacreddonations.com).
    4. The Franchise Concept: Why not just own the Alpha units and hire crews and mine the Alpha locations ourselves? Why is the franchise concept important?
    5. HERC, IPO, and the LP: Should all three entities be combined and go public? What are the reasons for keeping them autonomous?
    6. Patents: How are the patents used and protected? New patents belong to who?
    7. Seed Capital: How will it be paid back within two years so a conversion may be made or declined? Would preferred stock or a combination with common on conversion be better?
    8. Royalties: Paid in gold? Can we as individual investors and shareholders be franchise operators with our own Alpha Units? Can family apply for franchise consideration?

    The $4m IPO objective is not an exorbitant amount of funding for this extensive opportunity but it is enough to identify the parameters of the patents, locate mineral sites, and market the public interest in providing equipment for a possible gold rush. Whoever is first in this endeavor will be the McDonalds in the fast-gold franchise business and therefore time is really of the essence.

    It is important to visualize the process as it currently stands so that a discussion and questions can get the documents prepared with funding to follow. A Beta Unit could be in place in four to five months using your seed capital and then public funding will following a few months thereafter. The following flowcharts might help in visualizing the process:

    (These are forward-looking flowcharts with projections – use caution as they have no validity in fact)

    Flowchart #1 – Uses of Funds

    With proper SEC disclosures and $4m in funding, a sonic drill will be ordered from Terra Sonic International in Ohio – could be (3) months before delivery.
    See their website at: www.terrasonicinternational.com

    A Beta Testing crew will then be hired and will assemble in Grants Pass, Oregon for training. First deployment to Washington State for testing and timing analysis. IPO and LP entities will be setup with funding based on budgets. Legal contracts will be prepared by the LP for Beta Testing and Alpha mining. Patent assignments and license fees on Alpha conversion will be completed.

    Flowchart #2 – Overview of Financial Model

    When the $4m in seed capital is applied as projected the financial model begins to emerge. Geodrilling Technologies, Inc. holds the intellectual property that will be assigned to HERC. The LP is making inquiries about Hydro-Mining contracts with Beta property owners. HERC has engaged legal and marketing experts to raise public funds for financing the Alpha franchises. In six to eight months funding should begin when the IPO goes public. Funding will be paused at $10m for more marketing funds and $8m for the IPO to pay HERC for option to buy HERC in five years for $100m+. $5m of the $8m will be offered to seed capital investors for debt or conversion. If $5m paid without conversion then $3m will be used to finalize the first Alpha unit. If seed investors convert to equity then balance will be used to purchase more Beta Units and finalize Alpha Unit conversions. Ten Alpha Unit conversions are expected in the first year after the first conversion is successful.

    Flowchart #3 – HERC Exit Strategy in Five Years

    Assuming projections are reasonably accurate for the next 5 years, then more than a hundred Alpha Units should be producing profit and making payments to HERC for royalties and financing. The mining franchise concept should be refined with international goals being exploited. HERC as a private Corporation will have completed its purpose of developing the Hydro-Mining franchise method and will be in control of the patents. The IPO will have an option to buy HERC for $100m+ in five years after paying $8m for the option five years earlier. HERC should have a substantial number of Beta Units and be collecting royalties. The buyout should include an IPO stock trade with cash. In the meantime, the private shareholders in HERC have invested in mineral rights, the limited partnership, and have friends and family acquire Alpha franchises. HERC shareholders are also invested in IPO stock.

    There are many reasons why this financial structure is presented in its current form. It is designed to provide good business practices to the mining industry while letting the gold miners (franchisee) mine with only oversight. The franchisee will get rich if they follow the franchise rules and work at it. HERC will avoid most of the problems inherent with a mining business like crew issues, weather, MSHA, breakdowns, and many other irritations with actual mining. HERC is the franchisor and developer with oversight on each franchisee and will also get rich by collecting fees, royalties and working on expansion and improving the process. This is good business practice without getting your hands dirty. It is time to talk about “profit”.



    11. The Franchisee’s and his/her Gold Kiosk (Alpha Unit) will feed the entire industry. Show me the Gold!

    What is really good about this franchise approach is one Gold Kiosk (Alpha Unit Franchise) is a reflection of all the others. With that in mind, if efficiencies and costs are all pretty much the same, the only variables are time, location and commodity price. Profit begins with breakeven.

    (The following forward-looking statements and charts have no validity in fact – use caution!)

    The monthly production breakeven chart presented below has a horizontal line that depicts breakeven based on production volume in troy ounces of gold. The diagonal line represents variable costs and the vertical line above the horizontal line intersect shows net profit in dollars. The vertical line below the horizontal intersect shows net loss in dollars and starts at fixed costs. Please review the assumptions and costs as follows for a single Alpha Unit that is representative of all Units.

    Alpha Unit #1:

    Operating Assumptions:

    1. Placer gold if refined will yield $700, $1,000, or $1,500 per troy ounce (market price).
    2. Measured resource location approved for financing by IPO.
    3. Logistic difficulty and costs determined by Beta Unit.
    4. Fixed costs will not change within a very large operating envelope.
    5. Assume one ten hour shift per 25 day working month.
    6. Average depth of pay grade is 150 feet.
    7. Pay grade conglomerate includes boulders, pebbles, sand, and silt.
    8. One ten hour shift uses five hours for drilling and five hours for Hydro-Mining.
    9. Hydro-Mining will process 20 cubic yards per hour in this conglomerate.
    10. Location change will be less than one week. Alpha Unit must be mobile.
    11. All royalties and fees are paid in gold through HERC.
    12. Each Alpha franchise will be a Subchapter “S” Corporation or similar entity.
    13. All ancillary equipment (trucks, atv’s, trailers, etc) may be financed by the IPO.
    14. IPO buys Alpha Unit for franchise sale/lease from HERC for $3.4m converted.
    15. IPO sells/leases Alpha Unit to franchisee for $5m.
    16. Minimum payment to IPO is $150k/m for 36 months at 5%APR on $5m sale/lease.
    17. Monthly payment to IPO is not less than 50% of production.
    18. Excess minimum payment over $150k can apply to months for winter break.

    Cost Assumptions: (Franchise fee and royalties will increase after recovery of 500 oz. per month)

    Variable Costs / % of Recovery – can change every 500ozs of production:

    Total Variable Costs / % of Recovery...........70.0%

    Fixed Costs:

    Total Fixed Costs......................$ 100,000

    Monthly Breakeven Analysis in Gold Ounces

    (Based on 2,500yds Mined paying 6.22grams/yd – 1/5 ounce/yd)

    The breakeven analysis portrayed above is what is expected from a typical Alpha location with a measured resource yielding a bit more than 6 grams per cubic yard. This is about 1/5 ounce of gold per cubic yard or about 1/5 the size of your little finger – not a lot of gold for virgin ground at 150 feet underground. Nevertheless, it will pay a substantial return to all. Let’s discuss this from the franchisee’s point of view.

    We have made the assumption that the operator (franchisee) will be able to mine 20 cubic yards per hour for five hours (100 yards) a day – this is one cubic yard every three minutes for five hours per day. The operator should be able to do this for 25 days a month in one ten hour shift. This is a given, meaning the measured mineral deposit at 150 feet can be processed at 20 cubic yards per hour even if there is no gold to be recovered.

    Since it is assumed the operator can Hydro-Mine 2,500 yards a month, what are the concerns this operator will be addressing every day?

    1. Assuming they are recovering gold, how much gold are they recovering per day?
    2. Is the recovery rate above breakeven?
    3. Will the price of gold at the recovery rate sustain a profit?

    Although the operator has many concerns, if daily recovery averages 20 ounces and the price of placer gold is around $1,000 per ounce, then total recovery should be 500 ounces a month. Now, take a look at the breakeven chart. The horizontal line shows production in gold ounces up to 500 ounces per month. The middle diagonal line shows production with the price of gold at $1,000 per ounce. So, at 500 ounces (20 ounces per day for 25 days in the month) if you go vertical and then cross over to the net income line you will see a little over $50,000 per month net income. If market gold hoovers around $1,250 per ounce (recovery gold a little over $1,000 per ounce) that middle line is a really good management tool. For example, let’s drop average daily production to 15 ounces for 25 days – total 375 ounces per month. The operator is still above the horizontal line and will make about $12,000 per month. This is still okay, but if recovery falls to 13 ounces per day (325 ounces per month) you can see the operator has fallen below breakeven and is starting to lose money. Now what?

    Let’s say the deposit is now marginal at 12 ounces per day – a loss of $10,000 per month. The operator can do a number of things to keep from losing money.

    1. 25 days per month leaves an extra 5 days to increase mining.
    2. Double shift and run a night shift (this will increase fixed costs)
    3. Use the Alpha drill for a quick exploration search for higher paying ground.

    All these can be reflected in the breakeven chart by adding the additional cost to fixed costs which will drop the line a bit and then parallel the diagonal line to see if breakeven is reached.

    Of course if the deposit is not paying, move to another Alpha location and come back when the price of gold is up to say $1,500 an ounce (please refer to the breakeven chart and the top diagonal line – gold at $1,500 per ounce). Breakeven in this case is 222 ounces per month which would still pay the operator $8,000 per month even if recovery is only 10 ounces a day. But what if monthly production was still at 500 ounces per month and the price of gold goes to $1,500 per ounce – look at the net profit line ($125,100 net profit for the operator free of all expenses, royalties and payments). Of course if the gold price falls to $700 per ounce, the operator really needs to be recovering 500 ounces per month; or, will have to move to a better paying Alpha location. Moving will not be a problem as these Alpha and Beta Units are designed to be very mobile with no more than a week turnaround across several states. Let’s look at monthly financials:

    At 400 ounces recovered per month (about 5 grams per yard) with the recovery price of gold at $1,000 per ounce, mining placer appears to be somewhat profitable; however, placer is unpredictable, the price of gold is unpredictable, and anything can happen. This is one reason we have Beta Units scourging the planet for Alpha locations and another reason the Alpha Unit must be mobile. As the price of gold drops or the deposit plays out to something less than breakeven, the Alpha Units will move to more profitable ground. This means that we will be placing Alpha units initially on marginal ground (5 to 7 grams per yard) and keep the better ground in inventory (in the LP). Any problems with breakeven recovery and using solutions as described above without results will trigger a move to a more appropriate Alpha location. The location that was just vacated will still be in inventory and may be mined again depending on gold price, payment reduction when drill is paid off, and royalties. Of course the real problem is franchise operators making good business decision.

    The operator will no doubt have a mining personality and not interested in providing financial and operating information to HERC and as usual they will make decisions not based on good financial input. For this reason and security, HERC will provide a “Hydro-Mining Auditor” (HMA) paid by HERC to monitor the production of each Beta and Alpha unit. This HMA will be deployed to Alpha and Beta sites to compile information on production, observe gold cleanup, and provide an extra layer of security for the equipment and product. A daily report will be filed with HERC headquarters using a daily breakeven chart as described above. The information will also be shared with the operator. Royalties, fees, and equipment payment information will then be accumulated with reconciliation at the end of the month. The HMA will be hired with priority given to geology college students, handicapped individuals (tracked wheelchairs are now available), military, and retired people that would like to travel. The HMA will be required to be on site for three weeks and then will have one week off. Every four weeks the HMA will be assigned to a different site to enhance compliance without collusion. Every Alpha Unit site will always have an HMA on hand for compliance observation with production and royalty verification.

    With daily input, HERC will be able to monitor breakeven and anticipated monthly production. If it appears that a crisis with gold flow is about to take place, the operator will be informed of such and if remedies suggested are not followed with a resulting subsequent loss, then the operator will be in jeopardy of losing the franchise as they will not be able to make the royalty and fee payments which are essentially guaranteed by HERC. Each Alpha Unit will make their fee and royalty payments or the franchise will be given to another operator.

    Show me the Gold! Okay, let’s look at the one Beta Unit drill that was funded with seed capital. If the one Beta Unit drill purchased with the $4m in seed capital is used for Beta testing (basically 6 months before IPO is ready) it should be able to confirm a few Alpha location – we already have “Letters of Intent” from several Alpha location owners that show viable Beta Unit prospects. After 6 months and spending $600k for “testing public interest”, if the IPO does not appear to have the ability to raise public funds of at least $10m, the single Beta Unit will be used to Hydro-Mine as an Alpha Unit. It should be noted that the franchising and IPO payments for the Alpha Unit conversion are not needed as HERC is now operating as a private mining company with one Hydro-Mining Unit – not a franchise. The normal budget for a Regulation A+ Tier II offering is around $600k. That means there is an extra $400k in the seed capital $1m IPO budget. The seed investors may also opt out of the insurance option for an extra 2% in equity conversion that will free up the other $200k. These extra funds should be enough to complete an Alpha Unit conversion (although not with much testing) and begin Hydro-Mining.

    So, if we took your seed capital ($4m) and deployed the single sonic drill unit to Beta locations to confirm an Alpha location paying .4oz/yd (12grams) per yard (the middle column above), 3 months would be used for training and another 3 months would be used to find the Alpha location. In that time the IPO decision to continue or not will be made, the LP will have been setup and funded, and a working crew will have had several months of training on the Beta Unit.

    Let’s assume we go with the one drill as presented above and Hydro-Mine the .4oz (12grm)/yd – middle column above. Assume it takes 4 months and $600k to get a working Alpha Unit conversion for deployment to mine the resource. So, after one year from the initial seed capital investment, we start Hydro-Mining. In twelve months (2 months for weather leaving 10 months to mine) HERC will have 6,550 oz of gold as net profit. At this time we are into the project for 24 months – the convertible debt is now due. Do you want 22% equity in HERC or 5,000 ounces in gold? What if we were mining in 1.0 ounce per yard ground – 16,250 ounce in ten months! Can you see the gold?



    12. Conclusion – why not take a chance with the Beta Unit and net 6,550 ounces in ten months? Choices?

    As explained in question #10 herein, nothing is engraved in granite but more like engraved in gold (much more malleable). There are three basic choices that HERC can make, subject to seed investor’s agreement (MOU), that puts a priority on either the formation of the IPO; and/or, prototype completion and Alpha Unit gold production.

    Assuming there is a reasonable understanding of the Hydro-Mining process and financial structure as presented thus far. It should be understood that $4m in seed capital will provide the means (sonic drill and equipment) to test locations for measured resources, acquire a good understanding of sonic drilling, develop a rudimentary method to Hydro-Mining (Alpha conversion), and form an IPO for fund raising using the benefits promulgated by the SEC’s Regulation A+. The primary benefits of this structure is raising funds quickly through the IPO to pay off the seed capital investors; or, have them commit to a 20% equity conversion. If the IPO offering is paused at $10m and the option to buy HERC is accepted for an amount more than the $5m seed capital note, the balance will be enough to complete the Alpha conversion testing and manufacturing. If investor’s equity conversion is their choice, there should be enough funds in addition to completing the Alpha conversion to purchase at least two more Beta Units and purchase more marketing for the IPO before continuing the offering. This can all be done in one year; but, let’s look at some different uses of funds and discuss different approaches to grub stake this new industry.

    (These are forward-looking flowcharts with projections – use caution as they have no validity in fact)

    Choice #1 - IPO Objective #1
    Uses of Funds With Priority Centered on Going Public with an IPO (Current Plan)

    As presented, the use of funds for purchasing the sonic drill for Alpha and Beta testing will primarily be used for Beta setup and deployment. The Alpha portion will address research, pump, and manufacturing questions prior to perfecting and testing parameters for a complete Alpha conversion. The $300k for onsite Beta testing should provide deployment for 5 months. $1m is budgeted for IPO offering for a $50m raise. Normally this kind of offering costs about $600k to complete. An extra $400k is provided for marketing the issue to give it the best odds of raising at least $10m to $20m. This will provide payback for seed capital investors and enough funds to complete the Alpha Unit prototype and its parameters of operation. Gold profit should be forthcoming in about 18 months assuming the IPO has raised enough funding to finance the franchise units.

    Choice #2 – IPO Objective #2
    Uses of Funds Diverting $400k from IPO Formation to Improve Alpha and Prototype Development (Secondary Plan Using One Drill with a more complete Alpha Conversion)

    It is entirely possible that the Beta Unit in its initial deployment will be able to identify a resource paying at least 12 grams per cubic yard (2/5 of an ounce) that can be Hydro-Mined. In reviewing question #11 above and the last several paragraphs, a 12 gram per cubic yard resource will yield more than 6,000 ounces as net profit for the one seed capital drill in ten months; but, in this scenario Hydro-Mining begins about one year after raising the $4m seed capital. The IPO is also in play in this scenario but somewhat marginalized with $600k in marketing funds, not $1m. When pausing the offering the IPO could still option to buy HERC in five years and provide the funds to pay the seed investors; or, if converted to equity, pay the complete development costs for the Alpha prototype and have excess funds for more Beta Units. The difficulty is in the prototype which is basically the Hydro-Mining string that is patented – not the entire unit. In order to properly test and define the prototype parameters, another sonic drill identical to the Beta Unit is needed at the testing center in Grants Pass, Oregon. The Beta Unit in the field is not appropriate for Alpha Unit testing and development because it would have to be pulled from the field and Alpha locations would cease to be located.

    Choice #3 – Prototype Objective
    Uses of Funds Priority on Prototype and Alpha Unit Conversion with Two Sonic Drills and Delaying IPO Fund Raising Until Gold Net Profit from Alpha Units can Provide for IPO Costs

    It should be noted that this scenario requires an additional $1m in seed capital making the total seed capital requirement $5m as an OID investment payable within 24 months for $6m. The extra $1m will be used to acquire two sonic drills. The first sonic drill will be used for Alpha Unit development and Hydro-Mining string prototype – cost $2.2m coming from $1m as additional investment, $200k taken from the Beta Unit budget, and cancelling the IPO funding for $1m. Now, all bets are on recovering gold. The Alpha Unit conversion and completed prototype testing should be done within the first year with final production trials in Washington State. The Second drill (Beta Unit with budget change to $1.6m) will have located several Alpha locations and will be converted to an Alpha Unit to mine the best Alpha location the Beta unit has found. Both Units will be producing gold within a year and the net gold recovered will first be offered to pay off the $6m in seed capital; or, accept their conversion for 30% equity in HERC. The balance of gold not paid to the seed capital investors will be used to initiate the IPO funding for the Hydro-Mining franchises. This is the wrinkle. Franchise financing will not be available for almost two years when it will start issuing stock. Of course, with gold flowing and prototype proven there should be investment money to privately fund a franchise for $3.4m – $5m payback in gold within three years with $400k in interest plus residual production royalties after drill is paid off.

    Choices? Each venture capital investor has financial concerns that dictate whether an investment is intriguing or too risky to justify their investment. In this case, hopefully it is clear that:

    What is the best choice for investors?

    The first choice where $1m is used to promote and initiate the IPO fund raising will most likely fund the seed capital payout quickly (about 8 months); but, the Hydro-Mining string (prototype) will have little development within that eight month period and with excess funds after seed capital payout development and testing will begin and completed within the next year. It appears under this choice that Hydro-Mining will not be productive until 18 months after the initial seed capital funding.

    The second choice takes money from the IPO to improve on the Hydro-Mining string (prototype) and brings HERC closer to mining and recovering gold that will be used to finish the Hydro-Mining prototype testing and manufacturing. It is not quite enough to complete the prototype and define parameters with a high level of confidence for recovery much needed to assure the IPO that the Alpha location and franchisee can pay off the Alpha Unit.

    The third choice requires a $5m seed capital raise instead of a $4m raise. It will also delay funding for the IPO until it can be paid for with gold production. It will take a year after seed capital funding to perfect the prototype and determine parameters including limitations. In this choice, $2.2m will be budgeted for prototype completion, $1.6m for a Beta unit and the IPO will not be funded. The first sonic drill ordered will be used for prototype development. The second drill will be the Beta Unit. Within the first 12 months from seed capital funding, several Alpha locations will have been confirmed with the Beta Unit and the Alpha Unit will be ready for mining. Also, an Alpha Unit conversion package may be applied to the Beta Unit so that two Alpha Units are in the field mining. Please note there are no payments on these Alpha Units except for royalties to the mineral rights holder and the LP. The prototype will be complete and the IPO will be initiated with net gold mining profits from the two Alpha Units owned by HERC. In this case, we will be a mining company for about ten months.

    So, do we go for the IPO and heavily fund the offering to get seed capital payout and then fund the prototype; or, do me bet on the prototype Alpha Units by buying two drills instead of one, finish the prototype in one year, and begin Hydro-Mining the Alpha locations identified by the Beta Unit and use the net profit to pay off the seed capital investors and fund an IPO? It is conceivable that gold net profit produced by two Alpha Units could mine enough gold to fund the franchise units and the IPO funding may not be necessary. In this case, we might go public with HERC which is the ultimate goal of the IPO buying out HERC in the first place. Please note that nothing is engraved in granite when gold mining.

    The most important component to this entire process is a working prototype. A working prototype can provide proof that exorbitant profits can be made with Hydro-Mining – not just gold recovery but in other precious metals, rare earths, and gems as well. The sooner the prototype is functional and proven, more validity can be placed on this entire scenario; therefore, we are recommending the third choice - $5m for $6m in convertible debt, payable in 24 months. Because this is our preferred choice we are offering 30% (an extra 10% in equity for the additional $1m). This entire dissertation is based on $4m seed capital with an IPO for quick seed capital pay back and at that time beginning prototype development; but, the IPO is trumped by developing and testing the prototype first which will make it more effective to fund an IPO even though seed capital payback will be delayed until a year after funding. It is anticipated that seed capital payback will be offered in the second year in placer gold – in which case you probably will take the 30% conversion.

    Thank you for reading this rather extensive explanation of what this new and exciting industry could be. For you as investor, the IPO and $4m investment is an easy-to-understand and viable financial model for a start-up of this nature. If you can see how a public company (the IPO) can prosper, finance the franchise units, and provide an exit strategy in five years, then it solves the pervasive problem of not having a living, breathing, and viable prototype that you as investors need in order to have a credible project that you can sink your financial teeth into. This project can progress effectively with the IPO and the $4m offer without the prototype, as first priority, by transferring the risk to the IPO. But, perhaps you can see the massive green-mining gold potential of a fully operational Hydro-Mining unit producing gold made possible for an additional $1m, ($5m total). If the prototype is developed first, and the gold is flowing from an Alpha unit and can be measured with profit by physical observation, then real-world-credibility to support funding this project will not be a problem as the risk will have been mitigated. We invite you to...TAKE A CHANCE on the opportunity of the millenium. The old time investors and bankers in the gold rush days of the 1800s would "grub stake" gold miners for a share of their vision and dreams. However, in this instance we have the patents that can be verified, the financial vision as to how to make the patents work, and the franchise business model that can harvest virgin gold deposits just a few hundred feet away. This is something like an old time grub stake, but our advantage is that – we are the first in this NEW gold rush, and we have the patents!

    In conclusion, the offer for funding the Prototype Objective is $6m convertible debt within 24 months for $5m now. The $4m IPO Objective still stands if it is more attractive to investors. The $6m prototype debt can be converted to 30% common stock equity in HERC at any time throughout the 24 months unless a $6m payoff is offered by HERC at such time the payout will be accepted by investors or they will take the 30% conversion privilege. The convertible debt will be offered in increments of $500k to no more than ten interested parties. The parties will have to prove investment posture and sign a non-contractual MOU before the PPM will be prepared. On final review, this will work! After all, it’s just a patented adaptation of borehole mining that makes recovering heavies several hundred feet underground possible, and uses few moving parts.