memorandum
Date: August 3, 2010
From: The Office of the President
To: Franklin Mining, Inc. Shareholders
Your Company has concluded the first-half of 2010 and entered the second-half of the year with a number of meaningful accomplishments under its belt. As I’ve done several times this past year, I want to use this Quarter’s Memo to Shareholders as the means to deliver a brief recap of our current status.
■ On January 4, 2010, Franklin entered into an agreement with an accredited institutional investor to provide $32 million for project financing. These funds are intended for use in developing our mining projects (principally our Escala Mina I joint-venture in Bolivia) as well as other energy, real estate and infrastructure projects. The agreement specified that funds would be received in tranches and would include a Bridge Loan, Working Capital, Term Loans and Equity. Terms and conditions of the agreement further stated that funds could be tied to the equity structure of the Company, could be structured as a convertible debenture or (in the case of a loan) might, at some future point, become a convertible debenture. Under this Condition, some additional increase in common shares would probably be required.
As of this writing, first funds have not yet been received. Even though we continue working with the lead investor and have reviewed several proposals, we've recently stepped-up our effort to locate other options. The objective is to identify the right financial partner(s), best financial instrument. Our Escala Mina I joint-venture is extremely important to us and – as you will see in a moment – could become even more valuable in the near future.
■ In April, we announced our joint-venture with Planet Resource Recovery , Inc. for development of our operating agreement with Bolivia's San Antonio de Turiri antimony mine, Raptor Ventures, LLC. In the months since that initial announcement, Franklin's contribution to the joint-venture grew to include operating agreements for three antimony mines (Turiri, Sorpressa and Concordia). In addition, Franklin has this week assigned a purchase agreement with the Chilean company PRIMASUR to Raptor. This first purchase agreement of antimony tailings is expected to generate gross revenues in excess of $700,000.
■ In addition to our Escala and Raptor joint-ventures, negotiations are continuing for four additional antimony mine operating agreements and two iron-ore agreements. Details on each opportunity will be announced as negotiations are complete. And I continue searching Bolivia's mining and energy industries for additional opportunities, including companies suitable for acquisition or joint-venture.
■ As announced in early-June, we've completed a Memorandum of Understanding with Bolivian Oil Services, Ltda (BOLSER) for their joint development of mine construction at our Escala Mina I joint-venture. Our MOU forms the basis of a service contract designed to include specific exploratory and development stages including: benching (earth moving to a depth of one meter necessary for subsequent mapping and sampling); trenching (to a four meter depth, ten kilometer length); providing water needed for diamond drilling; rail and roadway construction; and, excavation and foundation work required for mine site, camps, the mineral processing plant and other mechanical and civil works.
The importance of our contractual relationship with BOLSER, one of Bolivia's largest, most respected construction companies, will become even more significant in the coming weeks if COMIBOL approves my recent proposal for the expansion of our Escala joint-venture to include all three areas.
Last month I met with Jose Antonio Pimentel Castillo, Bolivia's Minister of Minerals and Mines to discuss expanding Franklin's Escala Mina I concession and joint-venture. Following the meeting, Franklin's Santa Cruz staff submitted a formal proposal to expand the Escala joint-venture. That presentation was made following completion of a Spanish translation of our Escala technical audit. Prepared by Dr. Michael Biste, the audit recommended expansion of the current Franklin-COMIBOL-Cooperativa Minera LTDA joint-venture to include the remaining two areas, Escala Mina II and III. Franklin's consultant, Dr. Michael Biste, is a respected geologist with 30+ years' mining experience including nine years as a consultant to several of South America's largest and best-known underground, open pit and alluvial operations.
■ We’ve completed the application and interview process for obtaining a Commercialization, Import & Export license in Bolivia. All requested documentation has been submitted and initial fees have been paid. The approval process is now underway and expected to be complete in mid-August.
The importance of this license to the future of Franklin Mining Bolivia is significant. Since the Colonial Period, Bolivia has been a major supplier to the world for Silver, Titanium, Gold and many other metals and minerals. Recent changes by another exporter has created a gap in sales options available to the small operator which is a valuable opportunity for Franklin Mining Bolivia. With our many contacts among small mine operators, as soon as we receive our license, we will begin negotiations for export sales of silver, gold, iron, tin, antimony, wolframite, tantalum and other metals and minerals.
In conclusion: My last trip to Bolivia lasted almost three months. I returned to Texas last week for a series of meetings with our financial consultants and representatives of both potential investors and future joint-venture partners. When I return to Bolivia late next week, I will be going back to a country that has been loyal and supportive of Franklin's continuing effort to develop the Escala into the world-class Silver-Lead-Zinc producer that Dr. Biste's report indicates it could become. I'll be returning to a country filled with opportunities for companies like ours.
Even though the first seven months of 2010 have produced the least amount of new capital since I became your CEO, I am confident that the restructured company with its new and strengthened relationships will benefit all Franklin shareholders. One of the key indicators that our Company has such a promising future during these tough economic times is the recent growth in the inquiries we receive from both potential customers and potential partners ... inquiries from the US and Canada, China, Korea and Australia.
I will keep you informed as we move forward.
Sincerely,
William A. Petty
Chairman, CEO and President
Franklin Mining, Inc.