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Message: SFMI ASM, My impressions.

I attended the SFMI ASM and am very glad I did. I have been away from the computer and I do not have a "smart phone" and probably wouldn't know how to operate it anyway. I read Cowboy's summary and he did an excellent job. I thought there must have been others there that I didn't know that would post here, but I guess not. The only other agoracom poster I saw and spoke with was Bluesideup. He indicated he is not as heavily invested in SFMI as in the past. I don't know if he is motivated to post his impressions or not.

Cowboy was right that there were only about 30 shareholders there compared to about 90 at each of the last 3 ASMs. Much more intimate and also much more subdued. I had the impression that many of the shareholders were frustrated, and maybe a little afraid that things were not going well for whatever reason. After PQ gave his presentation (very different than in the past), many very pointed questions were asked but I was suprised that there was no real anger displayed. In that respect it was a very positive meeting.

I mentioned PQ's presentation was different (in my opinion) as he said many of the same things, but not so belicose or in your face this time. He still showed great confidence, but tempered by reality. I spoke with Rich Kaiser prior to the meeting and he told me one of the reasons the meeting this year was delayed was so that two deals could be done before the meeting. One the outside milling agreement to mill material for another miner(s) and the other to annouce the Canadian deal. Neither were done, so I sensed dissapointment in PQ even though he did not say it in words. He did say these were still in the works and near completion. I know we have heard this before, but I have no doubt he believes this.

As an aside, in watching PQ over the last four years, I have seen a change from: this project is a can't lose easy to accomplish deal; to this is a little harder than I thought; to now, this is really tough, but I'm still getting to the projected end, it just takes much longer than I thought and the end project may end up differently than I thought. (Shareholders that are still here have had to go through the same process whether we realized it or not.)

One of the things I admire about PQ is his tenacity. This really is a different project than he originally invisioned and he may have been very discouraged at different points, but he has carried on and right now I sense he is really scrambling to make this project a success. I'm sure this outside milling agreement and the Canadian investor possibility were not in his original plans, but one or the other of these are the only way this company will survive. He still exhibits confidence, but his huborous is gone. He does demonstrate flexibility and seems to be willing to do whatever it takes.

The biggest (and to me) the best change in his plan is for SFMI to farm out the leach system process to an outside entity. This outside entity was unkown to them until recently, new information. This also is not a signed done deal but "close". The plan now is to send the 37,000 tons of already processed material in the back of the mill through the floatation system to generate 800 tons of material to be shipped to an outside entity in Idaho (unnamed) that has a cyanide leach system. The processed material would be returned to our mill to be made into ingets or bars which would then be shipped to the refiner in Florida for processing into silver and gold. The plan is to do this until there are funds available to build their own cyanide leach system at a projected cost of $1.5 million. I spoke with CQ after the meeting and he cleared up some questions about that for me. He explained that SFMI has the county approvals in hand. This is usually the most difficult to achieve as locals need to be assured there will be no runoff contamination. This permit needs to be renewed shortly but is usually not difficult (CQ's words). The permits still not acquired are the state and federal permits which he said are based on process approvals and showing you have the financial wherewithall to do it. These permits are premature now but generally easier to obtain once ready to actually begin intallation of the system.

PQ also said the are going to resart the mill in 2 weeks to begin processing the outside mining company's material, or if no agreement is finished, they will process our own material. The biggest problem is there is no cash on hand to actually pay for this startup. PQ when asked where the funds were going to come from didn't know or speculate. My speculation is it would come from prepayment from the outside mining entity or some kind of encombrance of the metal generated from the cyanide leach process. This is perhaps why it is taking so long to get the deals done.

PQ indicated from startup through the entire floatation to cyanide leach process to making dore bars to refinery to generating some kind of payment is three to six months. PQ said the is about $7 million in gold and silver in this material. He said the material in the back averaged 4 grams gold and 16.44 grans silver per ton.

This outside milling contract is to generate $30,000 per day. I didn't ask if this is gross or net. In my opinion, this whole concept of processing somebody else's material is certainly not what any of us signed up for, however if this is the way we can keep this entity afloat, go for it. Cash in hand is the secret to success for SFMI and the big problem this past year and the reason the promises made were not kept is they ran out of cash or cash resourses. This may be the means of keeping us in the game.

Two Canadians from the investment group were at the meeting. Sadly I didn't have time to speak with them, but it was encouraging that they were there. Speaking with CQ, he said they have taken grab samples from the piles in the back but have not taken more comprehensive samples from a grid and cored down into the piles to obtain their random samples. Didn't know if they were going to do that. PQ did indicate that conversations were continuing with them and also indicated as a result there would be a change in the board of directors and the executive staff, but they would not be wholesale. I could speculate what that means, but you can all do that as well as I could. Part of this deal would be the completion of the 43-101 report and I believe he said there would be $10 million involved. Truthfully, my mind was drifting about then and I may not have heard that right. As I understood it, the Canadian group would be involved in the BOD.

PQ said that in 2-5 years SFMI would be a major producer. This to me means that his thinking is still to not have a merger with another miner.

PQ said in his presentation that $750,000 had been generated from the past milling work completed. When asked why hasn't the dollars showed up on the financial statements, he said because of the accounting rules this money shows as a reduction in inventory, not as income. He said it does show as cash coming in. I'll leave that to someone else to comment on. He also said that the investment in the mill is $8 million. I'm not positive he meant only the mill, or all capital investment made so far.

He said there are currently 3 liens on the property, one lawsuit and one counterlawsuit. It is very apparent that the company is cash strapped. There are a couple of ways out of it, but they need to happen.

CQ also said they know where the material on the mountain is that has 2 ounces of gold. The problem is to get to it they would need to put in a new road through BLM land. They would require a $1 million bond, and I didn't hear what else they required. There of course would also be the cost of installing the road. So this material is in one pile and not all of that pile.

PQ also said there is a change in the relationship of GHDC and SFMI coming. The directions of both companies are diverging. He was asked if GHDC might be a source of money for SFMI in the future, and he would not say.

Lastly, the meal provided was sandwiches this time, not BarBQue. Cut back on expenses. I sensed there has been a lot of that lately.

My bottom line is much like Cowboys. I think this company is going to succeed, but it is no sure thing. Don't put money into this you can't afford to loose, but at the same time it has terrific up side. I think we are going to know which it is within six months. Whatever anyone thinks of PQ, CQ etc; they want---they need for this company to succeed. I don't believe they have done anything "intentionally" to mess with the shareholders although they probably have unintentionally. The very biggest mistake I have seen from the beginning is they just didn't realize that they couldn't get the gold and silver out of all of that waste on the mountainside without a cyanide leach system. If that wasn't needed, I think everything would have turned out as originally projected. The question I guess is, shouldn't they have known that.

I'm sure there are other things I heard that haven't come to mind, but as I said, I'm glad I went. I saw a friend from Washington who hadn't been there for two years and thought he dropped out of SFMI, but nope, he is still in. There were a lot of people who didn't come and I understand. There are a lot of good people who have invested in this company, some of my family included, just like pic. It would be a real shame if it didn't succeed, and wonderful if it does. I'm betting on PQ's tenacity.

Hope this helps a little, Calfarmer.

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