§ 465 and IRS CODE § 616
References that you might use:
The Complete Internal Revenue Code
by: Research Institute of America
Code Section 465 is located on page 2,297
Code Section 616 is located on page 3,015
The Complete Internal Revenue Code
by: Clark Boardman Callaghan
Code Section 465 is located on page 2,291
Code Section 616 is located on page 3,015
Is there risk that I will not recover my money?
That's why you maintain the at risk monthly payment, to
demonstrate to the IRS that you are at risk for the tax credit
in your favor. We make no representation that one mining
unit is worth the same as any other. Luck of the draw.
What you do get is a 3:1 write off immediately if you chose the 34% down option, with a 100%
write off of the monthly interest payments. What else will
give you a legitimate write off with the potential of actually
making a profit, but without liability until you cash in the 'in
kind' payment from your mining unit?
Is there a current mine operation or mining property for this
The purpose of the Tax Shelter program is to provide
for the development of legal alluvial mining claims for a
proposed mining operation in Alaska. The current property
targeted is located near Candle, Alaska.
A certain number of investment units have to be sold in order to
adequately fund a viable alluvial mining operation. This is a
remote property located in northwestern Alaska south of Kotzebue,
Alaska in a historic gold district.
Additional properties are in the negotiations process and will be
disclosed upon investment.
The current price of Au requires discretion when providing
information regarding a potential property.
How many investment units in the Tax Shelter will need to be
sold to achieve adequate funding?
A minimum of 200 units will need to be sold to provide for the
cost of operations, heavy equipment and the mining
plant for the proposed mining operation.
How was the mining property for this tax shelter selected?
A viable and legally maintained potential mining property will be
selected based upon historical data, production data, geologist
reports, drill logs, geophysical surveys, accessibility, permafrost
issues, and regulatory issues.
An opinion by a professional
geologist specializing in alluvial deposits will be used as part
of the decision process.
What can the Tax Shelter investment monies be used for?
The $35,700 and the monthly interest payments can be used for equipment acquisition, and costs
associated with the mine development. The mining property
cannot be purchased with the investment monies themselves.
Why is the Promissory Note for 10 years at 10% interest?
This is the recommended time period and the recommended interest
rate suggested by the IRS under IRS guidelines regarding this Tax
Why is the Promissory Note a "full recourse" note?
Again, this is per IRS regulations governing the Tax Shelter.
Are the interest payments on the Promissory Note tax
The interest payments on the Promissory Note are fully tax
deductible over an above the initial $105,000 write off afforded by
the initial investment of $35,700 and the note on the remaining
What happens if I do not make the interest payment if I paid
the $35,700 down payment to receive the 3:1 write off?
See the promissory note. Any amounts due are
deducted by Glacier Valley before any disbursal to the lesee.
Obviously, any increase in the price of Gold reduces the risk of any
default or failure of the property to produce sufficient Au to meet
the obligations under the promissory note.
Which government agencies regulate the mine operation?
The State of Alaska has oversight for the mine operation through
the Division of Mining, Dept. of Natural Resources (DOM, DNR), and
for environmental compliance through the Dept. of Environmental
Conservation (DEC). Federal oversight is through the Corps of
Engineers regarding any wetlands issues, EPA for water quality and
other environmental compliance.
How long is the mining season in Alaska?
For the proposed operation in the Candle area, approximately 90-120 days, maximum:
June-September. Permafrost also plays a factor in that the next
season’s production area has to be prepared before the end of the
Other areas in Alaska can have longer seasons.
How is the operation re-supplied?
By air. In most of Alaska, re-supply is accomplished overland
seasonally, by airplane or by river barge or seasonal sea lift by
barge, if the location is coastal Alaska. Overland resupply
can have seasonal constraints depending upon the location.
The proposed Candle operation can be supplied by air as there is a
4,500 ft runway at Candle that is Lockheed L1020 capable (C130)
(year round), and by river--only during the summer months.
The mine site determines the method of logistics.
How large is the available mining area?
An alluvial mining claim comprises 40 acres. The only
properties to be considered will have sufficient claims to justify
the number of cubic yards comprising this tax shelter program.
The Candle property meets this criterion.
What are patented mining claims?
Patented mining claims are rare and were created under the Mining
Act of 1872. The mining claims at Candle are patented under federal
patents. This means that the mine owner owns the surface and the
subsurface mineral rights.
What is the fineness of recovered gold in Alaska?
The fineness or purity of native gold is .76 to .92. The proposed Candle
property historically produces .76-.78 fine gold.
What pays for the cost of mining?
The mine will be operated under contract by Terra Resources, Ltd.
which company will provide their Arctic Miner(TM) alluvial mining
technology to insure adequate Au recovery.
The cost of operation is paid for through a cost per ton fee of $70 per
ton to recover
any gold. This is the basis of the $105,000 per mining unit
cost to the investor.
The investor's risk is that there is
enough gold to pay any balance remaining on the $105,000 initial
mining unit price.
How would the gold recovery be handled so that the investor will
get his/her share from the mining unit purchased?
To recover the gold, the
overburden is stripped to bedrock using dozers, with
the material at or next to bedrock being excavated and run through
the wash plant. The gold is then separated from the alluvium into a
concentrate by gravity. The gold bearing concentrate is removed daily and taken
back to a recovery room where the gold is then further separated
from the magnetite, garnets and other heavy minerals that may be in
the concentrate. The gold is then melted into dore bars and provided
to the investor with a stamp demonstrating the mining unit. All gold
recovered will be accounted for, with that accounting available to
the investor for review.
Mine owner's Royalty
By IRS rules, the mining property must be leased to GVM&M.
No part of the tax shelter can be used to purchase the claims.
It is a common practice to pay the mine owner a percentage share or
royalty for mining rights.
The mining property claimholder/owner is afforded a royalty percentage share of the
gross amount of recovered gold as payment for the lease on the mine
property, usually 10% of the gross amount of gold (Au) recovered. The
investor’s share is the remainder of the gold recovered from the
investor's mining unit after the
leaseholder’s royalty has been removed.
GOLD (Au) is the target metal to be recovered under this program.
This is the metal to be "paid" in kind to the claim owner and to the
investor recovered from the investor's mining unit. To recover
any other metals would be more expensive, and may require additional
regulatory restrictions upon the operation.
Will the investor be able to visit the mining operation?
Yes, the investor only, as long as there is advance notice so
that quarters can be provided at the mine. The investor will be
expected to spend one, or two, days at the site depending on weather
conditions. The investor will have access to all aspects of the mine
operation. Be advised, THIS IS NOT A TOURIST CAMP. ALL VISITORS WILL
BE ESCORTED AT ALL TIMES DUE TO WILDLIFE AND OTHER HAZARDS. A
RELEASE FROM LIABILITY WILL ALSO BE REQUIRED. FURTHER, VISITS WILL
BE LIMITED, DUE TO QUARTERS, FOOD AND OTHER ISSUES INVOLVING THE
OPERATION OF A REMOTE AIR SUPPORTED MINING OPERATION IN BUSH ALASKA.
How can the investor get to the mine site?
Fly to Kotzebue, Alaska via Alaska Airlines, then to Candle
through Haglund or another air taxi service. GVM will coordinate the
arrangements for the investor from Anchorage, Alaska north.
If the investor intends to visit the mine, what is needed in the
way of clothing?
Bring a heavy parka, rain gear, rubber boots, hiking boots,
gloves, and a good hat. Lots of mosquito repellent is a good idea,
also. You will literally be in the wilderness, so do not have high
expectations regarding services.
What is there to do besides viewing the mine?
A fishing license is a good idea, along with a good fishing pole
as salmon run in the river through Candle proper during the summer.
There are Arctic Char and other game fish besides salmon. Berries
are plentiful in the fall. A good camera and/or video camera for
local wildlife is also recommended.