Eric David & Sons: Can you tell our readers about LKA’s properties including the Golden Wonder Mine?

Kye Abraham: LKA International owns a high-grade, gold producing property known as the Golden Wonder Mine which is located near Lake City, CO. The Golden Wonder is a lode-type deposit which is characterized by narrow vein(s) and exceptionally high grades. Over the most recent eight quarters our operators have produced 39,184 ounces of gold at a weighted average grade of 15.26 ozs. Au per ton. As the property owner, LKA receives a 10% “net smelter royalty” which it shares with an affiliated partnership. LKA anticipates increasing its interest in the Golden Wonder by funding further exploration and development to increase the size of the existing production zone.

EDS: Will you introduce us to your management team?

KA: Since LKA International is a land owner and not an operator, the active management team consists primarily of myself. With our industry contacts we think we can operate more efficiently, at this point anyway, by outsourcing the technical work, geology, legal, engineering, etc.

EDS: What testing has been done on the Golden Wonder Mine prior to the decision to expand operations there?

KA: We’ve owned this property since 1982 and expended over $1.3 million in exploration and development of the existing vein structure. This included a five-month pilot production program in 1985. The Golden Wonder has been in production for the past five years, so I can say with a reasonable degree of confidence that I think we’ve got a pretty good handle on the geology. In our proposed expansion plan we’ll be driving a drift into the side of a mountain with the proposed adit for the lower level located approximately 1,000 feet vertically below the existing vein structure on 6 th level and almost a mile away laterally. This means that drilling to intersect the existing vein structure will be expensive. Having said that, we’ve not ruled out some directional drilling at various points on the mountainside. I guess we’ll have to see how we do with permitting issues first.

EDS: How much revenue can the company expect to generate from the expansion, at the current gold prices?

KA: Let me address your question in three parts. First, LKA is in the process of acquiring the royalty interest of its affiliated partnership, Caldera Partners in exchange for a 51% interest in LKA. If we’re successful in making this acquisition, and I fully expect we will be, LKA will virtually double its current royalty income even if we do nothing on the proposed expansion. Second, by funding the proposed expansion of the Golden Wonder, LKA expects to increase its interest to over 40%. While this would be subject to certain production costs that we don’t currently pay it will mean a sizeable increase in our overall percentage of production. Finally, if we’re successful in our expansion plans and intersect the current vein structure at the new, lower level the known ore body of the Golden Wonder (including the section we’ve already mined out which exceeds 94,000 ozs. Au) would be extended almost 3 fold vertically and who knows how far laterally. Obviously there are still a number of variables, like permitting, water control and ground conditions that we don’t yet have a handle on. But, with ore grades exceeding 10 ozs. Au per ton at the lowest levels of our current production zone we think it will be worth the investment of an additional $3 million or so.

EDS: How do you plan to finance the expansion at Golden Wonder Mine? Are you currently seeking additional funding? If so, what type?

KA: Well, we haven’t begun the search for financing yet, but we expect to do so sometime within the first half of ‘05. We expect that it would be some type of equity-based financing.

EDS: What kind of profit does current production on Golden Wonder Mine generate?

KA: I can’t speak for our operators because they conduct their activities through a private corporation and their records are not public. I can tell you that over the past two years the Golden Wonder has grossed just under 40,000 ounces of gold by a small crew operating on a single shift basis. Currently, LKA and Caldera share a 10% net smelter interest which equates to about 9% of the gross proceeds after trucking and smelting charges. At current production levels our royalty doesn’t amount to a significant amount, approximately $1.2 million over the last couple of years. But, even at this level LKA showed a profit of $.02 per share in ’02 and $.07 per share in ‘03. Obviously, we think we can do much better by increasing our interest in the Mine and expanding production. I don’t however expect a profitable outcome in 2004 or 2005 due to sizeable increases in expenses associated with our expansion plans.

EDS: How many shares are outstanding and how many are in the public trade-able float?

KA: Currently, there are about 6.3 million shares issued and outstanding. Virtually all of this is free trading. If we complete the acquisition of the Caldera royalty interest that number will increase to approximately 13 million shares of which 6.4 million will be restricted. As to the float, there are approximately 4.8 million shares.

EDS: How many shares do company insiders hold?

KA: As of today, insiders hold approximately 1.5 million shares with options to purchase an additional 2 million shares at prices of $.25 and $.55 over the next three years. These options have been authorized but not yet granted.

EDS: How much cash and liquid assets does the company currently have?

KA: According to our last 10-QSB we had approximately $1.2 million in current assets. This amount includes approximately $200,000 in cash, $677,000 investment in trading securities and the balance in various short-term accounts and notes receivable.

EDS: Where will LKA International go next?

KA: Well, we’ve got enough on our plate to keep us busy in the near term but we’re always on the look-out for projects capable of generating healthy margins. Mining or otherwise. This means that, for now anyway, we’re not interested in high volume, low- grade mining projects where front-end capital and environmental costs are huge.

EDS: Is there anything else you would like to say about the company?

KA: Yes, I don’t know of any other junior, gold producers who have a five-year production history on a property that produces ore this rich. Even more significant in our minds is the possibility that we may have just scratched the surface of a much larger high-grade deposit. As far as the numbers go, we have our properties paid off…$1.2 million in current assets…no long-term debt…only 6.3 million shares outstanding…and, a market cap of less than $1.5 million.

End

Safe Harbor Statement

Statements made in this interview which are not purely historical are forward-looking statements with respect to the goals, plan objectives, intentions, expectations, financial condition, results of operations, future performance and business of LKA. Such forward-looking statements include those that are preceded by, followed by or that include the words "may," "would," "could," "should," "expects," "projects," "anticipates," "believes," "estimates," "plans," "intends," "targets" or similar expressions.

Forward-looking statements involve inherent risks and uncertainties, and important factors (many of which are beyond our control) that could cause actual results to differ materially from those set forth in the forward-looking statements, including the following, in addition to those contained in this report: general economic or industry conditions nationally and/or in the communities in which we conduct business; fluctuations in global gold and silver markets; legislation or regulatory requirements, including environmental requirements; conditions of the securities markets; competition; our ability to raise capital; changes in accounting principles, policies or guidelines; financial or political instability; acts of war or terrorism; and other economic, competitive, governmental, regulatory and technical factors affecting our operations, products, services and prices.

Accordingly, results actually achieved may differ materially from expected results in these statements. Forward-looking statements speak only as of the date they are made. LKA does not undertake, and specifically disclaims, any obligation to update any forward-looking statements to reflect events or circumstances occurring after the date of such statements.

Contact:

Investor Relations:

InvestSource, Inc.
Shawn Emericf
v 949-260-8430 x 8389
f 888-473-9205

Source: LKA International Inc.

Please view the diclaimer of LKAI here

2004 © Eric, David & Sons, Inc. All Rights Reserved.

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