SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB

              [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                 For the quarterly period ended October 31, 2000

                                       OR

             [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                 For the transition period from________to________

                         Commission File Number: 0-13078

                     LEADVILLE MINING & MILLING CORPORATION
        (Exact name of small business issuer as specified in its charter)

                          NEVADA                       13-3180530
              (State or other jurisdiction of        (I.R.S. Employer
               incorporation or organization)       Identification No.)

                      76 Beaver Street, New York, NY 10005
                    (Address of principal executive offices)

         Issuer's telephone number, including area code: (212) 344-2785

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.

                                 Yes [X] No [_]

Indicate the number of shares outstanding of each of the issuer's classes of
common equity as of the latest practicable date.

           Class                                 Outstanding at October 31, 2000
  Common Stock, par value                             26,824,014 Shares
       $.001 per share

         Transitional Small Business Format (check one); Yes [_] No [X]

<PAGE>

<PAGE>

                          PART I. FINANCIAL INFORMATION


Item 1. Financial Statements

The accompanying financial statements are unaudited for the interim periods, but
include all adjustments (consisting only of normal recurring accruals), which we
consider  necessary  for the fair  presentation  of results for the three months
ended October 31, 2000.

Moreover,  these  financial  statements  do  not  purport  to  contain  complete
disclosure in conformity  with  generally  accepted  accounting  principles  and
should be read in conjunction with our audited financial  statements at, and for
the fiscal year ended July 31, 2000.

The  results  reflected  for the three  months  ended  October  31, 2000 are not
necessarily indicative of the results for the entire fiscal year.



                                       2
<PAGE>

                       LEADVILLE MINING AND MILLING CORP.
                        (A DEVELOPMENT STAGE ENTERPRISE)
                                  BALANCE SHEET
                                OCTOBER 31, 2000
                                   (Unaudited)


                                     ASSETS

Current Assets:
  Cash                                                             $     72,659
  Loans Receivable                                                       16,050
  Other Current Assets                                                    9,653
                                                                   ------------
     Total Current Assets                                                98,362
                                                                   ------------

Property and Equipment (Net of
  Accumulated Depreciation of $361,754)                               1,343,897
                                                                   ------------
Other Assets:
  Mining Reclamation Bonds                                               47,750
  Security Deposit                                                        3,667
                                                                   ------------
     Total Other Assets                                                  51,417
                                                                   ------------

Total Assets                                                       $  1,493,676
                                                                   ============

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
  Accrued Expenses and Taxes                                       $    105,810
  Note Payable - Current Portion                                          4,908
                                                                   ------------
         Total Current Liabilities                                      110,718

Long Term Liabilities:
  Note Payable - Net of Current Portion                                   4,264
                                                                   ------------

         Total Liabilities                                              114,982
                                                                   ------------

Commitments and Contingencies

Stockholders' Equity:
  Common Stock, Par Value $.001 Per Share;
    Authorized 150,000,000 shares; Issued and
    Outstanding 26,824,014, Shares                                       26,824
  Capital Paid In Excess of Par Value                                12,001,237
  Deficit Accumulated in the Development Stage                      (10,649,367)
                                                                   ------------
     Total Stockholders' Equity                                       1,378,694
                                                                   ------------

Total Liabilities and Stockholders' Equity                         $  1,493,676
                                                                   ============

The accompanying notes are an integral part of the financial statements.


                                       3
<PAGE>

                       LEADVILLE MINING AND MILLING CORP.
                        (A DEVELOPMENT STAGE ENTERPRISE)
                             STATEMENT OF OPERATIONS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                                      For The Period
                                                                                                    September 17, 1982
                                                                  Three Months Ended                    (Inception)
                                                                      October 31,                            To
                                                              2000                  1999             October 31, 2000
                                                         ------------           ------------         ----------------
<S>                                                      <C>                    <C>                    <C>
Revenues:
  Sales                                                  $      4,577           $       --             $      4,577
  Interest Income                                                 653                    244                712,158
  Miscellaneous                                                  --                      400                 26,276
                                                         ------------           ------------           ------------

    Total Revenues                                              5,230                    644                743,011
                                                         ------------           ------------           ------------

Costs and Expenses:
  Mine Expenses                                               323,684                159,306              3,736,123
  Selling, General and Administrative Expenses                519,923                 76,559              7,155,237
  Depreciation                                                    956                  1,329                361,754
  Loss on Write-Off of Investment                                --                     --                   10,000
  Loss on Joint Venture                                          --                     --                  101,700
                                                         ------------           ------------           ------------

    Total Costs and Expenses                                  844,563                237,194             11,364,814
                                                         ------------           ------------           ------------

Loss Before Provision For Income Taxes                       (839,333)              (236,550)           (10,621,803)

Provision For Income Taxes                                        170                    170                 27,564
                                                         ------------           ------------           ------------

Net Loss                                                 $   (839,503)          $   (236,720)          $(10,649,367)
                                                         ============           ============           ============

Net Loss Per Share                                       $       (.03)          $       (.01)
                                                         ============           ============

Average Common Shares Outstanding                          26,150,013             20,393,990
                                                         ============           ============
</TABLE>

The accompanying notes are an integral part of the financial statements.


                                       4
<PAGE>

                       LEADVILLE MINING AND MILLING CORP.
                        (A DEVELOPMENT STAGE ENTERPRISE)
                             STATEMENT OF CASH FLOWS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                                       For The Period
                                                                                                     September 17, 1982
                                                                     Three Months Ended                 (Inception)
                                                                         October 31,                         To
                                                                 2000                  1999           October 31, 2000
                                                            ------------          ------------        ----------------
<S>                                                         <C>                   <C>                   <C>
Cash Flow From Operating Activities:
  Net Loss                                                  $   (839,503)         $   (236,720)         $(10,649,367)
  Adjustments to Reconcile Net Loss to
    Net Cash Used By Operating Activities:
      Depreciation                                                   956                 1,329               361,754
      Loss on Write-Off of Investment                               --                    --                  10,000
      Loss From Joint Venture                                       --                    --                 101,700
      Value of Common Stock Issued For Services                   15,170                  --               1,957,404
      Compensation Portion of Options Exercised                  426,550                  --               1,874,606
      Changes in Operating Assets and Liabilities:
        Increase in Other Current Assets                          (6,474)                 (431)               (9,653)
        Increase in Security Deposit                                --                    --                  (3,667)
        Increase (Decrease) in Accrued Expenses
           and Taxes                                              52,296                12,088               105,810
                                                            ------------          ------------          ------------

Net Cash Used By Operating Activities                           (351,005)             (223,734)           (6,251,413)
                                                            ------------          ------------          ------------

Cash Flow From Investing Activities:
  Purchase of Property and Equipment                                --                    --              (1,705,650)
  Investment in Joint Venture                                       --                    --                (101,700)
  Investment in Privately Held Company                              --                    --                 (10,000)
                                                            ------------          ------------          ------------

Net Cash Used By Investing Activities                               --                    --              (1,817,350)
                                                            ------------          ------------          ------------
</TABLE>

The accompanying notes are an integral part of the financial statements.


                                       5
<PAGE>

                       LEADVILLE MINING AND MILLING CORP.
                        (A DEVELOPMENT STAGE ENTERPRISE)
                             STATEMENT OF CASH FLOWS
                                   (Unaudited)
                                   (Continued)

<TABLE>
<CAPTION>
                                                                                                     For The Period
                                                                                                   September 17, 1982
                                                                 Three Months Ended                    (Inception)
                                                                     October 31,                           To
                                                              2000                  1999            October 31, 2000
                                                          -----------           -----------         ----------------
<S>                                                       <C>                   <C>                   <C>
Cash Flow From Investing Activities:
  (Increase) Decrease in Loans Receivable                 $    (1,500)          $    (1,000)          $   (16,050)
  Increase in Loans Payable - Officers                           --                    --                  18,673
  Repayment of Loans Payable - Officers                          --                    --                 (18,673)
  Increase in Note Payable                                       --                  13,223                11,218
  Decrease in Note Payable                                     (1,228)                 --                  (2,046)
  Increase in Loan Payable                                       --                  12,500                  --
  Proceeds From Sale of Common Stock                          383,570               136,499             8,610,063
  Commissions on Sale of Common Stock                            --                    --                  (5,250)
  Expenses of Initial Public Offering                            --                    --                (408,763)
  Purchase of Certificate of Deposit - Restricted                --                    --                  (5,000)

  Purchase of Mining Reclamation Bond                          (6,600)                 --                 (42,750)
                                                          -----------           -----------           -----------

Net Cash Provided By Financing Activities                     374,242               161,222             8,141,422
                                                          -----------           -----------           -----------

Increase (Decrease) In Cash and Cash Equivalents               23,237               (62,512)               72,659

Cash and Cash Equivalents - Beginning                          49,422               106,893                  --
                                                          -----------           -----------           -----------

Cash and Cash Equivalents - Ending                        $    72,659           $    44,381           $    72,659
                                                          -----------           -----------           -----------

Supplemental Cash Flow Information:
  Cash Paid For Interest                                  $      --             $      --             $      --
                                                          -----------           -----------           -----------

  Cash Paid For Income Taxes                              $       170           $       170           $    27,013
                                                          -----------           -----------           -----------

Non-Cash Financing Activities:
  Issuance of Common Stock as Commissions
    on Sales of Common Stock                              $    58,530           $      --             $   403,480
                                                          -----------           -----------           -----------

Issuance of Common Stock as Payment for Expenses          $      --             $      --             $   192,647
                                                          -----------           -----------           -----------

Issuance of Common Stock For
  Property and Equipment                                  $      --             $      --             $     4,500
                                                          -----------           -----------           -----------
</TABLE>

The accompanying notes are an integral part of the financial statements.


                                       6
<PAGE>

                       LEADVILLE MINING AND MILLING CORP.
                         (A DEVELOPMENT STAGE ENTERPRISE
                          NOTES TO FINANCIAL STATEMENTS
                                OCTOBER 31, 2000
                                   (Unaudited)


NOTE 1 - Basis of Presentation

In the opinion of the Company,  the accompanying  unaudited financial statements
reflect  all  adjustments  (which  include  only normal  recurring  adjustments)
necessary to present  fairly the financial  position,  results of operations and
cash flows for the periods presented.

Results of operations for interim periods are not necessarily  indicative of the
results of operations for a full year due.

NOTE 2 - Subsequent Events

In December 2000,  the Company  entered into a letter of intent for an option to
purchase  from  AngloGold  of  North  American  Inc.  100%  of  the  issued  and
outstanding stock of Minera Chanante S.A. de C.V., a wholly-owned  subsidiary of
AngloGold North American Inc. Minera  Chanante's  assets consist or will consist
of certain exploitation and exploration  concessions in the States of Sonora and
Chihuahua, Mexico. Pursuant to the letter of intent, from the date of the letter
of intent  through the date three months after the  execution of the  definitive
stock purchase option  agreement,  the Company will be permitted to complete its
due diligence on the acquisition. The option will expire if the Company does not
exercise it by the end of the due  diligence  period.  For a period of 12 months
after the execution of the option,  the Company will be  responsible  for making
all  rental  and   maintenance   payments   on  Minera   Chanante's   properties
(approximately  $126,000).  If at the end of that 12 month  period,  the Company
decides  that it still wants to own Minera  Chanante,  the Company  will make an
additional  $50,000  payment to AngloGold of North  American Inc. If the Company
decides  that it does not want to continue to own Minera  Chanante,  the Company
must sell the shares back to AngloGold for $1.00. Assuming that the Company does
not sell it back,  AngloGold will be entitled to an ongoing net smelter  returns
royalty of between 2% and 4%,  plus a 10% net profits  interest  until the total
net profits interest payment received by AngloGold equals $1,000,000.


                                       7
<PAGE>

Item 2. Management's  Discussion and Analysis of Financial Condition and Results
        of Operations.

Cautionary Statement on Forward-Looking Statements

Except for the historical  information contained herein,  certain of the matters
discussed in this quarterly report are "forward-looking  statements," as defined
in Section 21E of the  Securities  Exchange Act of 1934,  which involve  certain
risks and  uncertainties,  which could cause actual results to differ materially
from those  discussed  herein  including,  but not limited to, risks relating to
changing economic conditions,  changes in the prices of minerals and the results
of testing and actual mining.

We caution  readers that any such  forward-looking  statements  are based on our
current  expectations and beliefs but are not guarantees of future  performance.
Actual results could differ  materially  from those  expressed or implied in the
forward-looking statements.

Three Months Ended  October 31, 2000  Compared to Three Months Ended October 31,
1999

Results of Operations

During the first fiscal quarter ended October 31, 2000 exploration  continued at
the  Hopemore  mine both  underground  and on the  surface in search of mineable
gold.

At the  Hopemore  mine,  7th level  the  exploratory  drift on vein #69,  7L-428
continued   in  a   southeasterly   direction   encountering   gold  and  silver
mineralization  on an average 4-foot width,  the length of the  structure.  Long
hole  drilling  was also  carried  out at the  terminus of the drift to test the
walls and the vein  ahead of the  drift.  The #69 vein is  considered  to be the
feeder  system to the  overlaying  Silica  Stope,  ore body.  The grades to date
reveal a series of small  high-grade gold shoots along a generally,  lower grade
mineral trend. The site is presently undergoing  evaluation pursuant to possible
further exploration.

Long  hole  drilling  has also been  performed  on the  Hopemore  6th level at a
location where intense mining occurred at the turn of the last century. No assay
results have yet been received.

R.C. drilling including Phase I and Phase II have been completed and the results
are being  evaluated.  Phase  III R.C.  drilling  will be guided by  information
gained  from the  evaluation.  General  observations  to date  revealed  a large
envelope of gold/silver  mineralization  associated with near surface  carbonate
rock units,  overlain by approximately 100 feet of porphyry sill material.  Core
areas  within  the zone  reveal  economic  grades of gold and  silver  generally
associated with open pit/heap leach type of mining operations. The mineral trend
appears  to  trend to the  north-northeast  and  east.  We  continue  to seek an
expanded land position in that direction.

R.C.  Drilling  also  took  place on newly  acquired  ground  to the west of the
Hopemore Mine, in the areas of the great magnetic anomaly. Three R.C. holes were
drilled within the anomaly and


                                       8
<PAGE>

encountered  disseminated  gold/silver  mineralizations  at depths of 150 to 200
feet.  The results were  encouraging  and will serve as the catalyst for further
exploration.

In December  2000,  we entered into a letter of intent for an option to purchase
from AngloGold of North American Inc. 100% of the issued and  outstanding  stock
of Minera  Chanante S.A. de C.V., a wholly-owned  subsidiary of AngloGold  North
American  Inc.  Minera  Chanante's  assets  consist  or will  consist of certain
exploitation and exploration  concessions in the States of Sonora and Chihuahua,
Mexico.  Pursuant to the letter of intent, from the date of the letter of intent
through  the date three  months  after the  execution  of the  definitive  stock
purchase option agreement, we will be permitted to complete our due diligence on
the  acquisition.  The option will expire if we do not exercise it by the end of
the due diligence  period.  For a period of 12 months after the execution of the
option, we will be responsible for making all rental and maintenance payments on
Minera Chanante's properties  (approximately $126,000). If at the end of that 12
month period, we decide that we still want to own Minera Chanante,  we will make
an additional  $50,000  payment to AngloGold of North American Inc. If we decide
that we do not want to continue to own Minera Chanante,  we must sell the shares
back to AngloGold  for $1.00.  Assuming  that we do not sell it back,  AngloGold
will be entitled to an ongoing net smelter returns royalty of between 2% and 4%,
plus a 10% net profits  interest  until the total net profits  interest  payment
received by AngloGold equals $1,000,000.

The  most  advanced  concession  is  the  El  Chanante  gold  property,  located
approximately 25km northeast of Caborca, in Sonora, Mexico. A total of 199 drill
holes are present and  suggest a resource  of one  million  ounces of gold.  The
stripping ratio is about 1.4 to l.

We generated de minimis  revenues from operations  during the three months ended
October 31, 2000 of $4,577 and no revenue  for October 31,  1999.  There were de
minimis  non-operating  revenues  during the three months ended October 31, 2000
and 1999 of $653 and $644, respectively.

Over all,  costs and expense  increased  by $607,369  (approximately  256%) from
October 31, 1999 ($237,194) to October 31, 2000 ($844,563).

Mine expenses increased by $164,378  (approximately  103%) from October 31, 1999
($159,306)  to October  31,  2000  ($323,684).  The  increase  in mine  expenses
resulted primarily from expanded work at the mine.

Selling, general and administrative expenses increased by $443,664 approximately
(579%) from October 31, 1999 ($76,559) to October 31, 2000 ($519,923)  primarily
due to increase in the cost of raising capital.

As a result,  our net loss for the  three  months  ended  October  31,  2000 was
$839,503, which was $602,783 (approximately 255%) more than our October 31, 1999
loss of $236,720.

Liquidity and Capital Resources

As of October 31, 2000, we had a deficit working capital of $12,356. We can only
continue as a going concern if we obtain additional  capital. We anticipate that
we will need  approximately  $1,150,000  in order to carry out our plans for the
remainder of fiscal 2001, which includes the costs of  administration,  and mine
related  activities in both Colorado and Mexico.


                                       9
<PAGE>


To the extent  that cash flow is  unavailable,  management  intends to raise all
necessary  capital  through the sale of its  securities  and/or debt  financing.
There can be no  assurance,  however,  that such funds  will be raised.  We have
raised  approximately  one million dollars through the sale of securities  since
October 31, 2000.

Specific plans to obtain  financing will most likely include private  placements
of our securities to institutions, private individuals and/or investment groups.
During the three-month ended October 31, 2000, we raised approximately  $383,570
through the sale of common stock.  These investments have enabled us to initiate
R.C.  drilling  from the  surface,  core  drilling and long hole  drilling  from
underground  and to drive  tunnels  and drifts from the  Hopemore  7th level and
conduct metallurgical testing of B-zone minerals.

Environmental Issues

We do not expect that environmental  issues will have an adverse material effect
on  our  liquidity  or  earnings.   Before  any  mining  development  or  mining
exploration or construction of milling  facilities could begin, it was necessary
to meet all environmental requirements and to satisfy the regulatory agencies in
Colorado  that our  proposed  procedures  fell  within the  boundaries  of sound
environmental  practice.  We are bonded to insure  procedures and reclamation of
any areas disturbed by our activities. In 1997, the Mined Land Reclamation Board
reviewed  our permit and bond and  determined  that an  increase in the bond was
necessary.  At that time, we placed an additional  $6,000 in escrow  against any
future  indemnity.  We again  increased  the bond by an  additional  $24,550 and
$5,600 respectively on March 14, 2000 and July 25, 2000. On October 19, 2000, we
again increased the bond by an additional $6,600.

Part of the Leadville  Mining  District was declared a Superfund  site.  Several
mining  companies  and one  individual  were  declared  defendants in a possible
lawsuit.  We were not named a defendant or Possible  Responsible  Party.  We did
respond in full detail to a lengthy questionnaire  prepared by the Environmental
Protection Agency ("EPA") regarding our proposed  procedures and past activities
in November 1990. To our knowledge, the EPA has initiated no further comments or
questions.

We do include in all our internal  revenue and cost projections a certain amount
for  environmental  and  reclamation  costs on an ongoing basis.  This amount is
determined  at a fixed  amount  of $1.50 per ton of  material  to be milled on a
continual,  ongoing basis to provide for further  tailing  disposal sites and to
reclaim the tailings  disposal sites in use. At this time, there does not appear
to be  any  environmental  costs  to be  incurred  by us  beyond  those  already
addressed above. No assurance can be given that  environmental  regulations will
not be changed in a manner that would adversely affect our planned operations.


                                       10
<PAGE>

                           PART II - OTHER INFORMATION


Item 1. Legal Proceedings

     None.

Item 2. Changes in Securities and Use of Proceeds

During the quarter ended October 31, 2000, we issued the following shares of our
common stock  pursuant to the exemption  from  registration  provided by Section
4(2) of the  Securities  Act of 1933:  In August  2000,  we sold an aggregate of
729,564 shares to fourteen  individuals  for an aggregate of $155,770 and issued
1,060,000 shares to two individuals for  commissions,  expenses and services for
an aggregate  value of  $439,770.  In  September  2000,  we sold an aggregate of
271,364 shares to five individuals for an aggregate of $62,700 and issued 15,000
shares to one  individual  for expenses  and services for an aggregate  value of
$1,950.  In October  2000,  we sold an  aggregate  of 723,989  shares to sixteen
individuals for an aggregate of $167,100.

Item 3. Defaults Upon Senior Securities

     None.


Item 4 Submission of Matters to a Vote of Security Holders

     None

Item 5. Other Information


     None.

Item 6. Exhibits and Reports on Form 8-K

     Letter of Intent signed December 15, 2000 with AngloGold North America Inc.


                                       11
<PAGE>

                                   SIGNATURES


Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereto duly authorized.


                                      LEADVILLE MINING & MILLING CORPORATION
                                                   Registrant


                                      By: /s/ Gifford A. Dieterle
                                          ------------------------------
                                          Gifford A Dieterle
                                          President/Treasurer


Date: December 19, 2000


                                       12
<PAGE>

                        LEADVILLE MINING & MILLING CORP.
                          76 Beaver Street - Suite 500
                            New York, New York 10005



                                            December 13, 2000


Mr. Jerry Bateman
AngloGold North America Inc.
5251 DTC Parkway, Suite 700
Englewood, CO 80111
Fax No.: 303-889-0707

Dear Jerry:

     Pursuant to the ongoing  discussions  we have had with your  company,  this
letter is to confirm the  conditions  under which  Leadville  Mining and Milling
Corporation   ("LMMI")   would  acquire  from   AngloGold   North  America  Inc.
("AngloGold")  an exclusive option to purchase all of the issued and outstanding
stock (the  "Stock")  of Minera  Chanate  S.A.  de C.V.  ("Minera  Chanate"),  a
wholly-owned  subsidiary  of  AngloGold,  which  owns (or will own  prior to the
execution of the Stock Purchase Option Agreement  referred to below) (i) certain
exploitation and exploration  concessions which together comprise the El Chanate
Property located in Sonora,  Mexico, as more particularly described on Exhibit A
attached hereto (together with any ancillary rights  associated  therewith,  the
"El Chanate  Property") and (ii) certain additional  exploration  concessions in
the states of Sonora and Chihuahua,  Mexico, as more  particularly  described on
Exhibit  B  attached  hereto  (together  with any  ancillary  rights  associated
therewith, the "Additional Property;" the concessions at the El Chanate Property
and the concessions within the Additional Property will be collectively referred
to as the "Properties").

     The definitive  agreement (the "Stock Purchase Option  Agreement") by which
AngloGold would grant to LMMI the option to purchase the Stock would contain the
terms and conditions set forth below, as well as such other terms and conditions
as are usual and customary in a transaction  of this nature and as may be agreed
upon by AngloGold  and LMMI.  All dollar  amounts set forth herein are in United
States dollars.


                                       13
<PAGE>

     1. Stage 1 -- Due Diligence  Period (3 months) For and in  consideration of
$5,000 in hand previously  paid by LMMI to AngloGold,  prior to the execution of
the  Stock  Purchase  Option  Agreement,  and  during a  3-month  option  period
commencing on the date of execution of the Stock Purchase Option  Agreement (the
"Due Diligence Period"), LMMI shall be free to conduct a due diligence review of
(a) title to, (b) surface ownership of, (c) environmental conditions at, and (d)
geological,  engineering,  metallurgical,  political and other  conditions at or
affecting the  Properties,  as well as any other matters LMMI  reasonably  deems
necessary,  and AngloGold  will  cooperate  fully with LMMI in  conducting  such
reviews.

     2. Stage II -- Option to Acquire Stock and Evaluation Period (9 months). On
or prior to the last day of the Due Diligence Period, LMMI shall have the right,
in its sole  discretion,  to notify  AngloGold  that LMMI  wishes to acquire the
Stock. In the event LMMI timely exercises the option,  the transfer of the Stock
shall occur as soon as reasonably practicable,  for no additional consideration,
as set forth in the Stock  Purchase  Option  Agreement.  If LMMI fails to timely
exercise the option to purchase the Stock,  the Stock Purchase Option  Agreement
will terminate.

     During the initial  12-month period  commencing on the date of execution of
the Stock Purchase Option Agreement (which,  including the Due Diligence Period,
will be  referred  to  hereinafter  as the  "Evaluation  Period"),  LMMI will be
responsible for (a) making all rental/maintenance  payments and filings required
during that period to maintain the concessions at the El Chanate Property (which
the parties  agree will amount to  approximately  $54,000 in payments  due twice
during  the  Evaluation  Period,  once in  January  of 2001 and again in July of
2001),  or, if any  concessions are dropped,  termination  payments in a similar
amount; (b) making all  rental/maintenance  payments required during that period
to maintain the concessions at the Additional  Property (which the parties agree
will amount to approximately  $9,000 in payments due twice during the Evaluation
Period,  once in  January  of 2001  and  again  in July  of  2001),  or,  if any
concessions  are  dropped,  termination  payments in a similar  amount;  and (c)
diligently working towards converting the eleven exploration  concessions at the
El Chanate Property to exploitation  concessions (assuming the data derived from
those  concessions  warrant such a conversion).  If LMMI, at any time during the
Due Diligence  Period,  elects to terminate the Stock Purchase Option Agreement,
LMMI shall  nevertheless  be responsible for making the payments and filings due
in January and July of 2001 to maintain the concessions at the  Properties,  or,
if any concessions are dropped, to terminate such concessions.  AngloGold agrees
that it will  provide to LMMI a schedule of the  anticipated  rental/maintenance
payments for the  concessions at the Properties as soon as practicable and prior
to the execution of the Stock Purchase Option Agreement.



     During the  entire Due  Diligence  Period,  AngloGold  will grant (or cause
Minera  Chanate  to  grant)  to LMMI the sole and  exclusive  right to go on the
Properties for the purpose of conducting exploration and development activities.
At the beginning of the Due Diligence


                                       14
<PAGE>

Period,  AngloGold  will  make  available  to  LMMI  all  data  and  information
concerning the Properties in AngloGold's  possession or reasonably  available to
AngloGold.  Notwithstanding  the prior  grammatical  paragraph,  during  the Due
Diligence  Period,  AngloGold  will  cooperate  with LMMI by  timely  delivering
payments,  notices and the like to applicable  governmental  agencies  (assuming
such payments,  notices and the like are timely prepared by LMMI and provided to
AngloGold).

     3. Stage III -- End of  Evaluation  Period.  On or prior to the last day of
the Evaluation Period, if LMMI desires to continue to hold all or any portion of
the concessions at the Properties,  LMMI must make an additional $50,000 payment
to  AngloGold.  If LMMI  does  not wish to hold  any of the  concessions  at the
Properties,  LMMI must similarly notify AngloGold on or prior to the last day of
the Evaluation Period, and thereafter,  as soon as practicable and in accordance
with the Stock Purchase Option  Agreement,  LMMI will offer to convey all of the
issued and  outstanding  stock of Minera  Chanate (or any  successor  entity) to
AngloGold.  If LMMI timely makes the additional $50,000 payment,  but thereafter
decides to abandon  any  particular  concession(s),  LMMI shall  offer to convey
those concession(s) to AngloGold, for a consideration of one dollar, and if such
offer is not made at least 90 days prior to the date(s) any semi-annual  payment
required to hold such  concession(s)  is due, then LMMI will be required to make
such payment.

     4. Stage IV --  Additional  Consideration  for  Purchase of Stock and Joint
Venture Option.  As additional  consideration  for the purchase of the Stock (in
addition to the payments  referred to above),  in the event LMMI  exercises  its
option  to  purchase  the  Stock  and  does not  convey  all of the  issued  and
outstanding stock of Minera Chanate or any successor entity back to AngloGold as
described in paragraph 3 above,  AngloGold  shall reserve a net smelter  returns
royalty ("NSR Royalty") as follows:

           Gold Price                              %NSR
           ----------                              ----

           Less than $300/oz.                       2%
           $300/oz. to $350/oz.                     3%
           Greater than $350/oz.                    4%


                                       15
<PAGE>

     Upon the commencement of commercial  production for any deposit of ore from
any of the  concessions  at the  Properties,  in  addition  to the NSR  Royalty,
AngloGold shall be entitled to receive a 10% net profits  interest ("NPI") until
a total of $1,000,000 has been paid to AngloGold based on production from any of
those  concessions,  at  which  time  the NPI  shall  be  extinguished.  If LMMI
exercises the option,  and  thereafter  the drill  indicated  resource at the El
Chanate Property or any of the Additional  Properties exceeds two million ounces
of  contained  gold,  AngloGold  shall have a one-time  option to buy back a 51%
interest in the entity  holding the El Chanate  Property  and/or the  Additional
Properties,  whichever is  applicable,  by paying to LMMI an amount equal to two
times 51% of the project costs incurred by LMMI from the date of the Exploration
Agreement forward on or related to the El Chanate Property. AngloGold's buy back
right  shall be  subject  to the  execution  and  delivery  by the  parties of a
mutually  agreeable mining venture  agreement,  using the Rocky Mountain Mineral
Law Foundation Forms 5 and 5A as models,  subject to whatever  modifications and
additional provisions are mutually agreeable to the parties and as are necessary
for the mining venture  agreement to be valid and enforceable  under  applicable
Mexican federal, state and local laws.

     5.  Representations and Warranties.  The Stock Purchase Option Agreement is
to  contain,  among  other  provisions,   representations  and  warranties  from
AngloGold (a) that to the best of its  knowledge,  Minera Chanate holds title to
the Properties,  free and clear of all claims,  liens,  encumbrances and defects
arising by,  through or under it, and that to the best of its  knowledge  it has
performed all actions and made all payments  necessary to keep the Properties in
good standing through the effective date of the Stock Purchase Option Agreement;
(b) that AngloGold has no knowledge of any litigation or administrative  actions
affecting the  Properties;  (c) that to the best of its  knowledge  there are no
adverse environmental conditions at the Properties;  and (d) that to the best of
its knowledge  Minera Chanate owns no assets and is subject to no liabilities or
obligations other than those connected with the Properties.

     6.  Confidentiality.  This  letter  and its  contents  are  intended  to be
confidential  and are not to be disclosed to or discussed  with any third party,
except to legal  counsel and advisors  assisting  LMMI in its  evaluation  of or
conduct of activities on the Properties, or to the extent disclosure is required
by law or stock exchange rule.

     7. No  Assignment.  Neither this letter,  nor any of the rights,  duties or
obligations of the parties hereunder may be assigned by either party without the
prior written consent of the other party hereto; provided, however, that no such
consent shall be required for an assignment  by LMMI to a  wholly-owned  Mexican
subsidiary or in connection  with a corporate  merger,  reorganization  or other
consolidation involving LMMI.

     It is understood  that this letter,  except for  paragraphs 6 and 7 and the
payment  obligations  set forth in  paragraph 2, is not intended to and does not
constitute a binding agreement, and until the Stock Purchase Option Agreement is
executed and delivered, neither party shall have any legal obligation to proceed
with the transaction  described in this letter.  Notwithstanding  the foregoing,
the execution of this letter shall constitute the binding agreement of AngloGold
through  January  31,  2001,  to refrain  from  entering  into any  discussions,
negotiations  or agreements with any third party regarding the conveyance of any
interest in the Properties,  or any joint venture, farm-out or other arrangement
affecting activities at the Properties.  In addition, the


                                       16
<PAGE>

parties  agree to work  diligently  and in good faith towards the execution of a
Stock  Purchase  Option  Agreement  as soon as  reasonably  practicable.  If the
foregoing  is  acceptable  to you,  please  so  indicate  by  signing  duplicate
originals of this letter in the space  provided  below,  and returning one fully
executed original to me. The parties hereby agree that faxed and/or  counterpart
copies of this letter may serve as originals for all intents and purposes.


                                        Yours very truly,


                                        /s/ Gifford A. Dieterle
                                        ----------------------------------------
                                        Gifford Dieterle, President
                                        Leadville Mining and Milling Corporation


Accepted and agreed to this 15 day of December, 2000.


By /s/ Jim Komandina
   ------------------------------------
       CEO and President
       of  AngloGold North America Inc.


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