UNITED STATES
                  SECURITIES AND EXCHANGE COMMISSION
                       Washington, D.C.  20549

                              FORM 10-K

   (X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
                        EXCHANGE ACT OF 1934

              For the fiscal year ended March 31, 1997

                   Commission File Number 1-7375

                        COMMERCE GROUP CORP.

       (Exact name of registrant as specified in its charter)

          DELAWARE                                39-6050862
(State or other jurisdiction of      (I.R.S. Employer Identification No.)
 incorporation or organization)

                        6001 North 91st Street
                   Milwaukee, Wisconsin 53225-1795
         (Address of principal executive offices) (Zip Code)

   Registrant's telephone number, including area code: (414) 462-5310

      Securities registered pursuant to Section 12(b) of the Act:

                                              Name of each exchange
          Title of each class                 on which registered
          -------------------                ----------------------
     Common Shares $0.10 par value            Boston Stock Exchange
                                         National Association of Security
                                        Dealers Automated Systems (NASDAQ)

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports 
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 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 by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. (x).

The aggregate market value of the voting stock held by nonaffiliates of
the registrant based on the quote of the NASDAQ Small Cap Issue on May 
13, 1997, was approximately $17,023,171.

Common shares outstanding as of March 31, 1997, were 9,193,042.

DOCUMENTS INCORPORATED BY REFERENCE

Part III incorporated by reference from the registrant's definitive Proxy 
Statement for its Annual Meeting of Shareholders to be filed, pursuant to 
Regulation 14A, no later than 120 days after the close of the 
registrant's fiscal year.

<PAGE>

                            COMMERCE GROUP CORP.
                        1997 FORM 10-K ANNUAL REPORT
                  For the Fiscal Year Ended March 31, 1997

                             TABLE OF CONTENTS

                                                                    Page

Glossary of Mining and Financial Terms . . . . . . . . . . . . . . . 3

                                  PART I

Item 1.     Business . . . . . . . . . . . . . . . . . . . . . . . . 7
Item 2.     Properties . . . . . . . . . . . . . . . . . . . . . . .29
Item 3.     Legal Proceedings. . . . . . . . . . . . . . . . . . . .47
Item 4.     Submission of Matters to a Vote of Security Holders. . .48
Item 4(a).  Executive Officers of the Company. . . . . . . . . . . .48

                                  PART II

Item 5.     Market for the Company's Common Equity and Related
            Stockholders' Matters  . . . . . . . . . . . . . . . . .50
Item 6.     Selected Financial Data. . . . . . . . . . . . . . . . .51
Item 7.     Management's Discussion and Analysis of Financial
            Condition and Results of Operations. . . . . . . . . . .51
Item 8.     Financial Statements and Supplementary Data. . . . . . .57
Item 9.     Changes in and Disagreements on Accounting and
            Financial Disclosure   . . . . . . . . . . . . . . . . .79

                                  PART III

Item 10.    Directors and Executive Officers of the Registrant . . .79
Item 11.    Management Remuneration and Transactions . . . . . . . .79
Item 12.    Security Ownership of Certain Beneficial Owners and
            Management . . . . . . . . . . . . . . . . . . . . . . .79
Item 13.    Certain Relationships and Related Transactions . . . . .79

                                  PART IV

Item 14.    Exhibits, Financial Statement Schedules and Reports on
            Form 8-K   . . . . . . . . . . . . . . . . . . . . . . .80

The Company will furnish a copy of any exhibit filed as a part of this
report to any shareholder of record upon receipt of a written request
from such person and payment of the Company's reasonable expenses for 
furnishing such exhibit.  Requests should be made to the Assistant 
Secretary of the Company at the address set forth on the cover page of 
this report.

This document includes certain "forward-looking statements" within the
meaning of Section 21E of the United States Securities Exchange Act of 
1934, as amended.  All statements, other than statements of historical 
fact, included herein, including without limitation, statements regarding 
potential mineralization and reserves, exploration results, and future 
plans and objectives of Commerce Group Corp. ("Commerce"), are 
forward-looking statements that involve various risks and uncertainties.  
There can be no assurance that such statements will prove to be accurate, 
and actual results and future events could differ materially from those 
anticipated in such statements.  Important factors that could cause 
actual results to differ materially from Commerce's expectations are 
disclosed under various sections of this and other documents filed from 
time to time with the United States Securities and Exchange Commission, 
the Boston Stock Exchange, Inc., and the National Association of Security 
Dealers Automated Systems.

<PAGE>

Glossary of Mining and Financial Terms

Adit - horizontal or nearly horizontal passage driven from the surface 
for the working or unwatering of a mine.  If driven through the hill or 
mountain to the surface on the opposite side it would be a tunnel.  A 
passage driven into a mine from the side of a hill.

Agitated leaching - vigorous stirring of pulp in a tank by low-pressure 
air or mechanical means to prevent settlement used in the leaching of 
gold and other minerals from finely ground aqueous suspension in which 
oxygen is essential to chemical reaction, for example, the cyanide 
process.

Breccia -  fragmental rock, the components of which are angular, and 
therefore, it is distinguished from a conglomerate in that its components 
are not waterworn.  There are friction or fault breccias, talus breccias, 
and eruptive breccias.  Any rock formation essentially composed of 
uncemented, or loosely consolidated, small angular-shaped fragments.

Carbon adsorption - extracting dissolved gold and silver from solvents in
which soluble complexes of gold and silver physically adhere to activated 
carbon particles.

CIL - carbon-in-leach, a process for the recovery of gold from the ore.
Ore is ground finely and mixed with a dilute sodium-cyanide solution to 
dissolve the gold which is absorbed onto carbon.  The gold enriched 
carbon is stripped of the gold and the gold is recovered either through 
electrolysis or precipitation.

CIP - carbon-in-pulp, a process similar to CIL except that the ore is 
leached with cyanide prior to carbon loading.

Contained ounces - estimate of the total number of ounces of gold
contained in an ore body, a portion of which are not recoverable.

Country rock -  rock traversed by or adjacent to an ore deposit.  Applied 
to the rocks surrounding and penetrated by mineral veins or invaded by 
and surrounding an igneous intrusion.  The rock in which a mineral 
deposit or an intrusion is enclosed.

Cross section or cross cut -  profile portraying an interpretation of a 
vertical section of the earth explored by geophysical and/or geological 
methods.  A cutting or a section across.  A section at right angles to, 
especially the longer axis of anything.

Dore - gold and silver bullion which remains in a cupelling furnace after 
the lead has been oxidized and skimmed off.  An unrefined bar of bullion 
containing an alloy of gold, silver and impurities.

Drill rig  - a drill machine complete with all tools and accessory
equipment needed to drill boreholes.

Drilling -  act or process of making a circular hole with a drill.  Use
of a compressed-air rock drill to prepare rock for blasting.  The 
operation of making deep holes with a drill for prospecting, exploration, 
or valuation.

  Blasthole drilling - drilling of holes in rock to insert an explosive 
  charge.  The drill holes are usually 3-8 meters apart.  The blast 
  breaks up the rock so it can be dug out.

  Diamond drilling - drilling with a hollow bit which has a diamond 
  cutting rim to produce a cylindrical core that is used for geological
  study and assays.  Used in exploration.

<PAGE>

  Infill drilling - drilling at shorter intervals between holes, used to
  provide greater geological detail and to help establish reserve
  estimates.

  Rotary drilling - drilling with a bit that breaks the rock into chips
  rather than core.  Faster and cheaper than diamond drilling, the chips
  are forced by water and air to the surface of examination.

  Reverse circulation drilling -  type of rotary drilling that uses a
  double-walled drill pipe.  Compressed air, water, or other drilling
  medium is forced down the space between the two pipes to the drill bit
  and the drilled chips are flushed back up to the surface through the
  center tube of the drill pipe.

Dump material - spoil heap at the surface of a mine stored for further
reclamation.

Electrowinning - recovery of metal from an ore by means of
electrochemical processes.

Extraction - process of mining and removal of ore from a mine.  The
separation of a metal or valuable mineral from an ore or concentrate.

Fire assay - assaying of metallic ores, usually gold and silver, by
methods requiring a furnace heat.  It commonly involves the processes of 
scorification, cupellation, etc.

Flotation - method of mineral separation in which a froth created in 
water by a variety of reagents floats some finely crushed minerals, 
whereas other minerals sink.

Footwall - wall or rock under a vein.  It is called the floor in bedded 
deposits.  Opposite wall from hanging wall.  the underside of vein or 
lens in relation to dip of ore deposit.  In metal mining, that part of 
the country rock which lies below the ore deposit.

Grade - classification of an ore according to the desired or worthless 
material in it or according to value.

Hanging wall -  rock on the upper side of a mineral vein or deposit.

Heap leaching - economical process used for the recovery of ore.   Ore is 
placed in a heap on an impermeable pad and cyanide is sprinkled over the 
heap and collected at the bottom after percolating through the ore and 
dissolving the metals.

Heap leach pad ("heap") -  large, impermeable foundation or pad used as a 
base for ore during heap leaching.  The leach solution is collected and 
does not escape from the circuit.

Leach - to wash or to drain by percolation.  To dissolve minerals or
metals out of the ore, as by the use of cyanide or chlorine solutions,
acids, or water.

Leaching -  removal in solution of the more soluble minerals by
percolating waters.  Extracting soluble metallic compound from an ore by
selectively dissolving it in a suitable solvent.  The solvent is usually 
recovered by precipitation of the metal or by other methods.

Leach material - material sufficiently mineralized to be economically 
recoverable by selectively dissolving the wanted mineral in a suitable 
solvent.

<PAGE>

Leach pad - pad used as base for ore; the pad prevents the leach solution 
from escaping and can be used continually.

Leach pile - mineralized materials stacked so as to permit wanted 
minerals to be effectively and selectively dissolved by application of 
suitable solute.

Merrill-Crowe process - process utilized to recover soluble gold and 
silver values from a sodium-cyanide leaching solution by precipitating 
with zinc dust after the leaching solution is clarified and deoxygenated 
by vacuum treatment.

Metric conversion -
  1 acre = 0.4047 hectare
  1 foot = 0.3048 meters
  1 mile = 1.6093 kilometers
  1 ton = 0.9072 tonne
  1 troy ounce = 31.1034 grams
  1 ounce per ton = 34.2848 grams per tonne

Mill -reducing plant where ore is concentrated and/or metals recovered.
The whole mineral treatment plant in which crushing, wet grinding, and 
further treatment of the ore is conducted.

Mineralization - process of converting or being converted into a mineral,
as a metal into an oxide, sulfide, etc.  The processes taking place in 
the earth's crust resulting in the formation of valuable minerals or ore 
bodies.

Mineralized zone - mineral-bearing belt or area extending across or 
through a district.  It is usually distinguished from a vein or lode as 
being wide, the mineralization extending in some cases hundreds of feet 
from a fissure of contact plane.

Mining lease -  legal contract for the right to work a mine and extract 
the mineral or other valuable deposits from it under prescribed 
conditions of time, price, rental or royalties.  Also called mineral 
lease.

Open-pit mining -  form of operation designed to extract minerals that
lie near the surface.

Ore reserves -the term is usually restricted to ore of which the grade
and tonnage have been established with reasonable assurance by drilling 
and other means.  The total tonnage and average value of proved ore, plus 
the total tonnage and value (assumed) of the probable ore.

Ounce - troy ounce, which is equivalent to 31.1034 grams

Pyrites - the term pyrites as frequently used, literally, means a mineral
that strikes fire.  It is applied to any of a number of metallic-looking 
sulfides, of which iron pyrites (pyrite) are the most common.

Recovery -  amount of gold ore metal, expressed in weight or money per
ton which is obtained from the treatment of ore.

Shaft -  excavation of limited area compared with its depth, made for
finding or mining ore or ventilating underground workings.  The term  is 
often specifically applied to approximately vertical shafts, as 
distinguished from an incline or inclined shaft.  A shaft in metal mining 
may be sunk upon a vein, even if the inclination is but slight.

<PAGE>

Stope  - excavation from which ore has been excavated in a series of 
steps.  Usually applied to highly inclined or verticle veins.  To 
excavate ore in a vein by driving horizontally upon it a series of 
workings, one immediately over the other, or vice versa.  Each horizontal 
working is called a stope.  Also workings in a mine, or the activity by 
which ore is broken from blocks in ore reserves and other areas.

Sulfate - a salt or an ester of sulfuric acid, of which most of the salts 
except those of barium, lead, strontium, and calcium are fairly soluble 
in water.

Sulfide - a compound of sulfur with more than one element.  A salt or an 
ester of hydrogen sulfide. Except for the sulfides of the alkali metals,  
the metallic sulfides are usually insoluble in water and occur in many 
cases as minerals.

Tailings - material removed from a milling circuit after separation of 
the valuable minerals.

Waste material - a part of the ore deposit too low in grade to be of
economic value at the time, but this material may be stored separately in 
the hope that it can be profitably treated later.

Winze - a vertical or inclined opening , or excavation, connecting two
levels in a mine, differing from a raise only in construction.  A winze 
is sunk underhand and a rise is put up overhand.  When the connection is 
completed, and one is standing at the top, the opening is referred to as 
a winze, and when at the bottom, as a raise, or rise.  Also, it is 
usually a connection between two levels, and is sunk in the ore body; 
interior mine shaft.

<PAGE>


                                   PART I


Item 1.  Business

Introduction

Commerce Group Corp. ("Commerce," the "Company," and/or the "Registrant") 
is a developmental stage Delaware corporation  based in Milwaukee, 
Wisconsin, primarily engaged in the business of developing mines and 
producing gold in the Republic of El Salvador, Central America, through 
its Commerce/Sanseb Joint Venture ("Joint Venture").  Commerce holds a 
nearly 100% interest in the Joint Venture (detailed below) which owns the 
concession rights to extract gold in the San Sebastian Gold Mine 
("SSGM").  It is exploring four other potential gold prospects located in 
El Salvador.  There are approximately 1.7 million ounces of proven and 
estimated gold ore reserves at the SSGM, and at three of the other El 
Salvador gold mines (see chart on page 9).   Currently and for all 
financial statement periods presented herein, SSGM is the only one of the 
Company's properties which has generated revenues, although there are 
strong initial indications of gold ore present at the other sites.

Currently the Joint Venture is processing on a limited basis, a blend of 
virgin gold ore and tailings at its San Cristobal Mill and Plant (SCMP).  
The gold ore is from the open pit and the tailings are waste material 
left as a by-product of past mining operations at the SSGM.  The SCMP is 
located approximately 13 miles from the SSGM.  Commerce acquired this 
facility on February 23, 1993, and the Joint Venture thereafter made 
substantial renovations and modifications to the plant and equipment 
before and after placing this facility in a limited operation.  From 
March 31, 1995, and during the fiscal year ending March 31, 1996, 5,993 
ounces of bullion containing 3,161 ounces of gold and 1,489 ounces of 
silver were produced at this facility from these tailings and virgin ore.  
In the fiscal year ended March 31, 1997, 3,653 ounces of bullion 
containing 2,492 ounces of gold and 430 ounces of silver were produced.  
Revenues from this production were used primarily to fund further 
exploration of virgin ore reserves at the SSGM, to fund the development 
of the four other mining prospects, and to fund improvements at the SCMP.

Commerce's current business plan is to secure sufficient capital to 
substantially increase its production of gold to at least 40,000 ounces 
per year and to develop additional gold ore reserves.  The Company 
expects to increase production by developing an open-pit mine heap-leach 
operation on site at the SSGM and by acquiring additional mining 
equipment which will permit it to process virgin ore at the SCMP.  The 
heap-leach operation will have the capability of producing (through 
processing a higher volume of ore) significantly more gold than could be 
produced at the SCMP which has a present capacity of processing  400 tons 
of tailings per day.  Commerce will also continue to drill test holes at 
previously unexplored areas at the site of the SSGM and it plans to drill 
its four other potential mining prospects.

Aside from its mining operations, Commerce independently and through its 
partially and wholly-owned subsidiaries conducts other business 
activities, which at present are substantially less significant than its 
gold production and exploration in El Salvador:  (1) land acquisition and 
real estate development through its wholly-owned subsidiaries, San Luis 
Estates, Inc. ("SLE") and Universal Developers, Inc. ("UDI"); (2) real 
estate sales, through its wholly-owned subsidiary, Homespan Realty Co., 
Inc. ("Homespan"); (3) the operation of a 331-acre campground known as 
Standing Rock Campground, which is owned by Homespan and operated by the 
Company; and (4) advertising, through its wholly-owned subsidiary, 
Piccadilly Advertising Agency, Inc.  ("Piccadilly").

<PAGE>

Commerce was incorporated in Wisconsin in September 1962, and it merged 
into a Delaware corporation in July 1971.  Its common shares have been 
publicly traded since 1968.  Commerce acquired 82 1/2% of the authorized 
and issued shares of San Sebastian Gold Mines, Inc. ("Sanseb"), a Nevada 
corporation.  The balance of Sanseb's shares are held by approximately 
200 unrelated shareholders.  From 1969 forward, Commerce has provided 
substantially all of the capital required to develop a mining operation 
at the SSGM, to fund exploration, and to acquire and refurbish the SCMP.

On September 22, 1987, Commerce and Sanseb entered into a joint venture
agreement (named the "Commerce/Sanseb Joint Venture" and sometimes 
referred to herein as the "Joint Venture" or "Comseb") to formalize the 
relationship between Commerce and Sanseb with respect to the mining 
venture and to divide profits commensurately with Commerce's substantial 
investment.  The terms of this agreement authorize Commerce to supervise 
and control all of the business affairs of the Joint Venture.  Under this 
agreement 90% of the net pre-tax profits of the Joint Venture will be 
distributed to Commerce and ten percent to Sanseb, and because Commerce 
owns 82 1/2% of the authorized and  issued shares of Sanseb, Commerce in 
effect has an over 98% interest in the activities of the Joint Venture.

The Joint Venture leases the SSGM from a 52%-owned subsidiary, Mineral 
San Sebastian, S.A. de C.V.  ("Misanse"), an El Salvador corporation.  
Although Misanse owns the real estate comprising the site of the SSGM, 
the lease agreement grants Comseb the right to all gold produced in 
exchange for a five percent royalty over  a term of 25 years beginning on 
the first day gold is produced, which Comseb may, at its option, extend 
for an additional 25 years.  Because Commerce owns 52% of Misanse, Comseb 
in effect pays a royalty amounting to less than two and one-half percent 
of the SSGM gold production.

The Joint Venture is registered as an operating entity to do business in 
the State of Wisconsin, U.S.A. and in the Republic of El Salvador, 
Central America.  Under the Joint Venture Agreement, Commerce is 
authorized to sign agreements on behalf of the Joint Venture.

As of March 31, 1997, the total investment in the El Salvador mining
projects by  Commerce, three of Commerce's wholly-owned subsidiaries, 
Sanseb, and the Joint Venture amounted to $42,098,447.  The profitability 
and viability of the Joint Venture is dependent upon, not only the price 
of gold in the world market (which can be unstable), but also upon the 
political stability of El Salvador and the availability of adequate 
funding for either the SCMP operation or the SSGM open-pit, heap-leaching 
operation or for the four other exploration projects.

The Company's organizational structure is as follows: Commerce Group
Corp. was originally a Wisconsin Corporation (September 14, 1962) that 
merged into a Delaware Corporation on July 26, 1971.  It owns 52% of 
Mineral San Sebastian S.A. de C.V. (Misanse), an El Salvadoran 
corporation that was formed on May 8, 1960, reinstated on January 25, 
1975 and reincorporated on October 22, 1993 and it owns 82 1/2% of the 
San Sebastian Gold Mines, Inc. (SSGM).  Misanse has a mining concession 
with the government of El Salvador and is the real estate owner of the 
SSGM.  Misanse also has a gold mine lease and assignment of the mining 
concession with the Commerce/Sanseb Joint Venture (Comseb), the mining 
operator formed on September 22, 1987, and with SSGM, a Nevada 
corporation formed on September 4, 1968.  Comseb operates the SCMP (the 
gold processing plant in the City of El Divisadero acquired on February  
23, 1993) and has conducted exploration and exploitation in its five El 
Salvador gold mines as follows: SSGM (in the City of Santa Rosa de Lima 
since October 1968), Potosi (near the City of El Potosi since September 
1993) as well as its extension Capulin (near the City of El Potosi since 
May 1995); Modesto (near the City of El  Paisnal since August 1993); 
Hormiguero (near the City of Comacaron since September 1993) and 
Montemayor (northwest of SSGM since March 1995).

<PAGE>

The Mining Properties

The Company, through the Comseb Joint Venture, is currently engaged in
the mining activities at five separate sites in the country of El 
Salvador.  From its first involvement with Sanseb in 1968 and until 1993, 
all of the Company's exploration and development of its mining activities 
took place at one site, the San Sebastian Gold Mine.  On February 23, 
1993, the Company acquired the San Cristobal Mill and Plant, which is 
located approximately 13 miles from the SSGM.  Subsequently the Company 
applied for certain exploration rights to sites known as the Modesto 
(August 1993), the San Felipe-El Potosi (September 1993),  the Hormiguero 
(September 1993) and the Montemayor (March 1995).  The Company maintains 
a business office in San Miguel, El Salvador, and employs over 318 
professionals and skilled, semi-skilled, mill personnel and miners at the 
sites of its operations.

At the current stage of the exploration and development, the Company's 
geologists have defined the following gold reserves:

                                                      Contained     Oz.
                                    Tons     Grade       Ounces  Probable
                                    ----     -----    ---------  --------
1. San Sebastian Gold Mine
   (a) Tailings                    10,000    0.030          300
   (b) Dump waste (av. grade)     960,000    0.100       96,000
   (c) Stope fill               1,000,000    0.340                340,000
   (d) Open pit-virgin ore     13,400,000    0.087    1,165,800
                               ----------             ---------   -------
                               15,370,000             1,262,100   340,000
2. San Felipe-El Potosi
   (a) Tailings                   185,000    0.060       11,100
3. Modesto Mine                    80,000    0.235       12,800     6,000
4. Hormiguero Mine
   (a) Tailings                   150,000    0.0644       9,600
                               ----------             ---------   -------
   Total Contained Ounces      15,785,000             1,295,600   346,000
                               ==========             =========   =======
                                                               

In management's opinion, the Company's ongoing exploration, exploitation
and development at the five sites will significantly increase the
Company's proven ore reserves.

The San Sebastian Gold Mine

The SSGM  is situated on a mountainous tract of land consisting of
approximately 1,470 acres of explored and unexplored mining prospects.  
The SSGM is located approximately two and one-half miles off of the Pan 
American Highway, northwest of the City of Santa Rosa de Lima, El 
Salvador. The tract is typical of the numerous volcanic mountains of the 
coast range of southeastern El Salvador.  The topography is mountainous 
with elevations ranging from 300 to 1,500 feet above sea level.  The 
mountain slopes are steep, the gulches are well defined, and the drainage 
is excellent.

The tailings, dump material, and stope fill at the SSGM, are the 
by-products of past mining operations.  The tailings are the residue of 
higher grade ore once milled and processed to recover the then 
economically feasible fraction of gold present in the material.  The dump 
material is actually gold ore which has been mined in the search for 
higher grades of gold ore and piled to the side of past excavations as it 
was considered at that time to be too low of a grade of ore to process 
economically.   The stope fill also was considered to be too low of a 
grade of ore to process economically therefore it was primarily used to 
fill the voids in the underground workings of the past SSGM mining 
activities.  Virgin gold ore, as the term is used in this report, is gold 
ore which is in the open pit and readily available for processing; it 
also includes the undeveloped underground gold ore.

<PAGE>

Virgin gold ore at the SSGM represents the majority of the material (13.4 
million tons) included in the Company's reserves.  The Company plans to 
use open-pit mining and truck the gold ore to one or more heap-leaching 
pads developed on site at the SSGM site.  The use of open-pit mining and 
heap-leaching techniques will enable the Company to process a higher 
volume of gold ore than can be processed at the SCMP or through 
underground operations used by the Company and others in the past.  The 
Company plans to continue to operate the SCMP after developing a 
leach-pad operation at the SSGM, using the facility to process the higher 
grade ore it encounters in the course of mining at the SSGM.  The milling 
operation at the SCMP is expected to return a higher rate of gold 
recovery than can be expected from heap-leaching techniques.

The 960,000 tons of dump material present at the SSGM site has grades 
ranging from 0.082 to 0.178 ounces of gold per ton.   An analysis of the 
stope fill was made by the Company's consulting geologist who has 
confirmed that about seven percent of the stope fill had been removed and 
processed during the 1973-1978 period.  The grade of the stope fill 
averages 0.34 ounces of gold per ton.  It is estimated that there are 
about one million tons available for treatment from the underground 
operations.  It is necessary to remove the material which has caved in 
the adits to reach the stope fill areas.

All residue from the contemplated operations will be stockpiled for 
potential future processing dependent upon the price of gold, 
improvements in technology, and the depletion of better grading material.

There is good access to the SSGM.  The City of Santa Rosa de Lima (three
miles from the SSGM)  is a substantial trading center.  The SSGM is
approximately 30 miles from San Miguel, which is El Salvador's second 
largest city, and approximately 108 miles southeast of  El Salvador's 
capital city, San Salvador. SSGM is also approximately 26 miles from the 
City of La Union which has port and railroad facilities.  Three major 
United States' commercial airlines provide daily scheduled flights to San 
Salvador.  An airline commuter service provides daily flights to the 
cities of Santa Rosa de Lima, San Miguel, and La Union.

The Company (through the Comseb Joint Venture) leases the SSGM from 
Mineral San Sebastian, S. A.  ("Misanse"), an El Salvadoran corporation.  
The Company owns 52% of the total of Misanse's issued and outstanding 
shares.  The balance of the shares are owned by about 100 El Salvador, 
Central American and United States' citizens.  (Reference is made to Note 
6 of the financial statements for related party interests.)

Misanse Mining Lease

On July 28, 1975, an amended lease agreement between Misanse as lessor 
and Sanseb as tenant was executed by the parties giving the tenant all 
the possessions and mining rights that pertain to the SSGM as well as 
other claims that may already have or could be claimed in the future 
within the 1,470 acre plat of land encompassing the SSGM.  The lease was 
further amended to run concurrently with the concession described herein 
and may be extended for one or more equal periods by the tenant as long 
as the tenant has paid the rent and has complied with other obligations 
under the lease and the concession.  The lease further provides that the 
tenant will pay rent to equal five percent of the gross gold production 
revenues obtained from the leased SSGM and further commits itself to 
maintain production taking into consideration market, political, and 
other conditions.  In no case will the rent be less than 1,800 colones 
per month (approximately $206 per month at the current rate of exchange).  
The lease further provides that, in the event the lessor wishes to sell 
the property, it must first give preference to the tenant; the lease 
further provides that the tenant must give preference to employ its 
former mining employees and Misanse shareholders.

<PAGE>

The lease is freely assignable by the Joint Venture without notice to
Misanse.  The lease may also be cancelled by the Joint Venture on thirty 
day's notice to Misanse and thereafter all legal obligations thereunder 
shall cease.

In the event that new extended bodies of ore are discovered, Misanse may
be required to make proper claim for them through the Ministry of Economy 
of El Salvador's Department of Energy, Mines and Hydrocarbons,  and 
include such claims in the present lease.  Such addition to the lease is 
required to be made without additional rental payment, except that the 
expenses for procuring the concession shall be borne by the Joint 
Venture.

Misanse Concession Agreement

On July 23, 1987, in an official ceremony in the City of Santa Rosa de 
Lima, El Salvador, President Jose Napoleon Duarte of the Republic of El 
Salvador, presented the "concession" which is the official decree 
granting rights to extract gold ore from the SSGM.  In order to obtain 
the mining concession from the Government of El Salvador, on December 22, 
1986, the Company and Sanseb entered into an agreement (incorporated by 
reference to Exhibit I of the Company's S.E.C. Form 10-K filed for the 
period ended March 31, 1988) with Misanse as follows:

Under the terms of the San Sebastian Gold Mine concession and the
agreement referred to in the concession, the Joint Venture has agreed to
the following:

(a)  The Joint Venture will pay to approximately 270 former El Salvador 
     employees pursuant  to a settlement agreement dated June 1985, as 
     follows:  A sum of approximately 500,000 colones (approximately U.S.  
     $57,208 at the current rate of exchange) in three (3) installments 
     contingent upon the production and sale of gold, to wit:  one-third 
     is to be paid from the sale of the first production of gold; 
     one-third is to be paid one (1) year thereafter; and one-third is to 
     be paid two (2) years after the first payment.  The entire amount 
     due has been paid or is held in escrow for those persons that cannot 
     be located.

(b)  Preference is to be given to the former Sanseb employees and Misanse 
     shareholders in filling any job vacancies, providing that there is a 
     need for their skills or services.

(c)  From the SSGM profits earned, five percent of the gross wages paid 
     to the full-time employees shall be paid into a newly created 
     pension fund for the benefit of the employees.

(d)  From the SSGM profits earned, a sum of 500,000 colones annually 
     (equivalent to $57,143 at the present rate of exchange) will be paid 
     by the Joint Venture as a social tax for the benefit of the 
     community in the SSGM area which said funds are to be used for 
     social, economic, educational, recreational, health, welfare, 
     medical or for such other beneficial community services as 
     determined by the Joint Venture.

(e)  At such time as the Government of El Salvador forms a cooperative 
     for the benefit of the employees, the Joint Venture has agreed to 
     contribute from its annual pre-tax earnings, the sum of five percent 
     of its pre-tax profits, but, in any event, not less than a minimum 
     amount equal to five percent of eight percent of the total assets.

(f)  Pursuant to an agreement with the El Salvador Minister of Economy, 
     at the request of the Company to the El Salvador Central Reserve 
     Bank and/or office of the El Salvador Minister of Foreign Commerce, 
     it will be able to convert the El Salvador currency into United 
     States' currency for the payment of its loans, interest, and any 
     other obligations, including the payment of dividends.  Presently, 
     there are no restrictions in converting the El Salvador colones into 
     United States' currency.  The Company, as a foreign investor, may 
     hold dollar accounts in El Salvador banks and may use these accounts 
     to obtain local financing.

<PAGE>

(g)  On November 30, 1987, the El Salvador Minister of Foreign Commerce 
     issued a project approval for the gold mining operation which was 
     ratified on April 15, 1988.

(h)  In consideration for the obligations agreed to by the Joint Venture, 
     the Government of El Salvador agreed to exempt the Joint Venture 
     from the payment of all import duty, fiscal or municipal taxes 
     whatsoever.  The El Salvador Department of Customs refused to 
     recognize this exemption.  On November 15, 1993, the Joint Venture's 
     attorneys filed a declaratory proceeding with the El Salvador 
     Constitutional Supreme Court ("Court") informing the Court that the 
     Joint Venture's rights were being violated and that the Court should 
     restrain the Department of Customs from attempting to collect any 
     duty.

On May 18, 1994, the El Salvador Constitutional Supreme Court of Justice 
declared that the Joint Venture is entitled to be temporarily exempt from 
the payment of all import duty, fiscal and municipal taxes on the import 
of any item relating to the needs of the SSGM pending its review of the 
petition filed on November 15, 1993, and that the Company's Joint 
Venture's constitutional rights are to be preserved.  The El Salvador 
Department of Customs takes a position that the Supreme Court could deny 
the exemption, therefore, in lieu of paying the Custom's duty, it is 
accepting a payment bond or cash in an amount of the Custom's duty until 
a final decision is made.  It is charging the Company the 13%  added 
value tax as of July 1995, which is refundable to the extent of six 
percent of the value of the Joint Venture's exports.  The Joint Venture 
plans to export all of its gold.

Misanse Mineral Concession-Government of El Salvador

On January 27, 1987, the Government granted a right to the SSGM mining 
concession ("concession") to Misanse which was subject to the performance 
of the El Salvador Mining law requirements.  These rights were 
simultaneously assigned to the Joint Venture.

On July 23, 1987, the Government of El Salvador delivered and granted to
Misanse, possession of the mining concession.  This is the right to 
extract and export minerals for a term of 25 years (plus a 25-year 
renewal option) beginning on the first day of production from the real 
estate which encompasses the SSGM owned by Misanse.  Misanse assigned 
this concession to the Joint Venture.  Under the concession and the then 
applicable El Salvador law, the Joint Venture has the right to export 
said minerals for five years beginning with the first day of production 
without imposition of mineral or export taxes.  It also has the right to 
import free of duty, equipment and all other items necessary to operate 
the SSGM.

During February 1996, and effective 120 days thereafter, the Government 
of El Salvador adopted a revised mining law.  This law grants longer 
exploration and exploitation terms.  It also contains a provision that 
three percent of the gold receipts will be paid to the Government of El 
Salvador and an additional one percent is to be paid to the municipality 
where the mine is located.

The concession, or the right to mine gold, is subject to cancellation by
the Government of El Salvador if there is an abandonment of the property
such as if there is no demonstration that the concession holder intends 
to carry out exploration, exploitation, or development of the property in 
good faith during a six-month period after the concession is granted or 
if the work of exploration, exploitation or development is suspended for 
six months or if the exploration, exploitation or development is reduced 
to an extent that the effort used cannot be regarded as being reasonable 
in relation to the importance and resources of the mining property.

In the event of public disaster or disturbance of the public order, all
mines in the given locality shall be regarded as being in exploration, 
exploitation or development without the necessity of any special 
formality.  Such event did occur when, on November 11, 1989, the 
guerrillas attempted to seize the Country of El Salvador.  On January 16, 
1992, a peace accord and cease-fire agreement was entered into by the 
Government of El Salvador and its opposition.  The transition from war to 
peace was effected without any serious occurrences and final peace was 
declared on December 15, 1992, with a three-year period to comply with 
the terms of the peace pact.

<PAGE>

The work of a concession may be suspended by permission of a competent 
authority for a reasonable period not to exceed one year.  An exception 
would be in case of acts of God or force majeure in which case the period 
may be extended successively as long as such reasons exist.

A concession may be fortified for lack of security measure, or if its
condition would endanger the lives of workers, or for failure to comply 
with provisions of the Mining Code or other provisions enacted with 
respect to any aspect of exploitation in the mining industry, unless 
corrected within a  reasonable period.

The Complimentary Mining Law states that, in addition to the cases 
mentioned in the El Salvador Mining Code, abandonment of the mine will be 
presumed if after a significant reduction or exhaustion of the veins, 
beds, or other formation in exploitation, three months is allowed to pass 
without adequate efforts either to exploit other deposits existing in the 
concession or to discover new deposits suitable for exploitation.

A concession may be granted for an unlimited time, as long as the 
concession holder complies with the conditions imposed by law.  The Joint 
Venture's concession is for a period of twenty-five years, beginning on 
the first day of production, and with a right to extend it for an 
additional twenty-five years.

In addition, the El Salvador Constitution contains certain provisions
which, although not referring specifically to mining, are applicable 
thereto.  Article 138, for example, prohibits confiscation of property as 
a penalty or for any other reasons, but, in the event that any authority 
violates this prohibition, the confiscated property is imprescriptible.

Proposed Mining, Mill, Heap-Leaching and Exploration Operations

San Cristobal Mill and Plant ("SCMP") Recovery and Processing Systems

On February 23, 1993, the Company, on behalf of the Joint Venture 
acquired SCMP, a precious metals' cyanide leaching mill and plant rated 
with a capacity of processing 200 tons per day which utilized the 
following unit operations:  crushing, grinding, thickening, agitated 
leaching, counter current decantation of leach solution, recovery of 
precious metals by zinc precipitation (Merrill-Crowe), and direct 
smelting of precipitates to produce precious metals as dore and tailings' 
disposal.

The Company's engineers recommended that this processing system be 
retrofitted and converted to process the SSGM tailings by a cyanidation 
carbon-in-leach (CIL) system to recover the residual cyanide soluble 
precious metals.  The retrofitting has been completed and the first 
pouring of gold on a test basis took place on March 31, 1995.  The SCMP 
is being operated on a "start-up and build-up" to a gradual full capacity 
system  during this trial and modification period.

Although the Joint Venture owns the mill, plant and related equipment, it 
does not own the land and certain buildings.  Since February 23, 1993, 
the Joint Venture attempted to either lease or purchase this real estate 
from an Agency of the El Salvador Government, Corporacion Salvadorena de 
Inversiones ("Corsain").  On November 12, 1993, the Joint Venture entered 
into an agreement with Corsain to lease approximately 166 acres of land 
and the buildings for a period of ten years.  The annual rental charge is 
U.S. $11,500 payable in advance and subject to annual increases based on 
the United States' percentage rate of inflation.  Also as agreed, an 
$11,500 security deposit was required and this deposit is subject to an 
annual increase based on the U.S. inflation rate.  The premises are 
strategically located to process gold ore from three of the four other 
mining prospects that are in the exploration stage.

<PAGE>

SCMP Project Operating Plan
                                                               
Production Schedule

Preproduction development, consisting primarily of expansive road and 
site improvements to the mine and mill sites, and delivery of tailings' 
reclaim and expansive mill equipment modifications, has taken place 
during the last year.  Initial production was from the SSGM tailings.  
Since the tailings' resource is almost exhausted, virgin gold ore is 
excavated from the SSGM surface and hauled to the SCMP site.

The Joint Venture dedicated extraordinary efforts to attain its 
production goals, but there were delays in establishing the SCMP in a 
mode to accomplish its expectations.  Substantial modifications had to 
take place and a completely new force of labor had to be seasoned to 
operate the SCMP.  An unusual rainy aftermath of the hurricane season 
caused hauling problems and many metallurgical differences were 
encountered due to the unbalance of the tailings' grade and consistency; 
in the handling of the tailings, coarse material separation was 
encountered creating difficulties in achieving its production goal.  
Other related factors delayed the Joint Venture from realizing its goals.  
Nevertheless, the operations, if recorded on a profit or loss basis, 
would have reflected a nominal profit.  It is expected that the ongoing 
technical and mechanical changes should activate the increase of the 
profits to meet the projections.

The other sources of gold ore from the SSGM to be used at the SCMP 
operation will be obtained from the stope fill or higher grade gold ore 
after obtaining access through the underground workings from the main ore 
body.  This gold ore will have to be crushed and pulverized which 
increases the cost, but then the yield is expected to be at a 92% 
recovery.  The income, dependent on the market price of gold  from the 
higher grade and  recovery of gold ore, will be substantially more than 
the cost involved, providing that the world gold market price does not 
decline below $200 an ounce.

SCMP Continued Operating Plans

The virgin ore and/or tailings are referred to herein as "gold ore."  The 
gold ore from the  SSGM open-pit is loaded onto 20-25 ton dump trucks for 
transport to the SCMP.  Trucks then haul the gold ore approximately 15 
miles from the SSGM.  Mine employees are responsible for the mining 
activities including the determination of areas to be excavated, trucking 
and loading operations, head sampling and sample analysis.

The gold ore is  received at the SCMP where it is weighed, logged, and 
sampled.  Weighing is performed utilizing a conveyor belt scale and/or a 
truck scale located on the SCMP site.  The excess gold ore is then 
unloaded at the SCMP site and stockpiled in an area which was developed 
to allow storage of more than 15,000 tons.

SSGM gold ore is transferred from the stockpile to a feed bin utilizing a
rubber-tired wheel loader.  The feed bin has a capacity of approximately 
10 cubic yards (13.5 tons).  The feed is fed at a controlled rate onto a 
conveyor, which transfers the ore to the next part of the process.  The 
conveyor includes a belt scale (weightometer) for instantaneous 
determination of feed rate and totalizing of tonnage fed to the process.

<PAGE>

The conveyor discharges into a chute and transports the material into the
ball mills which serve as a repulper for the tailings and as a grinding 
process for the virgin ore.  Virgin ore is fed through the first ball 
mill for grinding.  The pulp is pumped to a cyclone where it is 
classified.  The underflow goes to the second ball mill for regrinding 
and the overflow (fines) goes to a 20 mesh static sieve bend screen to 
remove any oversize or trash material.  The second ball mill discharges a 
product and joins the first ball mill sump pumping making it a closed 
circuit with the use of the cyclone.   Water is added to the solids in 
the ball mill to a pulp density of approximately 32% solids by weight and 
lime is added to raise the alkalinity of the pulp to approximately PH 
10.5.  After grinding, the slurry is transferred into the thickener.  The 
excess water is removed from the thickener to raise the pulp density to 
approximately 45% solids which is an ideal density for the cyanidation 
process.  The pulp is transferred by pump to the CIL system's #1 tank.  
Lime and liquid cyanide are added to the first leach tank to dissolve the 
gold.  It  then enters into a series of seven agitated leach tanks 
utilized for cyanide leaching of the pulp.  This provides approximately 
24 hours of  leach retention time.  An eighth  tank is maintained in 
operable condition as a standby unit.

Precious metals recovery is accomplished by utilizing carbon-in-leach 
(CIL) methods where activated carbon is utilized to adsorb the gold from 
the solution.  Each leach tank is equipped with an air lift pump for 
inter-stage advancement of carbon, and an air swept cylindrical 
stationary interstage screen (.030 mesh) for retention of carbon and 
downstream gravity transfer of pulp.  A 24 mesh carbon safety screen is 
attached to the end of the leaching circuit.  An air blower provides air 
for operation of the air lifts and air sweep on the screens.  Pulp loaded 
with precious metals in the carbon from the CIL process is passed over a 
carbon recovery screen where the carbon is retained and washed, and the 
pulp is directed back to the CIL process.  The carbon is moved 
counter-current to the pulp flow in order that the highest possible gold 
loadings are obtained and highly active fresh carbon is maintained in the 
last leach tanks.

Liquid ferrous sulfate is added to the tailings to destroy any residual
cyanide.  Tailings from the CIL process are directed to the tailings' 
impoundment area using a slurry transfer pump.  Tailings are stored in a 
tailings' impoundment area with tailings' water reclaimed as required.

Loaded (gold containing) carbon is transferred from the carbon recovery
screen to the strip and acid wash circuits.  The carbon is stripped 
utilizing atmospheric Zadra desorption methods, with the resulting 
pregnant strip solution reporting to electrowinning, where gold 
containing sludge is formed, which is pyrometallurgically refined on-site 
to dore metal.  The carbon is acid washed to remove detrimental 
impurities prior to being transferred back to the CIL circuit.

Reagents (cyanide, lime) are made up in separate agitated mix tanks.  The
cyanide mix tank holds up to three days worth of 20% cyanide by weight 
solution.  The lime mix tank  holds up to a supply of three eight-hour 
shifts worth of 20% lime by weight slurry.  The lime is pumped to the 
repulp tank and CIL process as required for alkalinity control.  The 
cyanide is pumped to the CIL process and carbon strip circuit as 
required.

Process water is provided from mine sources and stored in a 40' 
thickener.  Process water is pumped from the thickener to various 
locations throughout the process.  If water treatment is required it is 
done by utilizing the thickener as a mixing/precipitation device.

Electricity is supplied by local public utilities.  In the event power is
discontinued for any reason whatsoever, an emergency generator to produce 
power is on site to maintain and provide the power needed.

<PAGE>

SCMP Personnel

The SCMP employees, during this past year's start-up testing period
(including its own trained security personnel) totals about 144 persons.  
The SCMP is operated 24 hours per day, seven days per week and 52 weeks 
per year.

SSGM Open-Pit, Heap-Leaching Operation

The Joint Venture has placed the SCMP into a limited operation.  It now
intends to obtain a sum of $6 million or more  to commence an open-pit, 
heap-leaching operation at the SSGM site.  An additional $7 million or 
more is estimated to be required for the crushing  system and mining 
equipment if the Joint Venture were unable to lease this equipment.  
After these funds are obtained, the Joint Venture intends to start 
processing gold ore from its open pit at a production level of 2,000 tons 
per day.  During the second year, the production level plans are to 
expand production to  3,000 tons per day (the funds for this expansion 
could be generated from profits).  An increase to process 4,000 tons of 
gold ore per day would take place during the third year and another 
expansion to process 6,000 tons per day would take place at the beginning 
of the fifth year, and all funds for this expansion should be available 
through a combination of earned profits, borrowings, equity sales, or 
other sources.  The independent feasibility study and the Company's 
Project Summary report comfortably support this program as the estimated 
projected production costs are substantially lower than a current $340 
per ounce market price of gold. Pursuant to the geologists' report, the 
total volume of proven gold ore reserves from the open-pit area amount to 
13.4 million tons with an average grade of 0.087 ounces of gold per ton.  
With the anticipated production volume, there is at least an eight-year 
supply of gold ore.  More gold ore would be developed during this period 
of time as it is believed that a substantial amount of gold ore can be 
proven.

The leach pad site consisting of approximately 3.7 acres on the SSGM 
property was chosen because of the relatively even grade level, the 
access to water supply, electric power, roads, telephone service, and 
because of its close proximity to the open-pit area.

Gold ore will be crushed to produce stones of a size which will maximize
gold recovery.  If required, lime and cement will be added "agglomerated" 
to such gold bearing material that will require this process to assist 
the heap-leaching operation, in accordance with metallurgical 
recommendations.

A leach pad will be constructed with a plastic liner sandwiched between
layers of gravel to protect its integrity.  On top, the liner will be 
protected with a six-foot layer of one-inch gravel comprised of 
gold-bearing material.  Material to be processed and agglomerated if 
necessary will,  in stages, be heaped an additional 20 feet on top of 
this protective layer, and then removed at the end of the leaching cycle.

Basically, this process involves the placement of material containing 
gold onto a "pad" which is impermeable to liquids, sprinkling the "heap" 
with a water-based chemical solution which will dissolve the gold as it 
percolates through the material, collecting the solution at the bottom of 
the heap as it runs off the pad, and then recovering the gold from the 
solution.  The chemical solution is actually recycled through the heap 
many times before it is processed, in order to maximize the recovery of 
gold and to recycle the chemicals.

Gold laden cyanide solution will be collected at the base of the pad and 
then will be filtered through a series of carbon adsorption columns (a 
series of open-topped tanks) where the gold will be drawn out of the 
solution and into beds of granular activated carbon.  Next, the carbon 
from the columns will be washed with acid to strip the gold from the 
carbon into a more concentrated solution.  Lastly, gold will be removed 
from this acid solution by electrolysis (the same process used in 
gold-plating) first by collecting the gold on steel wool type cathodes, 
and then by electrolytically transferring the gold to a charged metal 
plate in another acid solution.  After their use in processing a batch of 
gold, the cyanide and acid solutions, as well as the carbon, will be 
replenished and recycled to process the next batch.   This procedure is 
similar to the existing SCMP process.

<PAGE>

Exploration Projects

The Joint Venture is performing exploration at the following El Salvador 
locations:

(1) At the SSGM site which is located approximately two and one-half 
    miles northwest of the City of Santa Rosa de Lima, Department of La 
    Union, El Salvador.

(2) At the San Felipe-El Potosi Mine and its extension, the El Capulin 
    Mine,  which are located near the City of Potosi, Department of San 
    Miguel, El Salvador (approximately 18 miles northwest of the City of 
    San Miguel).

(3) At the Hormiguero Mine which is located about five miles southeast of 
    the SCMP near the City of Comacaron in the Departments of San Miguel 
    and Morazan, El Salvador.

(4) At the Modesto Mine which is located near the City of El Paisnal 
    about 19 miles north of San Salvador, the Capital City in the 
    Department of San Salvador, El Salvador.

(5) At the Montemayor Mine which is located about 14 miles northeast of 
    SCMP, about six miles northwest of SSGM, and two and one-half miles 
    east of the City of San Francisco Gotera in the Department of 
    Morazan.

All of the above mines were formerly in production and did produce gold 
and/or silver.  In addition to the channel trenching, test pit holes, and 
underground adit openings, the Joint Venture has acquired its own diamond 
drilling rig to explore in depth, the above described potential targets.  
All of the properties have promising geologic prospects and alternations, 
and historical records evidence that all have been mined and produced 
gold in the past.

Also, the Joint Venture has its own SSGM on-site laboratory with 
full-time, trained personnel working three shifts to fire assay the gold 
ore samples.  It also has two full-time surveying crews consisting of ten 
persons.  (Reference is made to Item 2.  Properties for additional 
detailed information.)

Gold Prices, Sales, Marketing and Competition

Since the Joint Venture is in operation and producing gold on a limited
start-up basis, its revenues, profitability and cash flow will be greatly 
influenced by the price of gold.  The gold world market price is 
unpredictable, can fluctuate widely and is affected by numerous factors 
beyond the Company's control, including, but not limited to, expectations 
for inflation, the relative strength of the United States' dollar in 
relation to other major currencies, political and economic conditions, 
and production costs in major gold-producing regions.  The supply and 
demand for gold also affects the price.  The Company has not and does not 
expect in the forseeable future to engage in hedging or other 
transactions to minimize the risk of fluctuations in gold prices or 
currencies.  Gold and silver can be sold on numerous markets throughout 
the world, and the market price is readily ascertainable for such metal.  
There are many refiners and smelters available to process these precious 
metals.  Refined gold and silver can also be sold to a large number of 
precious metal dealers on a competitive basis.  The Joint Venture's SCMP 
operation which produces dore is refined by Handy & Harman's refinery 
located in the United States.

At this time the Joint Venture believes it will not be a major gold 
producer based on the size of existing gold mining companies and its 
financial capacity.  The Company believes no single gold-producing 
Company has a large impact to offset either the price or supply of gold 
in the world market.  There are many companies in the world producing 
gold.  Many of these companies have substantially greater technical, 
financial resources and large gold ore reserves  than the Company.  The 
Company believes that the expertise of the Joint Venture's experienced 
key personnel employees, its ability to train its employees, its low 
overhead, its gold ore resources and its projected low cost of production 
will allow it to compete effectively  and to produce reasonable profits.

<PAGE>

To date, inflation, currency and interest rate fluctuations have not had 
a material impact on the Company or its results of operations.

Environmental Matters

In order to make certain that the exploration, development, mining and 
ore processing do meet acceptable environmental impact acceptability, an 
environmental impact study has been prepared by an independent consultant 
and submitted for review to the Government of El Salvador.

The Joint Venture's consultant  believes that the report relating to the 
safety precautions, employee health and safety, air quality standards, 
pollution of stream and fresh water sources, waste material, odor, noise, 
dust and other reasonable environmental protection practices contained in 
this report will meet the Government of El Salvador's approval.

Political Environment in El Salvador

The following information is an excerpt from a report from the American 
Embassy San Salvador, Economic/Commercial /Agriculture Section entitled,  
"Country Commercial Guide, August 1996":

"Chapter III - POLITICAL ENVIRONMENT

"A major milestone in El Salvador's peace process was reached in the 
Spring of 1994 with peaceful presidential, legislative, and municipal 
elections, in which the political party of the ex-guerrillas, the FMLN, 
participated.  Though losing the presidential election, the FMLN emerged 
as the second largest political party in the 84-seat legislative 
assembly.  The presidential election was won by Armando Calderon Sol, the 
candidate of the right-of-center ARENA party, which won 39 seats in the 
Assembly.  While most of the requirements of the peace accords have been 
fulfilled, some commitments are still pending; for example, in the area 
of land distribution, human settlements, and legal and judicial reform.  
In recognition of the progress in fulfilling the accords, the U.N.  
monitoring presence has been steadily reduced.

"Since its early inception as an anti-communist nationalistic party in 
the early 1980s, ARENA has moderated its policies, particularly during 
the previous administration of President Alfredo Cristiani.  Under his 
administration, the government ended the 12-year civil war, greatly 
liberalized the economy and reduced corruption.  President Calderon Sol 
has continued these policies.

"Shortly after the 1994 elections the FMLN split into two parties, one 
keeping the FMLN name and the other naming itself the Democratic Party 
(PD).  The PD has advocated a more moderate political line than the FMLN.  
While taking a more radical tone, the FMLN has strongly supported the 
democratic process.  The center-left Christian Democratic Party (PDC) has 
seen its support slowly erode since controlling the Presidency and 
Assembly in the mid-1980s.  There are several other small parties, the 
largest of which, the Social Christian Revolution Party (PRSC), is a PDC 
breakaway.

<PAGE>

"El Salvador has an excellent relationship with the United States, 
solidified by 12 years of close cooperation during the Salvadoran civil 
war and strong U.S. support for reconstruction and reconciliation in the 
aftermath of the 1992 peace accords.  Leaders of the FMLN have 
established close relations with the U.S. government, seeing it as an 
honest broker during the peace process.  The vast majority of Salvadoran 
people also view the U.S. in a favorable light, a sentiment augmented by 
the fact that almost a million Salvadorans live in the U.S.  The 
political environment is expected to remain stable over the next ten 
years."

Economy Status

The following selected information on El Salvador was obtained from 
excerpts of the "The World Factbook page on El Salvador" on the internet:

"Economy

"Economic overview: El Salvador possesses a fast-growing entrepreneurial 
economy in which 90% of economic activity is in private hands, with 
growth averaging 5% since 1990.  Yet, because the 1980s were a decade of 
civil war and stagnation, per capita GDP has not regained the level of 
the late 1970s.  The rebound in the 1990s stems from the government 
program, in conjunction with the IMF, of privatization, deregulation, and 
fiscal stabilization.  The economy now is oriented more toward 
manufacturing and services compared with agriculture.  The sizable trade 
deficits are in the main covered by remittances from the large number of 
Salvadorans abroad.
GDP: purchasing power parity - $11.4 billion (1995 est.)
GDP real growth rate: 6.3% (1995 est.)
GDP per capita: $1,950 (1995 est.)
GDP composition by sector:
agriculture: NA%
industry: NA%
services: NA%
Inflation rate (consumer prices): 11.4% (1995 est.)
Labor force: 1.7 million (1982 est.)
by occupation: agriculture 40%, commerce 16%, manufacturing 15%, 
government 13%, financial services 9%, transportation
6%, other 1% 
Unemployment rate: 6.7% (1993)
Budget:
revenues: $846 million 
expenditures: $890 million, including capital expenditures of $NA
(1992 est.)
Industries: food processing, beverages, petroleum, tobacco,
chemicals, textiles, furniture
Industrial production growth rate: 7.6% (1993)
Electricity:
capacity: 750,000 kW
production: 2.4 billion kWh
consumption per capita: 408 kWh (1993)
Agriculture: coffee, sugarcane, corn, rice, beans, oilseed; beef, dairy
products; shrimp . . .
Exports: $1.6 billion (f.o.b., 1995 est.)
commodities: coffee, sugarcane, shrimp
partners: US, Guatemala, Costa Rica, Germany
Imports: $3.3 billion (c.i.f., 1995 est.)
commodities: raw materials, consumer goods, capital goods
partners: US, Guatemala, Mexico, Venezuela, Germany
External debt: $2.6 billion (December 1992)
Economic aid:
recipient: ODA, $777 million (1993)
note: US has committed $250 million in aid to El Salvador for 1992-96
Currency: 1 Salvadoran colon (C) = 100 centavos
Exchange rates: Salvadoran colones (C) per US$1 - 8.755 (December 1995),
8.755 (1995), 8.750 (1994), 8.670 (1993),  9.170 (1992), 8.080 (1991)
Fiscal year: calendar year."

<PAGE>

Investment Climate in El Salvador

The following information is an excerpt from a report from the American
Embassy San Salvador, Economic/Commercial /Agriculture Section entitled,
"Country Commercial Guide, August 1996":

"Chapter VII - INVESTMENT CLIMATE

" Openness to Foreign Investment

"The Salvadoran Government is committed to attracting foreign investment.
Companies from the United States, Canada, Germany, Korea, Taiwan, and
Mexico have made investments here with favorable results.  The primary 
legislation governing foreign investment in El Salvador is the 1990 
Export Reactivation Law; and the 1988 Foreign Investment Promotion and 
Guarantee law.

"The 1988 Foreign Investment and Promotion Law is a  comprehensive
statute.  To investors who register with the Ministry of Economy this law 
provides:

"--Unrestricted remittance of net profits for investors in industrial 
activities.

"--Remittance of net profits up to fifty percent of the registered 
foreign capital per year for investors in commercial and service 
activities.  In practice, however, there is free convertibility of 
capital.

"--Unrestricted remittance of funds obtained from the liquidation of a 
business in proportion to the foreign funds invested.

"--Unrestricted remittance of royalties and fees for use of foreign 
patents, trademarks, technical assistance and other similar services.

"--Foreign investors may hold dollar accounts in El Salvador and may use 
these accounts to obtain local financing. . . .

"Under the Export Reactivation Law of 1990, firms not located in free
zones and exporting less than one hundred percent of their production may
apply for tax rebates of six percent of the FOB value of these exports.
However, the paperwork to obtain this rebate is cumbersome.

"In 1994 the government announced that it was setting up a one-stop
office for foreign investment in the Ministry of Economy, where investors
now register their investments.  To date, no concrete steps have been
taken towards this end.  The registration process is supposed to be
non-discriminatory and is not considered an impediment to investment.

<PAGE>

"It is not necessary to have a local partner in El Salvador.  Some
maquila operations are completely foreign-owned.  Three multinational oil
companies operate in El Salvador, and two of these companies share a
small refinery.  Two U.S. banks have offices in El Salvador.  The banking
law has been modified to encourage other foreign banks to enter the
country and to remove restrictions on ownership of newly-privatized
banks.  There are now no restrictions on ownership of banks.

"Investment Climate

"Privatization

"The Government of El Salvador is proceeding with the privatization of
both the telephone company (ANTEL) and the electric distribution
companies.  In February 1996 the Privatization Commission request
proposals from international consulting firms principally investment
banks, for advisory services on the privatization process.  Six banks
including American, Swiss, British, German and French firms were asked to
participate.  An American firm was selected to act in an advisory
capacity on this privatization project.

"The privatization of the electric company (CEL) is also moving ahead.  
Four distribution companies are being formed and will be sold off by the 
end of the fourth quarter of 1996.  The remainder of CEL will be broken 
up and sold in 1997 under a scheme that encourages maximum competition. 
The privatization should provide good opportunities for U.S. investors 
and exporters.

The GOES still lacks approval from the Legislative Assembly for the 
privatization process.  Legislation was introduced in May 1996 outlining 
duties and powers of a proposed Regulatory Entity.  It would be modeled 
after a Public Utilities Commission and would oversee telecommunications, 
electricity, ports, airports, railroads, and future tollroads. . . .

"Conversion and Transfer Policies

"El Salvador has a freely convertible currency that trades at 
approximately 8.75 colones per dollar.  This currency is buoyed by family 
remittances of nearly one billion dollars per year from Salvadorans who 
reside outside the nation.  The nation's banks and many foreign exchange 
houses actively trade dollars and colons.  Foreign businesses freely 
remit profits, repatriate capital, and bring in capital for additional 
investments.  Banks publish their exchange rates daily in local 
newspapers.

"Expropriation and Compensation

"The last case of expropriation began in 1986, when the government 
nationalized the assets of CAESS, San Salvador's electric distribution 
company.  Six years later, shareholders received the first payment of ten 
million dollars.  In March 1993, the government concluded payments of 
cash and bonds and the case was settled to the satisfaction of all 
parties.

"In 1960 the United States and Salvadoran governments signed an 
investment guarantee treaty, which guaranteed U.S. investors against 
losses that could arise from currency inconvertibility or expropriation.  
As of July 1995, the US and El Salvador have nearly completed negotiating 
a bilateral investment treaty (BIT) that would encompass all aspects of 
investment.  It has not been signed for technical reasons.  . . .

"Political Violence (as it may affect investments)

<PAGE>

"El Salvador continues its transition to a peacetime society after 12
years of civil conflict.  There have been few confirmed acts of political 
violence since the elections in mid-1994.  Although general crime levels 
are high and are of concern to the business community, there has not been 
political violence specifically aimed at foreign investors, their 
businesses or their property.

"Performance Requirements

"El Salvador's investment legislation does not require investors to 
export specific amounts, transfer technology, incorporate set levels of 
local content, or fulfill other performance criteria.

"Right to Private Ownership and Establishment

"Foreign citizens and private companies can freely establish businesses 
in El Salvador.  However, foreigners are prohibited from operating small 
businesses with start-up capital of less than the equivalent of USD 
25,000 dollars.  This is not seen as an impediment to foreign investment, 
and does not seem to be strictly enforced.  There are several sectors 
shielded from foreign and local private investment or competition.  The 
national telephone company (ANTEL), the water and sewer company (ANDA), 
and the electric company (CEL) are owned by the state, but their 
monopolies are slowly being dismantled.  For example, private power 
generation is now allowed (although for practical purposes, it must be 
sold to CEL for distribution), and a U.S. company has formed a 
partnership with ANTEL to operate the country's cellular phone system.  
Artesanal fishing within 12 miles of the coast is limited to citizens of 
El Salvador.  Commercial fishing between 12 to 200 miles from the coast 
can be undertaken by Salvadoran citizens, foreigners legally residing in 
El Salvador, or joint ventures legally registered with the government.  
Commercial fishing licenses must be obtained from CENDEPESCA, a 
government entity.  Foreigners may engage in sport fishing without 
restriction in any of El Salvador's coastal waters. . . .

"Regulatory System (laws and procedures as they pertain to investment)

"The laws and policies of El Salvador are relatively transparent and 
generally foster competition.  Bureaucratic procedures, although 
cumbersome, have improved in recent years and are relatively streamline 
for foreign investors.  Sectors that are still regulated or owned by the 
state, such as electricity, water and telecommunications, are scheduled 
to be privatized in 1996 under competitive rules that allow for foreign 
involvement and investment.  The superintendent of Banks supervises the 
banking system, but interest rates are determined by market forces.  
Banking-law reforms have attracted two new foreign banks to the country 
in the last year, and several new financial institutions have been 
established by Salvadoran investors.  Gasoline prices are  controlled' by 
the government, but are actually based on an average of U.S. Gulf Coast 
refinery prices.

"Bilateral Investment Treaties

"The United States and El Salvador signed an investment guarantee treaty
in 1960 designed to protect U.S.  investors against expropriation or
currency inconvertibility.  The United States and El Salvador also have a
framework agreement for a Trade and Investment Council (TIC).  An 
all-encompassing bilateral investment treaty which would address issues 
such as national treatment for foreign investors, transfers, 
expropriation, investment disputes, tax policies, etc., is being 
negotiated, but has not been signed for technical reasons.  The US and 
Salvadoran governments are working towards but have not yet reached 
agreement on a Tax Information Exchange Agreement.

<PAGE>

"El Salvador is a member of the Central American Common Market, and has 
approximately 50 commercial and technical cooperation treaties in effect.  
Three of these treaties (Mexico, Spain, and Venezuela) look to promote 
coinvestment.  El Salvador is a member of the World Trade Organization.

"OPIC

"The Overseas Investment Corporation (OPIC) has a bilateral agreement 
with El Salvador.  OPIC has approved insurance coverage for the expansion 
of a U.S. bank in El Salvador, and is considering several other projects.  
OPIC insures currency inconvertibility, expropriation and civil strife, 
as well as corporate financing.  El Salvador is also participating in the 
Multilateral Investment Guarantee Agency (MIGA).

"Labor

"Of El Salvador's labor force of approximately 1.5 million workers, 34 
percent work in the agricultural sector.  This is followed by services 
(21 percent), commerce (18 percent) and manufacturing (15 percent).  The 
minimum wage in the industrial and commerce sectors is 1050 colons[.] 
roughly 120 dollars a month.  Urban employees with minimal skills 
generally earn at least twenty percent more than the minimum wage.  
Although the minimum wage is less for agricultural workers, coffee 
plantation owners report that they pay above the minimum wage to attract 
workers during the harvest.

"According to a Planning Ministry survey of 5,000 urban and rural 
families, unemployment in 1995 was 7.7 percent.  Underemployment is 
probably much higher, although there are no reliable estimates.   
However, some construction contractors cannot find sufficient skilled 
workers, due to the number of projects now underway in El Salvador.  
According to the above survey, 150,000 more people are employed in 1994 
than 1993.  The statistics from this survey are not considered precise, 
but do indicate trends.

"Salvadoran labor is perceived as hard working and trainable.  The 
general educational level is low, which may inhibit the development of 
industries needing skilled, educated labor.  In addition, there is a lack 
of middle management-level talent, which often results in foreigners 
being brought in to perform such tasks.

"The Constitution of December 1983 guarantees the right of employees to
organize into associations and unions.  Employers are free to hire union 
or non-union labor.  Closed shops are illegal. . . .

"Capital Outflow Policy

"There are no restrictions on capital outflow for Salvadorans, nor are 
there any specific incentives to invest capital outside El Salvador.  
Regarding investment outflow, Salvadoran investors have interests in 
hotels, real estate and industry in Mexico,  Guatemala, Honduras, Costa 
Rica, Panama and the U.S.  Accurate statistics about the size of these 
investments are not available.

"Major Foreign Investors

"Coastal Technologies - owner/operators of the Nejapa power-generating 
plant.  Estimated value over USD 140 million dollars.

"Kimberley Clark de C.A. - owns a paper products factory.

"Texaco Caribbean - fuel storage and lubricant blending plant in
Acajutla, and service station/grocery markets throughout the country.

<PAGE>

"Esso Standard Oil - together with Shell, owns and operates a small oil
refinery in Acajutla.  Also own service station/grocery marts throughout
the country.

"Shell El Salvador - shares an oil refinery with Esso, and owns service
station/grocery marts throughout the country.

"Bayer de El Salvador - owns a modern pharmaceutical processing plant.

"Sara Lee Knit Products - owns a clothing assembly plant in the El
Pedregal free trade zone.

"Xerox de El Salvador - sells and services office equipment and
computers.

"Western Petroleum - produces and exports alcohol to the U.S.

"British American Tobacco - manufactures cigarettes."

Efforts to Obtain Capital

Substantial consideration, time and effort continue to be given to secure
investment capital through various financial arrangements for the
operation of the SCMP, the SSGM, and the other exploration projects.  The
Company, Sanseb, and the Joint Venture have considered the past political
situation in El Salvador to have been unstable and a great deterrent to
the investment community.  The stigma of the past political unrest still 
continues as a barrier to investors.

The Company has been successful in obtaining investment funds that were
required to retrofit and operate its SCMP, conduct its various
exploration and drilling program, and for its current needs.  It also 
raised capital in a sum of $2.5 million during 1997 to purchase a 
crushing system and to perform diamond core drilling at the SSGM site.  
It believes that it will be able to obtain the funds it will require to 
conduct its business affairs until the Joint Venture begins earning 
profits and has adequate cash flow.  An investment of approximately U.S. 
$13 million will be needed for its contemplated SSGM open-pit, 
heap-leaching operation.  It is estimated that an additional $2 million 
would be required to expand the SCMP facilities and $10 million is needed 
for a drilling program on the five exploration projects.  Plans, time and 
effort for obtaining these funds are in process.

Land Acquisition and Development

During the past years, the Company has substantially reduced its
activities in the business of land acquisition and real estate 
development which was conducted principally through its two wholly-owned 
subsidiaries, San Luis Estates, Inc. ("SLE"), a Colorado Corporation, and 
Universal Developers, Inc. ("UDI"), a Wisconsin Corporation.

SLE had been the developer of a large tract of land for recreation,
retirement and other individual purposes consisting of approximately 
7,000 acres of land which was subdivided in the San Luis North Estates 
Subdivision located in Costilla County, Colorado, which abuts the Town of 
San Luis, Colorado, and which lies between the San Juan and Sangre de 
Cristo mountain ranges in southern Colorado.  This tract of land had been 
subdivided into 1,205 five-acre or larger parcels, unimproved except for 
gravel roads now maintained by Costilla County, however, drainage, 
survey, staking, and water rights adjudication have been completed.

As of March 31, 1997, there remained an inventory of 40 five-acre parcels 
of real estate which represents less than four percent of the total lots 
developed in this subdivision. It is the intent of the Company to sell 
the remaining lot inventory as a bulk sale for cash or to exchange it for 
other assets or to reduce its debts.  This land inventory is not 
considered material or significant to the Company's operations.

<PAGE>

SLE believes that it is in compliance with the requirements of the 
Department of Housing and Urban development ("HUD") to sell its remaining 
lots in the San Luis North Estates Subdivision; if necessary, it intends 
to maintain its registration effective with HUD in anticipation of 
selling its remaining lots unless it finds that it is exempt from the HUD 
rules and regulations.

SLE also owns twelve improved lots located in the City of Fort Garland, 
Costilla County, Colorado.  The assets of SLE have served as a source of 
collateral for funds advanced to the Company and its majority-owned 
subsidiaries.

The Company's wholly-owned subsidiary, Homespan, owns a 331-acre 
campground known as Standing Rock Campground located in Camden County, 
Missouri.  This recreational resort includes approximately three quarters 
of a mile of lake frontage on the Lake of the Ozarks, 130 campsites of 
which 120 campsites include hook ups for electricity, water, sewer, and a 
pad for recreational vehicle parking.  A clubhouse and also several 
ancillary buildings are on the premises.  The Company is the operator of 
the campground and is leasing space to campers and others on a daily, 
weekly, or monthly basis.

Misanse, the Company's majority-owned subsidiary (52%) owns the SSGM real 
estate consisting of approximately 1,470 acres which is located 
approximately two and one-half miles northwest of the City of Santa Rosa 
de Lima, off of the Pan American Highway, and about 108 miles southeast 
of the Capital City of San Salvador, El Salvador, and it is about 11 
miles west from the border of the Country of Honduras.  It is also about 
26 miles from the City of La Union which has railroad and port 
facilities.  An airline commuter service provides daily scheduled flights 
to the City of Santa Rosa de Lima.

The Company owns 52 acres of land on the Modesto Mine site which is 
located due north of the City of Paisnal and approximately 19 miles north 
of San Salvador, the capital city of El Salvador.

Reference is made to "Item 2.  Properties," for additional information.

Real Estate Sales

Homespan, the local real estate marketing subsidiary of the Company is
presently inactive.  It has no significant activity and is not material 
to the Company's operation.  Homespan holds the title to the real estate 
located in Colorado and the Standing Rock Campground ("SRC"), located in 
the Lake of the Ozarks.  SRC is operated by the Company.  Assets of 
Homespan have also served as a source of collateral for funds loaned to 
the Company and its majority-owned subsidiaries.

Advertising

The Company owns 100% of the outstanding common stock of Piccadilly 
Advertising Agency, Inc.  ("Piccadilly"), a Wisconsin corporation.  
Piccadilly provides, when required, advertising services to the Company 
and its other subsidiaries when they are needed.  It was and still may be 
able to obtain advertising discounts because of its agency status.  
Piccadilly's operations are not significant or material to the Company's 
operations.

<PAGE>

Patents and License Agreements

On July 23, 1987, the Government of El Salvador delivered and granted to 
Misanse, possession of a mining concession.  On September 25, 1996, the 
SSGM concession was reconfirmed to comply with the 1996 El Salvadoran 
Mining Law.  The Joint Venture believes that its SSGM concession begins 
on the date it was issued--July 1987.  The pending case with the El 
Salvadoran Supreme Court may determine the outcome of which set of mining 
regulations will apply.  The concession provides the right to extract and 
export minerals for a term of 25 years (plus a 25-year renewal option) 
beginning on the first day of production from the real estate owned by 
Misanse and encompassing the SSGM.  Misanse assigned this concession to 
the Joint Venture.  Under the concession and applicable El Salvador law,  
including a bi-lateral agreement, the Joint Venture has the right to 
export said minerals for five years beginning with the first day of  
production, without imposition  of mineral, export, or any  taxes.  It 
also has the right to import free of duty, equipment and all other items 
necessary to operate the SSGM.  (Reference is made to "Item 1.  
Concession Agreement")

The Joint Venture has applications pending with the El Salvador 
Department of Energy, Mines and Hydrocarbons for the exploration rights 
under the February 1996 Mining Law for the following mining properties 
located in El Salvador:  San Felipe-El Potosi Mine, and its extension, 
the El Capulin Mine, the Hormiguero Mine, the Modesto Mine, and the 
Montemayor Mine.  The Company and its subsidiaries hold no patents or 
trademarks.

Significant Customers

The Company presently has no individual significant customers in which 
the loss of one or more would have an adverse effect on any segment of 
its operations or from whom the Company has received more than ten 
percent of its consolidated revenues except for the sale of gold which 
the Joint Venture is producing.  The gold in dore form is refined and 
then sold at the world market price to a  refinery located in the United 
States.

Miscellaneous

Backlog orders are not significant to either the Company's or its 
majority-owned subsidiaries' areas of operations, or at this time is any 
portion of their operations subject to renegotiation of profits or 
termination of contracts at the election of the United States' 
Government.

Neither the Company nor its majority-owned subsidiaries conduct any 
material research and development activities, except as indicated in this 
report with respect to the Joint Venture and its mining  exploration and 
exploitation programs.

The Company believes that the federal, state and local provisions
regulating the discharge of materials into the environment should not 
have a substantial effect on the capital expenditures, earnings or 
competitive position of the Company or any of its majority-owned 
subsidiaries as the Company does not have any mining activity in the 
United States.

Financial Information About Industry Segments Lines of Business

Operation

Campground:  For the years ended March 31, 1997, 1996 and 1995,  revenues 
have been generated from the campground business.  Although Homespan owns 
the campground real estate, the Company is the campground operator.

<PAGE>

Land Sales

The Company intends to sell its remaining lots in Colorado on a bulk 
basis.

Mining

The Company's primary strategy, through its Joint Venture, is to use its 
SCMP facilities to process gold ore transported  from SSGM and other 
exploration opportunities located in the Republic of El Salvador.  The 
Joint Venture has produced  gold from its SCMP operations during this 
start-up period.  At such time as funds are available, the Company 
intends to process its SSGM gold ore via an open-pit, heap-leaching 
system.

The Company anticipates that the capital required for the purchase of 
equipment and working capital can be obtained from the sale of its common 
or preferred shares, bonds, equity offerings, loans, leases, partial sale 
of its gold reserves, sale of gold, or from a combination of these and 
other creative funding possibilities.

Competition

The Company believes that neither it, nor any other competitor, has a 
material effect on the precious metal markets, and that the price that 
the Joint Venture will receive for its sale of gold is dependent upon 
world market conditions over which neither it nor any other single 
competitor has control.

Employees

As of March 31, 1997, the Joint Venture employed approximately 318 
full-time persons from El Salvador to perform its exploration, 
exploitation, and development programs; to produce gold from its SCMP 
facilities; and to handle the administration of its activities. None of 
these employees are covered by any collective bargaining agreements.  It 
has developed a harmonious relationship with its employees, and it 
believes that it is the largest single non-agricultural employer in the 
El Salvador Eastern Zone.   Also, the Company employs approximately four 
persons (plus part-time help) in the United States.

Insurance

The Joint Venture has in existence insurance through an El Salvador 
insurance company with the following coverage:  general liability, 
vehicle liability and extended coverage, fire, explosion, hurricane, 
cyclone, tornado, windstorm, hail, flood, storm, earthquake, tremor or 
volcanic eruption, politically-motivated violence, terrorism, strikes, 
work stoppages, riots, uprisings, malicious acts, vandalism, and related 
acts.  As additional equipment and assets are acquired or improvements 
are made, the insurance coverage can be increased accordingly.

<PAGE>

                             Industry Segments

1. Unaffiliated Sales                           Year Ended March 31,
   ------------------                           --------------------

   Industry     Location                      1997          1996          1995
   --------     --------               -----------  ------------   -----------
   Mining (*a)  El Salvador            $         0  $          0   $         0
   Campground   Missouri, USA               59,009        55,692        54,600
   Real Estate  Colorado, USA                    0             0         9,000

2. There Were No Intersegment Sales
   --------------------------------

3. Total Revenues                               Year Ended March 31,
   ---------------                              --------------------

   Industry     Location                      1997          1996          1995
   --------     --------               -----------  ------------   -----------
   Mining (*a)  El Salvador            $         0  $          0   $         0
   Campground   Missouri, USA               59,009        55,692        54,600
   Real Estate  Colorado, USA                    0             0         9,000
   Other        Delaware/Wis., USA       1,571,207     1,289,568       759,581
                                       -----------   -----------   -----------
                               Total:  $ 1,630,216   $ 1,345,260   $   823,181

4. Operating Profit (Loss)                      Year Ended March 31,
   -----------------------                      --------------------

   Industry     Location                      1997          1996          1995
   --------     --------               -----------   -----------   -----------
   Mining (*a)  El Salvador            $         0   $         0   $         0
   Campground   Missouri, USA               (1,976)       (6,741)       (7,336)
   Real Estate  Colorado, USA                    0             0         7,676
   Interest     El Salvador/Delaware
    Income      Wisconsin, USA           1,009,574       794,543       274,407
                                       -----------   -----------   -----------
                               Total:  $ 1,007,598   $   787,802   $   274,747

5. Identifiable Assets                          Year Ended March 31,
   -------------------                          --------------------

   Industry     Location                      1997          1996          1995
   --------     --------               -----------   -----------   -----------
   Mining (*a)  El Salvador            $22,733,462   $18,838,770   $15,692,668
   Campground   Missouri, USA            1,135,500     1,135,500     1,135,500
   Real Estate  Colorado, USA               21,000        21,000        21,000
   Corporate Assets                      1,177,372       517,845       768,305
                                       -----------   -----------   -----------
                               Total:  $25,067,334   $20,513,115   $17,617,473

(*a) The proceeds from the sale of gold and the gold inventory received from
the Joint Venture ($2,150,000--$969,721-1997; $1,180,279-1996) were used to
reduce the advances to the Joint Venture account.

<PAGE>

Item 2.  Properties

Corporate Headquarters

The Company leases approximately 4,032 square feet of office space for
its corporate headquarters on the second floor of the building known as 
the General Building located at 6001 North 91st Street, Milwaukee, 
Wisconsin, at a monthly rental charge of $2,789 on a month-to-month 
basis.  The lessor is General Lumber & Supply Co., Inc. ("General 
Lumber"), a Wisconsin corporation.  The Company's President, Edward L. 
Machulak  owns 55% of the common stock of General Lumber.  Edward L. 
Machulak disclaims any interest in the balance of General Lumber common 
stock which is owned by two of Mr. Machulak's brothers, his wife, and a 
trust for the benefit of his children.  In addition, the Company shares 
proportionately any increase in real property taxes and any increase in 
general fire and extended coverage insurance on the property.  In lieu of 
cash payment, the Lessor has agreed to apply the monthly rental payments 
owed to the open-ended, secured, on-demand promissory note(s) due to it.

Real Estate Holdings

A description of the Company's real estate holdings are set forth in 
"Item 1.  Land Acquisition and Development."  Real estate assets have 
served as a source of collateral for funds loaned to the Company and its 
wholly and partially-owned subsidiaries.

San Sebastian Gold Mine ("SSGM")

Tailings from the SSGM were, and now virgin gold ore is being transported
to the SCMP site to produce gold.  SCMP is gradually being expanded and 
improved technically to increase its virgin ore tonnage process to a 
capacity of 300 to 400  tons per day.  It is mining virgin gold ore from 
its open pit and it plans to extract the stope fill from underground to 
produce gold on the SSGM site.  The property consists of 1,470 acres.  
SSGM is located approximately two and one-half miles northwest of the 
City of Santa Rosa de Lima in the Department of La Union, Republic of El 
Salvador, Central America.

SSGM Current Status

The Company, through its Joint Venture is conducting the following 
activities: It is in the development and pre-production mining stage 
which consists of completing its survey, mapping, site preparation, 
infrastructure, construction, planning, and in the performance of the 
auxiliary work needed to begin gold production at the SSGM site. The 
Joint Venture's geologists have determined that SSGM has minable gold ore 
reserves via an open pit of approximately 13.4 million tons of gold ore 
which should contain approximately 1.166 million ounces of gold.   In 
addition, it has approximately 960,000 tons of dump material, and about 
one million tons of stope fill.  Presently,  the Company is seeking 
funding to purchase equipment, to purchase inventory, and to use for 
working capital for its on-site proposed open-pit, heap-leaching 
operation.  In addition, the Company is actively engaged in the 
exploration and development of the peripheral area (including diamond 
core drilling) surrounding the main body of gold ore in order to increase 
its gold ore reserves.

The Company's main objective and plan, through the Joint Venture, is to 
operate a moderate tonnage, low-grade, open-pit, heap-leaching operation 
to produce gold on its SSGM site.  Dependent on the funding, the grade of 
ore, and the tonnage processed, it anticipates producing more than 40,000 
ounces of gold from its open-pit, heap-leaching operations during the 
first twelve full operating months and more thereafter.

<PAGE>

In 1997, a diamond drilling program with an independent contractor was
initiated at the SSGM mine area to substantiate and expand the gold 
reserves.  At the same time, pit walls were excavated and the old vein 
system was exposed to facilitate systematic sampling of the wallrock.  
This program demonstrated that true widths of up to 100 feet of altered 
and mineralized trachyte occur frequently in the open-pit and adjacent 
areas.  Panel and surface channel sampling of these exposures revealed 
assays in the 0.03 to 0.20 ounce per ton gold range.  In addition, under 
ground workings on the Limon, Guaramal, Santa Elena, and Taladron veins 
are being rehabilitated.

SSGM Geology

The ore deposit consists of contact-fissure veins carrying gold-bearing 
pyrite.  The veins occur at the contact between quartz-monzonite porphyry 
dike and surrounding eruptives which are basalt capped by trachyte.  All 
the rocks are of recent age, probably late tertiary.  The SSGM lies 
within a silicified and hydrothermally altered zone of acid to basic 
volcanoes roughly within a two-square kilometer area.

The occurrence is typical of the late stage deposition associated with
instrusives in Island Arc plate tectonics dating millions of years (four 
to 65 million) ago.  These are typically polymetallic precious metal-base 
deposits with high grade veining in large haloes of low grade resembling 
in part the Kuroko deposits in Japan.  The dike is shaped like a 
flattened "s" and consists of a 2,800 foot long essentially vertical 
east-west segment, a northwest striking western section "dragged" sharply 
north for 800 feet and dipping 70 degrees northeast and a vertical 
south-east striking east.

The geology of the SSGM deposit is integrally linked to the presence of a
quartz monzonite intrusive.  This quartz monzonite has the appearance of 
being a high level sill and is probably coeval with the surrounding 
tertiary aged trachytes that form the main SSGM ridge.  The geometric 
configuration of the quartz monzonite controls the localization of quartz 
veins and alteration of the trachytes.  The overall structural control is 
east-west; according to historic mine records, the monzonite contacts 
with depth, but successive level plans suggest a funnel shaped structure 
plunging to the southeast.  On a detailed scale, the quartz veins are 
controlled by a master set of parallel veins preferentially oriented 
east-west.  The vein branch generally dips north and is interconnected by 
southeast dipping diagonal veins of variable strike.  Mapping records 
describe veins as sinuous, further suggesting brittle stress regimens, 
with veins occupying dilational zones.  These fissure style veins are up 
to five feet in width, and generally occur in trachyte or at the contact 
between trachyte and monzonite.

Pre and post mineral faulting is common throughout the deposit. The 
deposit is said to diminish when a basalt "basement" contact is 
approached at a depth, however basalt on top of San Juan Hill is also 
recognized.  The funnel shape of the deposit, suggests however a 
potential synvolcanic structural control, with a source to the southeast.  
The San Juan area has not been tested by modern exploration techniques.

Based on data available at present,  the hydrothermal system focused on
SSGM has a dimension of approximately 3,500 feet in strike, a vertical 
extension of 1,100 feet (minimum) and an approximate width of 500 feet.  
The volume of hydrothermally altered rocks in the system prior to erosion 
is likely to have been in the magnitude of up to 200 million tons.

Gold occurs in the native form and also occurs rarely as a telluride.
Pyrite is the predominant sulphide mineral in the deposit and it is the 
most common host to the fine grained gold.  Copper minerals including 
bormite, chalcopyrite, chalcocite, tetrahedrite, enargite and luzonite 
have been identified.  Gold mineralization is accompanied by 
silicification; other gangue minerals include kaolimite and sericite and 
more rarely barite.  High grade gold streaks are associated with barite.

<PAGE>

The SSGM deposit represents a bonanza gold system formed within a coeval
high level alkaline intrusive-extrusive complex.  Mineralization is more 
consistent with an acid sulphate system generated within an intracratonic 
caldera setting.  The potential for SSGM to host millions of ounces of 
gold is considered to be excellent.

SSGM Ore Reserves

As of March 31, 1997, the SSGM has approximately 13.4 million tons of 
virgin proven gold ore reserves, grading 0.087  ounces of gold per ton 
and containing about 1.2 million ounces of gold.  Overall the stripping 
ratio is low, ranging from zero in the Coseguina Hill area which is 
highly mineralized and consists of a series of high angle vertical veins 
to a possible stripping ratio of 1:3 to 1:8.  It is planned to use these 
reserves; they will be screened, crushed and, if required, they will be 
agglomerated and placed on a proposed leach pad on the SSGM site.  About 
one million tons of stope fill with a grade of  0.34 ounces per ton and 
approximately 960,000 tons of dump material with an average grade of 0.10 
ounces of gold per ton. (For additional information, reference is made to 
"Item 1.  Proposed Mining, Mill, Heap-Leaching and Exploration 
Operations.")

Since July 1987 through March 31, 1997, the following exploration has 
been performed on the SSGM site: surface channel trenching, 34,594 meters 
(114,160 feet/21.6 miles); test pit hole excavations, 655 vertical meters 
(2,162 feet/.41 miles); underground workings and adit openings, 1,054 
meters (3,478 feet/.66 miles).  The surface samples from the trenching 
averaged 0.026 ounces of gold per ton over an area approximately 1,000 
feet in width and approximately 5,000 feet in length.  A total of 46,619 
SSGM gold ore samples were fire assayed at the Joint Venture laboratory.

SSGM Diamond Drilling Program

The Joint Venture has completed eight diamond drill holes at the SSGM 
site.  Five were on the San Juan Hill which ranged in depth from 106 feet 
to 172 feet and the grade varied (dependent on the rock encountered) from 
0.01 to 0.15 ounces of gold per ton. Three drill holes were drilled in 
the Coseguina area from 62 feet to 255 feet.  The grade of gold from 402 
fire assay samples varied from 0.01 to 0.54 ounces of gold per ton.  In 
some areas former adits were encountered which prevented the drilling to 
go to a deeper depth.

SSGM Proposed Mining Open-Pit, Heap-Leaching Operations at the SSGM Site 

The open-pit ore will be loaded into trucks by wheel loaders and hauled 
to the recovery plant area.  The ore will then be placed into a vibrating 
screen hopper which will remove gold ore larger than 3/4 inches in size.  
Lime, cement and cyanide solution will be added if needed to this crushed 
ore.  If needed, it will then be placed into an agglomerator to convert 
the fine material into small stable pellets saturated with cyanide 
solution.  The material will be conveyed to the leach pad and stacked 
using conveyors.

The first step will be to load the first sections of the pad with the 
crushed ore.  Belt conveyors will be used to transfer ore to a stacking 
conveyor to build a heap.  After loading is completed, the ore cures and 
the top surface of the heap will be manually levelled.  Leaching of the 
heap proceeds by distributing barren sodium cyanide leach solution to the 
heap with sprinklers or by drip irrigation.

The gold will be recovered via a carbon column system where the porous
carbon recovers the solvent gold by adsorption.  The carbon will be 
stripped and the solution will flow through an electrowinning cell where 
gold will be recovered from the strip solution by electroplating onto 
stainless steel wool cathodes.

<PAGE>

Gold laden steel wool cathodes will be periodically removed from the 
electrowinning cells and transferred to the replating cell.  In the 
replating cell the gold will be electrolytically stripped from the steel 
wool and plated onto stainless steel cathode sheets.

The gold will be recovered from the cathodes, mixed with fluxes, placed
in a crucible, and heated in a furnace until melted.  The gold will then 
be poured into molds to form dore bars.

SSGM Ownership of the Property

The San Sebastian Gold Mine real estate consisting of approximately 1,470 
acres, is owned by Misanse, a Salvadoran Corporation.  The Company owns 
52% of Misanse common shares that are issued and outstanding.

History and Development-SSGM

The San Sebastian Gold Mine has a long history of gold production.  
Unquestionably, the SSGM deposit was the jewel of the El Salvador mining 
industry and one of the most prolific gold mines in Central America.

Prior to 1880, the SSGM was probably known to the natives of the area and
Spaniards, and may have produced gold during colonial days; however, no 
records of production exist.  Numerous artifacts in the Santa Rosa River 
below the present day SSGM provide mute evidence of primitive early day 
mining operations.

In 1883, an American company hired Mr. Charles Butters to conduct
experimental metallurgical tests on ore from the SSGM in his laboratory 
in New York.  He determined that amalgamation and gravity concentration 
could not be effectively employed, but that the gold was amenable to 
recovery by chlorination.

From 1885-1888, the first effective exploration work at the SSGM was done
by the above-mentioned American company.  Mr. Butters was contracted to 
build a 30-ton-per-day chlorination plant at the SSGM site.  This small 
scale operation proved unsuccessful, and the SSGM ceased production.

In 1898, the property was purchased by General Lisandro Letona.

In 1904, Mr. Butters, believing that the SSGM was a valuable property 
which had been grossly mismanaged, acquired the property in association 
with Mr.  David J. Pullinger of Johannesburg, South Africa, for $100,000.  
Within a year of acquisition, Mr. Butters had established ore reserves of 
42,560 tons with an average content of 2.75 ounces per ton.  Their 
operations mined approximately $1,000,000 worth of gold from ore bearing 
gold at two and three quarter ounces or more per ton.

From 1904 to 1908, three investigations were made at the SSGM site by Mr.
Butters and his staff regarding the type of beneficiation process best 
suited to the SSGM ores.  It was determined that roasting, followed by 
cyanidation, and the recovery of the gold by means of combined 
electrolytic and zinc precipitation, was the most effective method.  In 
later years, roasting of the ores was discontinued.

(During the period 1890-1898, Mr. Butters had been active in the 
development of cyanidation of gold ores at the Rand Mine in South Africa, 
and recognized the process as a revolutionary metallurgical practice.)

Continuous operations at the SSGM  by Butters Salvador Mines were
performed from 1908 to 1917, at which time operations ceased due to 
exhaustion of what they believed to be all of the high grade (two ounces 
or more of gold per ton) ore body.  Butters Salvador Mines was 
voluntarily liquidated in October 1917.

<PAGE>

Initially, mill capacity was 20 tons per day; it later increased to 40
tons, then to 100 tons, and finally, 120 tons per day.  For a period of 
several years, mill heads averaged no less than two ounces of gold per 
ton.  The SSGM was considered among the richest gold mines in the world.  
During the peak years of operation (1908-1917), more than 1,500 people 
were employed at the SSGM.  During this interval of time, the SSGM is 
reported to have produced 950,000 ounces of gold.

From 1917 to 1921, small operations at the SSGM, under the direction of 
Mr.  Butters, yielded approximately 150,000 ounces of gold.

In 1924, Mr. G. Swanquist, a former member of Mr. Butters' staff,
obtained the rights to develop the SSGM, but did no work worthy of 
mention.

From 1933 to 1953, owing to the increase in the world price of gold from 
$20.67 per ounce to $35.00 per ounce, operations were renewed under the 
name of Butters Salvador Mines, Ltd.  Initially, only the richest ore 
shoots were mined; later, level and shaft pillars were exploited.  In 
1933, the rate of milling was approximately 40 tons per day.  Diminishing 
grade and labor problems forced closure in 1953.  During the period 1933 
to 1945, approximately 150,000 ounces of gold were produced, and from 
1945 to 1953, 30,000 ounces of gold were produced.

In 1953, when Butters Salvador Mines, Ltd. ceased operations, members of 
the labor union acquired the property in lieu of a severance pay 
settlement.  The members of the union organized Misanse, an El Salvador 
Corporation, and managed monthly shipments of approximately 70 tons of 
surface oxide ore and old fill to the nearby Mina Lola mill.

In 1964, a ten-ton-per-day flotation and cyanide plant operated 
intermittently on an unprofitable basis.

From 1967 to 1968, there were unprofitable small-scale high-grading 
operations on an intermittent basis by various local miners working under 
a contract system with Misanse.

The Company's investment in Sanseb dates back to 1969.  Sanseb acquired 
its lease to mine gold from Misanse in 1968.  During March of 1973, the 
Company acquired control of Sanseb, and since then, owns 2,002,037 (82 
1/2%) of Sanseb's issued and outstanding common shares.

From 1969 to 1972, work advanced in reopening collapsed SSGM adits, 
tunnels and workings, with limited mining-milling operations.  A straight 
cyanidation plant was installed using zinc box (shavings) precipitation 
and operating on an intermittent basis with limited daily production.

From February of 1973 to 1978, reorganization of Sanseb under the control
of the Company, with continuous and increased production from the SSGM,
was commenced along with extensive plant modifications, including
conversion to Merrill Crowe type (zinc dust) precipitation.  The existing 
mill was upgraded to 100 tons per day when this plant was installed.  The 
underground tunnels and workings were rehabilitated.  While the SSGM 
produced significant revenue, heavy exploration and development costs 
strained the cash flow of the operation.

On February 6, 1978, Sanseb ordered operations at the SSGM suspended due 
to the unavailability of investment capital and the lack of continuity in 
management, primarily due to the political unrest, particularly in the 
Eastern Zone of El Salvador where the SSGM is located.  On May 6, 1978, 
as a result of the decision to suspend operations, former employees of 
Sanseb claimed that Sanseb was obligated under El Salvador law for the 
payment of severance pay to its former employees.  Sanseb's legal 
position was that it temporarily suspended operations due to the 
political instability and since it did not terminate all activities, it 
was not liable at that time for the severance pay.  In January of 1979, a 
lower El Salvador Court awarded possession of  the mining rights (not the 
real estate) to the former employees.  It is believed that the Court had 
no right to award a concession as only the Government of El Salvador has 
this right and authority.

<PAGE>

During 1979, when the embargo was in effect, Mr. Robert Villatoro 
contracted to operate the SSGM.  From the reports provided by his 
employees, it is believed that he extracted more than 10,000 ounces of 
gold.  Mr.  Villatoro ceased operations during 1981 or 1982 when the 
guerrillas were extremely active in the eastern part of El Salvador which 
includes the SSGM area.

During this time a dramatic increase in the world market price of gold (a 
peak of over $800/oz. in 1980) as well as developments in the technology 
of gold extraction presented new opportunities for the Company and Sanseb 
at the SSGM.

In February 1985, the Company made an on-site inspection of the  mill and 
SSGM site, which disclosed that the buildings, offices, machine shop, 
laboratory,  mill and equipment were completely destroyed.  Also, the 
SSGM tunnels and workings consisting of approximately 37 miles were 
demolished and collapsed.  The Company consulted with geologists and 
engineers to develop a new plan of extracting gold from the reserves 
developed in the Company's exploration and development program and to 
process gold via an open-pit, heap-leaching operation.

In June 1985, the Company and Sanseb settled the claims of Sanseb's 
former employees by agreeing to compensate them for the severance pay 
with proceeds attained from future gold production.  The El Salvador 
Court, on June 6, 1985, had decreed, in a non-appealable order, to the 
nullification of all previous acts of the previous Court's orders, and 
removed the embargo previously decreed.  In addition, the El Salvador 
Court ordered the return of all of the assets, rights and everything else 
whatsoever previously owned by  the Company, Misanse and Sanseb.

The Company had no significant activity at the SSGM site from February 
1978 through January 1987.  The present status is that, since January 
1987, the Company, through the Joint Venture, has completed certain of 
the required mining pre-production preliminary stages in the minable 
proven gold ore reserve area, and it is active in attempting to obtain 
financing for the project.  It is also engaged in the exploration and the 
expansion program to develop additional gold ore reserves in the area 
surrounding the minable gold ore reserves.

On July 27, 1987, El Salvador President Jose Napoleon Duarte, at an 
official ceremony in the City of Santa Rosa de Lima, personally presented 
the mining concession to Misanse, which simultaneously was assigned to 
Commerce Group Corp. and San Sebastian Gold Mines, Inc.

In September 1987 the Commerce/Sanseb Joint Venture was formed to conduct
and manage the El Salvadoran business operations.

During October 1989, the Joint Venture  set up in the City of San Miguel,
its own laboratory equipment and began performance of assays from its 
SSGM ore sample.  It trained its personnel to use this modern laboratory 
which was equipped with modern technical equipment.

Since 1990 to present date, extensive surface channel trenching, adit 
openings and test pit excavations developed thousands of fire assay 
samples.  They were assayed at the Joint Venture laboratory.  This 
laboratory was relocated to a Company-owned site near the SSGM.  
Extensive dirt roads and a bridge were constructed.  Electric lines to 
the laboratory were restored.  A diamond drilling program has been 
initiated to determine if there are additional gold ore reserves on this 
site.

<PAGE>

During this twelve-month period ended March 31, 1997, the Company has 
advanced funds, performed services, and allocated its general and 
administrative costs to the Joint Venture.

San Cristobal Mill and Plant ("SCMP") Recovery and Processing System

SCMP Location

SCMP is located near the City of El Divisadero (off of the Pan American 
Highway),  and  is approximately 13 miles east of the City of San Miguel, 
the second largest City in the Republic of El Salvador, Central America.

SCMP Lease Agreement

On November 12, 1993, the Joint Venture entered into an agreement with 
Corporacion Salvadorena de Inversiones ("Corsain"), a governmental agency 
of El Salvador, to lease for a period of ten years, approximately 166 
acres of land and buildings on which its gold processing mill, plant and 
related equipment are located, and which is approximately 15 miles east 
of the SSGM site.  The annual lease payment is U.S. $11,500 (payable in 
El Salvador colones at the then current rate of exchange), payable 
annually in advance, and subject to an annual increase based on the 
annual United States' inflation rate.  As agreed, a security deposit of 
U.S. $11,500 was paid on the same date which also will be increased 
annually to correspond with the annual U.S. inflation rate.

SCMP Mill and Plant Process Description

On February 23, 1993, at a foreclosure auction held by an El Salvador 
Court, the Company, on behalf of the Joint Venture, was the successful 
bidder in acquiring SCMP, a precious metals' cyanide leaching mill and 
plant rated with a capacity of processing 200 tons of virgin ore per day 
consisting of  the following unit operations:  crushing, grinding, 
thickening, agitated leaching, counter current decantation of leach 
solution, recovery of precious metals by zinc precipitation 
(Merrill-Crowe), and direct smelting of precipitates to produce precious 
metals as dore and tailings' disposal.

Instead of utilizing the existing recovery system, the Joint Venture's 
engineers have designed a carbon-in-leach (CIL) process which is 
described in detail under Project Operating Plan.

The Joint Venture completed a certain stage of the retrofitting,
rehabilitation, repairing and restoring of the SCMP's plant and it 
continues to perform such plant and equipment alterations, modifications  
and improvements to expand the SCMP's capacity to process 300/400 tons of 
virgin ore per day.   It presently is  producing gold on a limited 
production basis by processing the virgin ore from its SSGM.

SCMP Gold Ore Sources

The Joint Venture has several sources of gold ore to process at the SCMP:
the 185,000 tons of Potosi tailings which have an average grade of 0.06 
ounces of gold per ton; the SSGM open-pit virgin ore; the dump material; 
and the ore and stope fill from the underground workings.

The other sources of gold ore to be used at the SCMP operations are the
higher grade gold ore (0.13 ounces or higher) which could be processed 
with an up to  92% recovery grade or better at a rate of 300/400 tons per 
day.  The income from the higher recovery of gold ore will be 
substantially more than the greater cost involved in this process.  There 
is a sufficient amount of dump material, stope fill and higher grade 
virgin gold ore that could be used via the SCMP crushing and grinding 
process to recover up to 92% or more of the gold which recovery is 
substantially more than the expected 60% recovery of gold through the 
heap-leaching process.  The Joint Venture's geologists estimate that 
there are more than one million tons of higher grade ore from the stope 
fill (underground) to be processed via the SCMP.

<PAGE>

Current Status

The start-up, testing and adjustment stage of processing the remaining 
SSGM tailings via trucking this ore to the SCMP  has commenced and the 
Joint Venture is in this preliminary stage of producing gold.  The SCMP 
is designed to process 400 tons per day by utilizing 12-hour cycles that 
should recover approximately 70% of the gold from the tailings.  The 
average grade was about 0.08 ounces of gold per ton.

During this fiscal year the Joint Venture did process at the SCMP
approximately 75,000 dry tons  (approximately 101,000 wet tons) of 
tailings which yielded 4,332 ounces of dore and accounted for 2,595 
ounces of gold and 594 ounces of silver.  The gross receipts amounted to 
$969,721.  The proceeds from the sale of gold and silver were used to 
reduce the amount of Company advances to the Joint Venture.

San Felipe-El Potosi Mine ("Potosi") and its extension the El Capulin 
Mine ("El Capulin")

Potosi Location

The Joint Venture has commenced an exploration program on the Potosi 
property which is located approximately 18 miles northwest of the City of 
San Miguel, the second largest city in the Republic of El Salvador, on a 
paved road 15 miles to the City of Chapalteque and then west three miles 
on a gravel road to the City of Potosi.  The historical records indicate 
that the potential of developing a gold mine is above average.

Potosi Historical Information

Historical records evidence that exploration and production of gold took 
place in 1899 and that Potosi was worked intermittently from 1906 through 
1952.  The main production period in six levels was from 1938 through 
1952 at a rate of 35 to 50 tons per day.  Production data avouch that 
30,000 ounces of gold were produced from 1945 through 1952 after which 
the mine became dormant.  During this time a limited underground 
exploration program confirmed that the gold ore reserves were of 
commercial value.  The gold assays from some of the former drill hole 
samples on the southern extension of the north-south portion of this 
property showed a grade of 0.10 to 0.35 ounces of gold per ton of ore.

Potosi Geology

The Potosi vein type occurrences are very strong, persistent, poor 
quartz-calcite fissure fillings from two to ten feet wide and up to 3,400 
feet in length.  On a regional scale, the veins are fairly 
straight-forward type structures but in detail they can be complicated.  
Dips in the north-south veins are steeper than in the lattice systems 
such as the 50 degrees to 90 degrees in the Potosi type.  The proportion 
of gold-to-silver increases in north-south striking veins or in veins of 
any orientation whose dips more closely approach the vertical.

Two relatively narrow north-south veins, 450 feet apart, have been worked 
in the past by vertical and an inclined shaft for up to 2,100 feet along
the strike and to depths of between 180 and 440 feet below surface on
four to six levels.  The veins are contained in coarse-grained augite 
andesites.  The larger of the veins is up to ten feet in width, dipping 
55 degrees to 75 degrees west.  The second vein is weaker in structure 
and about three feet in width.  Gold values seem to be indiscriminately 
associated with quartz and do not seem to diminish at depth.  Assay plans 
and ore reserve sections completed in 1952 show 30 blocks with an average 
grade of 0.6563 ounces of gold per ton.  Holes drilled from the projected 
extension of the north-south portion of one of the veins returned various 
five-foot sludge samples grading 0.10 to 0.35 ounces of gold per ton with 
a one foot of core length grading at 0.39 ounces of gold per ton.  It 
appears that the deposition took place at higher temperatures than 
attributed to silver, thus the vertical zoning of gold deposition is 
deeper or has a larger vertical dimension than silver; therefore the 
possibility of considerable ore below levels is a realistic one.  The age 
mineralization is past laramide with the host rock being rhyolite.  The 
previous gold-silver ratio was 0.3:1.

<PAGE>

Potosi Tailings' Reserve

Since October 25, 1993, Comseb has had a full-time crew, ranging from 25 
to 30 employees,  conducting an exploration program consisting of 
surveys, channel trenching, adit openings, test pit holes, excavation and 
drilling of the tailings to determine its gold content.

Twenty-four test pit hole excavations have been plotted and drilled on
this four-acre site of tailings.  The depth to the bottom of the 
tailings' pile varied from 7.00 to 10.2 meters (23 to 34 vertical feet) 
and a total of 137.6 meters (454 feet) of test pit hole excavations were 
completed.  The 573 fire assay samples (tailings) indicated an average 
grade of gold per ounce to be 0.06  (0.06  times 185,000 tons should 
contain 11,100 ounces of gold times a 70% recovery should yield about 
7,770 ounces of gold).

Potosi and El Capulin Exploration Undertakings

A total of 2,100 meters (6,930 feet) of channel trenching was excavated 
with a grade ranging from 0.01 to 0.50 per ton.  A total of 686 meters 
(2,264 feet) of adits has  been restored for entry into the old workings.  
A tabulation of the work completed by the Joint Venture is as follows:

1. Surface

   a. An exploration consisting of twenty-seven surface channel trenches
      were excavated consisting of 1,010 meters (3,333 feet).   A total
      of 1,232 samples were fire assayed reflecting an average grade of
      gold of 0.02 ounces per ton.  Two veins were intercepted which
      assays averaged 0.051 ounces of gold per ton.  One vein encountered
      was 3.50 meters (11.55 feet) in width, while the other was 0.70
      meters (2.31 feet) in width.

2. Potosi Underground Workings

   a. Guayabito Adit: This adit was opened for a distance of 132.9 meters 
      (439 feet) and a cross cut was encountered at 25 meters (83 feet) 
      running to the west at which point a 0.40 meter (1.32 feet) thick 
      vein was intercepted.  The 399 samples that were fire assayed 
      reflected an average grade of gold of  0.012 ounces per ton.

   b. Guarumo Adit: At a point south 15 degrees east a 1.70 meter (5.61
      feet) thick vein dips 60 degrees to the west.  This adit is all
      vein area.  A total of seven meters (23 feet) was cleaned and the
      three fire assay samples proved an average of 0.05 ounces of gold
      per ton.

   c. San Isidro Adit:   A total of 158 meters (521 feet) was cleaned and 
      from the entrance a sub level 25 meters (83 feet) was developed on 
      a vein running south 13 degrees east.  This sub level is located 
      5.65 meters (19 feet) below the entry level.  The vein is 2.80 
      meters (nine feet) thick from which more than 243 samples reflected 
      an average grade of gold of 0.022 ounces per ton.

 <PAGE>

   d. Cacho de Oro Adit: A total of 57 meters (188 feet) was cleaned in 
      this adit.  At a point 34 meters (112 feet), a crosscut was 
      encountered which was advanced 23 meters (76 feet).  A total of 59 
      fire assay samples reflected an average grade of 0.07 ounces of 
      gold per ton.

   e. Canon 821: Exploration progress continues at Canon 821 Adit, Winze
      821, the General Winze and Adit 2A.  Pillars were found in Adit 2A
      about 105 meters (347 feet) from the entry.

3. The El Capulin Mine

   a. A total of more than 29 surface trenches was excavated over a
      distance of 537 meters (1,772 feet) and the 404 fire assay samples
      revealed an average grade of 0.10 ounces of gold per ton.  A
      backlog of samples are in the process of being assayed.

   b. In the Capulin adit, a total of 188 meters (620 feet) was cleaned;
      the goal is to reach the Capulin vein.  The seven fire assay
      samples averaged a grade of 0.25 ounces of gold per ton.

4. Tailings

The 573 samples that were fire assayed  reflected a grade of gold of 0.06 
ounces per ton.

Exploration on this property will continue with channel trenching, 
re-opening of former adits, and to include diamond core and/or reverse 
circulation drilling, mapping and sampling of the known mineralized areas 
to determine if there is any commercial gold mineralization on this 
property.  Diamond drilling may be utilized to outline the more promising 
shoots and to check for continuity of gold.

Potosi Exploration Concession

The exploration concession application was filed on September 6, 1993, 
with the Department of Energy, Mines and Hydrocarbons, a division of the 
El Salvador's Minister of Economy's office, by the owners of the real 
estate, the Cooperative San Felipe-El Potosi.  An application for an 
exploration concession was filed on May 8, 1997 in order to comply with 
the current mining regulations adopted by the Government of El Salvador 
in February 1996.  The concession consists of approximately 6,100 acres.

While the concession application is pending, it precludes any others from 
performing exploration on this site.  Upon assessing that the property 
has potential mining prospects, the Joint Venture has the right to apply 
for the mining concession.

Potosi Lease Agreement

The Joint Venture entered into a lease agreement with the San Felipe 
Potosi Cooperative ("Cooperative") of the City of Potosi, El Salvador on 
July 6, 1993, to lease the real estate for a period of 30 years and with 
an option to renew the lease for an additional 25 years, for the purpose 
of mining and extracting minerals and under the following basic terms and 
conditions:

1. The term of the lease will be for a period of 30 years plus an option 
   to automatically extend the lease for an additional 25 years.

2. The lease payment will be five percent of the gross receipts derived 
   from the production of precious metals from this site and will be 
   payable monthly.

<PAGE>

3. The Joint Venture will advance to the Cooperative the funds required
   to obtain the mining concession from the El Salvador Department of
   Energy, Mines and Hydrocarbons and all related costs will be
   reimbursed or will become a deduction from future rental payments.

4. The Joint Venture will, when it is in production, employ all of the 45
   qualified members of the Cooperative, providing that there is a need
   for their particular skill or service.

5. The Joint Venture will furnish medicine and first aid medical
   assistance to all of its employees to the extent that such benefits
   are not provided by the El Salvador Social Security System.

6. An employee life insurance program is to be seriously considered by
   the Joint Venture when production commences, providing that the cost
   of such insurance is not excessive.

Modesto Mine

Modesto Mine Location

The Modesto Mine is located due north of the town of El Paisnal, 
approximately 19 miles north of the Capital City, San Salvador.  The 
Joint Venture considers this property as a good gold mining prospect and 
since August 1993, it has proceeded with an exploration program.

Modesto Mine Geology and History

From its geologist and from the records available to the Joint Venture,
the following information was obtained:

Two persistent veins "Paredon" and "Chicharron" outcrop along the crests
of two parallel hogback ridges 1,900 meters apart, and are composed of
thick flat-lying andesite flows capped by discontinuous patches of
rhyolite.  These were examined in 1948-1950 by M. Buell along strike (45
degrees) for 2,240 meters and 2,760 meters respectively and down dip (60
degrees to 80 degrees southeast) a maximum of 25 meters.  The Paredon
vein was barren but the north-eastern 1,320 meters of the Chicharron
returned the following values:

1. "D" winze, five meters deep, northeast end:  0.46 ounces of silver, 
   0.82 ounces of gold over 61 meters horizontally; 0.71 ounces of 
   silver, 0.61 ounces of gold over 3.1 meters vertically from quartz of 
   undetermined orientation in rhyolite; 0.30 ounces of silver, 1.20 
   ounces of gold from a 15-ton dump and a value of $14.653 per ton from 
   a ten-ton dump.  (The market price of gold was pegged at $35 an 
   ounce.)

2. "S" winze, 420 meters southwest of "D" winze:  no values.

3. "5" winze, 882 meters southwest of "D" winze:  1.85 ounces of silver, 
   0.65 ounces of gold over an average of 1.0 meter to a depth of 11 
   meters below outcrop.  A 30-ton dump ran 2.28 ounces of silver and
   0.82 ounces of gold.

4. "14"  winze, 1,320 meters southwest of "D":  0.78 ounces of silver,
   0.22 ounces of gold to 19 meters below outcrop.  A 60-ton dump ran
   0.15 ounces of silver, 1.14 ounces of gold; average of six dump
   samples was 0.68 ounces of silver, 0.31 ounces of gold.  A surface
   sample representing a ten-meter width of vein structure gave 0.06
   ounces of silver, 0.09 ounces of gold, including 1.5 meters of 0.40
   ounces of silver and 0.50 ounces of gold on the footwall.

<PAGE>

A 155 meter crosscut, driven to intersect the vein 62 meters vertically
below surface and 80 meters northeast of "14" winze encountered only weak
quartz mineralization.  Of 20 samples taken in 45 meters of drift, one
returned 10.25 ounces of silver and 0.35 ounces of gold over 1.20 meters
and the remaining 19 averaged less than 0.40 ounces of silver and 0.05
ounces of gold.

On 30 meters of drifting up to seven meters below surface at "5" winze, 
1,095.6 tons grading 1.66 ounces of silver and 0.505 ounces of gold were 
indicated.

The mineralization is the Potosi type, very finely banded, milky,
aphanitic, sulfide-free quartz, with a gold-silver ratio similar to El 
Dorado's.  No calcite was seen on the dumps.  Wall rock alteration is not 
noticeable on surface, however fine grained silicification and 
pyritization of the andesite appears on the "5" winze dumps.

Modesto Mine Ore Reserves and Exploration Results

The exploration through March 31, 1997, has accomplished the following:  
Four bodies of gold ore have been blocked which contain approximately 
18,800 ounces of a  proven and probable grade of gold in 80,000 tons of 
ore with an average grade of 0.235 ounces of gold per ton.

The Modesto Mine appears to be a very good gold prospect.  Since October 
1993, three veins were discovered which extend over a length of one and 
one-half miles and a width of about one mile. The width of this area has 
a series of perpendicular and oblique tiny veins well dispersed which is 
a desirable ore for an open-pit operation.  A total of 84 surface channel 
trenches was excavated; the 2,369 fire assay samples revealed an average 
grade of 0.035 ounces per ton.

The status of the three vein systems is as follows:  

(1) Chicharron Vein: Over a length of 2,550 meters (8,415 feet), 69 
    surface channel trenches were dug consisting of 567.0 lineal meters 
    (1,871 feet) from which 2,015 samples were taken which averaged a 
    grade of 0.05 ounces of gold per ton.  This vein strike is at north 
    50 degrees east with a dip 70 degrees and consists of milky, brownish
    grey and white quartz surrounded by andesite.

(2) Intermidy Vein: This vein is at an offset angle to the Paredon vein.
    A total of 495 meters (1,634 feet) of surface channel trenching was
    excavated and 265 assay samples reflected an average grade of 0.025
    ounces of gold per ton.

(3) Paredon Vein: This vein was explored by excavating five surface
    channel trenches over 1,200 meters (3,960 feet) and 89 fire assay
    samples reflected an average grade of 0.015 ounces of gold per ton.

Underground workings:

(1) Taladron Adit: From this adit entrance to a point of 257 meters (848
    feet) along the north 85 degrees west strike, all of the blockage was
    removed to penetrate it.  A total of 80 fire assay samples were taken
    in the basalt and barren quartz monzonite veinlits which assays
    averaged 0.035 ounces of gold per ton.  This adit changed its
    direction to south 70 degrees west and at a point of 131 meters (423
    feet) a broken vein with a basalt horse was intercepted.  The former 
    vein was found at the end of this adit which turned to the west and 
    encountered the Chicharron vein which at this point was 13 meters (43 
    feet) in width and 26 meters (86 feet) from the top of the hill.  
    More than 20 assay samples are waiting to be fire assayed.

<PAGE>

(2) Adit No. 10: This adit is above the Taladron Adit and it is the 
    highest adit on this property.  A total of 47 meters (155 feet) has 
    been excavated and the 310 fire assay samples confirmed an average 
    grade of 0.03 ounces of gold per ton.  This adit follows a strike 
    vein south 50 degrees west with a 55 degree easterly dip and 
    encounters a vein at a width of 4.50 meters or 15 feet.

(3) Shaft No. 5: From the adit entrance, a total of 13.4 meters (44 feet)
    was cleaned.  A sub level was discovered and this was cleaned at both 
    ends north and south for a distance of 95.7 meters (316 feet) and 327 
    samples were fire assayed disclosing an average grade of 0.37 ounces 
    of gold per ton.  A total of 490 samples were taken from this sub 
    level and from interconnecting levels.  75 samples were fire assayed 
    revealing an average grade of 0.11 ounces of gold per ton.

(4) Shaft No. 7: This adit was recently opened to follow a vein and it is 
    too premature to provide meaningful results.

The Joint Venture employs from 25 to 30 employees to work at this mine
exploration program.

Modesto Mine Present Status

After completing the necessary surveying, mapping and planning, the Joint 
Venture proceeded to clean and trench the surface and adit vein exposure.  
Since August 1993, 3,084 metric feet of surface channel trenching (10,177 
feet) and 866 meters (2,858 feet) of adit cleaning were completed.  In 
addition,  four inclines have been completed.  A total of 4,027 fire 
assay samples were performed.  The Joint Venture will continue the 
channel trenching and the reopening of the former adits as well as to 
formalize its own drilling program.

Modesto Mine Concession/Ownership

On or about September 2, 1993, the Joint Venture through one of its 
employees, filed an application with the El Salvador Department of 
Energy, Mines and Hydrocarbons to explore the 4,000 hectares (9,800 
acres) of property known as the Modesto Mine.  The application, together 
with the consent to explore this area from the property owners owning 
more than 25% of total area, has been submitted to the El Salvador 
Director of Energy, Mines and Hydrocarbons.  Also, the Joint Venture had 
submitted its original plan to this governmental agency on January 24, 
1994, outlining its exploration program.    In order to comply with the 
current mining regulations adopted by the Government of El Salvador 
during February 1996, the Joint Venture filed an exploration concession 
application on April 21, 1997.

Hormiguero Mine ("Hormiguero")

Hormiguero Location

The Hormiguero is located approximately five miles southeast from SCMP
off of the Pan American Highway in the Departments of San Miguel and 
Morazan, Comacaran Jurisdiction, in the Republic of El Salvador.  The 
Joint Venture plans to survey, map, plat, plan and develop an exploration 
program.

Hormiguero Current Status

The Joint Venture continues to develop an exploration program on the 
5,000 acre site.  An application for exploration has been filed on 
September 6, 1993 with the Department of  Energy, Mines and Hydrocarbons, 
a division of the El Salvador Minister of Economy's office.  In order to 
comply with the El Salvadoran Mining Law adopted during February 1996, a 
current exploration application was filed on April 21, 1997.

<PAGE>

The Hormiguero property continues to be in the stages of being mapped 
geologically and topographically on a referenced grid in order to provide 
a base to plan a drilling program with the objective to prove that a 
commercial body of ore may extend below the bottom of the former 
workings.  This drilling activity would also determine if the faulted 
north end of the Gallardo vein continues.  Further drilling could 
evidence the mineralization of unexplored veins.

1. Tailings: In an area of approximately 15,744 square meters 
   (approximately four acres) 35 test pit holes at a total depth of 322 
   meters (1,063 feet) were excavated and the 705 samples that were fire 
   assayed showed an average of 0.064 ounces of gold per ton times 
   150,000 tons should contain 9,600 ounces of gold.

2. A total of 11 surface channel trenches consisting of 310 meters (1,023 
   feet) were dug perpendicular to the Guadalupe vein and from a total of 
   155 samples, 96 samples verified an average grade of 0.0177 ounces of 
   gold per ton.

3. Taladron Adit: The purpose is to clean this adit in an attempt to 
   intercept the Guadalupe vein at 61 meters (201 feet) below surface.  
   So far 35 meters (116 feet) have been cleaned.

Hormiguero Geology and Historical Information

The following information was obtained from a report entitled, "Mining in
El Salvador-United Nations Development Programs 1968-1971,":

". . . From 1913 to 1918 the Comacaran Gold Mining Co. produced 607,062
ounces of silver and 72,142 ounces of gold from 208,096 tons.
(Swanquist), and when this company liquidated in 1919 the El Salvador 
Silver Mining Co., formed by some of the Butters Co. personnel, continued 
operations on a small scale until 1921.  In 1930 the mine was reopened by 
the original property owners, the Gonzalez family, and functioned 
periodically until 1948, producing during the last 3 years about 21,000 
ounces of silver and 3700 ounces of gold.  "Straight arithmetic averaging 
from the production figures gives an overall recovered grade of 0.351 oz. 
gold and 2.92 oz. silver for the period 1913-1918, or assuming a 10% mill 
less, a mill head of 0.386 oz. gold and 3.21 oz. silver.  Mill records 
for 1917, the only surviving technical data, give a bullion production of 
139,369.36 ounces of silver and 17,193.84 ounces of gold from 61,890 
tons.  A mill head calculated from this, again at 10% mill loss, was 
probably 0.30 ounces gold and 2.47 ounces silver."

  "Although known locally . . . as  Hormiguero' the deposit is actually a
composite of three separate sections, the Gallardo, Guadalupe and 
Hormiguero, all in coarse-grained andesite, grouped about and formerly 
connected by aerial tramway to a central mill situated immediately 
southwest of the Canton Hormiguero.  The Gallardo and Guadalupe veins are 
strong, persistent structures striking 045 degrees and 020 degrees
respectively and forming thin ridges 500 feet east and 1,750 feet
west of the central mill.  Both are composite and slightly braided
structures composed of two main parallel branches 70 feet apart,
and several interconnecting sub-branches, all dipping greater than 60
degrees west.  Vein material is banded and crustiform quartz-calcite,
secondary manganese oxides and probaly [sic] rhodochrosite, weakly 
mineralized with pyrite, spalerite, galena and chalcopyrite.  Strong
proplylitization accompanied by considerable pyrite has attacked 
the andesites outward for about ten feet from the walls resulting 
in the formation of yellowish red, clayey oxidation 
products on surface.

<PAGE>

  "The Gallardo has been worked on six levels for 2050 feet along strike
and 400 feet vertically.  Access was through the Benjamin adit at the 
extreme southwest end and an inclined (61 degrees) shaft 350 feet from the 
northeast end.  Two vertically plunging ore shoots 300 and 600  long and 
500 feet apart were stoped to the 5th level where the larger bottomed, 
according to notations on a long section made by the El Salvador Silver 
Mining Co. in 1920.  Limited stoping above the Benjamin adit suggests a 
third shoot in that area and a possible unexplored prolongation of the 
vein towards the southwest.  An abrupt cut-off of the north (larger) ore 
shoot coincident with the north end of the mine may be due to lateral 
fault displacement; an undeveloped segment of the vein might therefore be 
anticipated further north.

  "Horizontal development of the Guadalupe vein opened a 1600 foot strike 
length on both a hanging wall and footwall branch, but the dip, exposed 
on five levels to 350 feet has been examined in an unsystematic manner 
more suitable for exploration than exploitation.  Little ore has in fact 
been taken from underground; most of the production appears to have come 
from open cuts.  The only regular mining has been confined to a 400 foot 
lens on the footwall branch, 150 feet south of the main three-compartment 
production shaft, which was  from surface 200 feet vertically to the 
third level, and from a small irregular shoot directly opposite it in the 
footwall branch.  Outside of these, the underground layout leaves the 
general impression that the distribution of ore grade mineralization is 
highly erratic and randomly dispersed.

  "1100 feet, and north of the Gallardo and Guadalupe mines, five steeply 
north (?) dipping, parallel, curving veins (Emilio, Oriente Emilio, 
Hormiguero, San Francisco and 4 de Julio) evenly spaced over a width of 
200 feet, constitute the separate Hormiguero mine.  They lie between the 
hypothetical northward prolongation of the Gallardo and Guadalupe 
structures and have been worked over an aggregate strike length of 1200 
feet starting from a point 700 feet west of the Guadalupe projection 
first 500 feet east-west then through a 700 foot arc curving to the 
southwest into alignment width, and 900 feet north of the north end of 
the Gallardo vein.  At least 7 levels were developed to a depth of over 
400 feet from a vertical 2 compartment shaft.  The amount of stoping is 
unknown; the available data show that irregular 100 to 200 foot long 
shoots were worked to depths of 300 and 400 feet on the east-west 
striking portions of the San Francisco and 4  Julio veins.

  "Four other virtually unexplored veins known as La Gloria or Esperanza, 
Victoria or Tilden, Tecolote and El Dorado, occur 500 to 900 feet west of 
the Gallardo and Hormiguero mines.  The Gloria and Tecolote strike 
east-west; the remaing [sic] two are roughly parallel to the Gallardo.  
In a letter dated 1919, a geologist named Mr. Swanquist states that 
initial exploration and very limited mining obtained  encouraging 
results' from the Tecolote and  fair ore' from the El Dorado.

  "The same letter mentions two additional prospects, the Consuelo of 
unknown location but  700 feet from the  plant and just being opened up' 
and the La Posa, on the Las Garzas river, north of Canton Hormiguero from 
which ore grading $10.92 per ton ($20.00 gold and $1.11? [.385] silver),  
with values mainly in silver, was mined over 4 to 5 foot widths, in a 35 
foot winze."

In 1921, i.e. during El Salvador Silver Mine's final year of operation, 
the following ore reserves were blocked out:

<PAGE>

Proven:  (U.S. dollar values based on a $20.00 per ounce gold price and a 
$0.385 per ounce silver price.)

                               Tons        Grade     Dollar Value Per Ton
                              ------       -----     --------------------
Guadalupe Hanging Wall Vein   11,208       0.353            $7.06
Guadalupe Footwall Vein        7,528       0.319            $6.37
Hormiguero and Gallardo       10,000       0.400            $8.00
                              ------
                   Total:     28,736
Probable:
                               Tons        Grade     Dollar Value Per Ton
                              ------       -----     --------------------
Guadalupe Hanging Wall Vein   21,900       0.295            $5.89
Guadalupe Footwall Vein       23,556       0.340            $6.80
                              ------
                    Total:    45,456


(Proven and probable gold and silver ore reserves total 74,192 tons.)

Exploration should center on the undeveloped veins, on the possibility of 
extending the Hormiguero  veins farther to the east and west, and on the 
unexplored ground between the north end of the Gallardo vein and the 
Hormiguero.

Hormiguero Ownership

The surface is owned by various individuals and families.

Montemayor Mine ("Montemayor")

Montemayor Location/Ownership

The Joint Venture has obtained permission from a number of property 
owners which permits the Joint Venture to enter their property for the 
purpose of exploring, exploiting and developing the property  and then, 
if feasible, to mine and extract minerals from this property.  The term 
of this permission is for an infinite period.  Montemayor is located 
about 14 miles northeast of the SCMP, six miles northwest of the SSGM and 
about two miles east of the City of San Francisco Gotera in the 
Department of Morazan, Republic of El Salvador.  Historical records 
evidence that the potential for the Montemayor to become an exploration 
and development gold-producing prospect is good.

Montemayor Geology and Historical Information

The following information was obtained from a report entitled, "Mining in 
El Salvador-United Nations Development Program 1968-1971":

"Montemayor-Lola Area

"The eastern and northeastern limits of the Three Corners area are
defined by a scattering of three small mines and numerous prospects 
distributed along the course of the south-flowing Rio Montemayor in a 
system of parallel normal faults collectively known as the  Montemayor 
lineament'.  Consistent with the origin proposed under General Geology' 
these have been probably induced by subsidence along the northern margin 
of the central graben, resulting in a progressive tensional failure that 
has sliced the pyroclastic rocks of the area into a series of tabular 
blocks stepped successively upward to the northeast end culminating in 
the steep serrated ridges of the Copetillos escarpment.  This has 
resulted in the creation of a 13,000 foot-wide regional  sheeted' zone 
composed of closely spaced, northwest striking, west dipping parallel 
faults, stretching for five miles northeast along the river and has 
imported to the river gorge an assymetric cross section whose higher, 
northeast slope is underlain by deeply dissected acid to basic tuffs and 
lower southwest slope by the low rolling andesitic, Three Corners 
terrain.

<PAGE>

"Extensive veining in the fragmentals has produced a lengthy mineralized 
 zone roughly coincident with the sheating,' which includes the 
 Montemayor deposit near the headwaters of the river and, arranged in 
 en-echelon alignment downstream, the Tebanco, Lola, and Tepeyac 
 occurrences and the minor Salamanca, Jimerito, Mina Grande, Copetilla 
 and La Joya showings.

"The veins, which dip almost universally 50 degrees to 80 degrees 
southwest, are normal quartz-calcite, sulfide-poor fracture fillings, 
distinguished by their remarkable lateral persistence and unfortunate 
paucity of workable ore shoots.  Sporadically distributed in lenses three 
to eight feet wide and up to 200 feet long and separated by longer 
stretches of barren ground, these have so far yielded enough tonnage to 
sustain mining operations only at the marginal Mina Lola.  On the whole, 
however, the area is little explored.

"Montemayor

"The Montemayor property embraces a group of small mine openings and 
prospects aligned along a series of parallel southeast striking veins 
following the course of the Montemayor river for 16,000 feet, from its 
headwaters to the beginning of the pronounced  S' bend enclosing the old 
Tabanco mine.  Some confusion over the names and locations of these 
various workings has always existed; for the purpose of this report, the 
following nomenclature, adapted from early maps of the district, will be 
employed.  Proceeding upstreams [sic], the workings are:

"(a) Montemayor-comprises the Montemayor, Montanita and Santa Gertrudis 
     sections, extending for 2700 feet upstream from the Caserio 
     Montemayor.

"(b) Tempisque-4800 feet north of the Caserio Montemayor and 1200 feet up
the east bank of the river.

"(c) Banadero-Carao-Carago-4500 to 8000 feet upstream from Tempisque.

"Mining was confined to Montemayor; appreciable underground exploration 
to Montemayor and Tempisque.  No motor road reaches the properties; 
access is either by five kms. of the mule trail along the southwest bank 
of the river from the end of the Santa Rosa de Lima-Caserio El Tabanco 
road or cross-country about the same distance by mule trail from a north 
branch of the Gigante road.  Trails also lead into the headwater area 
from the town of Sociedad.

"Historical information is sketchy.  The area was almost certainly worked 
in conjunction with the Tabanco mine, first by the English company until 
about 1855, then the Cia. Francesa de Minas de El Salvador who operated 
it some time between 1856 and 1882 (Guzman).  Until 1914 (?) no 
information is forthcoming; then the mine was comprehensively sampled by 
the Butters Co. and its successors between 1915 and 1921 and by the R.W. 
Habard Co. and Central American Mines around 1936.  Apparently the only 
production from 1856 to 1936 was obtained by the English and French 
companies but the figures are unknown.

"Roberts and Irving report that the mine was again functioning at 60 tons 
per day in 1945 under Sr. Benjamin Gonzalez, yielded a value of $233,818 
over a three year period.  Grebe (1955) does not confirm this and the 
data may refer to the Hormiguero mine which Sr. Gonzalez had in 
production at that time.  Finally in 1963 the principal showings were 
taken up by a local enterprise, Minas Montemayor, S.A. and received a 
little more attention up until 1967.

<PAGE>

"The vein system is apparently controlled by a simple set of poorly
exposed, northwest striking faults paralleling the river and outcropping 
occasionally in the river bed and rarely on the steep east slope of the 
river gorge.  Dips are to the southwest between 50 degrees and 60 
degrees.  Vein mineralization is quartz-calcite with weak disseminated 
pyrite and a small quantity of chalcopyrite, spalerite and galena.  The 
host rocks are a succession of coarse andesitic tuffs and agglomerates, 
fine acid tuffs and flows propylitized along the veins, and locally 
silicified towards the north end of the zone of mineralization.

"Formal mining was confined to three parallel veins spaced over a 500
foot interval up the east bank from the creek, at Montemayor.  The 
footwall Montanita vein was opened for 200 and 250 feet respectively on 
two levels about 70 feet apart, served by a winze and two crosscuts, and 
stoped over 100(?) feet on the upper level and 200(?) feet on the lower.  
Two levels opened at 115 and 215 feet off a 2 compartment shaft traced 
the middle (Montemayor) vein for 640 feet and disclosed a 200 foot long 
ore shoot, centered on the shaft and partially stoped before 1917, that 
might have graded around 12 ounces silver and 0.29 ounces gold.  On this 
same structure, 1250 feet north of the shaft in the separate Santa 
Gertrudis section, perhaps 9000 tons grading $31.00 at gold and silver 
$0.507 were extracted from a 90 by 220 foot area, averaging 7 feet wide, 
developed on four levels through a second vertical shaft.

"The hanging wall  sulfide' vein located 40 feet west of the Montemayor 
is apparently more heavily mineralized but contained no ore over 75 feet 
of drifting driven from the lower Montemayor level.

"On the Tempisque showing, two levels, 30 feet apart vertically and
served by two adits, have revealed 520 feet of the Tempisque vein running 
5.49 oz. silver and 0.14 oz gold over a 2.7 foot width, according to 
sampling by the R.W. Hebard Co. in 1936.  Check sampling by the present 
owners in 1966 returned an indicated grade of 3.68 oz. silver and 0.115 
oz. gold over four feet, on the lower level.

"Work on the Carago section has been purely exploratory; the only 
surviving records (map MM-8) show an average width of 2.3 feet of 9.95 
ounces silver and 0.16 ounces gold in a 60 foot shaft and a 160 foot long 
drift, spaced 280 feet apart."

Montemayor Current Status

1. Surface channel trenching: From July 19, 1995, 55 surface channel 
   trenches were excavated over a 920 meter (3,036 feet) length .  In the 
   Banadero area, from 29 trenches, 375 fire assay samples contained an 
   average grade of 0.036 ounces of gold per ton.

   The remaining 26 surface channel trenches were excavated in the 
   Montemayor area: the 103 fire assay samples averaged 0.022 ounces of 
   gold per ton.

<PAGE>

2.   Underground adits and workings:                                   Av.
                                                      Advancement      Assay
                                                                No. of Grade  
        Adit Name                  Comments       Meters  Feet Samples /Ton
        ---------                  --------       ------  ---- ------- ------
A. Montemayor Mine
   1. Polvorera Adit No. 1                          56.0  185     15    0.016
   2. Polvorera Adit No. 2 Crosscut encountered    140.0  462     27    0.010
   3. Lechuza Adit         Crosscut encountered    136.0  449     42    0.010
   4. Cablote Adit #2      Used to explore
                            Montanita vein           7.0   23
   5. Montanita Stope #2   Unaccessible entry
      a. Communication 1   Along side of Montanita 107.0  353     79    0.150
      b. Communication 2   Along side of Montanita   8.5   28      8    0.040
   6. Guascanal Adit                                19.0   63     11  no assays
   7. Sirena Adit          All in barren andesitic
                            rock                    90.0  297
   8. Sirena Adit No. 2                              7.0   23
   9. El Indio Adit        All in barren andesitic
                            rock                    29.0   96
  10. Guaruma Winze                                 21.7   72     22    0.03
  11. Tempisque Sub level  .90 meter (three feet)
                               vein                  9.0   30      8
  12. El Indio             Winze-excessive cave-ins 29.0   96
  13. Limon Adit                                     6.0   20
  14. La Encajonada Adit                            12.0   40
                                                   ----- ----    ---
       Totals:                                     677.2 2237    212
                                                   ===== ====    ===
B. El Banadero Mine        3.5 kilometers
                            (2.2 miles) west of
                            Montemayor
   1. Saravia Adit         Crosscut with .70 meters
                            (2.31 feet) vein        44.4  147
   2. Caraguito No. 1                               14.0   46
   3. Caraguito No. 2                               30.0   99
   4. Demetrio Adit        1.1 meter (3.63 feet)
                             vein                    5.0   17
   5. El Salto Adit                                 12.0   40
                                                   -----  ---
                 Totals:                           105.4  349
                                                   =====  ===

Approximately 20 to 25 employees are employed at this site.  On April 22,
1997, a current exploration concession was filed with the Minister of
Economy's office in order to comply with the El Salvadoran Mining Law
adopted on February 1996.

Comseb Laboratories (Lab)

The Joint Venture has two laboratories:  one located at the SCMP
facilities and the other on real estate owned by the Company near the
SSGM site.  At the SSGM Lab, the Joint Venture employs four employees for
each of the twelve-hour shifts.  A total of 58,924 samples of fire assays
have been completed through March 31, 1997.  Approximately four employees
are working during the two eight-hour shifts at the SCMP laboratory.

Item 3.  Legal Proceedings

The Company is not a party to any material legal proceedings.

<PAGE>

Item 4.  Submission of Matters to a Vote of Security Holders

No matters were brought to a vote of security holders in the fourth 
quarter ended March 31, 1997.

Item 4(a).  Executive Officers and Managers of the Company 

Listed below are the names and ages of each of the present executive
officers and managers of the Company together with the principal 
positions and offices held by each as of the end of the Company's fiscal 
year ended March 31, 1997.
                                            Executive         Period
                          Age as of       Offices Held        Served
        Name           March 31, 1997    With Company (1)  In Office (2)
------------------     --------------    ----------------  -------------
Edward L. Machulak           70          President,
                                         Chief Executive
                                         Officer, and
                                         Operating
                                         and Financial
                                         Officer           09/14/62 to present
                                         Treasurer         06/78 to present

Edward A. Machulak           45          Executive Vice
(Son of President)                       President         10/16/92 to present
                                         Secretary         1/12/87 to present
                                         Assistant
                                         Secretary         4/15/86 to 1/12/87

Luis A. Limay                55          Project and Mine
                                         Manager           10/86 to 1995
                                         Manager of El
                                         Salvador
                                         Operations        03/95 to present

(1)  Neither  have there been nor are there any arrangements nor
     understandings between any Executive Officer and any other person 
     pursuant to which any Executive Officer was elected as an Executive 
     Officer.

(2)  Executive Officers are elected by the Directors for a term expiring 
     at the Directors' Annual Meeting and/or hold such positions until 
     their successors have been elected and have qualified.

  Family Relationships

  Edward A. Machulak, presently a Director, Member of the Directors'
  Executive Committee, Executive Vice President, and Secretary, is the 
  son of Edward L. Machulak, the Company's Chairman of the Board of 
  Directors who is also a Member of the Directors' Executive Committee, 
  and is the President and Treasurer of the Company.    Attorney John E. 
  Machulak (son of Edward L. Machulak) of the law firm of Machulak, 
  Hutchinson, Robertson, Dwyer & O'Dess, S.C. is the legal counsel for 
  the Company.

  Directors', Officers', and Key Management's Experience 

  The business experience of each of the Directors, Officers, and Key 
  Management is as follows:

  <PAGE>

  Edward L. Machulak has been employed by the Company since September
  1962.  Mr. Machulak has served as the President, Director, and Chairman
  of the Board of Directors of the Company since 1962, Treasurer since 
  1978, and on March 11, 1991, he was elected as a Member of the 
  Directors' Executive Committee.

  He is a Director and the President for each of the Company's 
  subsidiaries:  Homespan Realty Co., Inc.; Piccadilly Advertising 
  Agency, Inc.; San Luis Estates, Inc.; San Sebastian Gold Mines, Inc.; 
  and Universal Developers, Inc.  He is the authorized representative of 
  the Commerce/Sanseb Joint Venture.  He is a Director and Treasurer of 
  Mineral San Sebastian S.A. de C.V.  Also he is involved in various 
  capacities with the following companies:  General Lumber & Supply Co., 
  Inc., Director; Edjo, Ltd., Director and Secretary; and Landpak, Inc., 
  Director and Secretary.

  Edward A. Machulak was elected as a Director and holds the following 
  Company positions:  Director as of October 28, 1985; a member of the 
  Directors' Executive Committee as of March 11, 1991; Executive Vice 
  President as of October 16, 1992; Secretary as of January 12, 1987; and 
  he was the Assistant Secretary from April 15, 1986 through January 12, 
  1987.  His business experience is as follows:  Director and Corporate 
  Secretary of General Lumber & Supply Co., Inc., a building material 
  wholesale and retail distribution yard from April 1, 1970 to November 
  1983;  Director and President of Gamco, Inc., a marketing and 
  advertising company, from November 1983 to present; Director and 
  President of Circular Marketing, Inc., an advertising and marketing 
  business, from March 1986 to present; Director and President of Edjo, 
  Ltd., a company involved in the development, subdividing and sale of 
  land and real estate from June 7, 1973 to present; Director and 
  President of Landpak, Inc., a corporation which owns, operates, manages 
  and sells real estate from September 1985 to present; and he was 
  involved in other corporate real estate ventures and business 
  activities since 1976.

  Clayton H. Tebo has been a Director of the Company since March 11, 
  1991.  Mr. Tebo had been a Director of the Company from the Company's 
  inception, September 1962, through March 1, 1969.  Mr. Tebo has been 
  retired since March 6, 1969, however, he has been retained from time to 
  time by the Company as a consultant for special projects.  He also was 
  the special assistant to the President prior to and after his 1969 
  retirement.

  Luis Alfonso Limay was appointed to the position of Project and Mine 
  Manager since October 1986 and is responsible for managing the daily 
  affairs of the Joint Venture.  During March 1995, Mr. Limay was 
  appointed to the position of Manager of El Salvador operations which 
  now supersedes his position as Project and Mine Manager.   Mr. Limay 
  was employed by Sanseb from 1977 through March 1978 as its chief 
  geologist. He obtained degrees in geology and engineering from the 
  National University of San Marlos, Lima, Peru, and the University of 
  Toronto.  He was employed as chief geologist by Rosario Resources in a 
  Honduran underground mining operation and he held the same position 
  with Canadian Javelin in El Salvador.

<PAGE>

                               PART II



Item 5.  Market for the Company's Common Stock and Related Stockholders' 
Matters

(a)  Principal Market and Common Stock Price

The Company's common shares are traded on the Boston Stock Exchange under 
the symbol "CMG" or "CMG.BN," on a fully listed basis since February 10, 
1976, and on the National Association of Securities Dealers Automated 
Quotation System Small-Cap Issue (NASDAQ) under the symbol "CGCO" since 
March 23, 1987.

The following table reflects the range of high and low prices of the 
common shares as reported by NASDAQ for the period ended March 31, 1996 
and the highest and lowest trade price during each quarter through the 
period ended March 31, 1997. The quotations reflect inter-dealer prices 
without retail mark-up, mark-down or commission, and do not necessarily 
represent actual transactions.

For the period ended                March 31, 1997    March 31, 1996
                                     High      Low     High      Low
                                    -----    -----    -----    -----
First quarter ending June 30        $4.38    $2.38    $4.63    $3.75
Second quarter ending September 30  $3.25    $2.38    $3.75    $3.00
Third quarter ending December 31    $3.25    $1.88    $3.25    $2.63
Fourth quarter ending March 31      $4.00    $1.88    $3.25    $2.75


(b)  Approximate Number of Holders of Common Shares

As of March 31, 1997, the common shares were held by approximately 3,000
shareholders of which a high percentage are United States' residents.

As of March 31, 1997, there were approximately 2,138 holders of record of
the Company's common shares.  The number of shareholders of the Company
who beneficially own shares in nominee or "street name" or through
similar arrangements are estimated by the Company to be approximately 
862.

As of March 31, 1997, there were outstanding: (a) 9,193,042 shares of 
common stock; (b) 1,591,360 stock options to purchase common stock; and 
(c) 1,515 shares of Series A Convertible Preferred Stock which 
subsequently were converted into 989,965 common shares.

(c)  Dividend History

Subject to the rights of holders of any outstanding series of preferred 
shares to receive preferential dividends, and to other applicable 
restrictions and limitations, holders of shares of common shares are 
entitled to receive dividends if and when declared by the Board of 
Directors out of funds legally available.  No dividends were payable 
during the last fiscal year ended March 31, 1997.  The declaration of 
future dividends will be determined by the Board of Directors in light of 
the Company's earnings, cash requirements and other relevant 
considerations.

<PAGE>

Item 6.  Selected Financial Data

The following table sets forth certain consolidated financial data for
the respective periods presented and should be read with the Consolidated
Financial Statements and the related notes thereto, and Management's
Discussion and Analysis of Financial Condition and Results of Operations.


                                      Year Ended March 31,
                                      --------------------
                      1997        1996         1995        1994         1993
                  ----------- -----------  ----------- -----------  -----------
Income Statement Data
Total revenue     $ 1,630,211 $ 1,345,260  $   823,181 $   507,964  $   403,242
                  =========== ===========  =========== ===========  ===========
Income from
 continuing
 operations       $ 1,007,598 $   787,802  $   274,747 $    66,852  $    41,970
                  =========== ===========  =========== ===========  ===========
Income (loss) from
 continuing operations
 per share:
Primary           $      .124 $     0.107  $     0.046 $      0.01  $      0.01
                  =========== ===========  =========== ===========  ===========
Fully diluted     $      .104 $     0.106  $     0.045 $      0.01  $      0.01
                  =========== ===========  =========== ===========  ===========
Weighted average
 shares outstanding 8,136,286   7,368,058    5,941,950   4,828,496    4,451,853
                  =========== ===========  =========== ===========  ===========
Balance Sheet
 Working capital  $   660,596 $   (92,398) $   322,944 $   (90,620) $    67,772
                  =========== ===========  =========== ===========  ===========
 Total assets     $25,067,334 $20,513,115  $17,617,423 $14,204,563  $13,568,374
                  =========== ===========  =========== ===========  ===========
 Short-term
  obligations*    $ 5,594,557 $ 5,185,298  $ 4,250,139 $ 4,487,511  $ 3,927,365
                  =========== ===========  =========== ===========  ===========
 Long-term
  obligations     $   145,000 $    20,259  $   120,000 $   245,000  $   245,000
                  =========== ===========  =========== ===========  ===========
 Shareholders'
  equity          $19,208,219 $15,159,507  $13,024,911 $ 9,365,870  $ 8,928,591
                  =========== ===========  =========== ===========  ===========
 Cash dividends   $         0 $         0  $         0 $         0  $         0
                  =========== ===========  =========== ===========  ===========

*Most of the short-term obligations are owed to related parties.

Item 7.  Management's Discussion and Analysis of Financial Condition 
         and Results of Operations 

The following discussion provides information on the results of
operations for the three years ended March 31, 1997, 1996 and 1995 and
the financial condition, liquidity and capital resources for the same
three-year period.  The financial statements of the Company and the notes 
thereto contain detailed information that should be referred to in 
conjunction with this discussion.

Introduction

The Joint Venture is producing gold on a limited basis from the virgin 
gold ore and tailings it is extracting at the SSGM and it simultaneously 
is performing four separate operations.  First, it has commenced a 
limited production of gold  by processing the SSGM tailings and now they 
are being blended with the virgin ore at its SCMP facility which is 
located approximately 15 miles from the SSGM site.  Second, it is 
installing  a pilot open-pit, heap-leaching gold process on the SSGM 
site.  Third, it is continuing its SSGM site preparation, the expansion 
of its exploration and exploitation targets, and the enlargement and 
development of its gold ore reserves.  Fourth, it is exploring the 
potential of the four gold mine prospects identified as the San Felipe-El 
Potosi Mine, and its extension, the El Capulin Mine, the Hormiguero Mine, 
the Montemayor Mine, and the Modesto Mine, all located in El Salvador, 
Central America.  Concurrently, it also is in the process of obtaining 
the necessary funding for each of these separate operations while it 
continues its limited production of gold and the exploration, 
exploitation and development of its mining prospects.  The more than 
twelve-year El Salvador war and the general disbelief that peace will 
prevail had been a material deterrent in obtaining funding for the 
resumption of the SSGM operations and for the restoration of the SCMP.  
On December 15, 1992, through the auspices of the United Nations, the end 
of the war was declared contingent upon a three-year term to comply with 
all of the conditions of this pact.  Presently peace prevails.

<PAGE>

Current Status

The Company, on February 23, 1993, through its Joint Venture acquired the 
SCMP, a precious metals' leaching mill and plant which has the capacity 
of processing 200 tons of virgin gold ore and precious metals' ore per 
day.  While the Joint Venture did achieve at times to operate the mill to 
its full capacity by processing tailings, it encountered operational 
problems  which compelled it to operate the mill at a lower production 
rate.  Considerable time and capital was consumed to bring the SCMP to a 
favorable operating condition. A new labor force had to be trained to 
operate the SCMP; mechanical problems occurred, metallurgical differences 
had to be resolved; the rainy (hurricane) season was unusually severe; 
the head grade varied and problems were encountered with the handling of 
the separation of the coarse material.  Taking into account all of the 
factors affecting the SCMP, if the Joint Venture had not offset all of 
the revenues ($969,721 - 1997; $1,180,279 - 1996) from the gold sales by 
reducing the advances to the Joint Venture, it would have reflected a 
nominal profit.

This production of gold broadens the Company's objectives and now enables
the Company to commence a complementary operation while continuing its
endeavor to obtain sufficient funds for the SSGM open-pit, heap-leach 
operation which is its major and original goal and presently is in the 
developmental stage.  The Company's main objective and plan, through the 
Joint Venture, is to operate at the SSGM site, a moderate tonnage, 
low-grade open-pit, heap-leaching, gold-producing mine and it intends to 
commence this major gold-mining operation as soon as adequate funding is 
in place.  Dependent on the grade of gold ore processed, it then 
anticipates producing approximately 12,000 ounces of gold from the SCMP 
operation and 40,000 ounces of gold from its SSGM open-pit, heap-leaching 
operation during the first twelve full operating months.  The Joint 
Venture continues to conduct an exploration program to develop additional 
gold ore reserves at the SSGM and at the following four other mines:   
the San Felipe-El Potosi, and its extension, the El Capulin Mine, the 
Modesto Mine,  the Hormiguero Mine, and the Montemayor Mine; all located 
in El Salvador.

Since the Joint Venture commenced producing gold at the SCMP, albeit a
very exiguous operation, and a forerunner of its greater goals, the 
Company's revenues, profitability and cash flow will be greatly 
influenced by the price of gold.  Gold prices fluctuate widely and are 
affected by numerous factors which will be beyond the Company's control, 
such as, expectations for inflation, the strength of the U.S. dollar, 
overproduction of gold, global and regional demand, or political and 
economic conditions.  The combined effect of these factors is difficult; 
perhaps impossible to predict.  Should the market price of gold fall 
below the Company's production costs and remain at such level for any 
sustained period, the Company could experience losses.  Under these 
circumstances, the Company could choose to suspend operations in order to 
minimize losses.

The Company believes that neither it, nor any other competitor, has a
material effect on the precious metal markets and that the price it will 
receive for its production is dependent upon world market conditions over 
which it has no control.

Results of Operation Fiscal Years March 31, 1997 Compared to March 31,
1996

The Company had a net gain of $1,007,598 or $.124 per share for its 
fiscal year ended March 31, 1997 compared to a net gain of $787,802 or 
$.107 per share for the previous fiscal year or an increase of 28%.  This 
increase was attributable primarily to the additional interest income 
earned from the advances to the Joint Venture.  This fiscal year the 
interest earned was $1,567,375 compared to the prior fiscal year's 
interest earnings of $1,286,733.  This gain results primarily from a 
charge of interest due to the advances to the Joint Venture which 
amounted to $15,693,766 for this period or a net increase of $3,894,692 
(33%) from the last fiscal period which equalled $11,799,074.  The total 
advances to the Joint Venture amounted to $16,663,487 but were reduced by 
the $969,721 revenues received from the gold sales.

<PAGE>

Likewise the Company's borrowings have increased from $3,583,480 (1996)
to $4,108,338 (1997) or approximately 15% and the interest expense for
1996 has increased from $470,710 to $554,636  for the last year.

Almost all of the costs and expenses incurred by the Company are
allocated and charged to the Joint Venture.  The Joint Venture 
capitalizes all of these costs and expenses and will continue to do so 
until such time as it resumes its gold mine operation.  At the time 
production commences, these capitalized costs will be charged as an 
expense based on a per unit basis.  If the prospect of gold production 
becomes unlikely, all of these costs will be written off in the year that 
this occurs.

Results of Operation Fiscal Years March 31, 1996 Compared to March 31,
1995

The Company had a net gain of $787,802 or $.11 per share for its fiscal
year ended March 31, 1996 compared to a net gain of $274,747 or $.046 per 
share for the previous fiscal year or an increase of 187%.  This increase 
was attributable primarily to the additional interest income earned from 
the advances to the Joint Venture.  This fiscal year the interest earned 
was $1,286,739 compared to the prior fiscal year's interest earnings of 
$751,389.  This gain results primarily from a charge of interest due to 
the advances to the Joint Venture which amounted to $11,799,074 for this 
period or a net increase of $3,122,766 (36%) from the last fiscal period 
which totalled $8,676,308.  The total advances to the Joint Venture 
during this fiscal period equalled $12,979,353, but were reduced by the 
$1,180,279 revenues received from the gold sales.

Likewise the Company's borrowings have increased from $2,725,014 (1995)
to $3,583,480 (1996) or approximately 32% and the interest expense for 
1996 has increased slightly from $466,604 to $470,710  for the last year.

Liquidity and Capital Resources

The Company continues to be cognizant of its cash liquidity until it is
able to produce adequate profits from its gold production.   It will 
attempt to obtain sufficient funds to assist the Joint Venture in placing  
the SSGM into production as the anticipated SCMP profits (unless 
accumulated over a period of time) will not be sufficient to meet the 
SSGM capital  and the other mining exploration needs.  In order to 
continue obtaining funds to conduct the Joint Venture's exploration, 
exploitation, development, expansion programs, and the production of gold 
from the SSGM  open-pit, heap-leaching operation, it may be  necessary 
for the Company to obtain funds from other sources.  The Company may be 
required to borrow funds by issuing open-ended, secured, on-demand or 
unsecured promissory notes or by selling its shares to its directors, 
officers and other interested investors or by entering into a joint 
venture with other companies.

During the past,  the Joint Venture was engaged in  exploration, 
exploitation and development programs designed to increase its gold ore 
reserves.  The prospects of expanding the gold reserves are positive.  
The funds needed by the Joint Venture were obtained from the Company via 
net advances:  $3,894,692 in fiscal 1997.  The Company believes that 
these advances significantly contributed to the value of the SSGM and  to 
the value of its other mining prospects as the results of the exploratory 
efforts evidence a potential substantial increase of gold ore reserves, 
which add value to the Joint Venture and to the Company.  The Company was 
able to obtain sufficient funds to retrofit the SCMP, to purchase 
consumable inventory, to purchase certain hauling and loading equipment, 
to purchase a crushing system, to perform diamond drilling on the SSGM, 
to upgrade and for working capital use.  The Company has been able to 
obtain the funds required for its and the Joint Venture's undertaking via 
a debt and equity structure of funding.  Since September 1987, the 
Company and three of its wholly-owned subsidiaries advanced a sum of 
$15,693,766 to the Joint Venture, exclusive of gold sale proceeds.

<PAGE>

The Company  estimates that it will need at least U.S. $13 million to 
start a 2,000 ton-per-day open-pit, heap-leaching operation and over time 
to increase the production capacity to 6,000 tons per day at the SSGM.
The use of proceeds is as follows: $7,000,000 for mining equipment and a
crushing system; $3,689,776 for the processing equipment and site and
infrastructure costs; and $2,310,224 for the working capital.

Advances to the Joint Venture

Advances to the Joint Venture during the Company's fiscal year ended
March 31, 1997 were derived from the various sources including related
parties as follows:

Funding Sources                           From
                                   Related      Other
                                   Parties     Sources      Total
                                -----------  ----------  ----------
Accounts payable &
 accruals etc.                  $  (59,524)  $  105,147  $   45,623
Notes payable                      377,159      147,699     524,858
 Equity                            890,921    2,150,193   3,041,114
Net income                                    1,007,598   1,007,598
                                ----------   ----------  ----------
Totals                          $1,208,556   $3,410,637  $4,619,193
Increase in cash
 & cash equivalents                            (724,501)   (724,501)
                                ----------   ----------  ----------
Advances to the Joint Venture   $1,208,556   $2,686,136  $3,894,692
                                ==========   ==========  ==========


Therefore, the Company continues to rely on its directors, officers,
related parties and others for its funding needs.  The Company believes
that it will be able to obtain such short-term funds as are required from 
the same sources as it has in the past.  In turn, then it can advance the 
funds required by the Joint Venture to continue the exploration, 
exploitation and development of the SSGM, and the other exploration 
prospects, for the operation of SCMP  and for other necessary Company 
expenditures.  Anticipated profits from the SCMP gold production provide 
a limited amount of cash for corporate purposes.  It further believes 
that the funding needed to proceed with the continued exploration of the 
five exploration targets for the purpose of increasing its gold ore 
reserves should be $10 million.  These programs will involve airborne 
geophysics, stream chemistry, geological mapping trenching and drilling.  
The Joint Venture believes that it may be able to joint venture these 
exploration costs with other mining companies.

From September 1987 through March 31, 1997, the Company has advanced to 
the Joint Venture, the sum of $15,103,501  and three of the Company's 
wholly-owned subsidiaries have advanced the sum of $590,265, for a total 
of $15,693,766.  The funds advanced to the Joint Venture were used 
primarily for the exploration, exploitation, and development of the SSGM, 
for the construction of the Joint Venture laboratory facilities on real 
estate owned by the Company near the SSGM site, for the operation of the 
laboratory, for the purchase of a 200-ton per day used SCMP precious 
metals' cyanide leaching mill and plant,  for the retrofitting, repair, 
modernization and expansion of its SCMP facilities, for consumable 
inventory, for working capital to commence the production of gold, for 
exploration costs for the San Felipe-El Potosi Mine, and its extension, 
the El Capulin Mine, the Modesto Mine, the Hormiguero Mine, and the 
Montemayor Mine, for SSGM infrastructure, including rewiring and 
repairing about two miles of the Company's electric lines to provide 
electrical service, for the purchase of equipment, laboratory chemicals, 
and supplies, for parts and supply inventory, for the maintenance of the 
Company-owned dam and reservoir, for extensive road extension and 
preservation,  for its participation in the construction of a community 
bridge, for community telephone building and facilities, for the purchase 
and advance lease payment of the real estate on the Modesto Mine, for the 
purchase of a crushing system, for diamond drilling at the SSGM, and many 
other related needs.

<PAGE>

SCMP Operations, SSGM & Other Mine Exploration

Items 1 and 2 of this report describe the Company's current activities 
and status.  The Company, through its Joint Venture, has reduced its 
advances to the Company from its sale of gold, therefore, the advances 
reported are after deducting these gold sale proceeds.  Presently the 
Company believes that the additional equipment needed for the SCMP would 
permit it to reach its goal of processing up to 400 tons of virgin ore 
each day of operation.  In the event the Joint Venture's goals are 
reached, then the profits and cash flow should provide funds that could 
be used to commence the SSGM open-pit, heap-leaching operation.  The 
Company  estimates that it will need at least U.S. $13 million to start a 
2,000 ton-per-day open-pit, heap-leaching operation and over time to 
increase the production capacity to 6,000 tons per day at the SSGM.  The 
profit and cash flow projections reflect that the invested capital could 
be recovered during the first 18 months of full production.  It further 
believes that it should be able to raise adequate funds to proceed with 
its goals which include the SCMP expansion and the installation of its 
crushing system. During the last fiscal quarter ended March 31, 1997, the 
Company did raise the sum of $2.5 million by issuing  Series A 
Convertible Preferred Stock and the placement of additional equity 
securities.

Employees

The Joint Venture employs approximately 318 full-time persons from El 
Salvador (up to 325 persons, including part-time employees) to perform 
its exploration, exploitation, and development programs; to produce gold 
from its SCMP facilities; and to handle the administration of its 
activities. None of these employees are covered by any collective 
bargaining agreements.  It has developed a continuous harmonious 
relationship with its employees. It believes that the Joint Venture is 
the largest single non-agricultural employer in El Salvador's Eastern 
Zone.  Also, the Company employs approximately four persons (plus 
part-time help) in the United States.

Insurance

The Joint Venture has in existence insurance through an El Salvador
insurance company with the following general coverage:  general 
liability, vehicle liability and extended coverage, fire, explosion, 
hurricane, cyclone, tornado, windstorm, hail, flood, storm, earthquake, 
tremor or volcanic eruption, politically-motivated violence, terrorism, 
strikes, work stoppages, riots, uprisings, malicious acts, vandalism, and 
related acts.  As additional equipment and assets are acquired or 
improvements are made, the insurance coverage will be increased 
accordingly.

Related Party Loans, Obligations and Transactions

The related party transactions are included in detail in the Notes to the 
Consolidated Financial Statements.

Company Advances to the Joint Venture

Since September 1987 through March 31, 1997, the Company, and three of
its subsidiaries, have advanced to the Joint Venture $15,693,766.  
Included in the total advances is the interest charged to the Joint 
Venture by the Company and this charge amounts to $5,234,795 through 
March 31, 1997.  The Company furnishes all of the funds required by the 
Joint Venture.

<PAGE>

Efforts to Obtain Capital

Since the concession was granted, and through the present time,
substantial effort is exercised in securing funding through various 
sources, all with the purpose to resume and expand the operations of the 
SCMP and SSGM and to continue the exploration of its other mining 
prospects.

The Company, Sanseb, and the Joint Venture consider the past political 
situation in the Republic of El Salvador to have been unstable, and 
believe that the final peace declaration on December 16, 1992, has put an 
end to war.  Presently, interested investors continue to be apprehensive 
and skeptical about the political status of the Republic of El Salvador 
and therefore continue to be  hesitant to invest the funds required.   
However, during the past fiscal year, the Company was able to invest a 
gross sum of $4,864,413 which was reduced by the $969,721 received from 
the sale of gold proceeds and reflected a net investment of $3,894,692,  
into the El Salvador operations.  This includes allocation of the 
Company's expenditures.  The Company believes that it will be able to 
obtain adequate financing from the same sources as in the past to conduct 
the present operations during the fiscal year ended March 31, 1998.  

<PAGE>

Item 8.  Financial Statements and Supplementary Data

                Index to Consolidated Financial Statements
                     And Supplementary Financial Data

                                                             Page

Report of Independent Certified Public Accountants . . . . . . . . . 58

Financial Statements:

Consolidated Balance Sheets, Years Ended March 31, 1997 and 1996 . . 59 
Consolidated Statements of Income, Years Ended March 31, 1997, 1996 and
1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Consolidated Statements of Changes in Shareholders' Equity Years
Ended March 31, 1997, 1996 and 1995. . . . . . . . . . . . . . . . . 61
Consolidated Statements of Cash Flows, Years Ended March 31, 1997,
1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . .62
Notes to Consolidated Financial Statements . . . . . . . . . . . . . 63
Quarterly Financial Data (Unaudited) . . . . . . . . . . . . . . . . 77

Supplementary Financial Data:

Report of Independent Accountants on the Financial Statements 
Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86

Financial statements schedules other than those listed herein have been
omitted since they are either not required, are not applicable, or the
required information is included in the financial statements and related
notes.


<PAGE>


                REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To the Shareholders and Board of Directors of Commerce Group Corp. and
Consolidated Subsidiaries:

We have audited the consolidated balance sheets of Commerce Group Corp.
("Company"), a Delaware Corporation, and its subsidiaries, as of March
31, 1997 and 1996, and the related consolidated statements of operations,
changes in shareholders' equity and cash flows, for each of the three
fiscal years in the periods ended March 31, 1997, 1996, and 1995.  These
financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements 
based on our audits.

We conducted our audits in accordance with generally accepted auditing 
standards.  Those standards require that we plan and perform the audit to 
obtain reasonable assurance whether the financial statements are free of 
material misstatement.  An audit includes examining, on a test basis, 
evidence supporting the amounts and disclosures in the financial 
statements.  An audit also includes assessing the accounting principles 
used and significant estimates made by management, as well as evaluating 
the overall financial statement presentation.  We believe that our audits 
provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial 
position of Commerce Group Corp. and its subsidiaries as of March 31, 
1997 and 1996, and the consolidated results of their operations and their 
cash flows for each of the three fiscal years in the periods ended March
31, 1997, 1996, and 1995, in accordance with accounting principles
generally accepted in the United States.

REDLIN AND ASSOCIATES
Certified Public Accountants


Milwaukee, Wisconsin
April 28, 1997

<PAGE>

           COMMERCE GROUP CORP. AND CONSOLIDATED SUBSIDIARIES
                  Consolidated Balance Sheets--March 31


                                                 1997              1996
                                          ------------    ---------------
                                 ASSETS
                                 ------

Current assets
 Cash                                    $     780,154     $       55,653
 Investments                                   194,888            198,982
 Accounts receivable                           112,382            143,476
 Inventories                                    88,250            118,748
 Prepaid items                                   1,698                986
                                         -------------     --------------
  Total current assets                       1,177,372            517,845

Real estate (Note 4)                         1,179,836          1,179,836
Advances to Joint Venture
 Net of Gold Sale Proceeds
 (Note 3)                                   15,693,766         11,799,074
Investment in Joint Venture
 (Note 3)                                    7,016,360          7,016,360
                                           -----------        -----------
Total assets                               $25,067,334        $20,513,115

                              LIABILITIES
                              -----------
Current liabilities
 Accounts payable                          $   119,558     $      148,051
 Notes and accrued interest
  payable to related parties
  (Note 5)                                   3,461,529          3,084,370
 Notes and accrued interest
  payable to others (Note 5)                   646,809            499,110
 Accrued salaries                            1,344,015          1,204,140
 Accrued legal fees                            137,069             76,883
 Other accrued expenses                        150,135            341,054
                                           -----------     --------------
   Total liabilities                         5,859,115          5,353,608

Commitments and contingencies (Notes 3, 5, 6, 7, 10 and 14)


                          SHAREHOLDERS' EQUITY
                          --------------------
Preferred Stock
 Preferred stock, $0.10 par value:
 Authorized 250,000 shares;
 Issued and outstanding
 1997-1,515 shares; 1996-none  (Note 10)   $ 1,515,000     $            0

Common Stock, $0.10 par value:
 Authorized 15,000,000 shares;
 Issued and outstanding:
 1997-9,193,042 (Note 10)                      919,304
 1996-7,792,209 (Note 10)                                          779,221
 Additional paid in capital                 14,359,037          12,973,006
Retained earnings (deficit)                  2,414,878           1,407,280
                                           -----------         -----------
 Total shareholders' equity                 19,208,219          15,159,507
                                           -----------         -----------
 Total liabilities and shareholders'
  equity                                   $25,067,334         $20,513,115
                                           ===========         ===========

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

<PAGE>
        COMMERCE GROUP CORP. AND CONSOLIDATED SUBSIDIARIES
             CONSOLIDATED STATEMENTS OF OPERATIONS
             Consolidated Statements of Income--March 31

                                  1997             1996          1995
                            ----------       ----------    ----------
Revenues:  
Campground income           $   59,009       $   55,692    $   54,600
Land sales                           0                0         9,000
Interest income                  3,832            2,669         6,172
Interest income Joint
 Venture (Notes 3 & 11)      1,567,375        1,286,739       751,389
Miscellaneous income                 0              160         2,020
                            ----------        ---------    ---------- 
  Total revenue              1,630,216        1,345,260       823,181

Expenses:
Cost of land sales                   0                0         1,325
General, administrative and
 campground expenses            67,982           86,748        80,505
Interest expense               554,636          470,710       466,604
                            ----------        ---------     --------- 
  Total expenses               622,618          557,458       548,434
                            ----------        ---------     ---------
Net income (loss)            1,007,598          787,802       274,747
  Credit (charges) for 
   income taxes                      0                0             0
                            ----------       ----------    ----------
Net income (loss) after income
  tax credit (charge)       $1,007,598       $  787,802       274,747
                            ==========       ==========     =========          
 
Net income (loss) per share
 (Note 2)                   $     .124       $     .107     $    .046  
                            ==========       ==========     =========

Weighted av. shares
 outstanding (Note 2)        8,136,286        7,368,058     5,941,950
                            ==========       ==========     =========

Fully diluted income per
 common share              $     .104        $    .106     $    .045
                           ==========        =========     ========= 

Weighted average diluted number
of shares and assuming all
rights and options were 
exercised on March 31
(Note 2)                    9,727,646        7,465,898     6,101,006
                           ==========        =========     =========

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

<PAGE>

                COMMERCE GROUP CORP. AND CONSOLIDATED SUBSIDIARIES
             Consolidated Statement Of Changes in Shareholders' Equity
                 For the Years Ended March 31, 1997, 1996, and 1995

                                                  Common Stock 
                                    ------------------------------------------
                                                        Capital in
                                                          Excess     Retained
                                    Number of    Par      of Par     Earnings
                                      Shares    Value      Value     (Deficit)
                                    --------- --------  ----------  ----------
Balance March 31, 1994              5,086,960 $508,696  $8,512,443  $ 344,731

Net Income for FY March 31, 1995                                      274,747


Common Shares Issued
 Dir./off./employee/services comp.    101,800   10,180     141,890
 Payment of debt                      859,076   85,908   1,543,359
 Stock options/rights                 978,066   97,807   1,005,151
 Cash/equipment lease/purchase        268,817   26,881     473,118   
                                    ---------  -------  ----------   -------- 
Balance March 31, 1995              7,294,719  729,472  11,675,961    619,478

Net income for FY March 31, 1996                                      787,802

Common Shares Issued
 Dir./off./employee/services comp.     45,384    4,538     110,069
 Payment of debt                      248,468   24,847     739,090
 Stock options/rights                  60,260    6,026     139,624
 Cash/equipment lease/purchase        143,378   14,338     308,262   
                                    ---------  -------  ----------  ---------

Balance March 31, 1996              7,792,209  779,221  12,973,006  1,407,280

Net income for FY March 31, 1997                                    1,007,598

Dir./off./employee/services comp.      66,563    6,656     122,875 
Payment of debt                       381,043   38,104     762,792
Cash                                  953,227   95,323   1,526,927
Preferred conv. stock issuance costs:
 Current                                                  (404,466)
 Deferred                                                 (622,097)
                                    --------- -------- ----------- ----------
Balance March 31, 1997              9,193,042 $919,304 $14,359,037 $2,414,878
                                    ========= ======== =========== ==========
The accompanying notes are an integral part of the consolidated financial
statements.

<PAGE>
        COMMERCE GROUP CORP. AND CONSOLIDATED SUBSIDIARIES
           Consolidated Statements of Cash Flows
              For the Years Ended March 31
                                              1997       1996       1995 
                                         ---------   --------   --------
Operating activities:
 Net income (loss)                      $1,007,598   $787,802   $274,747
Changes in other operating assets      
 and liabilities (net):
 Accounts receivable and inventory          61,592   (262,224)         0
 Other assets                                3,382       (366)       973
 Accounts payable                          (28,493)   (74,372)   116,241
 Accrued salaries                          139,875    (53,050)   267,550
 Accrued directors' fees                         0    (47,950)    (6,850)
 Accrued legal fees                         60,186    (89,473)  (113,257)
 Accrued liabilities                      (190,919)   167,425     (1,260)
 Common stock issued for services          129,531    114,607    152,070
                                         ---------   --------   ---------
 Cash provided (used)                   
   by operating activities               1,182,752    542,399    690,214

Investing activities:
 Cash advances to Joint Venture         (3,027,882)(2,845,282)(1,865,869)  
 Non cash advances to Joint Venture     (1,836,531)(1,457,763)(1,018,209)
                                         ---------  ---------  ---------
  Gross advances to Joint Venture       (4,864,413)(4,303,045)(2,884,078)
  Less:  gold sale proceeds                969,721  1,180,279          0
                                         ---------  ---------  ---------   
Net advances to Joint Venture           (3,894,692)(3,122,766)(2,884,078)

Financing activities:
 Net borrowings                            524,858    858,466   (508,555)
 Preferred stock issued                  1,515,000          0          0
 Common stock issued                     1,396,583  1,232,187  3,232,224
                                         ---------  ---------  ---------
   Funds provided by financing 
   activities                            3,436,441  2,090,653  2,723,669

Increase (decrease) in cash and
 cash equivalents                          724,501   (489,714)   529,805 
Cash - beg. of year                         55,653    545,367     15,562
                                        ---------- ---------- ----------   
Cash - end of year                      $  780,154 $   55,653 $  545,367
                                        ========== ========== ==========

The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
        

        COMMERCE GROUP CORP. AND CONSOLIDATED SUBSIDIARIES Notes to
           Consolidated Financial Statements March 31, 1997

(1) The Company and Basis of Presentation of Financial Statements

(a) Commerce Group Corp. ("Commerce," the "Company" and/or "Registrant") 
    and its 82 1/2% owned subsidiary, San Sebastian Gold Mines, Inc.
    ("Sanseb") have formed the Commerce/Sanseb Joint Venture ("Joint
    Venture") for the purpose of performing gold mining and related
    activities, including, but not limited to, exploration, exploitation,
    development, extraction and processing of precious metals in the
    Republic of El Salvador, Central America.   Gold bullion, the Joint
    Venture's principal product, is produced (but not on a full 
    production basis) in El Salvador and refined and sold in the United 
    States.  Expansion of exploration is taking place at the San 
    Sebastian Gold Mine ("SSGM") which is located near the City of Santa 
    Rosa de Lima.  Exploration is also taking place at four other mining 
    properties, all located in the Republic of El Salvador, Central 
    America.

    Presently, the Joint Venture is in the pre-production stage at the 
    SSGM and it simultaneously is performing four separate programs:  it 
    has started to produce gold on a start up (not full production) basis 
    at its San Cristobal Mill and Plant ("SCMP") which is located 
    approximately 15 miles from the SSGM site; the second program is to 
    begin its open-pit, heap-leaching process on the SSGM site; the third 
    program is to continue its SSGM site preparation, the expansion of 
    its exploration and exploitation targets, and the enlargement and 
    development of its gold ore reserves; and the fourth program is to 
    explore the potential of four gold mine exploration prospects 
    identified as the San Felipe-El Potosi Mine, and its extension, the 
    El Capulin Mine, the Hormiguero Mine,  the Modesto Mine,  and the 
    Montemayor Mine, all located in El Salvador, Central America.  
    Concurrently, it also is in the process of obtaining the necessary 
    funding for each of these separate programs while its Joint Venture  
    continues its gold production, exploration, exploitation and 
    development operations.

(b) The Company, a United States' corporation (incorporated as a 
    Wisconsin corporation in 1962 and consolidated with a Delaware 
    corporation in 1971), presents its consolidated financial statements 
    in U.S.  dollars.

(c) The preparation of the financial statements, in accordance with 
    accounting principles generally accepted in the United States 
    requires management to make estimates and assumptions that affect the 
    reported amounts of assets and liabilities and disclosure of 
    contingent assets and liabilities at the date of the financial 
    statements and the reported amounts of revenues and expenses during 
    the reporting period.  Actual results could differ from those 
    estimates.

(d) The investment consists of precious stones which are stated at the 
    lower cost or market value.

(e) Accounts receivable consist of gold bullion shipped to the refinery 
    pending the settlement date.

(f) Inventory consists of processed ores and metal-in-process which are 
    stated at the lower of average cost or market.

<PAGE>

(2) Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include the operations of the
Company and all of its majority-owned subsidiaries:  Homespan Realty Co., 
Inc. ("Homespan"); Piccadilly Advertising Agency, Inc. ("Piccadilly"); 
San Luis Estates, Inc. ("SLE"); Universal Developers, Inc. ("UDI"); San 
Sebastian Gold Mines, Inc. ("Sanseb"); and Mineral San Sebastian, S.A. de 
C.V. ("Misanse").  The Company does not include in its financial 
statements the operations of the Joint Venture.  Other than the Joint 
Venture, all significant intercompany accounts and transactions have been 
eliminated.  For further information regarding consolidated subsidiaries 
see Note 8.

Income Taxes

The Company files a consolidated Federal Income Tax return with its 
subsidiaries (See Note 9).

Income (Loss) Per Common Share

Net income per share is calculated based on the weighted average number 
of common shares issued and outstanding during this fiscal year.  The 
Company does not include in this calculation any common stock equivalent, 
rights or contingent issuances of common stock.

In computing the shares on a fully diluted basis, the net income per
share is based on the assumption that all rights and options were 
exercised on the last day of the period that is being reported.  No 
allowance was made for the common shares that will be issued upon the 
conversion of the Series A Convertible Preferred Stock as the exact 
number of shares to be issued are undeterminable until the conversion 
date.

If on March 31, 1997, 1,591,360 option shares would be added to the
weighted average calculated number of shares which amounts to 8,136,286 
(under the assumption  that all of the stock options would be exercised), 
the total number of the weighted average fully diluted shares would be 
9,727,646, and the profit per share for the fiscal year ended March 31, 
1997, would be $.104 per share.  The same assumptions were used for the 
same 1996 fiscal period.

Foreign Currency

The Company itself is not involved in any foreign currency transactions 
as it deposits U.S. funds primarily through bank wire transfer of funds 
from its U.S. bank account into the Joint Venture's El Salvador bank 
accounts.  The Joint Venture is obligated to repay the Company for funds 
advanced in U.S. dollars.  El Salvador has a freely convertible currency 
that at present trades about 8.75 colones per U.S. dollar.  In this 
environment, based on the free convertibility of the colon, foreign 
businesses have no problem making remittances of profits, repatriating 
capital or bringing in capital for additional investments.  There is no 
delay in exchanging dollars for colones or vice versa.

<PAGE>

Major Customer

The Joint Venture produces gold and silver. It sells its gold to a 
refinery located in the United States. Given the nature of the precious 
metals that are sold, and because many potential purchasers of gold and 
silver exist, it is not believed that the loss of any customer would 
adversely affect either the Company or the Joint Venture (Note 3).

(3) Commerce/Sanseb Joint Venture ("Joint Venture")

The Company is in a joint venture with and owns 82 1/2% of the total
common stock (2,002,037 shares) of Sanseb, a U.S. State of Nevada 
chartered (1968) corporation.  The balance of Sanseb's stock is held by 
approximately 180 non-related shareholders, including the President of 
the Company who owns 2,073 common shares.  Sanseb was formed to explore, 
exploit, research, and develop adequate gold reserves.  It produced gold 
from SSGM from 1972 through February 1978.

On September 22, 1987, the Company and Sanseb entered into a joint
venture agreement to formalize their relationship with respect to the 
mining venture and to account for the Company's substantial investment in 
Sanseb.  Under the terms of the agreement, the Company is authorized to 
supervise and control all of the business affairs of the Joint Venture 
and has the authority to do all that is necessary to resume mining 
operations at the SSGM on behalf of the Joint Venture.  The net pre-tax 
profits of the Joint Venture will be distributed as follows: Company 90%; 
and Sanseb 10%.  Since the Company owns 82 1/2% of the authorized and 
issued shares of Sanseb, the Company in effect has over a 98% interest in 
the Joint Venture activities.

The joint venture agreement further provides that the Company has the
right to be compensated for its general and administrative expenses in 
connection with managing the Joint Venture.

Under the joint venture agreement, agreements signed by the Company for
the benefit of the Joint Venture create obligations binding upon the
Joint Venture.

The Joint Venture is registered to do business in the State of Wisconsin
and in the Republic of El Salvador, Central America.

Accounting Matters

The Joint Venture records all costs and expenses as capital items which
are reduced by the gold sale proceeds and it will write off these 
cumulative costs on a unit of production method at such time as it begins 
producing gold derived from the virgin gold ore on a full production 
basis. If the prospect of gold production, due to different conditions 
and circumstances becomes unlikely, all of these costs may be written off 
in the year that this occurs.

Advances to Joint Venture

As of March 31, 1997, the Company's advances were $15,103,501, and three 
of the Company's wholly-owned subsidiaries' advances were $590,265 for a 
total of $15,693,766.

<PAGE>

Investment in El Salvador Mining Projects

During the fiscal year, the Company has advanced funds, performed
services, and allocated its general and administrative costs to the Joint 
Venture.

As of March 31, 1997, the Company, Sanseb and three of the Company's
wholly-owned subsidiaries have invested (including carrying costs) the
following in its Joint Venture:

The Company's advances since 09/22/87                    $17,253,501
Less amounts received from gold sales                     (2,150,000)
The Company's net of gold sale proceeds 
  advances since 09/22/87                                 15,103,501
The Company's initial investment                           3,508,180
Sanseb's investment in the Joint Venture                   3,508,180
Sanseb's investment in the mining projects
 and amount due to the Company                            19,388,321
                                                         -----------
Total:                                                    41,508,182
Advances by the Company's three subsidiaries                 590,265
                                                         -----------
Combined total investment                                $42,098,447
                                                         ===========

SSGM Activity

The Company had no significant activity at the SSGM site from February 
1978 through January 1987.  The present status is that, the Company, 
since January 1987, and thereafter, the Joint Venture, since September 
1987, has completed certain of the required mining pre-production 
preliminary stages in the minable proven gold ore reserve area, and the 
Company is active in attempting to obtain adequate financing for the 
proposed open-pit, heap-leaching operations on this site.  The Joint 
Venture is also engaged in the exploration and the expansion program to 
develop additional gold ore reserves in the area surrounding the minable 
gold ore reserves and at four other El Salvador mining prospects.   
During this fiscal period gold is being produced by trucking the tailings 
and virgin ore for processing at the SCMP.

Mineral San Sebastian S.A. de C.V. ("Misanse")

(a)  Misanse Corporate Structure

The SSGM real estate is owned by and leased to the Joint Venture by 
Misanse, a Salvadoran chartered corporation.  The Company owns 52% of the 
total of  Misanse's issued and outstanding shares.  The balance is owned 
by approximately one hundred El Salvador, Central American, and United 
States' citizens.  The Company has the right to select six of Misanse's 
ten directors. (Note 6)

<PAGE>

(b)  SSGM Mining Lease

On July 28, 1975, an amended lease agreement between Misanse as lessor
and Sanseb as tenant was signed by the parties giving the tenant all the 
possessions and mining rights that pertain to the SSGM as well as other 
claims to mineral rights that may already have or could be claimed in the 
future within the 595 hectares (1,470 acres) plat of land encompassing 
the SSGM.  The 25-year lease, which begins on the date gold production 
begins, was further amended to run concurrently with the concession 
described herein and may be extended for an additional 25 years by the 
tenant as long as the tenant has paid the rent and has complied with 
other obligations under the lease and the concession.  The lease further 
provides that the tenant will pay rent equivalent to five percent of the 
gross gold production revenue obtained from the leased SSGM and further 
commits itself to maintain production taking into consideration market 
and other conditions.  In no case will the rent be less than eighteen 
hundred "colones" per month (approximately $206 per month at the current 
rate of exchange).  The lease further provides that, in the event the 
lessor wishes to sell the property, it must first give preference to the 
tenant; the lease further provides that the tenant must give preference 
to employ former mining employees and Misanse shareholders, providing 
they qualify for the available position.  The lease agreement was 
assigned on January 29, 1987 to the Company and Sanseb together with the 
mining concession application.

The lease is freely assignable by the Joint Venture without notice to 
Misanse.  The lease may also be canceled by the Joint Venture on thirty 
day's notice to Misanse, and thereafter, all legal responsibilities 
thereunder shall cease.

In the event that additional gold ore is discovered, Misanse is required
to make proper claim for it under the jurisdiction of the Ministry of 
Economy of El Salvador's Director of Energy, Mines, and Hydrocarbons, and 
include it in the present concession.  Such addition to the lease is 
required to be made without any changes to the rental payment, except 
that the expenses for expanding the concession shall be borne by the 
Joint Venture.

(c)  Mineral Concession

On January 27, 1987, the Government granted a right to the mining 
concession ("concession") to Misanse which was subject to the performance 
of the El Salvador Mining law requirements.  These rights were 
simultaneously assigned to the Company and Sanseb.

On July 23, 1987, the Government of El Salvador delivered and granted to 
the Company's 52% owned subsidiary, Misanse, possession of the mining 
concession.  This is the right to extract and export minerals for a term 
of 25 years (plus  a 25-year renewal option) beginning on the first day 
of production from the real estate which encompasses the SSGM owned by 
Misanse.  Misanse assigned this concession to the Joint Venture.

Effective February 1996, the Government of El Salvador passed a law which 
will require mining companies to pay to it three percent of its gold sale 
receipts and an additional one percent is to be paid to the El Salvador 
municipality which has jurisdiction of the mine site.

Under the terms of the concession and agreements referred to in the 
concession, the Joint Venture has agreed to the following:

(1)  The Joint Venture will pay to 270 former El Salvador employees
     pursuant  to a settlement agreement dated June 1985, as follows:  A
     sum of approximately 500,000 colones (approximately U.S. $57,143 at 
     the current rate of exchange) in three (3) installments contingent 
     upon the production and sale of gold, to wit: one-third is to be 
     paid from the sale of the first production of gold; one-third is to 
     be paid one (1) year thereafter; and one-third is to be paid two (2) 
     years after the first payment.  The entire amount due has been paid 
     or placed in escrow for those persons that cannot be located.

<PAGE>

(2)  Preference is to be given to the former Sanseb employees and Misanse 
     shareholders in filling any job vacancies, providing that there is a 
     need for their skills or services;

(3)  From the profits earned, five percent of the gross wages paid to the 
     full-time employees shall be paid into a pension fund;

(4)  From the profits earned, a sum of 500,000 colones annually 
     (equivalent to $57,143 at the present rate of exchange) will be paid 
     by the Joint Venture as a social tax for the benefit of the 
     community in the SSGM area which said funds are to be used for 
     social, economic, educational, recreational, health, welfare, 
     medical or for such other beneficial community services as 
     determined by the Joint Venture;

(5)  At such time as the Government of El Salvador forms a cooperative 
     for the benefit of the employees, the Joint Venture has agreed to 
     contribute from its annual pre-tax earnings, the sum of five percent 
     of its pre-tax profits, but, in any event, not less than a minimum 
     amount equal to five percent of eight percent of the total assets;

(6)  Pursuant to an agreement with the El Salvador Minister of Economy,
     at the request of the Company or the Joint Venture to the El 
     Salvador Central Reserve Bank and/or office of the El Salvador 
     Minister of Foreign Commerce, it will be able to convert the El 
     Salvador currency into United States' currency for the payment of 
     its loans, interest, and any other obligations, including the 
     payment of dividends.  Presently, there are no restrictions to 
     convert the El Salvador colones into United States' currency.  (Note 
     2)

On November 30, 1987, the El Salvador Minister of Foreign Commerce issued 
a project approval for the gold mining operation which was ratified on 
April 15, 1988.

In consideration for the obligations agreed to by the Joint Venture the
Government of El Salvador agreed to exempt the Joint Venture from the 
payment of all import duty, fiscal or municipal taxes whatsoever.  The El 
Salvador Department of Customs refused to recognize this exemption.  On 
November 15, 1993, the Joint Venture's attorneys filed a declaratory 
proceeding with the El Salvador Constitutional Supreme Court ("Court") 
informing the Court that the Joint Venture's rights were being violated 
and that the Court should restrain the Department of Customs from 
attempting to collect any duty.

On May 18, 1994, the El Salvador Constitutional Supreme Court of Justice 
declared that the Joint Venture is entitled to be temporarily exempt from 
the payment of all  fiscal and municipal taxes and import duty on the 
import of any item relating to the needs of the SSGM pending its review 
of the petition filed on November 15, 1993, and that the Company's 
constitutional rights are to be preserved.  The El Salvador Department of 
Customs takes a position that the Supreme Court could deny the exemption, 
therefore, in lieu of paying the Custom's duty, it is accepting a payment 
guarantee bond in an amount of the Custom's duty until a final decision 
is made.  It is charging the Company a ten percent added value tax prior 
to June 30, 1995, and 13% thereafter which is refundable to the extent of 
six percent of the value of the Joint Venture's exports.  The Joint 
Venture intends to export all of its gold.

<PAGE>

Gold Ore Reserves

The Joint Venture's geologists have determined that the minable and 
estimated gold reserves are approximately 15,785,000 tons which should 
contain 1,641,600 ounces of gold.  The value of this gold ore reserve is 
not reflected in the balance sheet and since gold production has 
commenced on a limited start-up basis these gold ore reserves will have a 
significant impact on future earnings.

SCMP Land and Building Lease

On November 12, 1993, the Joint Venture entered into an agreement with
Corporacion Salvadorena de Inversiones ("Corsain"), a governmental agency 
of El Salvador, to lease for a period of ten years, approximately 166 
acres of land and buildings on which its gold processing mill, plant and 
related equipment (the SCMP) are located, and which is approximately 15 
miles east of the SSGM site.  The annual lease payment is U.S. $11,500 
(payable in El Salvador colones at the then current rate of exchange), 
payable annually in advance, and subject to an annual increase based on 
the annual United States' inflation rate.  As agreed, a security deposit 
of U.S.  $11,500 was paid on the same date and this deposit will be 
subject to increases based on any United States' inflationary rate 
adjustments.

Modesto Mine

(a)  Real Estate

On August 26, 1994, the Company entered into a fifteen-year lease 
agreement to lease approximately 30 acres of key vacant land located at 
the Modesto Mine site, near the City of El Paisnal, El Salvador, at a 
cost of one thousand colones per manzana per year or approximately U.S. 
$67 per acre.  A condition of the lease was a five-year prepayment 
provision of 87,500 colones or approximately U.S. $10,011.  Also, the 
Company has a first right of refusal to purchase this land.   On August 
31, 1996, the Company purchased this parcel of land.  This land was used 
as collateral in connection with a mortgage and a promisssory note that 
was issued.

On November 27, 1994, the Company entered into an agreement to purchase
approximately 22 acres of land which abuts the land formerly leased at 
the Modesto Mine site.  The Company owns a total of 52 acres.

San Felipe-El Potosi Mine ("Potosi")

(a)  Real Estate Lease Agreement

The Joint Venture entered into a lease agreement with the San Felipe-El 
Potosi Cooperative ("Cooperative") of the City of Potosi, El Salvador on 
July 6, 1993, to lease the real estate encompassing the San Felipe-El 
Potosi Mine for a period of 30 years and with an option to renew the 
lease for an additional 25 years, for the purpose of mining and 
extracting minerals and under the following basic terms and conditions:

1.   The lease payment will be five percent of the gross receipts derived
     from the production of precious metals from this site which will be 
     payable monthly.

<PAGE>

2.   The Joint Venture will advance to the Cooperative the funds required
     to obtain the mining concession from the El Salvador Department of
     Energy, Mines and Hydrocarbons and all related costs which will be
     reimbursed or will become a deduction from future rental payments.

3.   The Joint Venture will, when it is in production, employ all of the
     45 qualified members of the Cooperative providing that there is a
     need for their particular skill or service.

4.   The Joint Venture will furnish medicine and first aid medical
     assistance to all of its employees to the extent that such  benefits
     are not provided by the Salvadoran Social Security System.

5.   An employee life insurance program is to be seriously considered by
     the Joint Venture when production commences, providing that the cost
     of such insurance is not excessive.

(4)  Real Estate Ownership

The Company and its subsidiaries own a 331-acre campground located on the 
Lake of the Ozarks, Camden County, Missouri; 40 lots in the San Luis 
North Estate Subdivision, Costilla County, Colorado; and 12 lots in the 
City of Fort Garland, Costilla County, Colorado.  Misanse owns the 1,470 
acre SSGM site located near the City of Santa Rosa de Lima in the 
Department of La Union, El Salvador.  Other real estate ownership or 
leases in El Salvador are as follows:   it owns a total of approximately 
52 acres at the Modesto Mine:  the Joint Venture leases the SCMP land and 
buildings on which its mill, plant and equipment are located.  In 
addition the Joint Venture has entered into lease arrangements based on 
the production of gold payable in the form of royalties with one of the 
four other mining prospects in the Republic of El Salvador. Reference is 
made to Note 3 for other real estate ownership.

(5)  Notes Payable and Accrued Interest
                                                      March 31

Notes payable consist of the following:           1997         1996           
                                            ----------  -----------      
                                                         
Mortgage and promissory notes to 
related parties, interest ranging
from one percent to four percent 
over prime rate, but not less than
16%, payable monthly, due on demand,
using the undeveloped land, real estate
and all other assets owned by the Company, 
its subsidiaries and the Joint Venture as 
collateral (Note 6)                         $3,461,529   $3,084,370             

Other (consists primarily of short-term
notes and accrued 1996 interest of $262,955
(1995, $242,988.21) issued to trade creditors
and others, interest of varying  amounts,
in lieu of actual cash payments) and a 
mortgage on a certain 
parcel of land located in El Salvador.         646,809      499,110             
                                            ----------   ----------
Total:                                      $4,108,338   $3,583,480             
                                            ==========   ========== 
                                            
<PAGE>
                                                                   
(6)  Related Party Transactions

The Company, in an attempt to preserve cash, had prevailed on its
President to accrue his salary for the past 16 years, for a total of
$1,344,015.

In addition, with the consent and approval of the Directors, the
President of the Company, as an individual and not as a Director or
Officer of the Company, entered into the following financial transactions
with the Company, the status of which is reflected as of March 31, 1997:

The amount of funds which the Company has borrowed from its President 
from time to time, together with accrued interest, amounts to $1,839,465.  
To evidence this debt, the Company has issued to its President a series 
of  open-ended, secured, on-demand promissory notes, with interest 
payable monthly at the prime rate plus two percent, but not less than 16% 
per annum.

The Company had borrowed, as of March 31, 1997, an aggregate of $400,919,
including accrued interest, from the Company's President's Rollover
Individual Retirement Account (RIRA).  These loans are evidenced by the
Company's open-ended, secured, on-demand promissory note, with interest
payable monthly at the prime rate plus four percent per annum, but not
less than 16% per annum.

In order to satisfy the Company's cash requirements from time to time,
the Company's President has sold or pledged as collateral for loans,
shares of the Company's common stock owned by him.  In order to 
compensate its President for selling or pledging his shares on behalf of 
the Company, the Company has made a practice of issuing him the number of 
restricted shares of common stock equivalent to the number of shares sold 
or pledged, plus an additional number of shares equivalent to the amount 
of accrued interest calculated at the prime rate plus three percent  per 
annum.  The Company received all of the net cash proceeds from the sale 
or from the pledge of these shares.  The Company returned all of the 
shares (58,900) borrowed from him during this fiscal period and it issued 
26,887 of its common shares for the payment of interest for the shares 
loaned or pledged as collateral for the benefit of the Company.  It may 
owe additional common shares for such shares loaned or pledged by him for 
collateral purposes to others for the benefit of the Company, all in 
accordance with the terms and conditions of Director approved open-ended 
loan agreements dated June 20, 1988, October 14, 1988, May 17, 1989, and 
April 1, 1990.

On February 15, 1987, the Company granted its President, by unanimous
consent of the Board of Directors compensation in the form of a bonus in 
the amount of two percent of the pre-tax profits realized by the Company 
from its gold mining operations in El Salvador, payable annually over a 
period of twenty years commencing on the first day of the month following 
the month in which gold production commences.

The President presently owns a total of 467 Misanse common shares.  There
are a total of 2,600 Misanse shares issued and outstanding.

Also with the consent and approval of the Directors, a company in which
the President has a 55% ownership entered into the following agreements,
and the status is reflected as of March 31, 1997.

<PAGE>

The Company leased approximately 4,032 square feet on a month-to-month
basis for its corporate headquarters office; the monthly rental charge
was $2,789. The annual amount charged for the past three fiscal years is
as follows: 1997, $33,468; 1996, $28,316 and 1995, $25,740.

On June 10, 1996, in consideration for the partial cancellation of the
Company's debt due ($292,500) to this related party, 130,000 restricted 
common shares were issued to it.

On January 10, 1997, this related party purchased 68,000 of the Company's
restricted common shares at a price of $2.00 a share.  It also received a 
four-year stock option expiring on January 9, 2001, to purchase 68,000 of 
the Company's restricted common shares at a price of $3.00 for each 
share.  This transaction had the same terms as were entered into with 
other independent arms-length transactions.

The same related company provides consulting, administrative services, 
use of data processing equipment, use of its vehicles and other property 
as required by the Company.  Total charges for these services were as 
follows: 1997, $7,950; 1996, $7,920 and 1995, $7,620.

In lieu of cash payments for the office space rental and for the
consulting, administrative services, etc., these amounts due are added 
each month to this related company's open-ended, secured, on-demand 
promissory note issued by the Company.

In addition, this related company does use its credit facilities to
purchase items needed for the Joint Venture's mining needs.

This related company has been issued an open-ended, secured, on-demand
promissory note which at March 31, 1997, amounts to $963,152; the annual 
interest rate is four percent plus the prime rate, but not less than 16%, 
and it is payable monthly.

The Company's Directors have consented and approved the following 
transactions which status are reflected as of March 31, 1997:

The President's wife's Individual Retirement Account ("IRA") has the 
Company's open-ended, secured, on-demand  promissory note in the sum  
$207,475 which bears interest at an annual rate of prime plus three 
percent, but not less than 16% and the interest is payable monthly.   The 
President's wife on December 14, 1996, purchased 83,900 restricted common 
shares, $0.10 par value, for a sum of $167,800.  She simultaneously 
acquired a four-year stock option to purchase 83,900 of the Company's 
restricted common shares at a price of $3.00 each which expires December 
13, 2001.   This transaction is under the same terms entered into with 
arms-length other purchases.

The Law Firm which represents the Company in which a son of the President 
is a principal is owed the sum of $137,069 for legal services rendered 
throughout the past years.   Also, the son of the President and his son's 
wife have the Company's open-ended, on-demand promissory note in the sum 
of $50,518 which bears interest at an annual rate of 16% payable monthly.

<PAGE>

The Directors, by their agreement, have deferred cash payment of their 
Director fees beginning on January 1, 1981, until such time as the 
Company's operations are profitable.   Effective from October 1, 1996, 
the Director fees were increased from $750 to $1,200 for each quarterly 
meeting and $400 for attendance at any other Directors' meeting.  The 
Executive Committee Director fees were increased from  $250 to $400 for 
each meeting.  The Directors and Officers have a right to exchange the 
amount due to them for the Company's common shares.

On September 16, 1994, the Directors adopted a resolution offering the 
Directors and Officers of the Company a right to exchange the 
compensation due to them for the Company's common shares valued at the 
lowest bid quote reflected in the NASDAQ Monthly Statistical Summaries 
during a twelve-month period preceding the exercise of this right.  As of 
March 31, 1997, pursuant to the S.E.C. Form 8 Registration Statement 
effective as of April 4, 1994, the Directors/Officers exercised their 
rights to purchase 8,613 shares at a price of $1.875 per share in payment 
of all compensation due to them as of March 31, 1997.

The Company advances funds, allocates and charges its expenses to the
Joint Venture.  The Joint Venture in turn capitalizes all of these 
advances, costs and expenses until such time as it resumes its gold mine 
operation.  When full production commences, these capitalized costs will 
be charged as an expense based on a per ton production basis.  The 
Company also charges interest for its advances to the Joint Venture which 
interest rate is established to be the prime rate quoted on the first day 
of each month plus four percent and said interest is payable monthly.

Company Net Advances to the Joint Venture 

                                          Total          Interest 
                                        Advances         Charges
                                       ----------        --------
Balance April 1, 1990                 $ 1,625,163         252,060
 Year Ended March 31, 1991                718,843         266,107        
 Year Ended March 31, 1992                698,793         312,004
 Year Ended March 31, 1993              1,003,617         347,941     
 Year Ended March 31, 1994              1,155,549         451,180     
 Year Ended March 31, 1995              2,884,078         751,389
 Year Ended March 31, 1996              3,122,766       1,286,739               
 Year Ended March 31, 1997              3,894,692       1,567,375
                                      -----------      ----------
Balance March 31, 1997                $15,103,501      $5,234,795

Advances by three of the Company's
 wholly-owned subsidiaries                590,265               0               
                                      -----------      ----------
Total Net Advances March 31, 1997     $15,693,766      $5,234,795

(7)  Commitments

Reference is made to Notes (3), (5), (6), (10) and (14).

<PAGE>

(8)  Consolidated Subsidiaries

The following subsidiaries, all majority-owned by the Company, are 
included in the consolidated financial statements of the Company.  All 
intercompany balances and transactions have been eliminated.

                           Percentage of Ownership

      Homespan Realty Co., Inc.              100.0%                             
      Mineral San Sebastian, S.A. de C.V.     52.0%                             
      Piccadilly Advertising Agency, Inc.    100.0%                             
      San Luis Estates, Inc.                 100.0%                             
      San Sebastian Gold Mines, Inc.          82.5%               
      Universal Developers, Inc.             100.0%                             

(9)  Income Taxes

At March 31, 1996, the Company and its subsidiaries, excluding the Joint
Venture, have estimated net operating losses remaining in a sum of
approximately $4,347,244 which may be carried forward to offset future 
taxable income; the net operating losses expire at various times to the 
year of 2012.

(10) Description of Securities

a.   Common Stock

The Company's Certificate of Incorporation authorizes the issuance of 
15,000,000 shares of common stock, $0.10 par value per share of which 
9,193,042 shares were outstanding as of March 31, 1997.  Holders of 
shares of common stock are entitled to one vote for each share on all 
mattters to be voted on by the shareholders.  Holders of common stock 
have no cumulative voting rights.  Holders of shares of common stock are 
entitled to share ratably in dividends, if any, as may be declared, from 
time to time by the Board of Directors in its discretion, from funds 
legally available therefore.  In the event of a liquidation, dissolution 
or winding up of the Company, the holders of shares of common stock are 
entitled to share pro rata all assets remaining after payment in full of 
all liabilities.  Holders of common stock have no preemptive rights to 
purchase the Company's common stock.  There are no conversion rights or 
redemption or sinking fund provisions with respect to the common stock.  
All of the outstanding shares of common stock are validly issued, fully 
paid and non-assessable.

b.  Preferred Stock

The Company's Certificate of Incorporation authorizes the issuance of
250,000 shares of preferred stock, $0.10 par value, of which 2,500 shares 
of Series A Convertible Preferred Stock were issued as of January 30, 
1997, and as of March 31, 1997, there remained 1,515 preferred shares 
issued and outstanding and none were issued as of March 31, 1996.

The number of shares of common stock issuable upon conversion of each of
the 2,500 shares of preferred stock, and the consequent number of shares
of common stock available for resale under this prospectus, is based upon
a conversion ratio which is $1,000 divided by the lower of (a) $2.90 or
(b) 65% of the closing bid price of the common stock on NASDAQ averaged 
over the five trading days immediately prior to the date of conversion.  
The holders that converted these Series A Convertible Preferred Shares 
received 655,227 common shares.

<PAGE>

The remaining preferred shares are issuable in one or more series.  The
Board of Directors is authorized to fix or alter the dividend rate,
conversion rights (if any), voting rights, rights and terms of redemption
(including any sinking fund provisions), redemption price or prices, 
liquidation preferences and number of shares constituting any wholly 
unissued series of preferred shares.


c.  Stock option activity during 1997, 1996, and 1995 was as follows:



                              03/31/97         03/31/96           03/31/95
                         ------------------  ---------------- ----------------  
                                   Weighted          Weighted         Weighted
                                   Average           Average           Average
                           Amount   Price    Amount   Price    Amount   Price
                         --------   -----   -------   -----   -------   -----
Outstanding, beg. yr.      97,840   $2.66   154,850   $2.66   709,760   $1.51
Granted                 1,507,400   $3.38     3,250   $5.00    94,590   $2.56
Exercised                           $0.00   (60,260   $2.42  (649,500)  $1.46
Forfeited                 (13,880)  $3.00         0   $0.00         0   $0.00
Expired                         0   $0.00         0   $0.00         0   $0.00
                        ---------   -----    ------   -----   -------   -----
Outstanding, end of yr. 1,591,360   $3.22    97,840   $2.66   154,850   $2.34
                        =========   =====    ======   =====   =======   =====  
                                                                                
A summary of the outstanding stock options as of March 21, 1997, follows:

                                      Weighted Average
    Range of            Amount           Remaining           Weighted Average
Exercise Prices      Outstanding      Contractual Life        Exercise Price
---------------      -----------      ----------------       ---------------- 
$2.00 to $2.99         490,000           1.14 years                $2.44
$3.00 to $5.00       1,101,360           2.43 years                $3.56

d.  Stock Rights - To The President

Reference is made to Note 6, Related Party Transactions, of the Company's
financial statements which disclose the terms and conditions of the share 
loans to the Company by the President and the interest which is payable 
to him by the Company's issuance of its common shares.

Said interest payable is for shares loaned to the Company and/or for such
shares loaned or pledged for collateral purposes, or for unpaid interest, 
all in accordance with the terms and conditions of Director approved 
open-ended loan agreements dated June 20, 1988, October 14, 1988, May 17, 
1989 and April 1, 1990.
<PAGE>

e.  Stock Rights - Others

The Company has agreed to issue up to 25,000 of its restricted common
shares in connection with a certain funding agreement entered into on 
December 19, 1996.

f.  Share Loans - Others

A series of borrowings of the Company's common shares were made under the
provision that the owners would sell said shares as the Company's 
designee, with the proceeds payable to the Company.  In exchange, the 
Company agreed to pay these shares loaned within 31 days or less by 
issuing its restricted common shares, together with interest payable in 
restricted common shares payable at a negotiated rate of interest 
normally payable in advance for a period of two years; no shares were 
borrowed from other non-related parties during the period ended  March 
31, 1997.

S.E.C. Form 8 Registration

On April 4, 1994, the Company filed its Securities and Exchange
Commission Form 8 Registration Statement No. 33-77226 under the 
Securities Act of 1933, to register 500,000 of the Company's $.10 par 
value common stock for the purpose of distributing shares pursuant to the 
guidelines of the Company's 1994 Services and Consulting Compensation 
Plan.  From the 500,000 shares registered, 258,747 were issued and 
241,253 shares are authorized to be issued.

(11) Interest Income on Advances to the Joint Venture

From time to time the Company advances funds, services, etc. to the Joint 
Venture.  The interest rate charged is the prime interest rate fixed on 
the first day of each month plus four percent.  The interest is payable 
monthly.  (Note 6)

(12) Litigation

There is no litigation.

<PAGE>

(13) Quarterly Financial Data (Unaudited)

The following is a tabulation of unaudited selected quarterly operating
results for March 31, 1997, and March 31, 1996:
                                                          Net Income
                                              Net Income    (Loss)
                                Revenues (a)  (Loss) (b)  Per Share
                                ------------ -----------  -----------
First quarter       06/30/95    $  299,687   $  173,459     $ .024
Second quarter      09/30/95       329,240      207,139       .028              
Third quarter       12/31/95       355,729      206,487       .028              
Fourth quarter      03/31/96       360,604      200,717       .027
                                ----------   ----------     ------              
 Total as of        03/31/96    $1,345,260   $  787,802     $ .107              
                                ==========   ==========     ======
                                                                   
First quarter       06/30/96    $  373,213   $  220,032     $ .030              
Second quarter      09/30/96       401,758      250,608       .030              
Third quarter       12/31/96       417,536      258,928       .030
Fourth quarter      03/31/97       437,709      278,030       .034
                                ----------   ----------     ------  
 Total as of        03/31/97    $1,630,216   $1,007,598     $ .124            
                                ==========   ==========     ======

(a)  Includes interest income from Joint Venture.

(b)  Includes interest expense incurred on funds borrowed and then advanced
     to the Joint Venture. 

(14) Contingent Liabilities

In the event the El Salvador Constitutional Supreme Court should decide 
that the Joint Venture is subject to the payment of custom duty taxes, 
then the Company would have a contingent liability as it has, on behalf 
of the Joint Venture, agreed to reimburse an El Salvador Insurance 
Company the funds that may be disbursed to the El Salvador customs' 
office in connection with the payment of guarantee bonds it has issued in 
lieu of cash payment for the import duties.  The total sum of payment 
guarantee bonds issued by the Insurance Company through March 31, 1997, 
amounts to approximately $20,000.

<PAGE>

(15) Supplemental Cash Flow Information

Supplemental disclosure of cash flow information for the years ended
March 31, 1997, 1996 and 1995 is as follows:

 
                                             1997        1996   1995
                                           ------     -------   ----
Cash paid during the year for:
Interest                                   $1,350     $     0     $0
Income taxes                               $    0     $     0     $0
Non-cash financing activities
Equipment capital leases                   $    0     $35,775     $0


<PAGE>

Item 9.   Changes in and Disagreements with Accountants on Accounting 
          and Financial Disclosure

None


                             PART III

Item 10.  Directors and Executive Officers of the Registrant 

The information called for by Item 10 is incorporated by reference from 
information under the caption "Election of Directors" in the Company's 
definitive proxy statement to be filed pursuant to Regulation 14A no 
later than 120 days after the close of its fiscal year.  The information 
on Executive Officers is contained in Part I, Item 4(a) of this Form 
10-K.

Item 11.  Executive Compensation

The information called for by Item 11 is incorporated by reference from
information under the caption "Executive Compensation" in the Company's 
definitive proxy statement to be filed pursuant to Regulation 14A no 
later than 120 days after the close of its fiscal year.

Item 12.  Security Ownership of Certain Beneficial Owners and Management 

The information called for by  Item 12 is incorporated by reference from
information under the caption "Voting Securities" and "Principal 
Shareholders and Ownership by Management" in the Company's definitive 
proxy statement to be filed pursuant to Regulation 14A no later than 120 
days after the close of its fiscal year.

Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers and directors and persons beneficially
owning greater than ten percent of the outstanding shares, to file
reports of ownership and changes in ownership with the Securities and 
Exchange Commission.  Based solely on a review of the copies of such 
forms furnished to the  Company or representations that no Form 5 was 
required, the Company believes that all Section 16(a) filing requirements 
were complied with as required.

Item 13.  Certain Relationships and Related Transactions

The information called for by Item 13 is incorporated by reference from
information under the caption "Certain Relationships and Related 
Transactions" in the Company's definitive proxy statement to be filed 
pursuant to Regulation 14A no later than 120 days after the close of its 
fiscal year.

<PAGE>

                            PART IV

Item 14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a)  Financial Statements and Schedules

See index to Consolidated Financial Statements, Supplementary Data, 
Consolidated Financial Statements of the Registrant and its subsidiaries 
and Financial Schedules in Part II, Item 8 of this report.

Report of Independent Accountants on the Financial Statement Schedules . . 86

Schedule IV (1) Indebtedness of Related Parties. . . . . . . . . . . . . . 87

Schedule IV (2) Indebtedness to Related Parties. . . . . . . . . . . . . . 88

Schedule X (1) Supplementary Income Statement Information March 31, 1997,
1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .90

(b)  Reports on Form 8-K

Form 8-K dated June 11, 1996 regarding the Company's acceptance of letter
of intent with National Securities Corporation of Seattle, Washington.  
(Incorporated by reference as this Form 8-K was filed electronically 
through the EDGARLink Electronic Filing System on June 26, 1996.)

Form 8-K dated January 30, 1997 regarding the sale of Regulation S
shares.  (Incorporated by reference as this Form 8-K was filed 
electronically through the EDGARLink Electronic Filing System on  
February 11, 1997.)

Subsequent to March 31, 1997, a Form 8-K dated May 28, 1997 regarding the
agreement the Company entered into with Teck Corporation was filed.  
(Incorporated by reference as this Form 8-K was filed electronically 
through the EDGARLink Electronic Filing System on June 5, 1997.)

(c)  Exhibits

The exhibit numbers in the following list correspond to the numbers
assigned to such exhibits in Item 601 of Regulation S-K.  The exhibit 
numbers noted by an asterisk (*) indicate exhibits actually filed with 
this Annual Report on Form 10-K.  All other exhibits are incorporated by 
reference into this Annual Report on Form 10-K.

Exhibit No.          Description of Exhibit                   Page


3.1        Articles of Incorporation of the
           Company (Incorporated by reference to
           the Company's Registration Statement No.
           2-66932 on Form S-I filed on April 22, 1980.)

3.2        By-laws of the Company.  (Incorporated by
           reference to Exhibit 3.2 to the Company's 
           Form 10-K for the year ended March 31, 1993.)

4          Instruments defining the rights of security
           holders, including indentures.

<PAGE>

4.1        Three-Year Stock Option Agreement dated
           May 27, 1994, (30,000 common shares).
           (Incorporated by reference to Exhibit 10.14 of 
           the Company's Form 10-K for the year ended March 31, 1994.)

4.2        Three-Year Stock Option Agreement dated May 31, 1994, 
           (30,000 common shares).  (Incorporated by reference 
           to Exhibit 10.15 of the Company's Form 10-K for the 
           year ended March 31, 1994.)

4.3        30-Month Stock Option Agreement dated March 22, 1995
           (20,710 common shares).  (Incorporated by reference to
           Exhibit 4.14  of the Company's Form 10-K for the year 
           ended March 31, 1995.)

4.4        Two-Year Stock Option Agreement dated March 30, 1996 
           (1,375 common shares). (Incorporated by reference to 
           Exhibit 4.9 of the Company's Form 10-K for the year ended 
           March 31, 1996.)

4.5        Two-Year Stock Option Agreement dated March 30, 1996 
           (1,875 common shares). (Incorporated by reference to
           Exhibit 4.10 of the Company's Form 10-K for the year 
           ended March 31, 1996.)
                             
                                
4.6*       Three-Year Stock Option Agreement dated October 1, 1996
           to purchase 22,500 common shares at $3.00 per share.

4.7*       Four-Year Stock Option Agreement dated December 9, 1996
           to purchase 3,000 common shares at $3.00 per share.
                                
4.8*       Four-Year Stock Option Agreement dated December 11, 1996
           to purchase 15,000 common shares at $3.00 per share.

4.9*       Four-Year Stock Option Agreement dated December 11, 1996
           to purchase 60,000 common  shares at $3.00 per share.

4.10*      Four-Year Stock Option Agreement dated December 14, 1996
           to purchase 83,900 common shares at $3.00 per share.

4.11*      Four-Year Stock Option Agreement dated December 27, 1996
           to purchase 30,000 common shares at $2.50 per share.

4.12*      Four-Year Stock Option Agreement dated December 31, 1996
           to purchase 25,000 common shares at $3.00 per share.

4.13*      Four-Year Stock Option Agreement dated January 10, 1997
           to purchase 68,000 common shares at $3.00 per share.
                               
<PAGE>

4.14       Two-Year Stock Option Agreement is to be issued effective as
           of January 30, 1997 to purchase 100,000 common shares at $3.22
           per share and an additional 100,000 common shares at 
           $4.22 per share.

4.15       One, Two, Three, Four and Five-Year Stock Option Agreements
           are to be issued effective as of January 23, 1997, to purchase
           200,000 shares each of the years during a five-year period as
           follows: year one, $2.25; year two $2.75; year three, $3.25;
           year four $3.75; and year five $4.25.

9          Voting Trust Agreement--not applicable.

10         Material contracts regarding sale of assets and deferred
           compensation.

10.1       Bonus compensation, Edward L. Machulak, February 16, 1987.
           (Incorporated by reference to Exhibit 7 of the Company's Form 10-K
           for the year ended March 31, 1987.)

10.2       Loan Agreement and Promissory Note, Edward L. Machulak,
           June 20, 1988.  (Incorporated by reference to Exhibit 10.2 of 
           the Company's Form 10-K for the year ended March 31, 1993.)

10.3       Loan Agreement and Promissory Note, Edward L. Machulak,
           October 14, 1988.  (Incorporated by reference to Exhibit 10.3
           of the Company's Form 10-K for the year ended March 31, 1993.)

10.4       Loan Agreement and Promissory Note, Edward L. Machulak, 
           May 17, 1989.  (Incorporated by reference to Exhibit 10.4 of
           the Company's Form 10-K for the year ended March 31, 1993.)

10.5       Loan Agreement and Promissory Note, Edward L. Machulak,
           April 1, 1990.  (Incorporated by reference to Exhibit 
           10.5 of the Company's Form 10-K for the year ended March 31, 1993.)

10.6       Letter Agreement, Edward L. Machulak, October 10, 1989. 
           (Incorporated by reference to Exhibit 10.6 of the 
           Company's Form 10-K for the year ended March 31, 1993.)

10.7       Loan Agreement and Promissory Note dated January 19, 1994. 
           (Incorporated by reference to Exhibit 10.10 of the Company's 
           Form 10-K for the year ended March 31, 1995.)

10.8       John E. Machulak and Susan R. Robertson, Loan Agreement 
           and Promissory Note dated June 3, 1994.  (Incorporated by 
           reference to Exhibit 10.14 of the Company's Form 10-K 
           for the year ended March 31, 1995.)

11*        Schedule of Computation of Net Income Per Share

<PAGE>

13         Annual Report to security holders, Form 10-Q or Quarterly 
           Report to security holders:

           Annual Report for the period ended March 31, 1997, will 
           include the Form 10-K and will be submitted 120 days 
           within the fiscal year end.

21*        Subsidiaries of the Company.

23.1*      Consent of the independent auditors of the Company.

99.0       Additional Exhibits

99.1*      Confirmation agreement, General Lumber & Supply Co., Inc.,
           April 14, 1997.

99.2*      Confirmation Agreement, Edward L. Machulak, April 14, 1997.

99.3*      Confirmation Agreement, Edward L. Machulak Rollover Individual
           Retirement Account, April 14, 1997.

99.4*      Confirmation Agreement, Sylvia Machulak Rollover Individual 
           Retirement Account, April 14, 1997.
                                                         
99.5       Concession Agreement Assignment to the Company by Misanse 
           (Incorporated by reference to Exhibit 1 of the Company's Form
           10-K for the year ended March 31, 1988.)

99.6       Other Material Information: Restatement of prior period
           financial statements (Incorporated by reference to Item 7
           of the Company's Form 10-K for the year ended March 31, 1989.)

99.7       The El Salvador Constitutional Supreme Court of Justice
           order issued on May 12, 1994, suspending immediately any 
           charges to the Joint Venture for import duty taxes of any kind
           and dated May 18, 1994 (English and Spanish.)  (Incorporated 
           by reference to Exhibit 28.6 of the Company's Form 10-K for
           the year ended March 31, 1994.)

99.8       Form S-8 Registration Statement effective date April 4, 1994,
           File No. 33-77226.  (Incorporated by reference as this S-8 
           Registration has been filed.)



99.9(d)(1)  *Commerce/Sanseb Joint Venture certified financial statements
            for the fiscal year ending March 31, 1997.

99.10(d)(2) Individual financial statements of majority-owned companies 
            have been omitted because these companies do not constitute a 
            significant or material contribution to the Company.

<PAGE>
    
99.11       S.E.C. Form S-3 Registration Statement No. 333-23203 filed 
            under the Securities Act of 1933 as amended and declared
            effective at 10:00 a.m. on March 26, 1997.

99.12       Preliminary S.E.C. Form S-3 Registration Statement No.
            333-25797 filed April 24, 1997, and which includes the stock 
            options  to purchase one million two hundred thousand of the
            Company's common shares during a five-year period ending November 
            29, 2001 at an issuance price ranging from $2.25 to $4.25 for each 
            restricted share.
<PAGE>



        COMMERCE GROUP CORP.  FORM 10-K - MARCH 31, 1997

                            PART IV

                           SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities 
Exchange Act of 1934, the Company has duly caused this Annual Report to 
be signed on its behalf by the undersigned, thereunto duly authorized on 
April 28, 1997.

                                           COMMERCE GROUP CORP.
                                           (Company)


                                     By:   /s/ Edward L. Machulak
                                           -----------------------              
                                           Edward L. Machulak
                                           Director, Chairman of the
                                           Board of Directors,
                                           Member of Executive Committee,
                                           Director-Emeritus, President,
                                           Treasurer, Chief Executive,
                                           Operating and Financial
                                           Officer


Pursuant to the requirements of the Securities Exchange Act of 1934, this 
Report has been signed below by the following persons, on behalf  of the 
Company and in the capacities and on the dates indicated:

          Name                     Office                       Date
          ----                     ------                       ----
/s/ Edward L. Machulak   Director, Chairman of the         April 28, 1997 
-----------------------  Board of Directors           
Edward L. Machulak       Member of Executive Committee,                 
                         Director-Emeritus,                                     
                         President and Treasurer

/s/ Edward A. Machulak   Director, Member of Executive     April 28, 1997
-----------------------  Committee, Executive Vice President
Edward A. Machulak       and Secretary

         
/s/ Clayton H. Tebo      Director                          April 28, 1997
-----------------------
Clayton H. Tebo


<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS ON THE FINANCIAL STATEMENT SCHEDULES



Our report on the consolidated financial statements of Commerce Group
Corp. for its fiscal years ended March 31, 1997, 1996, 1995, 1994 and 
1993, is included in this Form 10-K.  In connection with our audits of 
such financial statements, we have also audited the following:  
supplementary income statement information, selected financial data 
report, and the related financial statement schedules listed in Item 
14(a) of this Form 10-K.

In our opinion, the consolidated financial statement information and
schedules referred to above, when considered in relation to the basic 
financial statements taken as a whole, present fairly, in all material 
respects, the information required to be included therein, all in 
accordance with accounting principles generally accepted in the United 
States.

REDLIN AND ASSOCIATES 
Certified Public Accountants



Milwaukee, Wisconsin
April 28, 1997 

<PAGE>


               COMMERCE GROUP CORP. AND CONSOLIDATED SUBSIDIARIES 
                                 SCHEDULE IV (1)
                  INDEBTEDNESS OF RELATED PARTIES - NOT CURRENT
                  YEARS ENDED MARCH 31, 1997, 1996, AND 1995

                    Balance at    Additions to  Deletions to  
                   Beginning of   Indebtedness  Indebtedness    Balance at
Name of Person (1)    Period          (2)           (3)         End of Period   
------------------ ------------   ------------- -------------   -------------   
Year ended 
March 31, 1997
Joint Venture      $11,799,074     $3,894,682       $0          $15,693,766

Year ended
March 31, 1996
Joint Venture      $ 8,676,308     $3,122,766       $0          $11,799,074

Year ended
March 31, 1995
Joint Venture      $ 5,792,230     $2,884,078       $0           $8,676,308
                                                                           
(1) Commerce Group Corp. and San Sebastian Gold Mines, Inc., Joint Venture
    ("Joint Venture"). 

(2) The purpose of the advances is to continue the exploration,
    exploitation and development of the SSGM and the other mining
    prospects managed by the Joint Venture and which are located in
    the Republic of El Salvador, Central America.  Also, funds were 
    used to retrofit, rehabilitate, repair and to renovate the San 
    Cristobal Mill and Plant acquired by the Joint Venture for the 
    purpose of producing gold.

(3) Beginning with September 30, 1987, the total indebtedness
    includes the advances of $590,265 from three of the Company's
    wholly-owned subsidiaries.


                    Balance at    Additions to  Deletions to    Balance at
                   Beginning of   Indebtedness  Indebtedness      End of
Name of Person (1)    Period          (2)           (3)           Period    
------------------ ------------   ------------- -------------   -----------   
Year ended
March 31, 1997
SSGM               $17,503,414     $1,884,907       $0           $19,388,321

Year ended 
March 31, 1996
SSGM               $15,725,444     $1,777,970       $0           $17,503,414

Year ended
March 31, 1995
SSGM               $14,270,925     $1,454,519       $0           $15,725,444

<PAGE>


      COMMERCE GROUP CORP.  AND CONSOLIDATED SUBSIDIARIES
                                
                         SCHEDULE IV(2)
                INDEBTEDNESS TO RELATED PARTIES
       CURRENT YEARS ENDED MARCH 31, 1997, 1996, AND 1995
                                
<TABLE>
<CAPTION>

                      Balance at    Additions to  Deletions to     Balance at
Identity of Debtor   Beginning of   Indebtedness  Indebtedness      End of
      (1)                Period          (2)           (3)          Period      
------------------    ------------   ------------- -------------   ---------- 
<S>                    <C>           <C>           <C>             <C>
Year ended 
March 31, 1997
President of the 
Company                $ 1,346,304   $   493,161(a) $         0    $  1,839,465
President's IRA            342,002        58,917(b)           0         400,919
President's Affiliated 
Company                  1,175,984       215,668(c)     428,500(a)      963,152
Others                     220,080        37,913(d)           0         257,993
                       -----------   -------------- -------------- ------------
 Total, notes payable  $ 3,084,370   $   805,659    $   428,500    $  3,461,529
                       ===========   ============== =============  ============

President's Accrued
Salary                 $ 1,204,140   $   139,875(e) $         0    $  1,344,015
                       ===========   ============== =============  ============

Legal fees (President's
son is a Principal)    $    76,883   $    60,186(f) $         0    $    137,069
                       ===========   ============== =============  ============ 
                                                                                
Year ended
March 31, 1996
President of the 
Company                $   841,168   $   651,386(a) $   146,250(a) $  1,346,304
President's IRA            291,617        50,385(b)           0         342,002
President's Affiliated
Company                    961,012       214,972(c)           0       1,175,984
Others                     163,037        70,668(d)      13,625(c)      220,080
                       -----------   -------------- -------------- ------------
 Total, notes payable  $ 2,256,834   $   987,411    $   159,875    $  3,084,370
                       ===========   ============== =============  ============

President's Accrued
Salary                 $ 1,089,390   $   114,750(e) $         0    $  1,204,140
                       ===========   ============== ============   ===========
Legal fees(President's
son is a principal)    $   166,355   $    36,178(f) $   125,650    $     76,883
                       ===========   ============== =============  ============

Year ended
March 31, 1995
President of the
Company                $ 1,275,561   $   188,755(a) $   623,148(a) $    841,168
President's IRA            248,763        42,854(b)           0         291,617
President's Affiliated
Company                    926,852       199,160(c)     165,000(c)      961,012
Others                     186,530        26,507(d)      50,000(d)      163,037
                       -----------   -------------- -------------- ------------
 Total, notes payable  $ 2,637,706   $   457,276    $   838,148    $  2,256,834
                       ===========   ============== =============  ============
President's Accrued
Salary                 $   974,640   $   114,750(e) $         0    $  1,089,390
                       ===========   ============== =============  ============
Legal fees (President's
son is a principal)    $   279,612   $     5,967    $   119,274(f) $    166,355
                       ===========   ============== =============  ============
<FN>

Additions to Indebtedness

(2)(a)(b) The additions to the open-ended, secured, on-demand promissory 
          notes issued to the President of the Company
          and his IRA result from cash advances and/or accrued interest.

(2)(c)    The President owns 55% of an Affiliated Company's common shares.
          The additions to the open-ended, secured, on-demand promissory
          note issued to an Affiliated Company result from cash advances, 
          accrued interest, accrued office rent, vehicle rental, computer
          use and other expenses paid on behalf of the Company.

(2)(d)   The additions by others resulted from cash advances and accrued
         interest.

(2)(e)   The President's salary was accrued for the entire fiscal year.

(2)(f)   The addition of the amounts due to the Law Firm results from 
         legal services rendered.

(3)      Deletions to Indebtedness:

(3)(a)   President's Affiliated Company.  Cancellation of debt in exchange 
         for a purchase of 130,000 (06/10/96) and 68,000 (01/10/97) of the 
         Company's restricted common shares.
</FN>
</TABLE>


             COMMERCE GROUP CORP. AND CONSOLIDATED SUBSIDIARIES
                                
        SCHEDULE X (1) - SUPPLEMENTARY INCOME STATEMENT INFORMATION

                                              Years Ended March 31,
                                              ---------------------
                                              1997      1996      1995
                                           -------   -------   -------
Depreciation of property and equipment     $  0.00   $  0.00   $  0.00

Property taxes, other than income 
     taxes and payroll                     $ 2,111   $ 2,065   $ 2,250

Advertising and promotion costs            $   965   $   679   $   100

Repairs and maintenance                    $13,054   $15,523   $15,535


Amounts for amortization of intangible assets and similar deferrals,
income taxes, and royalties are not currently presented, as such amounts
represent less than one percent of total revenues or are not applicable.