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, 1998

                    Commission File Number 1-7375

                        COMMERCE GROUP CORP.

       (Exact name of registrant as specified in its charter)

          DELAWARE                                39-6050862
(State  or  other  jurisdiction       (I.R.S. Employer Identification No.)
 of 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 8, 1998, was approximately $8,263,502.

Common shares outstanding as of March 31, 1998, were 11,039,670.

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.
                  1998 FORM 10-K ANNUAL REPORT
            For the Fiscal Year Ended March 31, 1998

                        TABLE OF CONTENTS

                                                              Page


Glossary of Mining and Financial Terms

                             PART I

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


                             PART II

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

                            PART III

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

                             PART IV

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


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.

<PAGE>

  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.

  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.

<PAGE>

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

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.  

<PAGE>

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.

Stope  - excavation from which ore has been excavated in a series of
steps.  Usually applied to highly inclined or vertical 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

Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the
Private Securities Litigation Reform Act of 1995.

The  matters  discussed in this report on  Form  10-K,  when  not 
historical matters, are forward-looking statements that involve a number 
of risks and uncertainties that could cause actual results to  differ  
materially  from  projected  results.   Such  factors include,   among  
others,  the  speculative  nature  of   mineral exploration, commodity 
prices, production and reserve  estimates, environmental   and  
government  regulations,   availability   of financing,  force  majeure  
events, and  other  risk  factors  as described  from  time to time in 
the Company's filings  with  the Securities  and Exchange Commission.   
Many of these factors  are beyond  the Company's ability to control or 
predict.  The Company disclaims  any intent or obligation to update its 
forward-looking statements, whether as a result of receiving new 
information, the occurrence of future events, or otherwise.

General

Commerce  Group  Corp.  ("Commerce," the  "Company,"  and/or  the 
"Registrant")  is  a  Delaware corporation,  with  its  corporate 
headquarters based in Milwaukee, Wisconsin.  It was organized  in 1962  
and its common shares have been publicly traded since  1968 on  the  
over-the-counter  market. Its common  shares  have  been traded  on  the 
Boston Stock Exchange from February 1975  to  the present  date and on 
the Nasdaq Small-Cap Market from March  1987 to  the  present  date.  
Commerce presently  is  engaged  in  the exploration  and  development 
of gold and  silver  mines  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  which  owns  the concession  rights  to extract gold from the 
San  Sebastian  Gold Mine ("SSGM").

Commerce's  objective is to enhance the value of  its  shares  by 
profits  and  cash flow.  This can be achieved by its  continuing to  be  
a  low cost gold producer and by expanding its  gold  ore reserves.

Commerce's  current  goal  is  to secure  sufficient  capital  to
increase its production of gold to 40,000 ounces per year and  to
develop  additional  gold ore reserves.  The Company  expects  to
increase   production  by  developing  an  open-pit,   heap-leach
operation on site at the SSGM and by acquiring additional  mining 
equipment which will permit it to process higher grade virgin ore at the 
San  Cristobal Mill and Plant ("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   200  tons of gold 
ore per day.  Commerce  will  also continue  to drill test holes at 
previously unexplored  areas  at the  site  of the SSGM and it also is 
planning drill programs  at the other potential mining prospects.

Operations

Currently  the Joint Venture is processing gold ore on a  limited basis 
at its SCMP.  The gold ore is from the SSGM open pit.   The SCMP  is  
located  approximately 13  miles  west  of   the  SSGM.  Commerce 
acquired the SCMP facility on February 23, 1993, and the Joint  Venture 
thereafter made and continues to make  substantial renovations  and 
modifications to the plant and equipment  before and  after  placing 
this facility in a limited  operation.   From March  31,  1995,  and 
through the fiscal year ending  March  31, 1998,  10,482 ounces of 
bullion containing 5,400 ounces  of  gold and  1,920  ounces of silver 
were sold. In the fiscal year  ended March  31, 1998, 5,604 ounces of 
bullion containing 3,667  ounces of gold and 1,416 ounces of silver were 
sold.  Revenues from this production were used primarily to fund further 
exploration of ore reserves at the SSGM, to fund the exploration of the 
other mining prospects, and to fund improvements at the SCMP.

<PAGE>

There  are  approximately  1.6  million  ounces  of  proven   and 
estimated gold ore reserves at the SSGM and the other El Salvador gold  
mines.   Currently, and for all financial statement periods presented  
herein,  the SSGM is the only  one  of  the  Company's properties  which
has  generated revenues,  although  there  are strong initial
indications of commercial gold ore present at  the other sites.

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

                                          Average  Contained  Probable
                                    Tons   Grade    Ounces     Ounces
                                    ----   -----    -------   --------
1.  San Sebastian Gold Mine
    (a) Dump waste (av. grade)    960,000  0.100     96,000
    (b) Stope fill              1,000,000  0.340              340,000
    (c) Open pit-virgin ore    13,400,000  0.087  1,165,800
                               ----------         ---------   -------
                               15,360,000         1,261,800   340,000
2.  San Felipe-El Potosi
    (a) Tailings                  185,000  0.060     11,100
3.  Hormiguero Mine
    (a) Tailings                  150,000  0.064      9,600
                               ----------         ---------   -------
    Total Ounces               15,695,000         1,282,500   340,000
                               ==========         =========   =======

The anticipated recovery for processing via the SCMP will range from 85%
to 90% and for heap leaching from 65% to 70%.

As  of  March  31, 1998, 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 $48,632,108.

SSGM Joint Venture Arrangements

Commerce acquired 82 1/2% of the authorized and issued shares  of San
Sebastian Gold Mines, Inc. ("Sanseb"), a Nevada  corporation formed on 
September 4, 1968.  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.  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.

<PAGE>

The  Joint  Venture leases the SSGM from the Company's  52%-owned 
subsidiary,  Mineral San Sebastian, S.A. de C.V. ("Misanse"),  an El 
Salvadoran 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.

Organizational Structure

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

                                                           % Ownership
                                                           -----------
  Homespan Realty Co., Inc. ("Homespan")                       100.0
  Mineral San Sebastian, S.A. de C.V.  ("Misanse")              52.0
  Piccadilly Advertising Agency, Inc. ("Piccadilly")           100.0
  San Luis Estates, Inc. ("SLE")                               100.0
  San Sebastian Gold Mines, Inc. ("Sanseb")                     82.5
  Universal Developers, Inc. ("UDI")                           100.0
  Commerce/Sanseb Joint Venture ("Joint Venture")               90.0


Commerce   was  originally  formed  as  a  Wisconsin  corporation
(September   14,  1962)  which  then  merged  into   a   Delaware
corporation  on  July 26, 1971.  It owns 52% of  Misanse,  an  El
Salvadoran corporation that was formed on May 8, 1960, reinstated on
January  25,  1975 and reincorporated on  October  22,  1993.  Commerce
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 has assigned the mining concession to   the  Commerce/Sanseb 
Joint  Venture  (Comseb),  the  mining operator formed on September 22, 
1987.  Comseb operates the  SCMP (the  gold  processing  plant near  the 
city  of  El  Divisadero acquired on February  23, 1993) and has 
conducted exploration and exploitation at the following El Salvador gold 
mines: SSGM  (near the city of Santa Rosa de Lima since October 1968), 
San Felipe-El 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).

The  Government  of  El  Salvador  has  issued  the  Modesto  and 
Montemayor  mining  concessions to others.  Commerce's  attorneys have   
challenged   the  legality  of  the  issuance   of   these concessions.  
Commerce owns properties  believed to  be   crucial to  the  Modesto 
Mine and it holds leases to the key property  of the  Montemayor  Mine.   
It  is in the process  of  applying  for concessions on the property it 
owns (Modesto) and on the property that it leases (Montemayor).

<PAGE>

All  of  the mines mentioned 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,  alternations, and  historical  
records that evidence all have  been  mined  and produced gold on a 
commercial basis in the past.

World Gold Market Price, Customers 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, volatile, 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 foreseeable 
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 precious metals.  There are many  
refiners and  smelters available to refine 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 and sold to  Handy  & 
Harman's refinery located in the United States.

At this time the Joint Venture believes that due to its financial 
capacity it may not be a major gold producer based on the size of larger  
existing gold mining companies.  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 entities  in  the 
world producing gold.  Many of these  companies have  substantially  
greater technical, financial  resources  and larger 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.   The Company's present and past 
practice has been to sell its gold and silver at spot prices.

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 other 
exploration projects.

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

Seasonality

Seasonality  does  not have a material impact  on  the  Company's
operations.

Environmental Matters

Since  the Government of El Salvador has established a new mining law  
effective  February 1996, its exploration, development,  and production 
programs are subject to environmental protection.  The El  Salvador 
Department of Mines and Hydrocarbons, a division  of the Minister of 
Economy's office regulates the mining operations.

<PAGE>

Environmental  regulations add to the cost  and  time  needed  to bring  
new mines into production and add to operating and closure costs for 
mines already in operation.  As the Company places more mines  into  
production,  the  costs associated  with  regulatory compliance can be 
expected to increase.  Such costs are a  normal cost  of  doing business 
in the mining industry, and may  require significant  capital and 
operating expenditures  in  the  future.  The Company's policy is to 
adhere to North American standards  in its  El  Salvador  operations.   
The  Company  cannot  accurately predict  or estimate the impact of any 
future laws or regulations developed   in  El  Salvador  that  would  
affect  the  Company's operations.

All  operations by the Company involving the exploration  for  or the  
production  of  minerals are subject to  existing  laws  and regulations   
relating   to   exploration   procedures,    safety precautions,  
employee health and safety, air quality  standards, pollution  of water 
sources, waste materials, odor,  noise,  dust and other environmental 
protection requirements adopted by the El Salvador  governmental 
authorities.  The Company may be  required to prepare and present to 
such authorities data pertaining to the effect  or impact that any 
proposed exploration for or production of  minerals  may  have upon the 
environment.   The  requirements imposed by any such authorities may be 
costly, time consuming and may   delay   operations.   Future  
legislation  and  regulations designed   to  protect  the  environment,  
as  well   as   future interpretations  of  existing laws and 
regulations,  may  require substantial  increases in equipment and 
operating  costs  to  the Company   and   delays,  interruptions,  or  a   
termination   of operations.   The Company cannot accurately predict  or  
estimate the  impact  of  any such future laws or regulations,  or  
future interpretations  of  existing  laws  and  regulations,   on   its 
operations.

The  Company has submitted an environmental impact study prepared by an 
independent El Salvadoran consultant which is under review.

Political Environment in El Salvador

The following information is an excerpt from the "U.S. Embassy  - San 
Salvador Country Commercial Guide 1996-97":

"Chapter III - POLITICAL ENVIRONMENT

"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 relationships 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.

"In  March 1997, Salvadorans held the second elections since  the end
of  the  war  and the reinsertion of former  guerillas  into society.   
The FMLN increased its strength as the second  largest political party 
in the legislature, falling one seat short of the strength  of  the 
governing party, the center-right  ARENA.   The FMLN  also  won 
important municipal contests and a  coalition  in which   it  
participated  won  the  mayorship  of  San  Salvador.  President  
Armando Calderon Sol (ARENA), elected  in  1994,  will serve until June 
1999.

<PAGE>

"ARENA was begun as an anti-Communist nationalistic party in 1980 by   
Roberto  D'Aubuisson.   Even  before  D'Aubuisson's   death, however,   
ARENA   had   moderated  its  outlook.    During   the administration  
of President Alfredo Cristiani  (1989-1994),  the ARENA government 
negotiated peace with the FMLN, liberalized  the economy  and  attacked 
corruption.  President  Calderon  Sol  has continued these policies.

"The  FMLN,  transformed  from  a  guerrilla  organization  to  a
political party after the Peace Accords, has sought to  pursue  a 
pragmatic,  center-left  policy.   The  FMLN's  economic   policy 
leaders  have  described its goal as a mixed economy,  with  free 
enterprise  and  investment  and with  government  regulation  to ensure 
that social interest are taken into account.

"The parties of the center include the Christian Democratic Party (PDC),
which  governed in the administration  of  Jose  Napoleon Duarte   
(1984-1989)  but  whose  support  has  eroded   in   the intervening  
years.   The  PDC  has  generated  several  splinter parties over the 
years, including the Social Christian Renovation Party  (PRSC).  Parties 
which were sympathetic to the FMLN during the  war,  but  which  
operated legally, coalesced  to  form  the Democratic  Convergence (CD).  
The CD is a small party,  but  its candidates have headed coalitions 
backed by the FMLN in the  1994 presidential campaign (Ruben Zamora, who 
lost) and  in  the  1997 San Salvador mayoral election with the 
U.S.-born Hector Silva who won and is now mayor."

"Economy Status

The  following selected information on El Salvador  was  obtained from 
excerpts of the 1997 World Factbook on El Salvador:

                            "Economy

"Economy   -  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 - $12.2 billion (1996 est.)

"GDP - real growth rate: 3% (1996 est.)

"GDP - per capita: purchasing power parity - $2,080 (1996 est.)

"GDP - composition by sector:
agriculture: 14%
industry: 27%
services: 59% (1995)

"Inflation rate - consumer price index: 7.4% (1996)

<PAGE>

"Labor force: total:  2.2 million (1996 est.) by  occupation: 
agriculture 40%, commerce 16%, manufacturing 15%, government 13%,
financial services 9%, transportation  6%,  other 1%

"Unemployment rate: 7.6% (1996 est.) . . .

"Economic aid:
recipient: ODA, $763 million (1996)
note:  US  has  committed $250 million in aid to El Salvador  for
1992-96"

Investment Climate in El Salvador

The following information is an excerpt from the "U.S. Embassy  - San 
Salvador Country Commercial Guide 1996-97":

"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  1996  the  government set up a one-stop office  for  foreign 
investment  located  at the National Commercial  Registry,  where 
investors   now  register  their  investments.  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  privatization  of state-owned entities has  proceeded  more slowly
than  originally  projected.   The  government  hopes  to quickly 
resolve the political disputes that have stalled the sale of  the  
telephone company and complete its privatization  before the end of 
1997.  The privatization of the electric company (CEL) is  moving  
ahead,  albeit in a limited way.   Four  distribution companies have 
been formed and will be sold off in mid 1997.  The remainder  of  CEL 
remain in government hands.  The privatization should   provide  good  
opportunities  for  U.S.  investors   and exporters. . . .

"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 country'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)

"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.

<PAGE>

"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 [or]  owned  by  
the  state,  such  as  electricity,  water   and telecommunications, are 
regulated by an independent authority and operate   under  competitive  
rules  which  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.

"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 co-investment.   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).

<PAGE>

"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 1150 colons[.] roughly  132  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 7.5 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.

"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.

<PAGE>

"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.

"Colgate Palmolive - Produces and distributes cleaning products.

"McCormick  &  Co.  - Produce and distribute sauces,  condiments, spices
and teas.

"Nestle,  El Salvador - processes and exports coffee  and  coffee 
products."

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 to be a 
concern to investors.  During  the  past year  there  was  much concern 
relating to the falling  price  of gold,  the  sale  of  gold  by 
certain  central  banks,  and  the uncertainty over the future price of 
gold.

The  Company  has  been successful in obtaining investment  funds that  
were  required to partially retrofit and operate its  SCMP, conduct  its 
various exploration and drilling programs,  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 sufficient 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 exploration projects.  Plans,  time  and
effort for obtaining these funds are in process.

Operations, Other Than Mining

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").

Land Acquisition, Development and Ownership

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.

<PAGE>

SLE  had  been  the  developer of  a  large  tract  of  land  for
recreation,  retirement and for other individual purposes.   This land
consists of approximately 7,000 acres.   It was  subdivided in  the  San
Luis North Estates Subdivision located in  Costilla County, Colorado,
abuts the Town of San Luis, Colorado, and  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, 1998, 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.

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 57 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.  It also leases 
vacant land in the Department of Morazan.

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.

<PAGE>

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.

Patents and License Agreements

On  July  23,  1987, the Government of El Salvador delivered  and
granted  to Misanse, possession of a mining concession (license).  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 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.   (Reference  is made to "Item 2." for additional
information)

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, and the Hormiguero Mine.  It will apply 
for concessions for 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.

<PAGE>

Financial Information About Industry Segments Lines of Business

Operation

Campground:  For the years ended March 31, 1998, 1997  and  1996, 
revenues  have  been  generated  from  the  campground  business.  
Although Homespan owns the campground real estate, the Company is the 
campground operator.

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, have  
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 have control.

Employees

As  of  March  31, 1998, the Joint Venture employed approximately 300
full-time persons in 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                1998          1997         1996
   --------        ---------               ----          ----         ----
   Mining (*a)     El Salvador         $ 1,234,443  $         0  $         0
   Campground      Missouri, USA            61,465       59,009       55,692

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

3. Total Revenues                             Year Ended March 31,
   --------------                             --------------------
   Industry        Location                 1998         1997         1996
   --------        --------                 ----         ----         ----
   Mining (*b)     El Salvador         $ 1,347,391  $         0  $         0
   Campground      Missouri, USA            61,465       59,009       55,692
   Other           Delaware/Wis., USA        3,025        3,832        2,669
                                       -----------  -----------  -----------
                   Total:              $ 1,411,881  $    62,841  $    58,361

4. Operating Profit   (Loss)                  Year Ended March 31,
   -------------------------                  --------------------
   Industry        Location                 1998         1997         1996
   --------        --------                 ----         ----         ----
   Mining (*a)     El Salvador         $   117,699  $         0  $         0
   Campground      Missouri, USA            (2,121)      (8,973)     (31,056)
   Interest Income El Salvador
                   /Delaware
                   Wisconsin, USA            3,025        3,832        2,669
                                       -----------  -----------  -----------
                   Total:              $   118,603  $   (5,141)  $  (28,387)

5. Identifiable Assets                        Year Ended March 31,
   -------------------                        --------------------
   Industry        Location                 1998         1997         1996
   --------        --------                 ----         ----         ----
   Mining (*a)     El Salvador         $24,386,843  $21,035,881  $18,228,070
   Campground      Missouri, USA         1,135,500    1,135,500    1,135,500
   Real Estate     Colorado, USA            21,000       21,000       21,000
   Corporate Assets                        256,308      976,740      256,621
                                       -----------  -----------  -----------
                   Total:              $25,799,651  $23,169,121  $19,641,191

(*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 tothe Joint
    Venture account.

(*b) Includes  $112,948 received from the Government of El  Salvador  as
    an added tax value refund.

<PAGE>

ITEM 2.  PROPERTIES

Mining Properties and Real Estate

The table below provides a summary of the most significant mining
properties  in which the Company has an interest.  More detailed
information regarding each  of these properties is provided in the text
that follows:

Commerce Group Corp./San Sebastian Gold Mines, Inc. Joint Venture
Properties all located in the Republic of El Salvador, Central America

                                                       Amount
                                                      of Funds         Date
                                     Date              to Make         Mine
                                   Interest   Cost    Property        will be
    Property         Nature of        was      of      Opera-         Opera-
   Description       Interest      Acquired Interest   tional         tional
   -----------       --------      -------- --------   ------         ------
1. San Sebastian  Mineral concession  1968  5% of the  This is       In opera-
   Gold Mine      consisting of 100%        gross      dependent     tion on
   located two    ownership of the          precious   on the        a limited
   and one-half   precious metals           metal      scale of      basis.
   miles north-   extracted from this       proceeds   production
   west of the    mine.                     or $206    that management
   city of Santa                            a month    decides to
   Rosa de Lima                             whichever  perform. The
   and the Pan                              is higher. amount of
   Anerican                                            investment
   Highway.                                            from $5 million
                                                       to $100 million.

2. San Felipe-    Application     07/06/93  5% of the  Undetermined  Undeter-
   El Potosi/     pending for               gross      until a       mined.
   Capulin Mine   mineral                   precious   preliminary
   located near   concession                metal      drilling
   the city of    for 100%                  proceeds.  program is
   Potosi, 18     ownership                            completed;
   miles north-   of the precious                      estimated cost
   west of the    metals extracted                     of drilling is
   city of San    from this mine.                      $2 million.
   Miguel.


3. Hormiguero     Application        09/93  Dependent  Undetermined  Undeter-
   Mine located   pending for               if this    until a       mined.
   five miles     mineral                   will be    preliminary
   southeast      concession                an under-  drilling program
   of the San     for 100%                  ground or  is completed;
   Cristobal      ownership of              surface    estimated cost
   Mill and       the precious              operation. of drilling is
   Plant near     metals extracted          If under-  $2 million.
   the city of    from this mine.           ground,    Mine surface
   Comacaron.                               minimal    channel trenching
                                            cost.  If  and adit cleaning
                                            surface,   should be performed
                                            the use    to determine
                                            of land    drilling cost.
                                            (rent) is
                                            to be ne-
                                            gotiated.

4. Modesto Mine   Application        09/93  It         Undetermined  Undeter-
   located near   to be submitted           appears    until a       mined.
   the city of    for a mineral             as if      preliminary
   Paisnal and    concession to             this will  drilling program
   about 19       own 100% of the           be an      is completed;
   miles north    precious metals           under-     estimated cost
   of San         extracted from the        ground     of drilling is
   Salvador,      real estate owned         operation  $2 million.
   the capital    by the Company.           in the
   city.                                    Company-
                                            owned land.
                                            Therefore,
                                            no cost for
                                            interest.

5. Montemayor     Application        07/95  It         Undetermined  Undeter-
   Mine located   to be submitted           appears    until a pre-  mined.
   about 14       for a mineral             that this  liminary
   miles north-   concession to             will be    drilling
   east of SCMP   own 100% of the           an under-  program is
   and about      precious metals           ground     completed;
   six miles      extracted from            mine,      estimated
   northwest      the areas the             therefore  cost of
   of SSGM.       the Company leases.       current    drilling is
                                            leases     $2 million.
                                            will have
                                            to be
                                            extended.

6. San Cristobal  Mill and Plant   Equip-   Equipment  To expand     Limited
   Mill and       owned by the     ment     purchased  the plant,    produc-
   Plant located  Joint Venture.  02/23/93  and exten- including     tion
   off the Pan    The real estate  Lease    sive       a crush-      commenced
   American       is owned by an  11/12/93  retrofit-  ing system    March
   Highway west   agency of the             ting was   to a capa-    1995
   of the city    Government of             performed. city of 400   expansion
   of El          El Salvador.              Through    tons per      program
   Divisadero.                              03/31/98   day; an       in pro-
                                            a total    estimated     gress.
                                            of         sum of up
                                            $3,332,303 to $3 million
                                            has been   may be required,
                                            invested   all dependent
                                            in this    whether new or
                                            plant      used equipment
                                            and        will be purchased.
                                            equipment.

The San Sebastian Gold Mine

General Location and Accessibility

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 in  the Department of La Union, 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.

There is good roadway access to the SSGM site.  The city  of Santa Rosa 
de Lima (approximately 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.   Major  United   States' commercial airlines 
provide daily scheduled flights  to  the Comalapa  Airport which is 
located on the outskirts  of  the city  of San Salvador.  An airline 
commuter service provides daily  flights  to  the cities of Santa Rosa  
de  Lima,  San Miguel,  and La Union as well as other cities throughout  
El Salvador.

<PAGE>

SSGM Reserves and Operation

Statistical  production  and  financial  data  for  the  San Sebastian
Gold Mine (SSGM) are shown on the following table:

               San Sebastian Gold Mine (SSGM) Operation

                                            03/31/98        03/31/97
                                            --------        --------
PRODUCTION
  Tons ore mined and processed               59,596          74,350
  Gold grade of ore (oz./ton)                 0.087           0.080
  Strip  ratio  (tons  waste/tons ore)          N/A             N/A
  Gold production (oz.) 
   (includes 259 oz. in inventory)            3,927           2,601
  Silver production (oz.)                     1,416             596
  Recoverable gold inventory (oz.)              259             259

FINANCIAL
  Ounces of gold sold                         3,667           2,601
  Average gold price realized            $      315      $      368
  Revenue from mine operations (1)       $1,234,443      $  956,261
  Cash operating cost per ore ton mined  $    14.72             N/A
  Cash  operating cost per  ounce (2)    $   198.24             N/A
  Total production cost per ounce (2)    $   276.43             N/A
  Operating earnings (3)(4)              $  117,700             N/A

MINEABLE RESERVES (03/31/98)

                                                          Contained
                                            Average           Gold
                              Tons         Grade(5)          Ounces
                              ----          -------       ---------
Ore - open pit             13,400,000         0.087       1,165,800
Dump waste                    960,000         0.100          96,000
Stope fill (estimated)      1,000,000         0.340         340,000
                           ----------                     ---------
  Totals                   15,360,000                     1,601,800

(1)  Proceeds   from   1997  gold  sales  credited   against equipment
     purchases and development costs.

(2)  As  calculated  under  The Gold Institute's  Production Cost
     Standard including $208,254 depreciation or $53.04 per ounce.

(3)  Including   a   deduction  for  general  administrative expenses of
     $36.67 an ounce.

(4)  Excludes exploration and development drilling.

(5)  The estimated recoverable ounces of gold by processing SCMP 82% -
     heap leach - 60%.

<PAGE>

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.  Most
of the tailings  have  been processed.  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.

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  an  open-pit  mining method  and will  truck the 
lower grade 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  which  is   all underground  material  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 SCMP 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.

Misanse Mining Lease

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  7  of  the  financial  statements  for  related  party 
interests.)

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 Mineral Concession-Government of El Salvador

In  El Salvador, the rights to minerals are vested with  the government.
Mineral rights are granted by  the  government through concessions or 
licenses.

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 this 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.

SSGM Current Status

The  Company,  through its Joint Venture is  conducting  the following 
activities:  It is in the exploration, 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. 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>

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, underground 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,  1998,  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.   In addition,  the Company's
geologists have defined  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.

Since  July  1987  through  March 31,  1998,  the  following exploration
has been performed on the SSGM  site:   surface channel  trenching, 
34,946 meters (115,322 feet/21.8 miles); test  pit  hole  excavations,  
655  vertical  meters  (2,162 feet/.41  miles);  underground workings and  
adit  openings, 1,119  meters  (3,693 feet/.70 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 66,610  SSGM gold  ore  samples  were fire 
assayed at the  Joint  Venture laboratory.

SSGM Diamond Drilling Program

The Company's geologists have reported that on the SSGM site a  total  of  
26  diamond drill holes were  completed.   The average depth of each hole 
was approximately 118 meters (387 lineal  feet).  Therefore, 
approximately 3,068  meters  were drilled  (10,062 lineal feet).  The 
drill holes were  spaced about 100 meters (328 feet) apart and covered an 
area of one square  kilometer  (.386 square miles or  approximately  250 
acres).  The drilling angle of each hole varied from  45  to 90 degrees.

This preliminary drilling confirms the Company's geologists' expectations
that  there  are four  basic  types  of  rock: basalt,  conglomerate, 
quartz monzonite, and trachyte.   The mineralization and alteration is 
well distributed  and  even though low grade values of 0.68 grams (0.02 
oz.) of gold per ton  are found in the quartz monzonite, the economic  
values are  found  in  the  trachyte.  In the  trachyte,  one  hole 
intercepted  a  12.2 meter (40 foot) vein of  gold  with  an average  
grade  of 15.08 grams (0.44 oz.) of gold  per  ton.  The  Company's 
geologists firmly believe that the  potential of   increasing   the  gold  
ore  reserves   is   excellent.  Additional  drilling  is required to  
expand  the  gold  ore reserves.

<PAGE>

Proposed 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;  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 $300  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 three  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 will be heaped  in  stages  an additional 20 feet  on  top  
of  this protective layer if necessary 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.  
The  balance  of this procedure is similar to  the  existing SCMP 
process.

<PAGE>

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.

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.  Over 75,075  fire  assay samples have been performed 
through March 31, 1998.

Environmental Matters

Since  the Government of El Salvador has established  a  new mining   law   
effective  February  1996,  its  exploration, development,   and  
production  programs  are   subject   to environmental  protection.  The 
El  Salvador  Department  of Mines  and  Hydrocarbons,  a division  of  
the  Minister  of Economy's office regulates the mining operations.

Environmental regulations add to the cost and time needed to bring  new
mines  or  mills  into  production  and  add  to operating  and closure 
costs for mines already in operation.  As  the Company places more mines 
into production, the costs associated  with regulatory compliance can  be  
expected  to increase.  Such costs are a normal cost of doing business in 
the mining industry, and may require significant capital and operating 
expenditures in the future.  The Company's  policy is  to adhere to North 
American standards in its El Salvador operations.   The  Company  cannot  
accurately  predict   or estimate  the  impact  of  any future  laws  or  
regulations developed  in  El Salvador that would affect  the  Company's 
operations.

All  operations by the Company involving the exploration for or  the 
production of minerals are subject to existing  laws and  regulations 
relating to exploration procedures,  safety precautions,  employee  
health  and  safety,   air   quality standards,  pollution  of  water 
sources,  waste  materials, odor,   noise,  dust  and  other  
environmental   protection requirements   adopted  by  the  El  Salvador   
governmental authorities.   The Company may be required  to  prepare  and 
present to such authorities data pertaining to the effect or impact  that  
any proposed exploration for or production  of minerals  may  have upon 
the environment.  The  requirements imposed  by  any  such  authorities  
may  be  costly,   time consuming and may delay operations.  Future 
legislation  and regulations designed to protect the environment, as well  
as future interpretations of existing laws and regulations, may require  
substantial  increases in equipment  and  operating costs  to  the  
Company  and  delays,  interruptions,  or  a termination  of  operations.  
The Company cannot  accurately predict  or estimate the impact of any 
such future  laws  or regulations, or future interpretations of existing 
laws  and regulations, on its operations.

The  Company  has  submitted an environmental  impact  study prepared by 
an independent El Salvadoran consultant which is under review.

<PAGE>

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, 
Central America, 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 2,388 meters (7,880 feet) of channel  trenching was  
excavated with a grade ranging from 0.01 to 0.05 ounces of  gold  per  
ton.  A total of 729 meters (2,406  feet)  of adits has  been restored 
for entry into the old workings.  A total  of  3,082 fire assay samples 
were completed with  the results encouraging a drilling program.  A 
tabulation of the work completed by the Joint Venture is as follows:

1.  Potosi Surface

    a.  The  exploration  and  excavation  of  2,388  meters  of surface 
        channel  trenches produced a  total  of  1,232 assay  samples.  
        These assay samples were fire  assayed and  reflected 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  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.   The  fire  assay samples  proved an 
        average of 0.05 ounces of  gold  per ton.

    c.  San  Isidro  Adit:   From the entrance to sub  level  25 meters 
        (83 feet), a vein running south 13 degrees  east was encountered.  
        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 
        the assay  samples reflected an average grade of gold of 0.022 
        ounces per ton.

    d.  Cacho de Oro Adit:  This adit was cleared for entry  and at  a 
        point 34  meters  (112 feet),  a  crosscut  was encountered  
        which was advanced 23 meters  (76  feet).  The  fire  assay 
        samples reflected an average grade  of 0.07 ounces of gold per 
        ton.

    e.  Canon  821: Exploration progress continues at this 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.  The  surface trench excavations over a distance  of  750 meters
        (2,475 feet)  and more  than  400  fire  assay samples  revealed
        an average grade of  0.10  ounces  of gold  per  ton.   An area
        was outlined which  estimated that there are more than 40,000
        tons of gold ore with a grade that varies from 0.12 to 0.23
        ounces of gold per ton.

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

<PAGE>

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 
and did 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.

Environmental Matters

Reference  is made to San Sebastian Gold Mine "Environmental Matters."
The  same  information applies  except  that  no environmental impact
study is being conducted at  Potosi  or El Capulin at this time.

Hormiguero Mine ("Hormiguero")

Hormiguero Location

The Hormiguero is located approximately five miles southeast from  the  
SCMP  off  of  the Pan American  Highway  in  the Departments   of   San   
Miguel   and   Morazan,   Comacaran Jurisdiction,  in  the  Republic  of  
El  Salvador,  Central America.  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, an exploration application was filed on 
April 21, 1997.

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; 
   (0.064  ounces per ton multiplied by 150,000 tons should contain 9,600 
   ounces of gold).

2. The  surface channel trenches consisting of 436  meters (1,439  lineal 
   feet)  were dug  perpendicular  to  the Guadalupe vein and from a 
   total of 155 samples in  this area,  96  samples verified an average 
   grade of  0.0177 ounces of gold per ton.

3. Taladron  Adit: The purpose is to clean this  adit  for entry, in an 
   attempt to intercept the Guadalupe vein at 61  meters  (201 feet) 
   below surface.  A total  of  122 meters (403 lineal feet) have been 
   cleaned and the  188 fire assay samples reflected a grade of 0.07 
   ounces  of gold per ton.

4. The  more than 6,000 tons of broken ore (dump material) averaged a 
   grade of 0.055 ounces of gold per ton.   The same  grade average was 
   encountered in the Las Hormigas vein system in the Guadelupe dump 
   material.

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   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.

      "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.

<PAGE>

      "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."

<PAGE>

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

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

                                                Dollar Value
                               Tons     Grade      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:
                                                Dollar Value
                               Tons     Grade      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

This  real  estate  is  owned  by  various  individuals  and families and
the Joint Venture has received permission  from the  land owners to
explore approximately 150 acres  of  the core of the mining property.

Environmental Matters

Reference  is made to San Sebastian Gold Mine "Environmental Matters."
The  same  information applies  except  that  no environmental impact
study is being conducted at  Hormiguero at this time.

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,  in
the  Republic of  El  Salvador,  Central America.

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:

<PAGE>

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.

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 July 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.

<PAGE>

The three vein systems disclosed the following:

(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 gray 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.

(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 cleared for entry.  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.

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 excavated for  entry.  
A total of 4,027 fire assay samples were performed revealing an average 
grade of 0.035 ounces per ton.  The Joint Venture suspended its 
exploration during July 1997 as the Government of  El  Salvador awarded 
the concession of the  property  to another  mining company.  The Company 
believes that it  owns the key property, therefore permission from the 
Company will be  required before entry can be made by others.  The  Joint 
Venture,  upon advice of legal counsel, intends to  file  an application  
for a concession (license) on the  property  it owns.

<PAGE>

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.

Environmental Matters

Reference  is made to San Sebastian Gold Mine "Environmental Matters."   
The  same  information applies  except  that  no environmental impact 
study is being conducted at Modesto  at this time.

Montemayor Mine ("Montemayor")

Montemayor Location/Ownership

The  Joint  Venture has obtained leases for  more  than  175 acres of the 
surface rights 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.  The Company believes that this 
real estate  contains  the  "heart" of the mine.   Montemayor  is located  
about  14 miles northeast of the  SCMP,  six  miles northwest of the SSGM 
and about two and one-half 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.

<PAGE>

"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.

"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  through July  1997,  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:

     The  underground  adits consisting  of  more  than  763 meters
     (2,518 lineal feet) revealed a variable range of gold  and  silver
     ore  grade.  From  the  368  samples assayed, the gold/silver grade
     ranged from 0.01 to 0.20 ounces per ton.

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.   During  July  1997, the  
Department  of  Mines  and Hydrocarbons  has awarded the concession to  
others.   Since the  Joint  Venture has leases on the surface  of key  
real estate, it cannot be forced to allow others on this key part of the  
property.  The Joint Venture, upon  advice  of  its legal  counsel, 
intends  to  file  an  application  for   a concession (license) on the 
property it leases.

Environmental Matters

Reference  is made to San Sebastian Gold Mine "Environmental Matters."
The  same  information applies  except  that  no environmental impact 
study is being conducted at  Montemayor at this time.

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

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 the other mining prospects that are in 
the exploration stage.

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.

<PAGE>

Instead of utilizing the existing recovery system, the Joint Venture's  
engineers  have designed a carbon-in-leach  (CIL) process.

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 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.

Current Status

The start-up, testing and adjustment stage of processing the remaining  
SSGM tailings via trucking this ore to  the  SCMP has  continued  and  
the  Joint  Venture  is  still  in  its preliminary  stage  of producing 
gold.  The  SCMP  is  being designed to process 300/400 tons of virgin 
ore per day.  The average grade was about 0.087 ounces of gold per ton.

During this fiscal year the Joint Venture did process at the SCMP
approximately  60,000 dry tons  (approximately  81,000 wet tons) of 
tailings which yielded 5,604 ounces of dore and accounted  for  3,927  
ounces of gold and  1,416  ounces  of silver.  The cash gross receipts 
amounted to $1,154,920.

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  virgin  
ore  and  expansive  mill   equipment modifications,  has  taken  place  
during  the  last   year.  Initial production was from the SSGM tailings.  
Since SSGM's tailings'  resource  is  exhausted,  virgin  gold   ore   is 
excavated from the SSGM surface and hauled to the SCMP site.

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  about  
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.

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.

<PAGE>

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.

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 open pit.

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.

During  the  last  fiscal  period,  primarily  all  of   the processed
ore  at the SCMP operations came  from  the  SSGM which could be 
processed with an up to 92% recovery grade or better.   There  is a 
sufficient amount of  open-pit  virgin gold  ore  that is being mined and 
transported to the  SCMP.  The  recovery  is  about 90% or more of the  
gold  which  is substantially  more than the expected 60% recovery  of  
gold through the heap-leaching process.

The  gold  ore  is  transported via truck and  placed  in  a primary
crusher to reduce the size to approximately one half inch  or  less.   A  
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.  
One tank is maintained in operable condition as a standby unit.

<PAGE>

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.

SCMP Personnel

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

Environmental Matters

Reference  is made to San Sebastian Gold Mine "Environmental Matters."  
The same information applies.

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  where a total of 70,075 samples of 
fire assays  have been  completed through March 31, 1998.  Approximately  
four employees  are working during the two eight-hour  shifts  at the 
SCMP laboratory.

<PAGE>

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 secured open-ended, on-demand 
promissory note(s) due to it.

ITEM 3.  LEGAL PROCEEDINGS

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

 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, 1998.

 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, 1998.

                 Age as of   Executive Offices            Period
                 March 31,          Held                  Served
     Name           1998      With Company (1)          In Office (2)
     ----           ----      -----------------         -------------
Edward L. Machulak   71     President,   Chief
                            Executive Officer,
                            and  Operating and
                            Financial  Officer        9/14/62 to present
                            Treasurer                 06/78 to present

Edward A. Machulak   46     Executive Vice President  10/16/92 to present
(Son of the                 Secretary                 1/12/87 to present
President)                  Assistant Secretary       4/15/86 to 1/12/87

Luis A. Limay        56     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.

<PAGE>

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, O'Dess & Reilly,  S.C.  is the legal counsel for
the Company.

Officers', and Key Management's Experience

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

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.   On  February 9, 1998, he was  
appointed  as   a member of the Audit 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 is 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.

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.  PART II

<PAGE>

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,
1998 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, 1998    March 31,  1997

                                     High      Low     High      Low
                                     ----      ---     ----      ---
First quarter ending June 30        $3.625   $2.125    $4.38    $2.38
Second quarter ending September 30  $2.625   $1.625    $3.25    $2.38
Third quarter ending December 31    $2.000   $ .875    $3.25    $1.88
Fourth quarter ending March 31      $1.281   $ .844    $4.00    $1.88

(b)  Approximate Number of Holders of Common Shares

As  of  March  31,  1998, the common  shares  were  held  by 
approximately  4,500  shareholders of  which  over  95%  are United 
States' residents.

As of March 31, 1998, there were approximately 2,207 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 2,293.

As of March 31, 1998, there were outstanding: (a) 11,039,670 shares  of  
common  stock; (b) 1,327,400  stock  options  to purchase common stock; 
and 80,000 common shares due on share loans and rights.

(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, 1998.  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.

ITEM 6.  SELECTED FINANCIAL DATA

The   following   table  sets  forth  certain   consolidated financial
data  for  the respective periods  presented  and should   be   read  in
conjunction  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
                --------------------------------------------------------------
                      1998         1997         1996         1995         1994
                      ----         ----         ----         ----         ----
Income statement data

Total revenue  $ 1,295,908  $    59,009  $    55,692  $    71,792  $    56,784
               ============ ===========  ===========  ===========  ===========
Income from
continuing
operations     $   118,603  $   (5,141)  $  (28,387)  $  (10,038)  $  (26,937)
               ===========  ===========  ===========  ===========  ===========

Income (loss) from
continuing operations
per share:

Basic          $       .01  $       .00  $       .00  $       .00  $       .00
               ===========  ===========  ===========  ===========  ===========

Diluted        $       .01  $       .00  $       .00  $       .00  $       .00
               ===========  ===========  ===========  ============ ============

Weighted average
shares - basic  10,358,132    8,136,286    7,368,058    5,941,950    4,828,496
               ===========  ===========  ===========  ===========   ==========

Cash dividends
per common
share          $         0  $         0  $         0  $         0  $         0
               ===========  ===========  ===========  ===========  ===========

Balance sheet data

Working
capital*1      $   614,554  $   660,596  $  (92,398)  $   322,944  $  (90,620)
               ===========  ===========  ===========  ===========  ===========

Total assets   $25,799,651  $23,196,121  $19,640,191  $17,573,464  $14,583,153
               ===========  ===========  ===========  ===========  ===========

Short-term
obligations*1  $ 7,270,772  $ 6,029,195  $ 5,660,979  $ 4,932,918  $ 5,176,295
               ===========  ===========  ===========  ===========  ===========


Long-term
obligations    $   135,000  $   145,000  $    20,259  $   120,000  $   245,000
               ===========  ===========  ===========  ===========  ===========

Shareholders'
equity         $18,393,879  $16,994,926  $13,958,953  $12,640,546  $ 9,416,858
               ===========  ===========  ===========  ===========  ===========


*1  Although  the  short-term obligations are due  on  demand, these
    obligations have the affect of being  long-term  as most  of  the debt is
    due to related parties who have  not called  for  the  payment except for
    nominal  amounts  and payment  of their short-term loans made on behalf
    of the Company during the past five or more years.

<PAGE>



ITEM  7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the
Private Securities Litigation Reform Act of 1995

The  matters discussed in this report on Form 10-K, when not historical
matters,  are  forward-looking  statements  that involve a number of
risks and uncertainties that could cause actual  results to differ
materially from projected results.  Such  factors include, among others,
the speculative  nature of  mineral  exploration, commodity prices,
production  and reserve estimates, environmental and government
regulations, availability of financing, force majeure events,  and  other
risk factors as described from time to time in the Company's filings
with the Securities and Exchange Commission.   Many of these factors are
beyond the Company's ability to control or  predict.  The Company 
disclaims any intent or obligation to  update  its  forward-looking 
statements,  whether  as  a result  of  receiving  new information,  the  
occurrence  of future events, or otherwise.

The following discussion provides information on the results of
operations for the three years ended March 31, 1998, 1997 and  1996 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.

Restatement of Prior Period Financial Statements

Overview

A  redefined structure of the financial statements  for  the fiscal years  
ended March 31, 1998, 1997  and  prior  years reflects and includes the 
Commerce Group Corp./Sanseb  Joint Venture  (Joint Venture) on a 
consolidated basis.  Prior  to this  change,  the  Company reported the 
investment  in  the Joint  Venture  as  advances to the Joint Venture  
and  the Company's  advances included the interest  earned  on these 
advances  in  anticipation of the interest being reimbursed.  In this  
report, these advances are restated  and  combined with   the Company's  
Consolidated  Financial  Statements.  Although  the elimination of 
interest  income  reduces  the retained  earnings,  it does  not  
eliminate  the  interest charged  by  and  earned by the Company  which  
is  due  and payable and which is maintained additionally with a separate 
accounting.  In effect, this restructuring modifies only the financial 
reporting and at the time that the profits for the gold mining operation 
are distributed, the interest  earned on these advances will be paid 
first to the Company pursuant to the contract entered into by both joint 
venture parties.

For  the  fiscal year ended March 31, 1998, the Company  was able to
segregate the disbursements to the Joint Venture  to identify the 
category to be charged.  Reference is  made  to Note 2 in the financial 
statements for additional details.

The  Joint Venture is producing gold on a limited basis from the  gold
ore it is excavating from its SSGM open  pit  and which it is processing
at its SCMP facility which is located approximately 15 miles from the 
SSGM site.  It is proceeding to  install a pilot open-pit, heap-leaching 
gold process  on the   SSGM   site.   The  cone  crushing  system  is 
being reconstructed at this site.  It also is continuing its  SSGM site 
preparation,  the  expansion of  its  exploration  and exploitation 
targets, and the enlargement and development of its gold ore reserves.  
It is exploring the potential of the other  gold  mine prospects 
identified as the San  Felipe-El Potosi Mine, and its extension, the El 
Capulin Mine and  the Hormiguero  Mine.  The Montemayor Mine and the 
Modesto  Mine have  been  placed on a standby basis pending the 
submission of an application for a concession (license) on the property 
it  owns  or holds leases. All of the mining properties  are 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.

<PAGE>

Current Status

The  Company currently has purchased and shipped a rod  mill and  a 
rotary  kiln  for carbon reactivation.   It  is  the Company's  belief 
that  the rod mill  should  increase  the processing  of 200 tons of ore 
to 350 tons of ore  per  day.  With this 75% increase of processing gold 
ore per day at the SCMP,  and  providing the price of gold maintains near  
the $300 per ounce level, there should be an increase of profits and cash 
flow to assist the current cash needs.

The  rotary  kiln  for  carbon reactivation  will  not  only regenerate
the carbon, but this process should increase  the production  of  gold.  
The cone crushing  system  is  being assembled  and  should also be a 
cost  saving  factor.   The Company  will seek funds to start a 
heap-leaching  operation at  the SSGM.  Instead of casting aside the low 
grade of ore it   could  place  it  on  heap-leaching  pads  to  increase 
additional revenue and profits.

This  increase in production of gold broadens the  Company's objectives.  
It  now  enables the Company  to  commence  an expanded   complementary 
operation  while  continuing   its endeavor  to obtain sufficient funds 
for the SSGM  open-pit, heap-leach operation.  This is its major and 
original  goal.  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 
and the funds it  is  able  to obtain  it  then  anticipates producing 
approximately  8,000 ounces of gold from the SCMP operation and 
eventually up  to 40,000  ounces of gold from its SSGM open-pit, 
heap-leaching operation.   The  Joint  Venture  continues  to  conduct an 
exploration program to develop additional gold ore  reserves at  the SSGM  
and at the following other mines:    the  San Felipe-El  Potosi Mine, and
its extension,  the  El  Capulin Mine and the  Hormiguero 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.

<PAGE>

Results of Operation Fiscal Years March 31, 1998 Compared to March 31, 
1997 on a Restated Basis

The  Company, on a consolidated basis, including  the  Joint Venture and
excluding the interest income due from the Joint Venture,  had a net gain 
of $118,603 or $.01 per  share  for its  fiscal year ended March 31, 1998 
compared to a  nominal loss  of  $5,141  or $-0- per share for the 
previous  fiscal year.   This  gain  results primarily from the  gold  
mining operations, including an added tax value refund of $112,948.

The  production costs for March 31, 1997 were not  separated to   reflect   
the  cost,  but  it  is  believed   that   an inconsequential profit was 
earned.  All of the gold proceeds ($969,721)  were applied to the 
reduction of the  investment in the Joint Venture.

During  the  fiscal year ended March 31, 1998,  the  Company sold  3,667
ounces of gold and 1,416 ounces of silver at  an average  realized price
of $315 an ounce  and  for  a  gross total   of  $1,154,920.   In
addition,  the  Joint  Venture transferred the 259 ounces of gold held in
its inventory  to the  Company at a value of $79,523.  Therefore, a  
total  of 3,926 ounces of gold were produced at a value of $1,234,443.
The  following  schedule reflects the cost to  produce  gold during this 
fiscal period:

                                          Total     Per Ounce
                                          -----     ---------
Direct mining expense                  $  736,743    $187.64


Third party smelting,
refining   and
transportation cost                        41,611      10.60
                                       ----------    -------
Cash operating cost                       778,354     198.24

Royalties (52% belongs to the Company)     61,722      15.72
Government tax                             37,033       9.43
                                       ----------    -------
  Total cash cost                         877,109     223.39

Depreciation                              208,254      53.04
                                       ----------    -------
 Total production costs                $1,085,363    $276.43
                                       ==========    =======

Direct mining expense includes all expenditures incurred  at the  SCMP  
site,  including inventory changes  and  specific corporate   charges.   
Exploration  expenditures   are   not included in the direct mining 
expense.

The  comparisons to the fiscal year ended March 31, 1997 are irrelevant
as no gold sale expenses in producing  gold  were included  in  1997.   
The most significant  change  was  the elimination  of interest income 
and expense  which  are  not shown on the consolidated statements of 
operations.

There  was no current or deferred provision for income taxes during 1998 
or 1997.  Additionally, although the Company has operating loss 
carryforwards, the Company has not recorded a net  deferred  tax asset in 
either 1997 or 1996  due  to  an assessment   of  the  "more  likely  
than  not"  realization criteria  required  by  Statement  of  Financial  
Accounting Standards No. 109, Accounting for Income Taxes.

<PAGE>

The   Company  adopted  Statement  of  Financial  Accounting Standards
No.  128 (SFAS128), Earnings per Share  in  prior years.   SFAS128's
objective is to simplify the  computation of  earnings  per share (EPS) 
and to make the U.S.  standard more  compatible  with  that  of  other  
countries  and  the International   Accounting  Standards  Committee.    
SFAS128 supersedes  APB  Opinion 15, replacing the  presentation  of 
"primary" and "fully diluted" EPS with "basic" and "diluted" EPS.  Basic 
EPS is computed by dividing income available  to common  shareholders 
(net income less any dividends declared on   preferred  stock  and  any  
dividends  accumulated   on cumulative preferred stock) by the weighed 
average number of common   shares  outstanding.   Diluted  EPS   requires   
an adjustment  to  the  denominator to include  the  number  of 
additional common shares that would have been outstanding if dilutive  
potential  common shares  had  been  issued.   The numerator  is adjusted 
to add back any convertible preferred dividends  and  the after-tax 
amount of interest  recognized with  any convertible debt.  The Company's 
basic and diluted EPS computations are the same for 1997 and 1996.

In  October  1995, the Financial Accounting Standards  Board (FASB)
issued  Statement of Financial Accounting  Standards No. 123 (SFAS 123),
Accounting For Stock-Based Compensation.  SFAS  123  defines a "fair 
value" based method of accounting for  employee options or similar equity 
instrument. SFAS 123 encourages,  but does not require the method  of  
accounting prescribed by the Statement, and does allow for an entity to 
continue to measure compensation cost as prescribed  by  APB Opinion  No.  
25. (APB 25), Accounting for Stock  Issued  to Employees.   Entities 
electing to remain with  APB  25  must make  proforma  disclosures of net 
income and  earnings  per share  as  if the fair value based method had 
been  applied, effective  for  fiscal years beginning  after  December  
15, 1995.   The Company has not issued any employee options  nor has it 
made elections as of this date.

Inflation  did  not have a material impact on operations  in 1997 or
1996.  Management of the Company does not anticipate that  inflation will 
have a significant impact on continuing operations.

The  interest expense in the sum of $667,836 was capitalized by  the
Joint Venture for the fiscal year ended  March  31, 1998 and $554,636 for 
the same period in 1997.

Almost all of the costs and expenses incurred by the Company are
allocated and charged to the Joint Venture.  The  Joint Venture 
capitalizes or expenses these costs and expenses and will  continue to do 
so until such time when it is  in  full production  on  each of its 
mining projects.   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, 1997 Compared to March 31, 
1996 on a Restated Basis

The  Company had a net loss of $5,141 or $-0- per share  for its  fiscal
year ended March 31, 1997 compared to a net loss of  $28,387 or $-0- per
share for the previous fiscal  year.  This  decrease was attributable 
primarily to a reduction  of general  and administrative expenses in 
1997.  The  interest expense   of   $554,636  (1997)  and  $470,710  
(1996)   was capitalized by the Joint Venture.

Financing Activities, Liquidity and Capital Resources

During  this  fiscal  year the Company  borrowed  a  sum  of $809,853;
$713,591 was from related parties which  included cash  and accrued 
interest; the balance of $96,262 was  from unrelated parties and included 
cash and accrued interest.

<PAGE>

A  total of 1,846,628 common shares were issued for a sum of $2,795,350
during  this  fiscal year.   These  shares  were issued  for  the
following:  cash, 34,477 shares  ($74,025); directors,  officers
employees, and for  services,  169,250 shares   ($230,661);  payment  of
debt  and  miscellaneous, 592,936 shares ($855,663); exercise of stock
options, 60,000 shares  ($120,000); and 1,515 shares of Series A
Convertible Preferred  Stock  were  converted in  exchange  for  989,965
common shares ($1,515,000).

The  Company  expects  to continue  operating  its  SSGM  by expanding
its   mill   production  capacity.    Additional equipment has been
purchased and has been delivered or is in route  of  delivery.   It  is 
believed  that  the  rod  mill purchased   should  increase  the  
processing   level   from approximately  200  to  350 tons per  day  
which  is  a  75% increase.  Additional needed equipment will be 
purchased  or leased.   At this level of processing with a grade  of  
gold ore  as  has  been processed in the past and at a  $300  per ounce  
gold  selling  price,  the  Company  should  have   a sufficient cash 
flow to operate for a long period  of  time.  Funds to explore the 
expansion of the SSGM gold ore reserves and  to explore the other mining 
prospects will have  to  be sought  by raising additional capital or by a 
joint  venture or by other means.

The  Company  will endeavor to commence an  open-pit,  heap- leaching  
operation at the SSGM as there  is  a  substantial amount  of  gold ore 
that grades less than 0.04  ounces  per ton.   The Company's engineers 
had determined that  a  1,000 ton-per-day open-pit, heap-leach operation 
could produce  an additional 540 ounces of gold per month  It is 
necessary  to raise  adequate funds for this operation; the amount  
needed is  dependent on the targeted daily volume.  An ideal amount of 
funds to have would be U.S. $13 million which would start the open-pit, 
heap-leach at a rate of 2,000 tons per day and the  profits and cash flow 
then could be used to  expand  to 6,000 tons per day.

The  Company continues to be cognizant of its cash liquidity until  it is 
able to produce adequate profits from its  SSGM 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) appear sufficient to 
meet the   SSGM   capital   and  the  other  mining   exploration 
requirements.   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  amount  of $3,402,089 was supplied to the Joint Venture 
in fiscal 1998.  The Company believes that these invested funds 
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  during  this fiscal year to continue  
to  modify  and 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  continue  
its  exploration  projects,  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.

<PAGE>

The  Company   estimates that it will need up  to  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.

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 and/or equity 
funds as are required from  similar sources as it has in the past.  In 
turn, then it can  invest 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 other exploration targets for the 
purpose of  increasing its gold ore reserves should be approximately $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, 1998, the Company  has invested  in  
the Joint Venture, including interest  charges payable to the Company, 
the sum of $19,500,508  and three of the  Company's wholly-owned 
subsidiaries have  advanced  the sum  of  $590,265,  for a total of 
$20,090,773.   The  funds invested in  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 a community place of worship, for 
the purchase of the real estate on the Modesto  Mine, for leasing the 
Montemayor real  estate,  for the purchase of a cone crushing system, for 
diamond drilling at the SSGM, and many other related needs.

Employees

The   Joint  Venture  employs  approximately  300  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.

<PAGE>

Insurance

The  Joint Venture has in existence insurance through an  El Salvador
insurance  company with  the  following  insurance 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, 1998,  the  Company, and  three  
of its subsidiaries, have advanced to the  Joint Venture $20,090,773.
Included in the total advances is  the interest  charged to the Joint
Venture by  the  Company  and this  charge amounts to $7,414,526 through 
March  31,  1998.  The Company furnishes all of the funds required by the 
Joint Venture.

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, as explained in this  report, the  Company was 
able to obtain a sum of funds to invest  in the  expansion  and 
retrofitting of its  SCMP  and  for  the exploration of its other mining 
prospects.  The  decline  in the  price  of  gold hit its lowest price in  
18  years  and therefore depressed the market price of the Company's 
shares as  well  as  the  shares of most of the  world-wide  mining 
companies.   This decline in the stock market  price  places the  Company 
in a situation of diluting its shares in  order to raise capital.  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, 1999.

Year 2000 Issue

Computer  programs written decades ago utilized a two  digit format   to   
identify   the   applicable   year.    Without modification,  any date 
sensitive software  beyond  December 31,  1998  could fail, as the date 
would be reset to   1900.  This  could result in, amongst other things, 
disruptions  to operations   and   the   inability  to   process   
financial transactions.  The Company has not yet made an assessment of 
the  impact of the year 2000 issue.  The Company expects  to initiate  
communications with all of its equipment suppliers in  which  a  computer  
is utilized and  with  its  computer manufacturers (hardware and 
software) for the processing  of financial  information to determine the 
extent to which  the issue may impact the Company.  In addition, the 
Company will inquire  of other entities who are significant suppliers  of 
consumables  used  in  its  operations  and  of  others   it currently    
interacts   with   electronically    (financial institutions, etc.) to 
determine the extent to which it  may be  vulnerable to those third 
parties' failure to  remediate their own year 2000 issue.

<PAGE>

Environmental Regulations

Based  upon current knowledge, the Company believes that  it is  in 
material compliance with all applicable environmental laws and 
regulations as currently promulgated.  However, the exact  nature  of  
environmental control problems,  if  any, which  the  Company may 
encounter in the  future  cannot  be predicted,  primarily  because  of  
the  increasing  number, complexity   and   changing   character   of   
environmental requirements  that may be enacted or of the standards  
being promulgated by federal and state authorities.

Recently Issued Financial Accounting Standards

In  June  1997,  the  Financial Accounting  Standards  Board (FASB)  
issued Statement of Financial  Accounting  Standards No.  130  (SFAS  
130),  Reporting Comprehensive  Income  and Statement  of Financial 
Accounting Standards No.  131  (SFAS 131),  Disclosures  about  Segments  
of  an  Enterprise  and Related  Information.   The provisions of SFAS 
130 and  SFAS 131  will  be  effective  for fiscal years  beginning  
after December  15,  1997.   SFAS 130  is  designed  to  report  a 
measure  of  all  changes in equity of  an  enterprise  that result  from  
recognized  transactions  and  other  economic events of the period other 
than transactions with owners  in their   capacity  as  owners.   Besides  
net  income,  other comprehensive  income would include foreign currency  
items, minimum pension liability adjustments, and unrealized  gains and  
losses  on  certain  investments  in  debt  and  equity securities.  SFAS 
131 establishes standards for the way that public business enterprises 
determine operating segments and report  information about those segments 
in annual financial statements.   SFAS  131 also requires those  
enterprises  to report  selected  information about  operating  segments  
in interim financial reports issued to shareholders.  SFAS  131 further 
establishes standards for related disclosures  about products   and   
services,  geographic  areas,   and   major customers.  Upon adoption of 
SFAS 130, the Company does  not anticipate  a  material impact on its 
financial  statements.  Upon  adoption  of SFAS 131, the Company does  
anticipate  a material impact on its on its reported disclosures.

Dividends

For  the  foreseeable  future, it is  anticipated  that  the Company will 
use any earnings to finance its growth and that dividends will not be 
paid to shareholders.

<PAGE>

Safe Harbor

Some of the statements contained in this report are forward- looking  
statements, such as estimates and  statements  that describe  the 
Company's future plans, objectives  or  goals, including words to the 
effect that the Company or management expects  a  stated  condition or  
result  to  occur.   Since forward-looking   statements  address  future   
events   and conditions,  by  their  very nature, they  involve  inherent 
risks  and uncertainties.  Actual results in each case could differ  
materially from those currently anticipated in  such statements  by 
reason of factors such as production  at  the Company's  mines,  changes 
in operating  costs,  changes  in general  economic conditions and 
conditions in the financial markets,  changes in demand and prices for 
the products  the Company produces, litigation, legislative, 
environmental and other   judicial,  regulatory,  political  and   
competitive developments  in  areas in which the  Company  operates  and 
technological  and operational difficulties  encountered  in connection 
with mining activities.

<PAGE>

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

           Index to Consolidated Financial Statements
                And Supplementary Financial Data

                                                             Page

Report of Independent Certified Public Accountant

Financial Statements:

Consolidated Balance Sheets, Years Ended March 31, 1998 and 1997 
Consolidated Statements of Operations, Years Ended March 31, 1998, 1997
and 1996
Consolidated Statements of Changes in Shareholders' Equity Years
Ended March 31, 1998, 1997 and 1996
Consolidated Statements of Cash Flows, Years Ended March 31, 1998, 1997
and 1996
Notes to Consolidated Financial Statements

Supplementary Financial Data:

Report of Independent Accountants on the Financial Statements Schedules

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 ACCOUNTANT


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

I  have audited the consolidated balance sheets of Commerce Group Corp.
("Company"), a Delaware Corporation, and its subsidiaries, as  of  March  
31,  1998  and 1997, 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, 1998, 1997 
and 1996.  These financial statements are   the   responsibility  of  the  
Company's  management.    My responsibility  is  to  express an  opinion  
on  these  financial statements based on my audits.

I  conducted  my  audits  in accordance with  generally  accepted 
auditing  standards.  Those standards require  that  I  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.  I believe that  my audits provide a reasonable 
basis for my opinion.

In  my 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, 
1998 and 1997, and the consolidated results  of their  operations  and 
their cash flows for  each  of  the  three fiscal years in the periods 
ended March 31, 1998, 1997 and  1996, in  accordance with accounting 
principles generally  accepted  in the United States.

Bruce Michael Redlin
Certified Public Accountant


Milwaukee, Wisconsin
May 19, 1998

<PAGE>

  COMMERCE GROUP CORP., ITS SUBSIDIARIES, AND THE JOINT VENTURE
              Consolidated Balance Sheets--March 31


                                                 1998             1997
                                 ASSETS          ----             ----
Current assets
  Cash                                    $    61,287      $   796,106
  Investments                                 187,792          194,888
  Accounts receivable                         452,534          299,746
  Inventories                                 205,300          191,250
  Prepaid items and deposits
                                               49,939           38,167
                                          -----------      -----------
    Total current assets                      956,852        1,520,157

Real estate (Note 5)                        1,179,836        1,179,836

Property, plant and equipment, net          3,332,303        1,812,612
Mining resources investment                20,330,660       18,656,516
                                          -----------      -----------
  Total assets                            $25,799,651      $23,169,121
                                          ===========      ===========


                               LIABILITIES
Current liabilities
  Accounts payable                        $   342,298      $   144,033
   Notes and accrued interest payable to
   related parties (Notes 6 & 7)            4,175,120        3,461,529
   Notes and accrued interest payable to
   others (Note 6)                            743,071          646,809
  Accrued salaries                          1,509,015        1,344,015
  Accrued legal fees                          175,082          137,069
  Other accrued expenses                      461,186          440,740
                                          -----------      -----------
      Total liabilities                     7,405,772        6,174,195

Commitments and contingencies (Notes  2, 4, 5, 6, 7, 8 & 12)

                           SHAREHOLDERS' EQUITY
Preferred Stock
  Preferred stock, $0.10 par value:
  Authorized 250,000 shares;
  Issued and outstanding
   1998-none;  1997-1,515 shares
   (Note 10)                              $         0      $ 1,515,000

Common stock, $0.10 par value:
  Authorized 15,000,000 shares;
  Issued and outstanding:
  1998-11,039,670 (Note 10)                 1,103,967
  1997-9,193,042 (Note 10)                                     919,304
Capital in excess of par value             16,969,724       14,359,037
Retained earnings (deficit)                   320,188          201,585
                                          -----------      -----------
   Total shareholders' equity              18,393,879       16,994,926
                                          -----------      -----------
   Total  liabilities and
    shareholders' equity                  $25,799,651      $23,169,121
                                          ===========      ===========

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

<PAGE>

  COMMERCE GROUP CORP., ITS SUBSIDIARIES, AND THE JOINT VENTURE
              Consolidated Statements of Operations
                   For the Year Ended March 31


                                       1998         1997         1996
Revenues:                              ----         ----         ----
  Gold sales                    $ 1,234,443   $        0   $        0
  Campground income                  61,465       59,009       55,692
                                -----------   ----------   ----------
    Total revenues                1,295,908       59,009       55,692

Expenses:
  Cost of gold sales                877,109            0            0
  Depreciation                      208,254            0            0
  General and administrative        207,915       67,982       86,748
                                -----------   ----------   ----------
    Total expenses                1,293,278       67,982       86,748

Other income:
  Interest income                     3,025        3,832        2,669
   El  Salvador added
   value tax refund                 112,948            0            0
                                -----------   ----------   ----------
    Other income                    115,973        3,832        2,669
                                -----------   ----------   ----------

Net profit (loss)               $   118,603   $   (5,141)  $  (28,387)
   Credit (charges) for
   income taxes                           0            0            0
                                -----------   ----------   ----------
Net  income (loss) after income
tax credit (charge)             $   118,603   $   (5,141)  $  (28,387)
                                ===========   ==========   ==========
Net income (loss) per share
(Note 2) basic                  $       .01   $      .00   $      .00
                                ===========   ==========   ==========
Net income (loss) per share
(Note 2) diluted                $       .01   $      .00   $      .00
                                ===========   ==========   ==========
Weighted av. common shares
outstanding (Note 2)             10,358,132    8,136,286    7,368,058
                                ===========   ==========   ==========
Weighted av. diluted common
shares (Note 2)                  11,783,532    9,727,646    7,465,898
                                ===========   ==========   ==========


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

<PAGE>


  COMMERCE GROUP CORP., ITS SUBSIDIARIES, AND THE JOINT VENTURE
   Consolidated Statements of Changes in Shareholders' Equity
        For the Years Ended March 31, 1998, 1997 and 1996


                                        Common Stock
                          ---------------------------------------
                               Number                              Retained
                                 of                     Excess of  Earnings
                               Shares     Par Value     Par Value  (Deficit)
                               ------     ---------     ---------  ---------
Balance March 31, 1995       7,294,719   $  729,472   $11,675,961   $235,113

Net income (loss) for  FY                                            (28,387)
March 31, 1996

Common Shares Issued
 Dir./off./employee/services    45,384        4,538       110,069
 comp.
 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    206,726

Net income (loss) for  FY
March 31, 1997                                                        (5,141)

 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   $201,585

Net income (loss) for FY
March 31, 1998                                                       118,603

 Dir./off./employee/services
 comp.                         169,250       16,925       213,736
 Payment of debt               592,936       59,293       796,370
 Cash                           34,477        3,448        70,577
 Preferred stock converted     989,965       98,997     1,416,004
 Stock options                  60,000        6,000       114,000
                            ----------   ----------   -----------   --------
Balance March 31, 1998      11,039,670   $1,103,967   $16,969,724   $320,188
                            ==========   ==========   ===========   ========

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

<PAGE>

    COMMERCE GROUP CORP., ITS SUBSIDIARIES, AND THE JOINT VENTURE
                  Consolidated Statements of Cash Flows
                      For the Years Ended March 31



                                              1998         1997         1996
Operating activities:                         ----         ----         ----
  Net income (loss)                    $   118,603  $    (5,141) $   (28,387)
                                       -----------  -----------  -----------
Adjustments  to reconcile  net  income
(loss)  to  net cash used in operating
activities:
Depreciation                               208,254      203,341      229,253
Changes in assets and liabilities
 Decrease (increase) in account
 receivables                              (152,788)      37,998      (88,918)
 Decrease (increase) in inventories        (14,050)      13,011     (129,953)
 Decrease (increase) in prepaid items
 and deposits                               (4,676)      21,012       (7,797)
 Increase (decrease) in accounts
 payable and accrued liabilities           198,265      (11,201)     (67,950)
 Increase (decrease) in other
 liabilities                                20,446     (220,761)     148,276
 Increase (decrease) in  accrued
 salaries                                  165,000      139,875     (101,000)
 Increase (decrease) in accrued
 legal fees                                 38,013       60,186      (89,472)
                                       -----------  -----------   -----------
 Total adjustments                         458,464      243,461     (107,561)
                                       -----------  -----------   -----------
 Net cash provided by (used in)
 operating activity                        577,067      238,320     (135,948)

Investing activities:
 Investment in mining resources         (3,402,089)  (3,080,901)  (2,518,674)
                                        -----------  -----------  -----------
 Net cash used in investing
 activities                             (3,402,089)  (3,080,901)  (2,518,674)

Financing activities:
  Net borrowings                           809,853      524,858      858,466
  Common stock issued                    1,280,350    3,041,114    1,346,794
                                       -----------  -----------  -----------
Net cash provided by (used in)
financing activities                     2,090,203    3,565,972    2,205,260

Net increase (decrease) in cash and
cash equivalents                          (734,819)     723,391     (449,362)
Cash - beg. of year                        796,106       72,715      522,077
                                       -----------  -----------  -----------
Cash - end of year                     $    61,287  $   796,106  $    72,715
                                       ===========  ===========  ===========

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

<PAGE>

  COMMERCE GROUP CORP., ITS SUBSIDIARIES, AND THE JOINT VENTURE
        Consolidated Statements of Cash Flows, continued
                                
Supplemental disclosures of cash information:

1.   The  following amounts of interest expense paid  or  accrued were
     capitalized:   $667,836 (1998),  $554,636  (1997)  and $470,710
     (1996).

2.   The interest expense paid in cash was $17,550 (1998), $1,350 (1997)
     and none in 1996.

3.   The  Company  paid no income taxes during  1998,  1997,  and 1996.

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

5.   Accounts receivable consist of gold bullion shipped  to  the 
     refinery pending the settlement date.

6.   Inventory  consists  of processed ores and  metal-in-process and
     consumable  items  which are stated  at  the  lower  of average cost
     or market.

Supplemental   schedule  of  non-cash  investing  and   financing
activities during the fiscal years ended March 31:

1.   The  Company  issued  the following common  shares  for  the values
     shown for services rendered:

                     Shares    Value
                    -------  --------
              1998  169,250  $213,736
              1997   66,653  $122,875
              1996   45,384  $110,069

2.   A total of 1,515 Series A Convertible Stock in the principal amount
     of  $1,515,000  was converted  into  989,965  common shares  in  the
     year ended March 31, 1998 and 985 shares  of the  same  issue  in
     the principal amount of  $985,000  were converted into 655,227
     common shares in the year ended March 31, 1997.

3.   The sale of gold for 1997 which amounted to $969,721 and for 1996 
     which amounted to $1,180,279 was applied as a reduction to the 
     mining  resources account.

4.   Other  non-cash  items were for the unpaid salary  and  fees which 
     amounted to $203,013 for 1998 and $139,875 for 1997.

5.   Non-cash equipment financing activities were none for  1998, none 
     for 1997 and $35,775 for 1996.




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

<PAGE>

(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 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 several 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 
    other gold mine  exploration prospects identified as the San 
    Felipe-El Potosi Mine, and its extension,  the El Capulin Mine and 
    the Hormiguero  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.

(2) Significant Accounting Policies

Restatement of Prior Period Financial Statements

The  Company  changed  its consolidation policy  to  include  the income
and expenses and the assets, liabilities and equity of its Joint Venture 
rather than show it as an investment on the balance sheet.   The 
consolidated balance sheets for March 31,  1998  and 1997  and the 
consolidated statements of changes in shareholders' equity,  consolidated 
statements of cash flows  and  consolidated statements of operations for 
the years ended March 31, 1998, 1997 and 1996 were also restated to 
reflect this change.

<PAGE>

The  balance sheet effect of the change in policy was  to  reduce the
Joint  Venture  advances  by a  total  of  $3,574,460  which consisted
of  the  following  amounts:  $1,511,895  for   1998; $1,012,739  for
1997; $816,029 for 1996; and $233,797  for  prior years.   Retained
earnings were reduced by an offsetting  amount for  both 1998 and 1997.  
The consolidated statements of  changes in  shareholders'  equity  was 
also  restated  to  reflect  these changes.

The  consolidated statements of operations for  the  years  ended March
31, 1998, 1997 and 1996 were restated to eliminate interest income  from
the  Joint Venture.  The amounts  were  $1,511,895, $1,012,739, and 
$816,029 for 1998, 1997 and 1996 respectively.

The  consolidated statements of cash flows for 1998 and 1997 were also  
restated  to  reflect  the  changes  in  operating  profits (losses) that 
are outlined in the above paragraphs.

Principles of Consolidation

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

                                                   % Ownership
    Homespan Realty Co., Inc. ("Homespan")             100.0
    Mineral San Sebastian, S.A. de C.V. ("Misanse")     52.0
    Piccadilly Advertising Agency, Inc. ("Piccadilly") 100.0
    San Luis Estates, Inc. ("SLE")                     100.0
    San Sebastian Gold Mines, Inc. ("Sanseb")           82.5
    Universal Developers, Inc. ("UDI")                 100.0
    Commerce/Sanseb Joint Venture ("Joint Venture")     90.0

Investments

The  investments consist of precious stones which are  stated  at the
lower cost or market value.

Accounts Receivable

The accounts receivable account consists of gold bullion produced and
shipped to the refinery and pending payment.

<PAGE>

Inventory

Inventories consist of the following as of March 31, 1998:

                                                1998     1997
                                                ----     ----
Gold in process (1) (Stated at market value) $ 79,523  $ 88,250
Materials and supplies (Stated at cost)       125,777   103,000
                                             --------  --------
                                             $205,300  $191,250


(1)  Includes  all direct and indirect costs of mining, crushing,
     processing and mine site overhead expenses.

Deferred Mining Costs

The  Company,  in  order to avoid expense and revenue  unbalance,
capitalizes  all  costs  directly  associated  with  acquisition,
exploration  and development of specific properties, until  these
properties are put into operation, sold or are abandoned.   Gains or
losses  resulting  from  the sale or  abandonment  of  mining properties
will  be included in operations.  The  Joint  Venture capitalizes  its
costs and expenses and  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.

The Company regularly evaluates its carrying value of exploration
properties   in   light   of   their   potential   for   economic
mineralization and the likelihood of continued work by either the Company
or a joint venture partner.  The Company may, from  time to time, reduce
its carrying value to an amount that approximates fair market value based 
upon an assessment of such criteria.

Revenue Recognition

Revenue  from  the  sale  of  gold  and  industrial  minerals  is 
recognized when title passes to the buyer.

Property, Plant and Equipment

Property, plant, and equipment is stated at the lower of cost  or 
estimated   net   realizable  value.    Mining   properties   and 
development costs and certain plant and equipment are depreciated using  
the  units  of  production method based  upon  proven  and probable  
reserves.   Other  assets  are  depreciated  using  the straight-line 
method over estimated useful lives of five  to  ten years.   Depreciation  
and  amortization  expense  includes   the amortization   of   assets   
acquired   under   capital   leases.  Replacements     and   major   
improvements   are    capitalized.  Maintenance and repairs are charged 
to expense based  on  average estimated  equipment  usage.   Interest  
costs  incurred  in  the construction or acquisition of property, plant, 
and equipment are capitalized  and amortized over the useful lives of  
the  related assets.

<PAGE>

Mineral Exploration and Development Costs

Significant  property acquisition payments for active exploration
properties   are  capitalized.   If  no  minable  ore   body   is
discovered,  previously capitalized costs  are  expensed  in  the period
the  property  is  abandoned.   Expenditures   for   the development of
new mines, to define further mineralization at and adjacent  to  existing
ore bodies, and to expand the capacity  of operating  mines, are
capitalized and amortized on the  units  of production basis over proven
and probable reserves.

Statement of Financial Accounting Standards

The  Company evaluates the carrying value of producing properties and
equipment  by  applying  the  provisions  of  Statement   of Financial 
Accounting Standards No. 121 (SFAS 121), Accounting for the Impairment of 
Long-Lived Assets and for Long-Lived Assets  to be  Disposed  of in 1995.  
SFAS 121 requires that  an  impairment loss   be  recognized  when  the  
estimated  future  cash   flows (undiscounted and without interest) 
expected to result  from  the use  of  an asset are less than the 
carrying amount of the asset.  Measurement of an impairment loss is based 
on fair value  of  the asset  if the asset is expected to be held and 
used, which  would be  computed  using  discounted cash flows.   
Measurement  of  an impairment loss for an asset held for sale would be 
based on fair market value less estimated costs to sell.

Management's   estimates  of  gold  and   other   metal   prices, 
recoverable proven and probable reserves, operating, capital, and 
reclamation  costs are subject to certain risks and uncertainties which  
may  affect the recoverability of the Company's investment in  property, 
plant, and equipment.  Although management has made its  best  estimate 
of these factors based on current conditions, it  is  reasonably possible 
that changes could occur in the near- term  which could adversely affect 
management's estimate  of  the net  cash  flows  expected  to be 
generated  from  its  operating properties.

Deferred Financing Costs

Costs  incurred  to  obtain debt financing  are  capitalized  and
amortized  over  the  life  of  the  debt  facilities  using  the
effective interest method.

Interest Capitalization

Interest costs are capitalized as part of the historical cost  of
facilities and equipment, if material.

Income Taxes

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

Earnings  (Loss) Per Common Share

The Company has in the past many years reported its "Earnings per Share"
which presently complies with SFAS No. 128.  As  required by  this new 
standard, the Company reports two earnings per share amounts,  basic  net 
income and diluted net  income  per  share.  Basic  net  income  per 
share  is computed  by  dividing  income available to common shareholders 
(the numerator) by the  weighted average  number  of common shares 
outstanding (the  denominator).  The computation of diluted net income 
per share is similar to the computation  of  basic  net  income per share  
except  that  the denominator  is increased to include the dilutive 
effect  of  the additional common shares that would have been outstanding 
if  all convertible  securities  stock options,  rights, etc.  had  been 
converted to common shares during the period.

<PAGE>

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 indeterminable.

If on March 31, 1998, 1,352,400 option shares and the 73,000 loan shares
would be added to the weighted average calculated  number of  shares 
which amounts to 10,358,132, the total number  of  the weighted  average 
fully diluted shares would be  11,783,532,  and the  profit per share for 
the fiscal year ended March  31,  1998, would be $.01 per share.  The 
same assumptions were used for  the same 1997 fiscal period.

Foreign Currency

The  Company is involved in 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  8.74 colones per U.S. dollar and 
this exchange rate was stable  during this  fiscal  year.   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.

Major Customer

The Joint Venture produces gold and silver. It sells its gold  at the 
world  market  price 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.

(3)  Property,   Plant,  Equipment,  Net  and  Mining   Resource
     Investments

The  following is a summary of the net book value  of  plant  and 
equipment,  and  of  mining properties and development  costs  by 
property:



                      Plant      Mining
                       and      Resource     Total         Total
                    Equipment  Investment     1998          1997
                    ---------  -----------  -----------  -----------
San Sebastian Gold
Mine               $  115,197  $20,330,660  $20,445,857  $18,750,311
Other Mining
Properties
San Cristobal Mill
and Plant           3,217,106            0    3,217,106    1,718,817
                   ----------  -----------  -----------  -----------
  Total Investment $3,332,303  $20,330,660  $23,662,963  $20,469,128
                   ==========  ===========  ===========  ===========

<NOTES>

(4) 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.

Investments in Joint Venture

As of March 31, 1998, the Company's investments including charges for 
interest expense were $19,500,508, and three of the Company's 
wholly-owned subsidiaries' advances were $590,265 for a total  of 
$20,090,773.

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.

<PAGE>

As  of March 31, 1998 and 1997, the Company, Sanseb and three  of the
Company's wholly-owned subsidiaries have invested (including carrying
costs) the following in its Joint Venture:

                                               1998           1997
                                               ----           ----
The Company's advances since 09/22/87     $ 22,884,951    $ 17,253,501
Less amounts received from gold sales       (3,384,443)     (2,150,000)
                                          ------------    ------------
The Company's net of gold sale proceeds
advances since 09/22/87                     19,500,508      15,103,501
The Company's initial investment             3,508,180       3,508,180
Sanseb's investment in the Joint Venture     3,508,180       3,508,180
Sanseb's investment in the mining projects
and amount due to the Company               21,524,975      19,388,321
                                           -----------    ------------
Total:                                      48,041,843      41,508,182
Advances by the Company's three
subsidiaries                                   590,265         590,265
                                          ------------    ------------
Combined total investment                 $ 48,632,108    $ 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 and   proven gold ore 
reserve area, and the Company is active  in attempting to obtain adequate 
financing for the expansion of  its SCMP   facilities   and  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 its other El Salvador mining prospects.    
During this  fiscal period gold is being produced by trucking the 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 4)

(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.

<PAGE>

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 days' notice to Misanse, and thereafter,  all legal 
responsibilities thereunder shall cease.

(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 requires 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.  The 
Company, in compliance with the new law, has filed its applications for 
all of the mining concessions in which it has an interest.

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

The  Company  owns 52 acres of land which are a key part  of  the Modesto  
Mine  that is located near the city of  El  Paisnal,  El Salvador.  It 
also has contracted to purchase additional  acreage which  transfer  will 
take place after it receives  clear  title.  Part of this real estate is 
subject to a mortgage.

<PAGE>

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.

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.

Montemayor Mine

The  Joint Venture has leased approximately seventy acres of land that  
it  considers to be key property.  The terms of the various leases are 
one year with automatic renewal rights.  This property is located 14 
miles northwest 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, El Salvador.

(5)  Synopsis of Real Estate Ownership and Leases

The  Company  and  its  subsidiaries own  a  331-acre  campground located  
in  the Lake of the Ozarks, Camden County, Missouri;  40 lots  in the San 
Luis North Estates 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 
a lease agreement  to  lease  approximately  675  acres  based   on   the 
production of gold payable in the form of royalties with a mining 
prospect   in  the  Department  of  San  Miguel  and  it   leases 
approximately  175  acres in the Department  of  Morazan  in  the 
Republic of El Salvador.

<PAGE>

(6)  Notes Payable and Accrued Interest
                                                 March 31
Notes payable consist of the following:      1998        1997
                                             ----        ----
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 7)                       $4,175,120  $3,461,529

Other (consists primarily of short-term
notes  and  accrued 1998  interest   of
$305,578  (1997,  $285,166)  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.                                    743,071     646,809
                                          ----------  ----------
                                 Total:   $4,918,191  $4,108,338
                                          ==========  ==========

(7)  Related Party Transactions

The Company, in an attempt to preserve cash, had prevailed on its
President to accrue his salary for the past 17 years, for a total of 
$1,509,015.

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, 1998:

The  amount  of  funds which the Company has  borrowed  from  its 
President  from  time  to time, together with  accrued  interest, amounts  
to  $2,219,984.  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
$469,987,   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  and payable monthly.  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 (222,950) 
borrowed  from him  during this fiscal period and it issued 40,036 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.

<PAGE>

On  February  16,  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, 1998.

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: 1998, $33,468;  1997, $33,468 and 1996, 
$28,316.

The same related company provides 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:  
1998, $8,040; 1997, $7,950 and 1996, $7,920.

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 amounts  to  $1,182,709;  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, 1998:

The  President's wife's Individual Retirement Account ("IRA") has the
Company's open-ended, secured, on-demand  promissory note  in the  sum   
of $243,218 which bears interest at an annual rate  of prime  plus three 
percent, but not less than 16% and the interest is payable monthly.

The  Law Firm which represents the Company in which a son of  the 
President  is a principal is owed the sum of $175,082  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  $59,222  which  bears interest at an 
annual rate of 16% payable monthly.

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.

<PAGE>

As  of March 31, 1998, pursuant to the S.E.C. Form 8 Registration 
Statement  effective as of April 4, 1994, the  Directors/Officers 
exercised  their rights to purchase 29,800 shares at a  price  of $1.00 
per share in payment of all compensation due to them as  of March 31, 
1998.

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
  Year Ended March 31, 1998            4,397,007     2,179,731
                                     -----------    ----------
                                     $19,500,508    $7,414,526
Advances by three of the Company's
wholly-owned subsidiaries                590,265             0
                                     -----------    ----------
Total Net Advances March 31, 1998    $20,090,773    $7,414,526

(8)  Commitments

Reference is made to Notes 2, 4, 6, 7, and 10.

(9)  Income Taxes

At  March  31, 1997, the Company and its subsidiaries,  excluding the
Joint Venture, have estimated net operating losses remaining in a sum of
approximately $3,339,645 which may be carried forward to  offset future
taxable income; the net operating losses expire at various times to the 
year of 2013.

<PAGE>

(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 matters 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 and outstanding as of March 31, 1998.

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 (1997) and 
989,965  common shares (1998).

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 1998, 1997, and 1996 was as follows:

                   03/31/98            03/31/97          03/31/96
                   --------            --------          --------
                        Weighted            Weighted          Weighted
                        Average              Average           Average
                Amount   Price      Amount    Price    Amount   Price
                ------   -----      ------    -----    ------   -----
Outstanding,
beg. yr.     1,591,360   $3.22      97,840    $2.66   154,850   $2.66
Granted              0   $0.00   1,507,400    $3.38     3,250   $5.00
Exercised      (60,000)  $2.00           0    $0.00   (60,260)  $2.42
Forfeited         (710)  $4.25     (13,880)   $3.00         0   $0.00
Expired       (203,250)  $2.25           0    $0.00             $0.00
             ----------  -----   ---------    -----   --------  -----
Outstanding,
end of yr.   1,327,400   $3.42   1,591,360    $3.22    97,840   $2.66
             =========   =====   =========    =====    ======   =====

<PAGE>

A summary of the outstanding stock options as of March 31, 1998, follows:

                                    Weighted Average
    Range of             Amount        Remaining      Weighted Average
 Exercise Prices      Outstanding   Contractual Life   Exercise Price
 ---------------      -----------   ----------------   --------------
 $2.00 to $2.99         230,000       1.78 years           $2.72
 $3.00 to $5.00       1,097,400       2.19 years           $3.56


d.  Stock Rights - To The President

Reference is made to Note 7, 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.

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; as of March 
31, 1998; 55,000  shares  were borrowed and were paid after the fiscal 
year ended.  In addition, there  were 18,000 common shares due; 15,500 
shares were for  the purchase   of  equipment  and  2,500  shares  were  
for  services rendered.

g.  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, 478,197 
were issued and 21,803 shares are  authorized to be issued.

(11)  Litigation

There is no material  litigation.

<PAGE>

(12) Commitments and Contingencies:

Based upon current knowledge, the Company believes that it is  in 
material  compliance with environmental laws and  regulations  as 
currently   promulgated.    However,   the   exact   nature    of 
environmental  control problems, if any, which  the  Company  may 
encounter in the future cannot be predicted, primarily because of the  
increasing  number,  complexity and  changing  character  of 
environmental  requirements  that  may  be  enacted  or  of   the 
standards being promulgated by governmental authorities.

(13) Recently Issued Financial Accounting Standards

In  June  1997, the Financial Accounting Standards  Board  (FASB) issued 
Statement of Financial  Accounting Standards No. 130 (SFAS 130),  
Reporting Comprehensive Income.  SFAS 130 is  designed  to report  a 
measure of all changes in equity of an enterprise  that result from 
recognized transactions and other economic events  of the  period other 
than transactions with owners in their capacity as  owners.  Besides net 
income, other comprehensive income would include   foreign  currency  
items,  minimum  pension   liability adjustments,   and  unrealized  
gains  and  losses   on   certain investments  in  debt and equity 
securities.  The  provisions  of SFAS 130 will be effective for fiscal 
years beginning after March 31,  1998.   Upon  adoption, the Company does  
not  anticipate  a material impact on its financial statements.

In  June  1997 the FASB issued Statement of Financial  Accounting
Standards  No. 131 (SFAS 131), Disclosures about Segments  of  an 
Enterprise   and  Related  Information.   SFAS  131   established 
standards  for the way that public business enterprises determine 
operating segments and report information about those segments in annual  
financial  statements.   SFAS  131  also  requires  those enterprises  to  
report  selected  information  about   operating segments  in  interim 
financial reports issued  to  shareholders.  SFAS  131  further  
establishes standards for related  disclosure about   products  and  
services,  geographic  areas,  and   major customers.   The  provisions 
of SFAS 131 will  be  effective  for fiscal years beginning after March 
31, 1998.  Upon adoption,  the Company  does  not anticipate a material 
impact on  its  reported disclosures.

<PAGE>

ITEM 9.  CHANGES IN AND DISAGREEMENTS 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 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
MANAGEMEMT

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.

Compliance with Section 16(a) of the Securities Exchange  Act  of 1934.

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 and Supplementary Data in
Item 8 of this report.

Report  of  Independent  Accountants on the  Financial  Statement
Schedules

Schedule IV (1) Indebtedness of Related Parties

Schedule IV (2) Indebtedness to Related Parties

(b)  Reports on Form 8-K

Form 8-K dated January 21, 1998 regarding the Company's employing
Fortress  Financial Group, Limited to advise and  counsel  it  on
procedures  and techniques to increase the Company's  shareholder value.
(Incorporated by reference as this Form  8-K  was  filed electronically
through the EDGARLink Electronic Filing System  on January 21, 1998.)

(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.

  4.1*    Stock  Option Agreement dated March 22, 1995  was
          modified  in  a letter agreement dated  June  26,
          1997 by reducing the number of shares from 20,710
          to  20,000,  increasing the price per share  from
          $4.00  to  $4.25,  and extending  the  expiration
          dated  from  September 22, 1997 to September  22,
          1998.  (Incorporated by reference to Exhibit 4.14
          of  the  Company's Form 10-K for the  year  ended
          March  31,  1995 and Exhibit 4.3 of the Company's
          Form 10-K for the year ended March 31, 1997)
          
  4.2     Three-Year  Stock Option Agreement dated  October
          1, 1996 to purchase 22,500 common shares at $3.00
          per  share. (Incorporated by reference to Exhibit
          4.6 of the Company's Form 10-K for the year ended
          March 31, 1997.)

<PAGE>

  4.3     Four-Year  Stock Option Agreement dated  December
          9,  1996 to purchase 3,000 common shares at $3.00
          per  share. (Incorporated by reference to Exhibit
          4.7 of the Company's Form 10-K for the year ended
          March 31, 1997.)
          
  4.4     Four-Year  Stock Option Agreement dated  December   
          11,  1996  to  purchase 15,000 common  shares  at
          $3.00  per  share. (Incorporated by reference  to
          Exhibit  4.8 of the Company's Form 10-K  for  the
          year ended March 31, 1997.)
          
  4.5     Four-Year  Stock Option Agreement dated  December   
          11,  1996  to purchase 60,000 common   shares  at
          $3.00  per  share. (Incorporated by reference  to
          Exhibit  4.9 of the Company's Form 10-K  for  the
          year ended March 31, 1997.)
          
  4.6     Four-Year  Stock Option Agreement dated  December   
          14,  1996  to  purchase 83,900 common  shares  at
          $3.00  per  share. (Incorporated by reference  to
          Exhibit  4.10 of the Company's Form 10-K for  the
          year ended March 31, 1997.)
          
  4.7     Four-Year  Stock Option Agreement dated  December   
          27,  1996  to  purchase 30,000 common  shares  at
          $2.50  per  share. (Incorporated by reference  to
          Exhibit  4.11 of the Company's Form 10-K for  the
          year ended March 31, 1997.)
          
  4.8     Four-Year  Stock Option Agreement dated  December   
          31,  1996  to  purchase 25,000 common  shares  at
          $3.00  per  share. (Incorporated by reference  to
          Exhibit  4.12 of the Company's Form 10-K for  the
          year ended March 31, 1997.)
          
  4.9     Four-Year  Stock Option Agreement  dated  January   
          10,  1997  to  purchase 68,000 common  shares  at
          $3.00  per  share. (Incorporated by reference  to
          Exhibit  4.13 of the Company's Form 10-K for  the
          year ended March 31, 1997.)
          
  4.10    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. (Incorporated by reference to Exhibit 4.14
          of  the  Company's Form 10-K for the  year  ended
          March 31, 1997.)
          
  4.11    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. (Incorporated by reference to Exhibit 4.15
          of  the  Company's Form 10-K for the  year  ended
          March 31, 1997.)
          
  9       Voting Trust Agreement--not applicable.

<PAGE>

 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.)

 10.9*    Lillian  M. Skeen, Loan Agreement and Open  Ended
          On Demand Promissory Note dated June 26, 1997.

 10.10*   Robert C. Skeen, Loan Agreement and Open Ended On
          Demand Promissory Note dated June 26, 1997.

 10.11*   Robert C. Skeen, Loan Agreement and Open Ended On
          Demand Promissory Note dated January 20, 1998.
          
 10.12*   John  E.  Machulak and Susan R.  Robertson,  Loan
          Agreement  and  Open Ended On  Demand  Promissory
          Note dated March 6, 1998.

 <PAGE>

 10.13*   Lillian  M. Skeen, Loan Agreement and Open  Ended
          On Demand Promissory Note dated May 21, 1998.

 11*      Schedule of Computation of Net Income Per Share

 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  within 120 days after 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 13, 1998.
          
 99.2*    Confirmation Agreement, Edward L. Machulak, April
          13, 1998.
          
 99.3*    Confirmation   Agreement,  Edward   L.   Machulak
          Rollover Individual Retirement Account, April 13,
          1998.
          
 99.4*    Confirmation Agreement, Sylvia Machulak  Rollover 
          Individual Retirement Account, April 13, 1998.
          
 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 8 of the Company's  Form  10-K
          for the year ended March 31, 1998.)

 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.)

99.10     Individual financial statements of majority-owned
(d)(2)    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     Pending  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, 1998

                             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 May 19, 1998.

                                COMMERCE GROUP CORP.
                                (Company)
                                   
                                   
                                   
                                By: /s/ Edward L. Machulak
                                    ----------------------
                                    Edward L. Machulak
                                    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   Chairman   of  the  Board   of   May 19, 1998
----------------------   Directors, Member of Executive
Edward L. Machulak       Committee,  Director-Emeritus,
                         President,  Treasurer,   Chief
                         Executive,    Operating    and
                         Financial Officer

/s/ Edward A. Machulak   Director,  Member of Executive   May 19, 1998
----------------------   Committee,   Executive    Vice
Edward A. Machulak       President and Secretary

/s/ Sidney Sodos         Director                         May 19, 1998
----------------------
Sidney Sodos
                                                         
/s/ Clayton H. Tebo      Director                         May 19, 1998
----------------------
Clayton H. Tebo

<PAGE>

   REPORT OF INDEPENDENT ACCOUNTANT ON THE FINANCIAL STATEMENT
                            SCHEDULES



My  report  on the consolidated financial statements of  Commerce Group
Corp.  for  its fiscal years ended March 31,  1998,  1997, 1996,  1995
and  1994,  is  included  in  this  Form  10-K.   In connection  with my 
audits of such financial statements,  I  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  my  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.

Bruce Michael Redlin
Certified Public Accountant



Milwaukee, Wisconsin
May 19, 1998

<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                                   Balance
                       Beginning   Additions to    Deletions to       at
                          of       Indebtedness    Indebtedness     End of
Name of Person (1)      Period        (2)              (3)          Period
------------------      ------     ------------    ------------     ------

Year ended
March 31, 1998
Joint Venture        $15,693,766   $3,806,742           $0        $19,500,508

Year ended
March 31, 1997
Joint Venture        $11,799,074   $3,894,692           $0        $15,693,766

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


(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                                   Balance
                       Beginning   Additions to    Deletions to       at
                          of       Indebtedness    Indebtedness     End of
Name of Person (1)      Period        (2)              (3)          Period
------------------      ------     ------------    ------------     ------

Year ended
March 31, 1998
SSGM                 $19,388,321   $2,136,654           $0        $21,524,975

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

<PAGE>

       COMMERCE GROUP CORP.  AND CONSOLIDATED SUBSIDIARIES

                         SCHEDULE IV(2)
                 INDEBTEDNESS TO RELATED PARTIES
       CURRENT YEARS ENDED MARCH 31, 1998, 1997, AND 1996

                      Balance at
                       Beginning   Additions to   Deletions to   Balance
Identity of               of       Indebtedness   Indebtedness   at End of
Debtor(1)               Period         (2)            (3)         Period
---------             ----------   ------------   ------------   ---------
Year ended
 March 31, 1998
President of the
Company              $1,839,465    $350,546(a)    $       0     $2,190,011
President's IRA         400,919      62,766(b)            0        463,685
President's
Affiliated Company      963,152     199,690(c)            0(a)   1,162,842
Others                  257,993      25,200(d)            0        283,193
                     ----------    -----------    ------------  ----------
 Total, notes
 payable             $3,461,529    $638,202        $      0     $4,099,731
                     ==========    ===========     ===========  ==========
President's
Accrued Salary       $1,344,015    $165,000(e)     $      0     $1,509,015
                     ==========    ===========     ===========  ==========
Legal fees
(President's son
is a principal)      $  137,069    $ 38,013(f)     $      0     $  175,082
                     ==========    ===========     ===========  ==========

Year ended
 March 31, 1997
President of the
Company              $1,346,304    $493,161        $      0     $1,839,465
President's IRA         342,002      58,917               0        400,919
President's
Affiliated Company    1,175,984     215,668         428,500        963,152
Others                  220,080      37,913               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        $      0     $1,344,015
                     ==========    ===========     ===========  ==========
Legal fees
(President's son is
a principal)         $   76,883    $ 60,186        $      0     $  137,069
                     ==========    ===========     ===========  ==========

Year ended
 March 31, 1996
President of the
Company              $  841,168    $651,386        $146,250     $1,346,304
President's IRA         291,617      50,385               0        342,002
President's
Affiliated Company      961,012     214,972               0      1,175,984
Others                  163,037      70,668          13,625        220,080
                     ----------    -----------    ------------  ----------
 Total, notes
 payable             $2,256,834    $987,411        $159,875     $3,084,370
                     ==========    ===========     ===========  ==========

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

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 net cash advances and/or  for  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 net cash  advances
           and/or 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 are reflected as a  net  to  the
           additions:

(3)(a)     During  the  fiscal  period ended  March  31,  1997,  the 
           President's  Affiliated  Company  purchased  the   following 
           common  shares from the Company:  130,000 common  shares  on 
           June  10,  1996  at  a cost of $292,500; and  68,000  common 
           shares  on  January  10, 1997 at a cost  of  $136,000.   The 
           payment  for the purchase of common shares was made  by  the 
           cancellation  of  $428,500  debt  owed  to  the  President's 
           Affiliated Company.