CALIFORNIA ENGELS MINING CO - 10-K Annual Report

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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10-K

Annual Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934 for the Fiscal Year Ended December 31, 2004
Commission File No. 1-3871

CALIFORNIA-ENGELS MINING COMPANY

Incorporated in the State of California
IRS Employer I.D. No. 94-0357560

117 Crescent Street
P. O. Box 778
Greenville, California 95947-0778
Telephone Number (530) 284-6191

SECURITIES REGISTERED PURSUANT TO SECTION 12 (b) OF THE ACT

Title of Each Class - Capital Stock, par value, $0.25 per share.

Number of Shares outstanding: 757,226.04

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,
and
(2) has been subject to such filing requirements for the past 90
days. Yes: X No:

As of March 15, 2005, 757,226.04 capital shares were
outstanding, and the aggregate market value of the common shares
of California-Engels Mining Company held by nonaffiliates was
approximately $419,513.

Documents Incorporated by Reference: NONE

Filing Contains 35 Pages

PART 1

ITEM 1. BUSINESS

Registrant was incorporated under the laws of the State of California on
July 12, 1922, under the name of California Copper Corporation, as a
holding company for the shares of its operating company Engels Copper
Mining Company which was incorporated under the laws of the State of
California on June 19, 1901. Engels Copper Mining Company was merged into
California Copper Corporation on March 3, 1936, and the name of the merged
company was changed to California-Engels Mining Company. Exploration and
development commenced at the Engels Mine, Lights Creek Mining District,
Plumas County, California, upon organization of Engels Copper Mining
Company; but it was not until 1914 that milling facilities were available
and actual production of copper started. From 1914 until operations were
suspended due to the low price of copper in July, 1930, approximately
4,700,000 tons of ore were mined from the Engels and Superior mines and
milled producing 160,170,000 pounds of copper and substantial values in
gold and silver. Out of profits of this operation, the Registrant retired
a bond issue of $500,000 and paid out more than $1,285,000 in dividends.
During the 1930's the mining and milling plant, Engelmine townsite and the
Indian Valley Railroad subsidiary were dismantled and sold.

Registrant's mining properties were continuously leased from
September, 1947, to March, 1951; from March, 1951, to December, 1959; from
November, 1960, to October, 1979; from August, 1980, to August, 1990; and
from November, 1990, to April 1993. The lessee from 1964 to 1993 was
Placer Dome U.S. Inc., the U.S. Subsidiary of Placer Dome Inc., Vancouver,
B.C., Canada. The Mining Lease With Option to Purchase, between the
Registrant (Lessor) and Placer Dome U.S. Inc. (Lessee) was terminated by
Placer Dome U.S. Inc. effective April 20, 1993. Registrant has received a
substantial amount of technical data on its mining properties and maintains
a library on the Plumas Copper Belt. Registrant's mineral deposits and
prospects are not deemed economically attractive under current conditions
for the mining industry, nor are they likely to be so in the foreseeable
future. The mining industry in the United States is being outsourced due
to the high costs of regulation and labor.

The Non-Industrial Timber Management Plan on Registrant's mining
properties was approved by the California Department of Forestry and became
effective July 2, 1999. The permitting process for this project began in
August, 1994 with the start of the archaeological survey and the February,
1995 agreement with Shasta Land Management Consultants to prepare the Plan.

The Non-Industrial Timber Management Plan is an assessment of the
timber inventory, conditions and potential of the entire property broken
down into units with similar growing conditions within each unit. Its
intent is to demonstrate a long-term commitment to appropriately manage the
resource. It functions as a coordinated collection of individual Timber
Harvest Plans and its advantage is that, once approved, the paperwork

necessary to initiate individual timber harvests is minimal. Under the
Plan the Registrant is restricted in management options to those
silvicultural systems that produce uneven-aged stands of timber.
Uneven-aged management means the management of a specific forest with the
goal of establishing a well-stocked stand of various age classes of trees
scattered over the forest. It will permit the periodic harvest of all size
classes as individual or small groups to realize yield. Over the long
term, forest growth and yield will be balanced. The Registrant will also
have the advantage of being able to time harvests for favorable market
conditions. It will take a number of years to fully implement the Plan.

After the effective date of the Non-Industrial Timber Management Plan
the Registrant filed a Notice of Timber Operations for a helicopter harvest
on its Green Ledge and Austrian Syndicate parcels on Ward Creek pursuant to
the Plan. The project harvested 377,520 board feet of timber and was
completed on October 28,
1999.

Registrant made application to the California Tree Farm Committee of
the American Tree Farm System for approval of its Engelmine Forest timber
lands on Lights Creek as a tree farm. Its Engelmine Forest was accepted as
California Tree Farm No. 2611 on June 17, 1999.

Registrant received approval on July 28, 2000 for a 103 acre hand
thinning project from the California Department of Forestry pursuant to
their California Forest Improvement Program. The Department reimbursed 75%
of the cost to the Registrant over the three year life of the agreement.
Other hand thinning projects funded by the Registrant are ongoing on other
overstocked areas of its property.

Registrant filed a Notice of Timber Operations pursuant to its
Non-Industrial Timber Management Plan on September 7th and December 15,
2000, for mechanical thinning and chipping/biomass projects on its Engels
and Smith parcels. A Timber Harvest Plan was filed for its Henry parcel on
November 27, 2000. Thinning began on December 11, 2000 by Pew Forest
Products, Crescent Mills, California using two Timbco feller buncher
machines, a stroke delimber, shovel loader, chipper, logging trucks and
other equipment. The thinning and timber harvest completed on July 13,
2001, products 1,432,000 board feet of small logs generating sufficient
funds to pay for the projects. The purpose of the thinning harvest was to
reduce fire danger, improve the timber stand, provide wildlife protection,
remove hazard timber and improve aesthetics.

The U.S.D.A. Forest Service approved its Sierra Nevada Forest Plan
Amendment on January 21, 2004 and affirmed it after appeals on November 18,
2004. The plan will activate the Herger- Feinstein Quincy Library Group
(HFQLG) pilot project on the Plumas National Forest. If the HFQLG is
implemented it will result in surface ladder fuels thinning to reduce the
extent and severity of wildland fires in the National Forest surrounding
Registrant's property.

Registrant is subject to a State of California General Industrial
Activities Storm Water Permit. During the year, pursuant to the
Registrant's Storm Water Pollution Prevention Plan, catch and evaporation
basins and monthly water sampling records were maintained.

ITEM 2. PROPERTIES

(a) Registrant is the fee owner of 36 patented lode mining claims
totaling 736 acres, plus 245.28 acres of other patented lands at Engelmine,
Lights Creek Mining District, Plumas County, California. None of the
claims or patented lands are subject to any encumbrance.

(b) Registrant is the fee owner of five patented lode mining claims
totaling 100 acres in the Genesee Mining District, Plumas County,
California. None of the claims are subject to any encumbrance.

ITEM 3. LEGAL PROCEEDINGS

None

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None

ITEM 5. MARKET FOR THE REGISTRANT'S CAPITAL STOCK AND RELATED SHAREHOLDER
MATTERS

(a) Principal Markets.

Registrant's shares of Capital Stock are quoted on the
Over-the-Counter Market in the "pink sheets" which are published daily by
the Pink Sheets LLC under the symbol "CAEN".

The following table shows the high and low bid prices of Registrant's
Capital Shares in the Over-the-Counter Market for the past two years:

(b) Approximate number of holders of capital stock.

The approximate number of holders of record of Registrant's Capital
Stock as of March 15, 2005, is 771.

(c) The Registrant has never paid a dividend on its Capital Stock
because it has had an accumulated deficit since the merger in 1936. The

Board of Directors of the Registrant is endeavoring to earn income from the
sale of timber, sale of land, sale of sand and rock and its bookkeeping
business so funds are available for the maintenance of its mining
properties and the implementation of its Timber Management Plan. It is not
the intention of the Registrant to pay dividends in the foreseeable future.

ITEM 6. SELECTED FINANCIAL DATA

Year Ended December 31

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

(a) Financial condition, changes in financial condition and results of
operations.

During the 30 years its mining properties were leased, the Board of
Directors of the Registrant endeavored to increase working capital, total
assets and shareholder's equity in the event that its lessee, Placer Dome
U.S. Inc., terminated its Mining Lease With Option to Purchase agreement
and return the mining properties to the Registrant. This event occurred
effective April 20, 1993. Thus funds were available to begin preparation of
the Non-Industrial Timber Management Plan. Because timber and land sale
revenues are infrequent, in order to provide regular monthly income the
President of the Registrant, on January 1, 2000, transferred his
bookkeeping business to the Registrant. Changes in working capital, total
assets and shareholder's equity for the past five years are summarized as
follows:

The objective of the Board of Directors of the Registrant is to earn
income from the sale of timber, sale of land, sale of sand and rock and its
bookkeeping business so that funds are available for the maintenance of its
mining properties and the implementation of its Non-Industrial Timber
Management Plan.

(b) Results of operations.

Registrant's principal sources of income are from the sale of timber,
sale of land, sale of sand and rock, bookkeeping business, interest and
dividends. There is no assurance that any of the sources of income will
continue at current rates into the future. The termination of the Mining
Lease With Option to Purchase agreement substantially increased
Registrant's property maintenance expenses.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Financial statements relying on Rule 3-11 of Regulation S-X which allows
the filing of unaudited statements of inactive registrants are listed in
the index to financial statements and schedules, and are included under
PART IV, Item 14, of this report.

ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURES

There were no disagreements on accounting and financial disclosure
matters required to be disclosed in this item.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

(a) Identification of Directors.

There are no arrangements or understandings between any of the foregoing
persons and any other person or persons pursuant to which any of the
foregoing persons were named as directors.

(b) Identification of Executive Officers.

There are no arrangements or understandings between any of the foregoing
persons and any other person or persons pursuant to which any of the
foregoing persons were named as executive officers.

(c) Identification of certain significant employees.

None

(d) No family relationships exist between any of the above named
directors and executive officers of the Registrant.

(e) Business experience.

(1) Norman A. Lamb is a Mining Executive and an officer and director
of several public mineral companies. He serves the Registrant as
President, was Secretary-Treasurer until November 16, 1987, and has been a
Director since 1978.

(2) Thomas J. Reardon is retired and formerly was a Department
Manager for Foremost Dairies. He serves the Registrant as Vice-president
and has been a Director since 1975.

(3) James E. Brousseau is a Mining Executive and an officer and
director of several public mineral companies. He was elected
Secretary-Treasurer and a Director on November 16, 1987.

(4) Richard C. Poulton is a Consultant. He was elected a Director of
the Registrant on March 27, 1993.

(5) M. Blair Ogden is a retired attorney and an officer and director
of several public mineral companies. He was elected a Director of the
Registrant on May 21, 2000.

(f) Involvement in certain legal proceedings.

There have been no events under any bankruptcy act, no criminal
proceedings

and no judgments or injunctions material to the evaluation of the ability
and integrity of any director or executive officer during the past five
years.

(g) Compliance with Section 16(a) of the Exchange Act

Registrant is not aware of any person who at any time during the year
2004 was a director, officer or beneficial owner of more than 10 percent of
Registrant's capital stock who failed to file on a timely basis reports
required by Section 16(a) during 2004 or prior years.

(h) As of year ended December 31, 2004, the Registrant did not have an
audit committee. Its financial statements are unaudited therefore it has
neither an audit committee nor an audit committee financial expert.

(i) As of year ended December 31, 2004, the Registrant has not adopted
a written code of ethics. Registrant has been in existence 103 years and
is guided by tradition, its Articles of Incorporation and By-Laws. In
addition, its officers and directors are, or represent, substantial
shareholders. Another document is not needed.

ITEM 11. Executive Compensation

(a) Cash Compensation.

(b) Compensation pursuant to plans.

During the fiscal year, Norman A. Lamb was reimbursed for out-of-pocket
expenses.

(c) Other compensation.

None

(d) Compensation of directors.

None

(e) Termination of employment and change of control arrangement.

None

ITEM 12. Security Ownership of Certain Beneficial Owners and
Management

(a) Security ownership of certain beneficial owners.

The following table shows, as of March 15, 2005, the number of shares of
Capital Stock held by every person owning of record or known by the
Registrant as owning beneficially more than five percent of the outstanding
stock:

* Includes 97,789 shares owned by Jenex Gold Corporation, a Washington
Corporation, of which Mr. Brousseau is Secretary-Treasurer, a Director and
substantial shareholder. Includes 86,000 shares owned by The Flowery Gold
Mines Company of Nevada, a Nevada corporation, of which Mr. Brousseau is
Secretary-Treasurer, a Director and major shareholder.

** Includes 97,789 shares owned by Jenex Gold Corporation, a Washington
Corporation, of which Mr. Lamb is President, a Director and major
shareholder. Includes 86,000 shares owned by The Flowery Gold Mines
Company of Nevada, a Nevada corporation of which Mr. Lamb is President, a
Director and major shareholder.

*** Includes 97,789 shares owned by Jenex Gold Corporation, a Washington
corporation, of which Mr. Ogden is Vice-President and a Director. Includes
86,000 shares owned by The Flowery Gold Mines Company of Nevada, a Nevada
corporation, of which Mr. Ogden is Vice-President, a Director and
substantial shareholder.

(b) Security ownership of management.

The following table shows as of March 15, 2005 all shares of Capital
Stock beneficially owned by all directors and all directors and officers of
Registrant as a group:

* Includes 97,789 shares owned by Jenex Gold Corporation, a Washington
corporation, of which Mr. Brousseau is Secretary-Treasurer, a Director and
substantial shareholder. Includes 86,000 shares owned by The Flowery Gold
Mines Company of Nevada, a Nevada corporation, of which Mr. Brousseau is
Secretary-Treasurer, a Director and major shareholder. Mr. Brousseau may
be deemed to have shared voting and investment power with respect to such
shares.

** Includes 97,789 shares owned by Jenex Gold Corporation, a Washington
corporation, of which Mr. Lamb is President, a Director and major
shareholder. Includes 86,000 shares owned by The Flowery Gold Mines
Company of Nevada, a Nevada corporation, of which Mr. Lamb is President, a
Director and major shareholder. Mr. Lamb may be deemed to have shared
voting and investment power with respect to such shares.

*** Includes 97,789 shares owned by Jenex Gold Corporation, a Washington
corporation, of which Mr. Ogden is Vice-President and a Director. Includes
86,000 shares owned by The Flowery Gold Mines Company of Nevada, a Nevada
corporation, of which Mr. Ogden is Vice-President, a Director and
substantial shareholder. Mr. Ogden may be deemed to have shared voting and
investment power with respect to such shares.

**** Includes 50,253 shares owned by the Poulton Trust, of which Mr.
Poulton is co-trustee. Mr. Poulton may be deemed to have shared voting and
investment power with respect to such shares.

***** Includes 44,366 shares owned by the Reardon Family Trust of which
Mr. Reardon is co-trustee. Mr. Reardon may be deemed to have shared voting
and investment power with respect to such shares.

(c) Changes in control.

Mr. Lamb may be deemed the "parent" or a "control person" of Registrant,
as those terms are defined under the Securities Exchange Act of 1934, as
amended. There are no arrangements known to Registrant the operation of
which may at a subsequent date result in a change of control of Registrant.

ITEM 13. Certain Relationships and Related Transactions

None

PART IV

ITEM 14. Exhibits, Financial Statements, Schedules and Reports
on
Form 8-K

(a) Financial Statements: Page

Balance Sheets as of December 31, 2004 2-3
and December 31, 2003.

Statements of Operations for the Years Ended
December 31, 2004, December 31, 2003, and
December 31, 2002. 4-5

Statements of Accumulated Deficit and
Accumulated Other Comprehensive Income (Loss)
for the Years Ended December 31, 2004,
December 31, 2003, and December 31, 2002. 6

Statements of Cash Flows for the years ended
December 31, 2004, December 31, 2003, and
December 31, 2002. 7-8

(b) Notes to Financial Statements 9-18

(c) Exhibits

None

(d) No reports on Form 8-K were filed during the last
quarter of 2004.

SIGNATURES

Pursuant to the requirements of section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.

CALIFORNIA-ENGELS MINING COMPANY
Registrant

By Norman A. Lamb
Norman A. Lamb, President and
Chief Executive Officer

Date: March 15, 2005

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
Registrant and in the capacities and on the dates indicated.

By Norman A. Lamb
Norman A. Lamb
President and Director
March 15, 2005

By Thomas J. Reardon
Thomas J. Reardon
Vice-President and Director
March 15, 2005

By James E. Brousseau
James E. Brousseau
Secretary-Treasurer
Chief Financial and Accounting Officer
March 15, 2005

By Richard C. Poulton
Richard C. Poulton
Director,
March 15, 2005

By M. Blair Ogden
M. Blair Ogden
Director
March 15, 2005

CALIFORNIA-ENGELS MINING COMPANY
FORM 10-K
FOR THE PERIOD ENDED December 31, 2004

CERTIFICATIONS

I, Norman A. Lamb, certify that:

1. I have reviewed this report on Form 10-K of California-Engels Mining
Company;

2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this report;

3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant is made known to us
particularly during the period in which this report is being prepared;

(b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing
date of this report (the "Evaluation Date"); and

(c) presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

1. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to registrant's board of directors (or
persons performing the equivalent functions):

(a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified
any material weaknesses in internal controls; and

(b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and

CALIFORNIA-ENGELS MINING COMPANY
FORM 10-K
FOR THE PERIOD ENDED December 31, 2004

CERTIFICATIONS, Continued

1. The registrant's other certifying officers and I have indicated in
this report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.

Date: March 15, 2005

/s/ Norman A. Lamb
Norman A. Lamb,
President and
Chief Executive Officer

CERTIFICATION

I, James E. Brousseau, certify that:

1. I have reviewed this report on Form 10-K of California-Engels Mining
Company;

2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this report;

3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant is made known to us
particularly during the period in which this report is being prepared;

(b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing
date of this report (the "Evaluation Date"); and

(c) presented in this report our conclusions about the effectiveness

CALIFORNIA-ENGELS MINING COMPANY
FORM 10-K
FOR THE PERIOD ENDED December 31, 2004

CERTIFICATIONS, Continued

of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

1. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation to the registrant's board of directors (or
persons performing the equivalent functions):

(a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified
any material weaknesses in internal controls; and

(b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and

1. The registrant's other certifying officers and I have indicated in
this report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.

Date: March 15, 2005

/s/ James E. Brousseau
James E. Brousseau
Secretary-Treasurer and
Chief Financial Officer

CALIFORNIA-ENGELS MINING COMPANY
(A California Corporation)

FINANCIAL STATEMENTS

December 31, 2004

page 1

CALIFORNIA-ENGELS MINING COMPANY
BALANCE SHEETS
DECEMBER 31, 2004 AND 2003
(Unaudited)

ASSETS

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

page 2

CALIFORNIA-ENGELS MINING COMPANY
BALANCE SHEETS
DECEMBER 31, 2004 AND 2003
(Unaudited)

LIABILITIES AND STOCKHOLDERS' EQUITY

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

page 3

CALIFORNIA-ENGELS MINING COMPANY
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
(Unaudited)

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

page 4

CALIFORNIA-ENGELS MINING COMPANY
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
(Unaudited)

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

page 5

CALIFORNIA-ENGELS MINING COMPANY
STATEMENTS OF ACCUMULATED DEFICIT AND ACCUMULATED OTHER
COMPREHENSIVE INCOME (LOSS)
FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
(Unaudited)

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

page 6

CALIFORNIA-ENGELS MINING COMPANY
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
(Unaudited)

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

page 7

CALIFORNIA-ENGELS MINING COMPANY
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
(Unaudited)

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

page 8

CALIFORNIA-ENGELS MINING COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2004

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This summary of significant accounting policies of California-Engels
Mining Company (the Company) is presented to assist in understanding the
Company's financial statements. The financial statements and notes are
representations of the Company's management who is responsible for their
integrity and objectivity. These accounting policies conform to Generally
Accepted Accounting Principles and have been consistently applied in the
preparation of the financial statements.

Nature of Activity

The Company's principal line of business is development of mineral and
timber properties. The principal revenue sources currently consist of
timber, land and rock sales, bookkeeping business, and investment income.
The Company's properties are located in the western United States.

Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from these estimates.

Basis of Accounting

The Company's books are maintained on the accrual method of accounting.

Cash and Cash Equivalents

For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments with a purchased maturity of three months of
less to be cash equivalents.

Concentration of Credit Risk

The Company places its temporary cash investments with financial
institutions and limits the amount of credit exposure to any one financial
institution.

Mineral and Timber Lands

Mineral and timber lands and depreciable property are stated at book
value less accumulated depletion and depreciation. Depreciation is
calculated using the declining balance method over five to seven years.
Timber depletion is calculated based on units of production.

page 9

CALIFORNIA-ENGELS MINING COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2004

Comprehensive Income

Pursuant to Financial Accounting Standards Board ("FASB") Statement No.
130, Reporting Comprehensive Income, the Company reports any material
components of comprehensive income in its financial statements.

Reclassification

Certain amounts in the prior year financial statements have been
reclassified to conform to the current years financial statement
presentation. Such reclassification had no effect on net equity or net
income.

NOTE 2 - PROPERTY AND EQUIPMENT

NOTE 3 - MINING CLAIMS AND FEE LAND OWNED

At December 31, 2004, the Company was the owner of 36 patented lode
mining claims totaling 736 acres comprising the Engels and Superior Mines
and 245.28 acres of patented land at Engelmine, Lights Creek Mining
District, Plumas County, California.

At December 31, 2004, the Company was the owner of five patented lode
mining claims totaling 100 acres on Ward Creek in the Genesee Mining
District, Plumas County, California.

page 10

CALIFORNIA-ENGELS MINING COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2004

NOTE 4 - VALUATION OF MINERAL LANDS - DEFERRED INCOME TAXES

The Mineral lands carried on the books at a value of $10,000 less
depletion have a historical cost basis from June 19, 1901 of $1,000,000.
Beginning in 1913, different valuations were placed on these lands by the
Commissioner of Internal Revenue. Under instructions of the Commissioner,
the values of the land were written up on the books to a high of $4,500,000
on February 23, 1928.

In 1934, because of depressed conditions, the mineral lands were written
down to $10,000 without any tax benefit. In the event of a sale of these
lands the recognized gain for tax purposes will be substantially reduced or
eliminated. Consequently a deferred tax asset of approximately $340,000
has been offset by a corresponding valuation allowance of approximately
$340,000 due to the unlikelihood of the sale of the property in the near
future.

It is estimated that the current market value of the properties meets or
exceeds the $1,000,000 historical cost basis; however, due to the length of
time the Company has reported the land values at the written down value of
$10,000, a change to the cost method has not been deemed appropriate for
reporting purposes.

NOTE 5 - DEEDS OF TRUST

Trust deed notes receivable at December 31,

page 11

CALIFORNIA-ENGELS MINING COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2004

NOTE 6 - INVESTMENT SECURITIES

In accordance with the provisions of SFAS No. 115, the available-for-sale
securities are reported as an asset at their fair market value with the
unrealized gain or loss excluded from earnings and reported as a component
of comprehensive income. The held-to-maturity securities are stated at
amortized cost, adjusted for amortization of premiums and accretion of
discounts to maturity. Realized gains and losses are determined using
specific identification of securities sold.

The investment securities portfolio was comprised of items classified as
available-for-sale and held-to-maturity at December 31, 2004 and items
classified as held-to-maturity at December 31, 2003.

The following reflect the estimated fair values of investment securities
and amortized cost held at December 31, 2004, 2003, and 2002. Fair values
are based on management's estimate.

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CALIFORNIA-ENGELS MINING COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2004

NOTE 6 - INVESTMENT SECURITIES, continued

Proceeds from the sale of equity securities were $11,657 and $71,315 in
2004 and 2002, respectively. No equity securities were sold in 2003.

NOTE 7 - CAPITAL STOCK

The Company retired odd lots totaling 1,464.9 shares of capital stock in
2004 and 225 shares in 2003.

page 13

CALIFORNIA-ENGELS MINING COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2004

NOTE 8 - CONTINGENT LIABILITIES

The Company is not a defendant in any legal proceeding nor is there any
litigation in progress, pending or threatened against the Company.

NOTE 9 - COMPREHENSIVE INCOME

The components of comprehensive income, net of tax, are as follows for
the years ended December 31:

The following shows the tax effect of each component of comprehensive
income as of December 31:

page 14

CALIFORNIA-ENGELS MINING COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2004

NOTE 9, continued

Accumulated other comprehensive income is comprised of only unrealized
gains (losses) on investment securities.

page 15

CALIFORNIA-ENGELS MINING COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2004

NOTE 10 - INCOME TAXES

page 16