Memorandum Agenda Item 11e 05/15/2000

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Landmine Page 7 of 20 Then, seemingly out of the blue, Bechtel Corp., the giant construction company, took an interest in Summitville. •Friedland, who was deposed in December, said he doesn't know why Bechtel became interested. Bechtel might have seen the company's press releases or been tipped off by others in the industry, he said. "But I do know what I do know, which is that one day there came a knock at my door and a delegation from Bechtel appeared in our offices on the ninth floor of the Marine building here in Vancouver," Friedland recalled. The Bechtel officials offered to build the mine and turn it over to Galactic for a fixed fee. "The whole nine yards is being proposed to be encompassed in this preliminary agreement," Friedland said. "And to my knowledge, no one had seen anything like this before up here in Vancouver, between Bechtel and a young start-up company." Before construction began in 1985, Bechtel backed away from its initial offer to build the entire mine. The San Francisco-based construction giant let another company dig the pit that would contain the ore and the cyanide solution, as well as erect the dike that was supposed to contain it. A Bechtel spokesman, Jeff Berger, denies the company ever agreed to build the entire mine and turn it over to Galactic. Berger says Galactic selected another company, Industrial Constructors Corp. of Montana, to build the cyanide leaching system. Friedland has since sued Bechtel, blaming the company for problems at the mine. Bechtel denies any wrongdoing. But in the spring of 1985, Galactic was basking in the glow of a partnership with the most prestigious construction company in the world—the company from which President Reagan had drawn two of his most powerful Cabinet members. Suddenly, the Bank of America—also under the impression Bechtel had agreed to build the entire mine—was interested in Galactic.With gold prices flying high in the early '80s, bank officials saw a chance to develop a niche market among start-up mining companies, according to court documents. The bank offered $25 million to finance the mine, asking that Galactic put up $8 million, to be raised from stock sales. What the bank wanted to see in return was a business plan showing that the loan could be repaid. But the cost figures geologists and mining experts were sending to Galactic headquarters in Vancouver told a different story, recalled Roger Leonard, the mine manager at the time. In response, Ed Roper, Friedland's mining expert, was dispatched to Colorado. On a snowy day in May 1985, he met with the Summitville crew at the company's office in Del Norte, according to Leonard. "Basically, Ed says ... 'You guys are too high. Let's just cut 20 percent.' I • don't remember if it was exactly 20 percent, 'let's cut it arbitrarily,"' said http://www.denver-rmn.com/news/0507smmt1.shtml 5/7/00