Memorandum Agenda Item 11e 05/15/2000

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Land mine Page 11 of 20 Krasovec said the exchange took place during a tour of the mine on Aug. 1, 1986, nearly two months after the leaks began. • Friedland said he can't recall making the comments to Kravosec. "Since I have no recollection of anything like this or anything near this fantastic, I'm confident it never occurred," Friedland said. He calls the allegations"just false." Friedland noted that the engineering firm Klohn Leonoff later lost a suit to Galactic in the Canadian courts over responsibility for the Summitville fiasco. But the leaks didn't go away. The water kept rising, and the problem haunted Galactic until the day it declared bankruptcy. Red ink, waste water rise fast By the end of the summer of 1986, the pool of cyanide solution was rising behind the dike, swelled by the polluted groundwater being pumped back into it. To keep the "bathtub"from overflowing, workers built the dike higher. "It was a problem that needed to be solved, because the alternative to not coming up with a solution ... was you were going to build a couple of dams that eventually got to the moon,"said Gerald Wyman, who was hired to replace Roper in 1987. • Meanwhile, the red ink was rising as fast as the water. In June, Galactic and the bank had hoped the mine would be producing more than 500 ounces of gold a day. But production was stuck at between 200 and 300 ounces a day through the summer. By fall, the Bank of America was nervous about its $25 million loan, but also reluctant to foreclose. The last thing the bank needed was a problem- plagued gold mine in Colorado, said Linkletter, the bank's vice president. "At this point in time we are probably fully pregnant," Linkletter said in his deposition. He was referring to the alleged strategy of luring the bank into the project with low-ball numbers, knowing that foreclosure would be impossible. The bank rescheduled loan payments originally due in November 1986. Bank officials took comfort in Friedland's efforts to cover the debt by selling more securities. "Mr. Friedland has a proven track record in raising capital, and we should encourage him in his efforts to bring in new capital, which can be used in part to pay down the Summitville debt," Linkletter assured other Bank of America officers in a memo. Galactic had been covering shortfalls by selling stock at least since 1985, when it became obvious that the gold mine could not be built for the$33 • million Galactic had submitted to the bank in the business plan. But Summitville was looking worse, and Friedland was having problems http://www.denver-rmn.com/news/0507smmtl.shtml 5/7/00