2019-12-23_REVISION - M1977342

• Permit No: M1977342
• IBM Index Class Name: Revision
• Doc Date: 12/23/2019
• Doc Name: Status Update
• From: Climax Molybdenum
• To: DRMS
• Type & Sequence: AM7
• Email Name: PSH
• Media Type: D
• Archive: No

VALUATION OF SKYLARK RANCH WATER RIGHTS
December 2019
1.0 INTRODUCTION
The Climax Molybdenum Company ("Climax"), a wholly owned subsidiary of Freeport-
McMoRan, Inc., operates the Henderson Mine and Mill located in the Colorado
mountains about 50 miles west of Denver. The Henderson Mine is located in Clear
Creek County on the east side of the Continental Divide in the headwaters of the South
Platte River basin. The Henderson Mill is located in Grand County on the west side of
the Continental Divide along the Willams Fork River in the headwaters of the Colorado
River basin. Ore from the underground mine is transported to the mill for processing by
a 15-mile conveyor system underneath the Continental Divide. The Henderson Mine
and Mill properties were acquired by Climax in a 1970s land exchange with the U.S.
Forest Service, along with the purchase of other private lands. The location of the
Henderson Mill is shown in Figure 1-1.
Water is used in the molybdenum milling process, and after processing, the spent ore is
transported in an ore-water slurry for deposition at a large tailings pond located in the
Ute Creek drainage just west of the Williams Fork River. Water for the milling processes
is diverted under various direct flow and storage water rights owned by Climax.
Certain of the Henderson Mill water rights may be used as security for bonding that is
required by the Colorado Division of Reclamation, Mining and Safety ("DRMS") for
reclamation of the mine upon its closure. The value of the Henderson Mill water rights
that are used to secure the bonding is required to be determined through a water rights
appraisal by a qualified independent consultant. Spronk Water Engineers, Inc. ("SWE")
was retained by Climax to provide a market valuation of certain water rights associated
with the Henderson Mill known as the "Skylark Ranch Water Rights.".
SWE is a consulting engineering firm in Denver Colorado that specializes in water
resources engineering and water rights in the western United States. SWE has
performed numerous water right valuations for various clients, including for buying and
selling of water rights, fixed asset studies, tax deductions, and loan collateral purposes.
The firm has experience in all seven water divisions in Colorado, including the Colorado
River basin in which the Henderson Mill water rights are located.
This report describes the Skylark Ranch Water Rights that are the subject of the
appraisal, presents estimates of the water right yields, summarizes comparable water
right sales and leases, and presents our analysis of the current (2019) market value of
the subject water rights.
0 Spronk Water Engineers,Inc. Page 1 1