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