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• <br />Production Historv <br />Kerr Coal began mining operations in the summer of 1974 and produced 7,900 <br />tons of coal in the last quarter of that year. From 1974 through 1977, <br />the production rate gradually increased to a maximum production level in <br />1980 of approximately 754,000 tons. Between 1980 and the present, <br />production has fluctuated in response to market demand ranging from <br />approximately 10,000 to 270,000 tons of coal. <br />Kerr Coal's current coal production is limited to the south mine area <br />where approximately 200,000 tons of minable coal remained in April, 1990. <br />Current production is being sold on the spot market where competition from <br />Wyoming's Powder River Basin has kept spot prices relatively low. <br />The Kerr Coal operation is also constrained by the steeply dipping <br />orientation of the Sudduth coal seam which results in increased mining <br />costs, and by limited access to low cost transportation. Continued <br />• operation of the existing rail line from Warden, Colorado to Laramie, <br />Wyoming is directly dependent upon significant increases in coal haulage <br />from the Kerr Coal Mine and some assurance of long term stability in coal <br />haulage demand. <br />With the noted constraints, the economic viability of the Kerr Coal <br />operations is uncertain. Without significant improvement in the coal <br />market and favorable resolution of the railroad question, Kerr Coal may be <br />forced to cease mining with recovery of remaining Pit 1 reserves. <br />Any future mining, other than completion of Pit 1 will be market dependent <br />and will proceed under revised mining and reclamation plans which must <br />first be approved by the CMLRD. <br />Contracts and Coal Commitments <br />When Kerr Coal began operations in 1974, it was a small coal company <br />without the financial resources to support a marketing organization. As <br />a consequence, a sales agreement was executed with Tower Fuels Sales <br />-5R- Revised - August, 1990 <br />Company of Northfield, Illinois, to serve as marketing agent for the coal <br />produced from the Marr Strip pl. Since the company reorganization in <br />August 1977, the marketing functions are performed jointly by Tower Fuels <br />