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III IIIIIIIIIIIII III ~ 999 DIVISION OF MINERALS AND GEOLOGY Depanmenl o(Nalural Resources 131) Sherman SI., Room 215 Denver, CO 80203 Phone: 0031866-3567 fA%:1]071832-8106 December 17, 1993 p4 ~O~o N~ , ti~~ I~ Roy Romer Governor Mahacl B. Long Mr. A. Reid Jones, Vice President - Finance Orv~fion Direcio~ VALCO, Inc. P. O. Box 550 Rocky Ford, Cd 81067 RE: Finanial Warranty securing Permits H-77-023, M-77-222, M-77-223, M-77- 559, M-77-560, M-77-572, M-77-573, M-78-287, M-81-014, H-81-132, H-84- 008 and M-86-015 Dear Mr. Jones: On December 16, 1993, the Division of Minerals and Geology conducted a review of your files and found the following: the new appraisal for the property securing the reclamation bonds of VALCO, Inc. to be inadequate. During a cursory inquiry this Office found property in the area of the subject deeded property to have a market value of approximately $250/Acre, including minerals, compared to the $4,700/Acre claimed in the appraisal. We believe this ie in violation of: C.R.S. 34-32-117(6)(a) for failure to maintain the Financial Warranty for the life of the permit. Therefore, we have reason to believe that a violation exists to the above referenced Permit Numbers and to the Law, and have scheduled this matter before the Hined Land Reclamation Board. A Formal Public Hearing will be held during the January 26 and 27, 1994 Board meeting for consideration of possible violation. The hearing will be held in Room 318 of 1313 Sherman Street, Denver, Colorado, beginning at 9:00 a.m. or ae soon thereafter as the matter can be considered. At that hearing you will have the opportunity to be represented and heard. It will be reiterated that there ie reason to believe that you are in violation of the provisions noted above. If the Board finds a violation at this hearing, it may issue a Cease and Desist order, assess a Civil Penalty in the amount of $100 to $950 for each day of violation, or order the permit be suspended, modified, or revoked. In addition, it may set the matter for consideration of forfeiture of $500,000 financial warranty at a subsequent hearing. If you have evidence indicating that the possible violations noted above do not exist or have been corrected, please provide it to us as soon as possible or bring it to the hearing. In order to correct this matter, you may: (1) poet the $251,704 insufficiency; (2) withdraw the Deed of Trust and submit the full $329,954 bond in an alternative warranty type; or (3) submit a recalculation of your bonds with proof of sufficient reclamation activity to justify a decrease in your reclamation bond liability to the $76,250 currently secured. If you have any questions, please contact James Stevens. SS ince HICHAEL B. ~~ Division Director • STATE OF COLORADO MBL/JCS/lpl CERTIFIED MAIL NO. P 296 525 766 Return Receipt Requested