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<br />GERSH & DANIELSON <br />Philip Hocker <br />Page 2 <br />(including the employees who run the water treatment plant) through <br />December 15, 1992 and has now filed for bankruptcy protection. <br />As you probably know, one of the benefits of thelsettlement <br />agreement we entered into with the company last year was that its <br />performance was guaranteed not only by the bond, but by the <br />corporate guarantees of both Galactic (its parent) ahd Galactic <br />Resources (parent of the parent corporation). <br />Unfortunately, what we are now told is that both of these <br />companies lack the assets to continue to operate the water <br />treatment plant, which is estimated to cost about $40,000 per <br />month. <br />We are not taking this lightly in any respect. T~e Attorney <br />General has filed suit againt all three companie and has <br />succeeded in obtaining a preliminary injunction orderi g Galactic <br />Resources to continue to operate the water treatment plant. In <br />addition, EPA has stepped in and has indicated that the will under <br />any foreseeable circumstances ensure that the water treatment plant <br />continues to operate. <br />The bond, so far as I am aware, is adequate to depl with all <br />of the reclamation issues, but does not cover the ongoing expenses <br />of operation of the water treatment plant. <br />We were within .a reasonably short period of time~of the day <br />when we hoped to have the tailings capped, or otherw~se prevent <br />additional inflitration of water from precipitation, which would <br />make our problem very much easier indeed. Unfortunately, we did <br />not reach that point, and water continues to be added to the <br />system. <br />Our fear, of course, is that this means that if th~~e treatment <br />plant does not operate, there are a number of unplatable <br />possibilities: <br />a. The water pumped from the sump under the tailings heap <br />would have to discharged without treatment; <br />b. If pumping of the sump under the tailings stopped, the <br />contaminated water under the leach pad would spread into <br />the groundwater system and would, of course, ultimately <br />impact the surface water as well; and/or <br />c. The liquid level in the tailings would continue to rise <br />until it overtopped the dam which retains the leached <br />