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Cheryl A. Linden, Esq. <br />Robert D. Clark, Esq. <br />January 26, 2001 <br />Page 2 <br />Dragoo will serve as the contacts for the State and assist with organization, management and any <br />other immediate needs that arise. <br />Part I. Efforts To Obtain A New Bond <br />Powderhom has spoken with representatives from three brokers during the intervening <br />period regarding bonds to replace the existing Frontier reclamation bonds. The companies <br />contacted, along with status of the conversation, include: <br />• Acordia - (Pete Gibson, Senior Vice President) - Mr. Gibson has been retained to make <br />contacts on behalf of Powderhom. Updates on Mr. Gibson's progress will be included in <br />each Fortnightly Report. This arrangement will increase the number of contacts that can be <br />made during each reporting period, with the expectation of enhancing the likelihood of <br />success. <br />• City Insurance - (Charles Morton, Executive Vice President) - is Powderhorn's broker of <br />record for Frontier. Mr. Morton is reviewing the matter, but believes there needs to be <br />significant improvement to the balance sheet before Powderhom will be able to obtain a <br />replacement bond. <br />• Marsh USA, Inc. -(Drew Brach- Senior Vice president & Midwest Surety Practice Leader) - <br />This was our first contact with Mr. Brach, who is a specialist in the mining industry and very <br />familiaz with Frontier's current situation. He has experience with other Chapter 11 <br />companies. He believes that while it will take time and effort, there are alternatives. Mr. <br />Brach identified the possibility of a sale of the properties or otherwise to incorporate a <br />settlement agreement between Frontier, a new surety and the lending group into a Plan of <br />Reorganization. <br />Powderhor will provide the contact information for the aforementioned individuals during the <br />next reporting period. If the State desires the contact information before that time, please let me <br />know and I will prepare a supplement to this report. <br />Part77. Efforts Involving Frontier <br />On January 19, 2001, Ethan Fogel and Tom Munro contacted Mr. William Gorton, who <br />serves as attorney for Frontier (Mr. Gorton's contact information is: Stites & Harbison, 250 West <br />Main Street, Lexington, Kentucky, Telephone 859-226-2241; Fax 859-253-9144). They reported <br />to Mr. Gorton that the DMG imposed conditions on Powderhorn's request for an extension of <br />time to abate the NOV, as specifically described in the DMG letter dated January 12, 2001. <br />Mr. Gorton was informed that it is Powderhom's position that the NOV resulted entirely <br />from Frontier's failure to maintain its listing with the United States Department of Treasury, and <br />7340.1 <br />