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through the 9.6 mile long main haulage tunnel to the west side of the Divide and, <br />hence, along the overhead conveyor route to the mill in the upper Williams Fork <br />River Valley for concentration. <br />On July 9, 2002, Henderson received the formal cost estimate for financial <br />warranty (FW) from the DMG. DMG's cost calculations increased the amount of the <br />FW required of Henderson from the present $10,133,000 to $54,695,000. <br />The DMG cover letter with the cost calculations specified three options available to <br />Henderson for reducing the amount of the required FW. These options included <br />revision of "...the reclamation plan in order to reflect a reduced cost.", <br />demonstration by Henderson that some cost estimates by DMG are excessive, <br />and performance of reclamation on site to reduce the FW. <br />Referenced TR-12 was submitted to revise the permit. This "clarifications" report <br />is submitted to clarify inaccuracies and ambiguities in DMG's cost calculations, <br />demonstrate that some cost estimates by OMG are excessive, and suggest <br />several cost additions for the final FW. <br />2.0 NEED FOR CLARIFICATIONS <br />As DMG is acutely aware, the face of mine reclamation and closure bonds has <br />changed dramatically over the past 7 years. Prior to approximately the mid-1990s, <br />most mineral producing interests could obtain such bonds with a simple call to <br />their insurance carriers. Premiums, although historically high, were reasonably <br />affordable. During the 1990s, and more specifically since about the mid-19906, <br />straight insurance bonds for reclamation and closure have become increasingly <br />difficult to obtain and significantly more expensive when they can be obtained. <br />Similar to automobile insurance firms cancelling policies for excessive citations <br />and accidents, increased bankruptcies of junior and mid-level mining companies <br />in the 1990s, resulting in defaults of reclamation and closure bonds, have caused <br />most insurance carriers to cancel policies and exit that specific market. In <br />addition, the long-term time frame associated with most mine reclamatian <br />obligations have caused surety interests to become wary and hesitant to <br />underwrite obligations extending beyond five years. Even large, active, well <br />capitalized corporations such as PDC must now seek multiple and complex <br />venues, including collateralization of land and water assets, to fulfill ever- <br />2 <br />