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' _' ..~4r^,H 1`c,: _.: = 3S .'-.5256 E._~ci;i RESCe.!ECL3 LTD ~::GE 9v Mr. David A. Berry December 28, 2000 Page 3 a. Frontier's "de-authorization" will c7eate no harm duringtheabatement oeriod The basis for the NO Vs is that Frontier is no longer listed by the United States Departmern of the Treasury as an "authorized" surety company. However, Frontier is not in bankruptcy or receivership and, to the best of our knowledge, has not failed to honor any reclamation obligation anywhere in the country. Therefore, while the "de-authorization" of Frontier by the Treasuty Department may (or may not) constitute a technical violation of Colorado's bonding requirements, there is no evidence that Frontier has failed or will fail to honor any obligation to the Staze of Colorado. While this fact might (or might not) be insufficient as a defense to the underlying NOV, it is certainly a significam fad to consider in determining the appropriate abatement petiod. b. There will be no reclamation failure during the abatement~eriod. For the dispute between Frontier and the Treasury Departmea2 to cause form to Colorado during the abatement period, all of the following would have to ocau within the next 60 days' (1) Bowie would have to fail to meet a reclamation obligation, (2) Bowie would have to fail to correct the problem, and (3) Frontier would have to fail to perform on the bond. That improbable chain of events simply will not occur within the next 60 days. Bowie has not failed to meet reclamation obligations to date. Bowie is a healthy mine operator. As we have discussed with you and others previously, Bowie is a healthy and viable mn.e operator. All of. the production from the Bowie No. 2 mine for the next four years has already been sold. Our production costs aze ]ow. Our profit margins are heahhy. We recently installed a new downhill conveyor for $6,000,000, and we are currently bidding a 510,000,000 rail loading facility. Our internal comparisons with other operators in Colorado show that we are extremely competitive with regard to cost-per-ton, earnings and cash flow. We aze also an extremely safe operator, as demonstrated by our receipt of the 2000 Heahh and Safety Award from the Colorado Mining Association and the Colorado Division ofMmerals and Geology. Moreover, we have an excellent compliance history with the Division. Bowie has ab $800,000 work order in place for reclamation at the Bowie No. 1 Mine, where reclamation of the west portal is scheduled for completion by March 1, 200], and reclamation ofthe east portal should be completed by the end of 2002. In short, we are a proStable, safe and responsible coal mine operator, and we are here to stay. Whatever the technical problems with the Frontier bonds, a 60-day extension ofthe abatement period will not harm the State of Colorado. D031]672.1