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Memo to Erica Crosby 3 Anril 27. 2003 <br />Finally, the intention of using the independent reviewer is to facilitate DMG's decision making <br />process as it relates to the Henderson financial warranty. However, DMG will not be obligated to <br />accept the reviewer's conclusions. <br />Issue 5: It appears at this point that the Henderson bond is going to be the second largest bond <br />required to be provided over the history of DMG. Given the magnitude of the reclamation costs <br />involved, to what extent should Ron Cattany be involved in process being undertaken? <br />Resolution: We will update Ron prior to issuance of the request for proposal to the independent <br />reviewer. Hopefully, a meeting with Ron can be arraigned and held Tuesday afternoon 4-29-03. <br />The subsequent point when it will be critical to update Ron will be in advance of a Board hearing <br />where DMG will make its recommendation on the water rights deeds of trust as components of the <br />Henderson Mine and Mill reclamation bond. <br />Issue 6: Should a portion of the bond be in the form of easily, quickly convertible instruments such <br />as cash, letter of credit, or certificate of deposit? <br />Resolution: The DMG currently holds a $10,133,000.00 corporate surety for the Henderson Mine <br />and Mill. There are aspects to the Henderson Environmental Protection Plan that would require <br />rapid response if the Operator were to default on their obligation to operate the Environmental <br />Protection Facilities. Specifically, mine water must continue to be pumped and treated until DMG <br />has inspected the underground workings and removed any potential ground water contaminants. <br />Henderson and DMG have already agreed that four months of mine pumping and mine water <br />treatment would be needed in the event of an Operator default. Also, certain process water <br />management systems at the mill must continue to operate in order to maintain zero discharge until a <br />water treatment plant can be constructed and put into service. There are two significant timing <br />elements of forfeiture and conversion of corporate sureties to cash that argue in favor of holding <br />mare rapidly convertible instruments, such as cash, certificates of deposit, or letters of credit for <br />sites like Henderson were funds will be required essentially immediately following an Operator <br />default. <br />• Rule 4.19(2) requires minimum thirty days notice to the surety company prior to a hearing <br />on bond forfeiture, and although DMG has emergency response authority under rule 8 that <br />would allow access to the site prior to the forfeiture hearing, lack of funding could make it <br />difficult or impossible to implement the emergency response. <br />• Rule 4.19(11) provides that the surety company may elect to reclaim a forfeiture site through <br />their own auspices in lieu of forfeiting the bond penalty. DMG anticipates that an equitable <br />and fair amount of time to allow a surety company to mobilize to a site where they elect to <br />do the required reclamation would be on the order of three months. <br />The sum of the amount of time needed to hold a hearing and allow for a surety company to mobilize <br />to the site is four months. As a result, DMG will require an amount of money required to operate <br />the necessary environmental facilities for four months to be placed in the financial warranty as cash, <br />certificate of deposit, or letter of credit (estimated to be $350,000.00). This is in accordance with <br />rules 4.1.2(7) and (8)(c). It might be argued that a thirty day delay in emergency response at a <br />forfeiture site could occur even with easily convertible bond types in place. This is because rule <br />