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Memo to Erica Crosbv 4 April 27, 2003 <br />4.19(2) also requires that Operators receive thirty days notice of bond forfeiture hearings. However, <br />it has been DMG's direct experience that Operators are willing to waive their right to thirty days <br />hearing notice in cases where an emergency response is required. Even if an Operator refused to <br />waive the right to thirty days notice, DMG may be able to persuade contractors to work on <br />speculation knowing that a forfeiture hearing is pending on a cash or other easily convertible bond. <br />In the 4-25-03 internal meeting, it was discussed that the other component of the bond that must be <br />in an easily convertible form is the amount of financial warranty required under rule 4.1.3 to pay for <br />necessary costs to convert the bonds into cash for mined land reclamation. However, a close <br />reading of rule 4.1.3 indicates that the Board did not intend for this component of the financial <br />warranty to be subject to rule 4.1.2(7) requiring easily convertible bond forms. Rather, rule 4.1.3(f) <br />states that the value of encumbered property "available to secure the amount of the Financial <br />Warranty attributable to costs of reclamation shall be reduced by an amount...up to a maximum <br />amount of two (2%) percent of reclamation costs." This results in the following modifications to <br />the deed of trust table as shown under Issue 1 above: <br />Name of Water Right Appraised Value Reduction Factor Financial Warranty Amount <br />Incidental Rights $3,520,000.00 85 - 2 = 83 percent $2,921,600.00 <br />Williams Pump Sta. $2,810,000.00 85 - 2 = 83 percent $2,332,300.00 <br />Skylark Ranch $4,935,000.00 85 - 2 = 83 percent $4,096,050.00 <br />TOTALS $11,265,000.00 $9,349,950.00 <br />DMG would require $350,000.00 bond to be posted in an easily convertible form. $350,000.00 <br />includes water management costs for the mine and mill, road maintenance and dust control fora 4- <br />month period and mobilization demobilization to and from the job site and the associated indirect <br />costs. <br />Issue 7 (not discussed at the 4-2-03 internal meeting): <br />The following additional items should be contained in the forthcoming response letter Steve Brown <br />will be preparing (response to the 4-2-03 Henderson letter prepared by Henderson's outside <br />counsel). These items should be included so that Henderson is made well aware of the ongoing <br />tasks and responsibilities required of Operator's that post deeds of trust. <br />• Rule 4.1.2(5) requires an annual certification by an independent auditor that Henderson <br />continues to meet all applicable of Rule 4. <br />• Rule 4.1.2(9) requires that Henderson pay an annual fee, in addition to the annual fee <br />required under section 34-32-127(2), C.R.S., for reasonable and necessary costs for DMG to <br />review the financial warranty. Henderson will be required to sign a fee agreement in this <br />regard (rule 4.1.2(9)(a)). <br />• Rule 4.9.1(2)(b) requires Henderson to include in the annual reclamation report required <br />under rule 1.15, an update by a qualified independent appraiser indicating any changes in <br />