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Mr. Ross Gubka, P.E. Western Fuels-Colorado February 9, 2007 Page-7- ownership (depreciation, cost of funds (CFC) and overhead) will apply. Operating costs (fuel, Tube, ground engaging components, tires/tracks, repair, and overhaul), aze applied only when the machine is working. In this case, the operating costs aze 25% while the operator and ownership aze 100%. This and all other tasks requiring support equipment have been revised to sepazate the support equipment hours (New Task #006). 6. The Division has revised this cost based on 109.31 hours of explosives prep time at $56.40 per hour for the bulk truck. 7. The Division's cost estimate was based on a 2-person crew loading with an auger rig. It includes 800 lineaz feet per hour and 0.05 hours setup time per hole to load the blast holes, 0.05 hours per hole to instal] detonators, primers, and downlines, 4001ineaz feet per hour to backfill stemming, 1,2001ineaz feet per hour to lay out and secure trunk lines, 0.05 hours per hole to connect downlines, delays and check connections, and 0.5 hours to clear the blast area and install access barriers. Task #002 1. The Caterpillaz Handbook provides a range of 0.6-0.8 for rock that is ripped or blasted. We used the mid-point of this range. Division observation of blasted spoil at surface mines is that the material is inconsistent in size and irregular in shape, making it more difficult to handle. 2. The Division's cost estimate is based on an assumption that slot dozing would only be achievable 50 percent of the time, which we believe to be reasonable based on site conditions. 3. The spoil pile correction factor has been used in the Division's cost estimates since 1993, when we became aware that Caterpillaz was using it in their commercially available production estimating softwaze (VEHSIM). The spoil pile correction factor takes into consideration the finished state of the material being moved (dozing over a cliff, producing a rough finish, smooth finish, etc.) while the material consistency factor takes into consideration the cohesiveness of the material itself. 4. The material weight correction factor is well documented in the Caterpillaz Handbook, and is relevant to earthmoving equipment production. The unadjusted production rates for bulldozers are based on 23001bs/cy. Material weighing more or less than this would affect the production adversely or favorably. To amve at the correction factor, the base production weight (2300 lbs/cy) is divided by the weight of the material to be moved (assuming 2900 Ibs at New Horizon), yielding the correction factor (0.79 in this case). 2900 lbs/cy was taken from the previously uncontested cost estimate for the New Horizon Mine. If WFC believes