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<br />reserve estimate, as of January 1, 1984, establishes the <br />tonnage necessary to achieve diligent development and to <br />satisfy continued operation requirements (lt x <br />tons). Diligent development vas achieved on the Lease <br />during April 1984. -The Lease, therefore, was subject to <br />continued operation requirements beginning May 1, 1984. <br />Commercial quantities were mined from the Lease during the next <br />three royalty reporting periods. The three year rolling <br />average allowed compliance during the fourth royalty reporting <br />period as follows: <br />Royalty Reoortina Period <br />May 1, 1984 to April 30, 1985 <br />May 1, 1985 to April 30, 1986 <br />May 1, 1986 to April 30, 1987 <br />May 1, 1987 to April 30, 1988 <br />Tons Produced 3-Yr. Average <br />345,454 <br />260,431 <br />133,121 <br />-0- 131,184 <br />Commercial quantities are not expected to be mined from the <br />Lease during the forthcoming continued operation year which <br />begins May 1, 1988. <br />Powderhorn must keep the Lease in compliance with FCLAA <br />requirements in order to maintain its rights under the Lease to <br />assure that the remaining coal reserves are conserved and <br />eventually mined. These rights must be maintained while the <br />Mines are idle for market reasons, which may be l0 years or <br />more. <br />Access to the northern portion of the Lease is controlled <br />by Powderhorn through private fee coal and surface. The Lease <br />- 4 - <br />