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`~~ WESTERN NUTRIENTS, INC. <br />6062 Umber St. <br />Arvada, CO 80403 <br />~ C~ t ~ ~ S <br />February 3, zoos RECEIVED <br />Members of the State Land Boazd <br />~ I ~ 1313 Sherman St -- FEB ~ 6 ?005 <br />Denver, CO Division ~f Minerals and Geology <br />Ladies and Gentleman of the Boazd, <br />Since early in 2004 Western Nutrients, Inc. ("WN") has issued numerous requests for the <br />State Land Boazd ("the Board") to renegotiate our expired mineral lease, lease number <br />OR3280, for mining of gypsum near Penrose, Colorado. To date the Board has failed to <br />enter into such negotiations. Due to our inability to arrive at a mutually satisfactory <br />solution to this lease issue the state of Colorado is very close to losing a major gypsum <br />consumer to an Oklahoma gypsum producer. It is indeed a sad state of affairs when a <br />major Colorado industry must pass up a low cost gypsum supply lying within 18 miles of <br />their plant and purchase gypsum from anout-of--state source some 300 to 400 miles away. <br />Colorado looses in every way with this situation. The state and county loose jobs, tax <br />revenue and royalty revenue, and industry is forced to pay higher prices for raw materials, <br />which in rum results in higher prices for Colorado consumers. <br />Given the eminent loss of this customer for Colorado gypsum with the present "course of <br />no resolution", WN wishes to offer a solution to the lease issue which will provide for <br />immediate production from this gypsum reserve, while also providing for a manner in <br />which to arrive at a long term solution. <br />In order to address this issue completely, the pertinent facts should first be noted. They <br />are: <br />1 WN held a state lease for the mineral resource in question from 1996 unti12002. <br />2 WN attempted to develop a commercial market for the gypsum throughout that <br />time period, while producing small tonnages of agricultural gypsum in an attempt <br />to keep the mine open. <br />3 Agricultural gypsum sales alone could not provide the necessary economics for <br />WN to continue the mining operation and in 2002 WN surrendered the lease. <br />4 Eazly in 2004 WN secured the necessary commercial account to reopen the mine <br />and make it economically feasible to operate <br />5 Eazly in 2004 WN started efforts to renegotiate the original lease or negotiate a <br />new lease. <br />6 The Board refused to enter into either line of negotiations and started discussing <br />holding a public auction for the gypsum lease. <br />7 To date, the Board has not announced any such auction, nor has it initiated any <br />public notice of intent to hold an auction. <br />8 Given the Board's refusal to enter into negotiations, WN's uncertainty regazding <br />future status of the gypsum reserve, and WN's substantial developmental <br />