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CLIMAX MOLYBDENUM COMPANY Henderson Daerations ^!J n s•e•m~,rv or an•m• ooeo• co~oo~•no• P.O. Box 68 Empire, Colorado 80430 (303)569-3221 Fax (303)569-2830 September 19, 2002 RECEIVEp Mr. Bruce Humphries SEA 2 ~ ~2 Minerals Program Manager Division of Minerals and Geology 1?ruision of Minerals and Geology 1313 Sherman Street Room 215 Denver. CO 80203 RE: Climax Molybdenum Co. Henderson Mine and Mill Permit No. M-1977-342 - Financial Warranty Increase ~C~L~.+'1r1CC~(c9(~ ~''~) Dear Mr. Humphries: On July 11, Climax Molybdenum Co. received notice of an increase in the financial warranty for the Henderson Mine and Mill from $10,133,000 to $54,695,000. Attached is a comprehensive response to the financial warranty increase, addressing items that were not included in TR-12. This clarification report identifies some cost estimates by the Division that Climax Molybdenum Co. believes are excessive, attempts to clarify inaccuracies and ambiguities in the Division's cost calculations, and suggests several cost additions for the final financial warranty. The changes proposed in the clarification report and in TR-12 result in a financial warranty, including both direct and indirect costs, of $22,989,782. This represents an increase of $12.856.782 from Henderson's current financial warranty. Climax Molybdenum Co. requests that the Division allow the financial warranty to be posted in an amount equal to the present worth cost (or net present value) of the total project. The present worth cost is a calculation that converts the cost of a project over time into present day dollars and represents the dollars required at the beginning of a projectto have enough money to see the project through. It assumes that the excess dollars that are not spent at the beginning of the project are invested at an interest rate equal to the discount rate. A reclamation project costing $23 million would require funding of $19.6 million. Climax Molybdenum Co. proposes a financial warranty of $19.6 for the Henderson Mine and Mill.