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<br /> <br />~~~I~~~TIAL <br />Despite making our best efforts to find alternative <br />customers, we have been unsuccessful to date; no active negoti- <br />ations are ongoing with any customers to supply coal from <br />either or both of the Mines. Nevertheless, we continue to <br />explore all available marketing options as they arise. Since <br />April 1987, we have submitted bids to Texas Eastman, Public <br />Service Company of Colorado and the City of Colorado Springs. <br />Two of these bids have been rejected and a third, while not yet <br />formally rejected, has received a preliminary discouraging <br />response. <br />The Lease is contained in the Roadside Mine. Powderhorn <br />has mined coal from the Lease from the time it acquired the <br />Roadside Mine until operations were suspended in 1986. The <br />Lease basically is mined out with only 29,000 tons of recover- <br />able coal remaining (see the Bureau of Land Management's <br />("BLM") letter to Powderhorn dated December 31, 1986, which <br />establishes such amount as the remaining recoverable reserves <br />on the Lease). Even if the Roadside Mine still were operating, <br />most of the remaining recoverable coal would not be mined for <br />many years because such reserves are contained in pillars which <br />support main ventilation and access entries. <br />Powderhorn was notified by BLM on August 13, 1984 that the <br />Lease would be readjusted. A proposed readjusted Lease was <br />sent to Powderhorn on February 10, 1986. Powderhorn filed <br />objections to the proposed readjustment on April 15, 1986 with <br />supplemental objections filed on April 18, 1986. On May 21, <br />1986, the Colorado State Office of BLM issued a decision <br />- 2 - <br />