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State and County officials required the property owner to consult with the United <br />States Department of Army Corps of Engineers to obtain the proper 404 permit for <br />gravel pit operation and reclamation. In order to obtain the permit, numerous soil <br />and wildlife studies were required. Larimer County also required offsite road <br />improvements for additional road traffic incurred by the business. Since the <br />subject property is in operation and partially mined out, the necessary permits <br />from both the State and County jurisdictions have already been obtained. <br />Permitting expenses do not apply to this property since they were paid prior to the <br />commencement of mining operations and are not being included in the discounted <br />cash flow model. <br />Royalty-Reveaues <br />An extensive search was conducted for gravel mining operations where the <br />property owner was receiving royalty payments from the sand and gravel operator <br />in order to glean the appropriate royalty payment and the period during which the <br />pit is forecast to be operational. <br />Remaining Reserves -The primary source of the historical production and <br />reserves data came from Mr. Dan Kehn, of Don Kehn Construction, Inc. His <br />company owns the subject property as well as the gravel pit operations located on <br />the property. Mr. Kehn provided documentation of the tons of mined gravel on <br />the site since 1997, data were broken down according to gravel type and total <br />aggregate removed each yeaz. Also included in the historical data provided by Mr. <br />Kehn aze the aggregate removed for the primary (May through October) and <br />secondazy (November through April) periods of each year for the past three years. <br />Please refer to the tables on the facing page. Currently it is estimated that the site <br />contains 4,160,063 tons (2,285,749 cubic yards) of remaining aggregate, which is <br />being estimated for the reserves on the site. <br />According to the 404 permit issued on November 20, 1994, from the United <br />States Department of Army Corps of Engineers, the authorized work permit ends <br />on December 15, 2019. Based on the tons of aggregate remaining on the site and <br />the 12 years remaining within the current permit timeframe, approximately <br />346,672 tons of aggregate would have to be mined each year for the next 12 years <br />in order to have the gravel pit completely mined out by December 15, 2019. This <br />figure is not feasible based upon the historical data provided on the tons of <br />aggregate being mined annually since production commenced. Historical <br />production records indicate that the market has been declining. Consequently, the <br />gravel pit operator and owner will likely apply for a permit extension or permit <br />renewal based upon a new application to the state and county governments. <br />FOSTER VALUATION COMPANY LLC <br />-30- <br />