_GENERAL DOCUMENTS - C1981017 (236)

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including our present cash flow situation. We have been making substantial changes in our mining operation which have caused us to incur significant costs while curtailing our production. We don't have the financial capability, at present, of completing installation of the plant. Further Progress Mid-Continent intends to provide additional treatment capabilities for the mine drainage. We have expended significant sums of money, time and effort to do so. The recent problems with H2O have been a setback. We feel that further analysis of the situation and possible alternatives to the plant as designed last fall is necessary. For one thing, the excellent performance of the ponds with the addition of guar gum, suggests to us that some of our assumptions of last summer concerning treatment needs should be re-examined. It is our intention to proceed diligently with an analysis of feasible options for (a) possible treatment method(s) other than the plant; (b) phase-in of components (of the plant) ; (c) possible re-design or down-sizing of the plant. The infra-structure established for the plant and which is now in place (including principally the 8" pipeline from the tunnel portal down to the plant area) does present us with options not previously available. Further consideration will be given to possible interim/near term uses which could be made of this infrastructure, as well as long term planning. At present there are no treatment methods approved for mine drainage other than the 016 ponds and the plant. Planning of additional or alternate methods will be done in consultation with MLRD and the Department of Health. Permit amendment(s) will be sought as necessary. Mid-Continent will report to MLRD and the Department of Health as to our revised plan of action, and we will submit a timetable for implementing the plan. Yours truly, Diane Delaney Mid-Continent Resources cc: Robert Shukle Chief, Enforcement & Permitting Colorado Department of Health