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needed for overall permit management purposes. With respect to the Land Board, no <br />mining land exists on the south end of the lease. There is disturbance recognized by <br />both the SLB and the MLRB, but no designated, approved mining land exists. Thus <br />all of the 300 acres approved by the Land Board is on the north end of the operation <br />and is shown on Exhibits C -2 and F, as included in this revision. Of this 300 acres, <br />only Area 1U will be bonded at this time. Area 1U includes the current pit and a <br />portion of the access road. Area 1U, in total, covers 58.2 acres. Therefore, of the 300 <br />acres in the new lease area (SLB definitions) that is allowed to be mined, 241.8 acres <br />will remain unbonded but approved for mining. This value differs from the remaining <br />approved, but unbonded land in the current 500 acre bond which is being reduced. <br />These differences are as expected and are caused by differences in the way the two <br />agencies classify the land. In the end it will all work out because the future mining <br />areas (1U, 2U, and 1L) are shown on the map and have not changed since originally <br />approved. <br />Reasons for Reduction in Bonded Land: <br />1. Because the current bond covers 500 acres, a significant part of which has been <br />released from bond, and there is currently somewhat less than 300 acres available for <br />mining in the future on the new lease area, maintaining a bond of over one million <br />dollars is costly and unnecessary. A reduction in the amount of bonded land provides <br />for a more economical operation. Also, because no plans are being changed on the <br />remaining acres being removed from bond, new bonded land can be added as needed <br />by request and without going through an amendment process. This will save the <br />company a very large sum of money in bonding costs on an annual basis. <br />2. The current operation is advancing very slowly simply because annual production <br />over the last two to three years has been about 30% of historical production prior to <br />this period. This is due entirely to the slowdown of the overall economy and the <br />general lack of need for sand products and/or the lack of funds for maintenance of <br />existing facilities that require new sand. With the operation expanding at a current <br />rate of perhaps 2 acres per year it is apparent that the remaining land, if it contained <br />consistent deposits throughout, would last around 150 years. Of course, the deposit <br />isn't consistent over the entire property. The point being, with the downturn of the <br />economy there is little point in spending large sums of money on a huge bond for a <br />large quantity of land, much of which would likely not be affected for decades <br />assuming the economy does not improve. <br />3. The current lease from the Land Board will expire in April 2014. A request for a lease <br />extension has been provided and preliminary discussions have occurred on an <br />extension, but no action has yet been taken and may not be taken for many months. <br />Therefore, at present the operation will conclude in April 2014 unless the lease is <br />extended. Having 300 acres in the new lease area bonded to cover the next 18 months <br />when the operation has about 250 acres of undisturbed land to work with but is <br />expanding at a rate of perhaps 2 acres per year simply does not make economic sense. <br />Technical Revision- Coal Creek Resources - M- 1988 -044 submitted August 6, 2012 Page 3 of 4 <br />