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energy fuels coal, inc. <br />southfield mine • post office box 459 - florence, colorado 81226 • (719) 784 -6395 <br />August 10, 2012 <br />Ms. Janet Bins, Reclamation Specialist <br />Colorado Division of Reclamation Mining & Safety <br />1313 Sherman St — Room 215 <br />Denver, CO 80203 <br />RE: Account of Meeting of Energy Fuels and Landowner Corley — RE: Corley Concerns <br />Energy Fuels Coal, Inc. — Permit No. C -81 -014 — Southfield Mine <br />Dear Janet Bins: <br />Per your request, this letter is to advise of the meeting between Energy Fuels and landowner <br />Corley Company concerning Southfield reclamation concerns as submitted to the DRMS by Corley. The <br />meeting took place June 20, 2012 on the Corley property at the Southfield mine site. Attendees were Dr. <br />Doug Corley and Ann Corley of the Corley Company and Rich Munson and George Patterson <br />representing Energy Fuels. <br />The majority of the discussion at the meeting concerned availability of water shares of the Twin <br />Lakes Reservoir owned by Energy Fuels Coal, Inc.(EFCI) which are committed to the Colorado Division <br />of Water Resources (CDWR) to fulfill EFCI's obligation to the Corley Well Water Replacement Plan (the <br />Plan) which is governed by the CDWR. EFCI explained that The Plan is a requirement by the CDWR to <br />replace water previously used during active mining operations at Southfield, or in DWR's words, "lagged <br />depletions" of the Arkansas River System. Modeling done by water consultants projected as far out as 50 <br />years to replace the volume used based on a small rate of annual depletion. The Plan states: To guarantee <br />that sufficient water will be provided to replace such depletions, EFC must make a commitment to use its <br />Twin Lakes shares to replace the yearly portion of the post plan depletions, which arrive as stream <br />depletions in the Arkansas River Basin. <br />There has been some confusion on what exactly is encompassed in the Water Replacement Plan. <br />The Corley Company has expressed their assumption that if the mine voids have recharged with water, <br />albeit a few hundred years sooner than engineering predictions, that that should relieve EFCI's <br />commitment of the Twin Lakes water shares to the CDWR's well water replacement plan and therefore <br />would allow EFCI to transfer the water shares to the Corley Company earlier rather than having to wait <br />the multi years projected by the Plan. However, EFCI has explained that water refilling the mine voids is <br />irrelevant to the Corley Well Replacement Plan. As stated above, the Plan pertains to replacement of <br />water pumped from the Corley Well for previous mining operations. <br />The Corley Company has made its desire known to you and others to secure control of the Twin <br />Lakes water shares as soon as possible. However, any early transfer of the water shares by EFCI to the <br />Corley Company at this time certainly would create some risks to EFCI over the long term. Despite the <br />risks, to satisfy the Corley Company and avoid any conflict that will result in a lot of time of the Division <br />