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Collom Area Geology Pre - Feasibility Report <br />Executive Summary <br />The Collom Mine Area (CMA) is located in southern Moffat County in <br />northwestern Colorado between the cities of Craig and Meeker along <br />Colorado Highway 13. The proposed CMA covers approximately 1,667 acres. <br />Kennecott Energy Company (KEC) controls the Collom surface leases. KEC <br />currently has approximately 600 acres of coal under lease within the CMA. <br />The remaining 1,067 acres of coal within the CMA belong to the US Bureau of <br />Land Management (BLM). Colowyo Coal Company (Colowyo), a wholly <br />owned operating subsidiary of KEC, filed an approximate 1,230 acre `Lease <br />by Application" (LBA) with the BLM in November 2004. A lease sale of the <br />Collom LBA is scheduled to occur on June 28, 2006. Colowyo is currently <br />permitting approximately 16,156 acres to include the current mine area and <br />potential adjacent mine areas to the east and west. - <br />The mineable coals within the CMA are located within Cretaceous Williams <br />Fork Formation. The deposit is on the south limb of a large synclinal <br />structure dipping about 3.5' to 8.5'(6% to 15 %) degrees to the north - northeast. <br />The Collom geological model contains approximately 77 seams or seam splits <br />with up to 27 seams planned for mining. No discernable faults have been <br />identified across the CMA. Natural burning of coal occurs along the perimeter <br />of the Collom coal deposit. The extent of burn varies from a few feet to <br />several hundred feet in depth. Burned coal areas delineated during the 2004 <br />exploration project reduced estimated coal resource estimates within the <br />CMA by about 11 %. <br />In 2004, Colowyo obtained a federal exploration license of approximately <br />4,510 acres and then drilled 89 drill holes at 42 sites across the entire Collom <br />area. Colowyo collected approximately 2,281 coal quality samples and <br />performed 3,434 analytical tests in 2004. Colowyo is currently drilling over <br />40 additional drill holes in Collom as part of the 2005 Exploration Program. <br />August 2005 Page i <br />