I . .

v- ~r

N e w Mexico r n e r g y , Minerals and Natu ra l Resources Department

Bill Richardson L Governor

Joanna Prukop Bill Brancard Cabinet Secretary Div~s~on D~rector Reese Fullerton Mining and Minerals Division Deputy Cablnet Secretary

7008 1 3 0 0 OOOL b103 4000

Certified Mail - Return Receipt Required

March 2. 2009

Mr. Pete V. Dominici, Jr. Domenici Law Firm, P.C. 320 Gold Avenue SW, Suite I000 Alburquerque, NM 87 102 -3228

Re: Request for Informal Conference, Notice of Violation N09-15-2, West Ranch Exploration Project, Ree-Co Uranium, LP; MK027EM, McKinley County, New Mexico

(7 Dear Mr. Dominici. . .

The Mining and Minerals Division (MMD) received your request for an Informal Conference regarding Notice of Violation N09-15-2. Pursuant to 19.10.1 l .I I 1 I NMAC, we have established a date and time for the informal conference. It will be held at the offices of MMD, in the MMD Conference Room, at 1220 South Saint Francis Dr., Santa Fe, NM, at 2:00 p.m. on March 5.2009.

Holland Shepherd, Manager Mining Act Reclamation Program (MARP) Mining and Minerals Division

Cc: Chuck Thomas, Chief. Mine Reclamation Bureau ,Mark Smith, Counsel, MMD Charles N. Lakins. Esquire, Domcnici Law Firm, P.C. James Hollen, Permit Lead, b1blDIMARP Mine File (MK027EM)

(3 . .

Mining and Minerals Division 1220 South St. Francis Drive ' Santa Fe, New Mexico 87505

' Phone: (505) 476-3400 * Fax (505) 476-3402' http://www.emnrd.state.nm.us

f'@? I FBI % o zot~g I DOMENICI LAW FIRM, P.C. - a , A ~ O R N E Y S AT LAW 3 20 Gold Avenue S. W.

Suite #I000

Jeanne Cameron Washbum Albuquerque, New Mexico 87 102 LonaineHolhpmih j w a s ~ c d 0 m e n i c i l a w . m - h o l l i ~ w ~ & c i l a w . c o r n

(505) 883-6250 Telephone (505) 884-3424 Facsimile

February 17,2009

Holland Shepherd, Project Manager Mining Act Reclamation Program N.M. Mining & Minerals Division 220 South St. Francis Drive Santa Fe, NM 87505

RE: Archeological Report

Dear Holland:

Enclosed is a copy of the Archeological Report done for the BLM for your records.

sin- / A

Pete v. Domenici, Jr., Esq / Encl.

cc: client

LONE MOUNTAIN ARCHAEOLOGICAL SERVICES, INC. 2625 Pennsylvania NE, Suite 2000

Albuquerque, NM 8 71 10

505-881-001 1 (phone) 505-881-0020 (fax)

LETTER OF TRANSMITTAL

DATE: February 17,2009

TO: Pete Domenici Jr. Domenici Law Firm 320 Gold Avenue SW Suite 1000 Albuquerque, NM 87102

Attached please find the following item(s):

Remarks: Mr. Domenici: Enclosed please hnd three copies of the above-mentioned report. One of the c o ~ i e s is for your records: the other two copies are for your submittal to the Bureau of Land Management.

#/Copies 3 I

We also forwarded c o ~ i e s to Jim and Oliver Reese for their files.

Description Copies of the Drill Location Archaeologcal Survey Report Invoice

If vou have an.cr questions. lease do not hesitate to call at the above phone number. or email me at swallev(ii,lone- rntn.com

Operations Manager

LMAS Invoice # 751

Lone Mountain Archaeological Services Inc. 2625 Pennsylvania NE, Suite 2000

Albuquerque, NM 871 10 Phone: (505) 881-0011 Fax: (505) 881-0020

Domenici Law Firm, Attn: Charles Laluns 320 Gold Avenue, SW, Suite 1000, Albuquerque, NM 87102

Invoice for Archaeological Services Cultural Resource Clearance for the RECO Project; LMAS 1200

Invoice Date: February 9, 2009 Net Due 15 days; late fees of 1.5%

Service Cultural Resource Survey and Negative Report

Units Contract Amount Pavable on Invoice 1 $4,950.00 $4,950.00

Subtotal

Gross Receipt Tax ARMS Fees

(7 Total

DOMENICI LAW FIRM, P.C. ATTORNEYS AT LAW

n Pete V. Domenici, Jr. 320 Gold Avenue SW, Suite 1000 Charles N. Lakins pdornenici@dornenicilaw.com clakins@domenicilaw.com

Albuquerque, New Mexico 87 102-3228 Jeanne Cameron Washburn Lorraine Hollingsworth jwasl~burn@domenicilaw.com IholIingswonh@domenicilaw.corn

(505) 883-6250 Telephone (505) 884-3424 Facsimile

I RECEIVED I February 17,2009 I FEB

VIA FACSIMILE TO: (505) 476-3402 and U.S. Mail MINING ;2 MINERALS DIVISION

Bill Brancard Director, Mining and Minerals Division Energy, Minerals and Natural Resources Department 1220 South St. Francis Drive Santa Fe, NM 87505

Re: Notice of Violation No.: N-09-15-2, Ree-Co Uranium LP Request for Informal Conference

0 Dear Mr. Brancard:

Our client Oliver Reese and Ree-Co Uranium LP received a Notice of Violation N09- 15-2. the date of service of which was February 4. 2009.

This letter is a request under Section 2 of NOV N09-15-2 for an Informal Conference for a review of the action set forth in the Notice of Violation.

We ask that you directly notify our office, not Oliver Reese and Ree-Co Uranium LP, of the date, time and location of the informal conference.

Sincerely, DOMENICI LAW FIRM, P.C.

Charles N. Lakins, Esq.

CC: 1558 client

I

N e w Mex ico Energy, Minerals a n d Natu ra l Resources Department

r) . . Bill Richardson Governor

Joanna Prukop Bill Brancard Cabinet Secretary Division Director Reese Fullerton Mining and Minerals Division Deputy Cabinet Secretary

7 0 0 3 Lb80 0 0 0 1 2967 3 2 8 7 - Certified Mail - Return Receipt Required

February 4, 2009

Mr. Oliver Reese Ree-Co Uranium LP 1401 West Route 66 Milan, NM 8702 1

Re: Notice of Violation N09-15-2, West Ranch Exploration Project, Ree-Co Uranium, LP, MK027EM, McKinley County, New Mexico

Dear Mr. Reese,

Please find attached Notice of Violation N09- 15-2 (NOV) issued as a result of unpermitted exploration activity in the West Ranch area. The exploration activity involved portions of five full. and one, one-quarter Sections (Sections 6 , 8 and 18 of Township 14 North, Range I0 West, and Sections 4. 10, and 12 of Township 14 North, Range I I West, N.M.P.M.) situated on both private and federal surface and mineral estates in McKinley County, New Mexico. Per your conversation with New Mexico Mining and Minerals Division (MMD) staff, on September 9, 2008, a field investigation on October 2. 2008. and further documentation you provided to M M D on October 15 and December 4.2008. you performed illegal exploration activity during the summer of 2008. Exploration activities completed by Ree-Co Uranium, LP (Ree-Co) involved 190 staked and noticed locations. Additionally, your correspondence has indicated that 34 boreholes were reopened, washed, and logged. It is unclear to M M D if these 34 holes are part of the 190 staked and noticed locations, o r in addition to them.

Ree-Co indicated to M M D that i t was following federal and state law in the discovery process of validating its claim locations. Most states, including New Mexico, no longer req~iire "discovery work" as a requirement to locate a mining claim. New ,Mexico's "discovery work" requirement to sink a shaft. dig a tunnel or pit. o r drill a hole on the claim was repealed on May 20, 198 1 (Scction 69-3-3 and 69-3-4 NIMSA). Drilling for the purpose of conducting "discovery work" is not necessary to establish a valid mining claim location. MMD finds that mineral exploration activities were not in compliance with the Rules o f the New Mexico Mining Act (the Act). Please be advised that exploration drilling in New Mexico requires an appro~.ecl permit t'rorn

Mining and Minerals Division ' 1220 South St. Francis Drive Santa Fe. New Mexico 87505

' Phone: (505) 476-3400 ' Fax (505) 476-3402' http://www.emnrd.state.nm.us

Re: Notice of Violation N09-15-2, West Ranch Drilling Project, Ree-Co Uranium, LP, MK027EM, McKinley County, New Mexico February 4,2009 Page 2

MMD pursuant to Section 19.10.4.401 .A, of the New Mexico Mining Act Rules, which state that:

Afier Decenrher 31, 1994, no person shall errgage in e.rplortrtion operurivn.~ in Nerv Me.rico rvitlroirt first ohruining ci perrnir to corteluct e.rplorcrtior1 froni the Director.

Prior to conducting any mineral exploration or silrfilce disturbing activities, Ree-Co should have first obtained an approved Minimal Impact Exploration Permit from MMD, as required, pursuant to 19.10.3.302 of the Act. Ree-Co's failure to have obtained a Minimal Impact Exploration Permit constitutes a violation under the Act.

MMD considers Ree-Co's exploration and surface disturbance activities as constituting mineral exploration pursuant to 19.10.1.7.E.3, which defines "Exploration" as:

"E-rplorcition " means the act cf searching for or investigating ci minerd cleposit, inclrrclir~g sinking shafls, trinneling, drilling core ant1 bore holes, cligging pits, niuking cuts and other works for the yrtrpose ofe.rtractitrg .samples prior to commencmlent oj' developnlent or e.rtruction operntiorls crnd the hrrilcling of roucls, access ~ ~ c l y s and other jucilities relutecl to silclt work; horvever, ~ctivities that cciuse no, or very little, .sirrfLlce disturbance, suc~h N S airborne siirveys and photographs, irse c$in.striimetzt.s or tlevices that are hctncl curriecl or otherlvise tr~in.sportec1 over the sugace m pet-fontl magnetic, rudionctive or other tests ancl nteasurenrents, hoimcfar?, or cluitri surveying, locvrtion work or ottrer kvork tllut cciiises no greater clistirrhunce tlrun is cuusecl by orclinury lulvfrrl rise of the areci by persons not enyagetl in eevplorotion ure t..uclucled froni the nreuning c,f "crplorution. "

Based on the level of surface disturbance activities you have described in your correspondence, and evident from a field inspection and other information available to us, MMD has found that Ree-Co has violated the Act. Prior to conducting the type of exploration work that Ree-Co has described to MMD in discussions and correspondence, Ree-Co should have first obtained an approved Minimal Impact Exploration Permit pursuant to 19.10.3.302 NMAC of the Act. Abatement of the violation will require, among other things, that Ree-Co submit a plan to MMD addressing the rcclamation of thc unpcrmitted drilling activity. The plan must be in compliance with current Act requirements addressing the reclamation of exploration activity.

Moreover, while Ree-Co purports to have plugged, abandoned and reclaimed the disturbed areas adequately, one of the consequences of Ree-Co's failure to obtain the required permit is that MMD was unable to oversee and inspect the process of reclamation, thereby confirming that the holes were plugged, and abandoned and surface disturbances reclaimed. in accordance with regulations. MMD will require access to the West Ranch exploration sites during the course of verifying abatement of the NOV.

The attached NOV addresses the nature of the violation. the provisions of the regi~lations or stalutc that were violatcd and the abaterncnt action required. A penalty has not yct bcen assessed fur the NOV. The penalty will be cteterniined based on compliance with rhe abatcrncnt requirements of this NOV. Please be inforrnccl that MMD may assess an additional penillty for each day the NOV is not abated.

Re: Notice of Violation N09-15-2, West Ranch Drilling Project, Ree-Co Uranium, LP, MK027EM, McKinley County, New Mexico February 4,2009 Page 3

Please contact me at 505.476.3437, or James Hollen of my staff at 505.4763436 with any questions, comments or requests for additional data.

Sincerely, -

Holland shepherd, Manager Mining Act Reclamation Program (MARP) Mining and Minerals Division

Enclosure: NOV N09- 15-2

Cc: Bill Brancard, Director, MMD Chuck Thomas, Chief, Mine Reclamation Bureau Mark Smith, Counsel, MMD Charles N. Lakins, Esquire, Dornenici Law Firm, P.C. Douglas Rappuhn, Hydrologist, NM Office of the State Engineer. Hydrology Bureau Kurt Vollbrecht, Mining Act Team Leader, NM Environment Dept., GWQB/MECS David Sitzler. Assistant Field Manager, BLM James Hollen, Permit Lead, MMD/MARP Mine File (MK027EM)

., - Page 1 of 4 FORM: MMDNOV STATE OF NEW MEXICO 2/4/09 ENERGY, MINERALS AND NATURAL RESOURCES DEPARTMENT

Director, Mining and Minerals Division

I 1220 South Saint Francis Drive Santa Fe, New Mexico 87505

(505) 476-3400 NOTICE OF VIOLATION NO.: N09-15-2

To the Following Permittee or Operator:

Name: Ree-Co Uranium, LP

Mine: West Ranch Exploration Proiect X Surface I 1 Underground X Exploration

County: McKinley Telephone: N/A

Mailing Address: 1401 West Route 66, Milan, New Mexico 87021

Permit No.: MK027EM

Date of Inspection: October 2. 2008

Time of Inspection: From: 10:OO X a.m. to: 11 a.m.

From: - $1 p.m. to: 2:00 X p.m.

Name of Operator (if other than permittee):

Mailing Address: 9 ' -., Under the authority of the New Mexico Mining Act, Sections 69-36-1 to 69-36-20 NMSA 1978, the undersigned

authorized representative of the Director of the Mining and Minerals Division (Director) has conducted an inspection, or otherwise made a determination, that the above mine operation is in violation of the Act, the regulations or required permit condition(s) listed on page 3.

You must abate this violation within the designated abatement time. Not completing the required work within the abatement time stated on this NOV may result in the issuance of a Cessation Order.

This Notice shall remain in effect until a final order has been made by the Director, as provided on the reverse side of this notice, or it is modified, terminated, or vacated by written notice by the Director or an authorized representative of the Director. The time for abatement may be extended by the Director or an authorized representative for good cause, if a request is made before the end of the abatement period.

The undersigned authorized representative of the Director has determined that a condition, practice or violation exists at this operation that violates the Act, these Rules, a permit, or order.

Date of Service: FEBRWRY f 2407

Signature of Authorized Representative: -% f l /&-. Time of Service: a.m. p.m.

Person Served with Notice: Oliver Reese

"3 (Print Name and Title)

Signature: - S e R v t c F f l y M * ' L -

Page 2 of 4 NOTICE OF VIOLATION NO.: N09-15-2

Notice of Opportunity to Respond and Request for Conference

1. Penalh Assessment. The Director shall review each Notice of Violation (NOV) or Cessation Order (CO) in accordance with the assessment procedures, described in 19.10.1 1 of the New Mexico Administrative Code (NMAC), to determine whether a civil penalty will be assessed, the amount of the penalty, and whether each day of a continuing violation will be deemed a separate violation for purposes of the total penalty assessed.

19.10.1 1 NMAC allows the permittee to submit written and oral information about the alleged violation to the Director and to the inspector who issued the notice of violation or cessation order, if applicable. The Director shall consider any information so submitted in determining the facts surrounding the alleged violation and the amount of the penalty.

The Director shall serve a copy of the proposed penalty and of the worksheet showing the computation of the proposed penalty on the permittee, by certified mail, no later than 30 days after the date set for abatement of the violation.

2. Informal Conference. A permittee who receives a NOV or a CO pursuant to 19.10.1 1.1 102 NMAC or a proposed penalty assessment may request a conference for a review of the Director's action by submitting a written request to the Director within 15 days from the date of service (see page 1). To arrange a conference, you must inform the Director of your request in writing, at:

Director, Mining and Minerals Division Energy, Minerals and Natural Resources Department 1220 South St. Francis Drive Santa Fe, New Mexico 87505

The conference shall consider all relevant information. It will be informal in nature and not be governed by the rules of evidence. The conference shall be held within 30 days from the date of issuance of the notice of violation, cessation order, or proposed penalty assessment, unless the Director grants an extension for good cause shown.

3. Order. Each order is effective upon service. If a conference is requested, the Director shall serve an order within 30 days after the conference. If no conference is requested, the proposed penalty and violation become the Director's order. All penalties must be paid within 30 days after the penalty assessment if no conference is requested, or 30 days after issuance of the Director's order following a conference.

4. Appeal of Order. Any order or penalty assessment by the Director pursuant to the Act or these Rules shall become final unless a person who is or may be adversely affected by the order or penalty assessment files, within 60 days from the date of service, a written petition to the New Mexico Mining Commission (Commission) for review of the Director's order or penalty assessment.

5. Penalties. For each violation covered by this Order, a penalty shall not exceed ten thousand dollars ($1 0,000) per day of noncompliance for each violation. Penalties will be assessed using the points table found in 19.10.1 1.1 107 NMAC.

6. Failure or Refusal to Comply. Anyone who fails or refuses to comply with an order of the Commission or the Director may be guilty of a misdemeanor and subject to a fine not to exceed $1 0,000 per day of violation or imprisonment of up to one year, or both. -7

NOTICE OF VIOLATION NO.: N09-15-2 Page 3 of 4

(9 .. Nature of the Violation:

Conducting mineral exploration without a permit - Ree-Co Uranium, LP (Ree-Co), conducted mineral exploration during the summer of 2008, which involved drilling on 190 alleged staked and noticed federal claim locations, in addition to 34 separate un-staked, un-noticed and unclaimed previously drilled locations for which no individual claim or right-to-enter documents, or claim maps, are known to exist, or were provided by Ree-Co, as requested by the Mining and Minerals Division (MMD). The exploration activity involved portions of five full, and one 114 section(s) (Sections 6, 8 and 18 of Township 14 North, Range 10 West, and Sections 4, 10, and 12 of Township 14 North, Range 11 West, N.M.P.M.) situated on both private and federal surface and mineral estates in McKinley County, New Mexico.

After the initiation of, and during, an MMD investigation, Ree-Co provided the MMD with written descriptions of the exploration activity. The descriptions are dated October 15 and December 4, 2008. Ree-Co provided MMD a description of procedures undertaken to obtain "assay samples" from each of Ree-Co's 190 noticed claim locations, between April and July, 2008. Ree-Co stated that for each of the 190 noticed claims, Ree-Co used a hand-held, air-hammer drill to sink two dry 2-inch holes, approximately 20 feet away from the center stake at each of the 190 noticed locations. The twinned 2-inch diameter holes accompanying each of the 190 staked claims were not logged, but were drilled to approximately 50 feet to contact bedrock. After "assay samples" were obtained, the holes were then backfilled with existing local surface soil. Additionally, Ree-Co describes a process used to remove any existing shallow, near-surface plugs to re-enter some 34 existing drill holes. The holes were then subject to down-hole "washing," using a rotary, reverse circulating, drilling rig and water to clear each borehole (6 inch diameter) of any residual material and to facilitate down-hole gamma radiation logging. Ree-Co describes a method of plugging the 34 washed and logged holes using a method call "holeplug." Ree-Co also describes a method of reclaiming surface disturbance associated with the

/q exploration areas.

Provision(sl of the Requlations, Act, or Permit Violated:

The following portions of the New Mexico Mining Act (NMMA) and the New Mexico Mining Act Rules (19.10 NMAC) were violated:

Section 69-36-13.A.of the New Mexico Mining Act :

Afier Dec.enzher 31, 1994, a persorl sllall not erz~~rge it1 e.v~)lor(lt io~~ operutiort.~ it1 Nerro Mexico rvithorrtjir.st ohttrining c:r pen~lit to conc11cc.t e.rl)lorrrtioti~rorn tlle tlirector. In ortler t o he trl~l)ro\wlI)~t Dec.ernher 31, 1994, the rr~)plic.trtion J i ~ r rr 1wt7rtit to ~ o r ~ i l r r ~ ~ e.vpIor~1tio11 .sIIuII he .ruhnlittc~rI hy Se1)tertlher I , 1994. A pennit to c.onclrtc-t e.rl~lonrtion slrtrll not he i.s.srredfor L r

lwriocl ofr11ot-e thrrn one )-ear frotrz the (lute ~J'i.ssrre clrld is rerzerr~rrhle Jrorrz Jetrr to rrport upplic.rrtiorl. An ~rppliccrtiort~r ri~rle~-ctl of u pc~rtrrit to c.onrlirct c .~~~lor~rt iorl .sl~rrll he file11 \r.itlrirl t11irt.v rlr~.~.s prc~ceilin,y the e.rpir(rtiorl cg'the C-rrrrrrit ~wnrrit. A /)er-r.rnit to 1-orr~lrrct e.rplonrtion .sl~ull 11ot he rrr~e\t.erl if' the rrppli~vrntJi)r rene.rr9trl is it1 r-iolotiotr r?f'rrny ~>ro~i.siorl of tlle iVerv ~Me.ric.o klirlitl,q Act 169-36-1 to 69-36-20 IVMSA 19781.

Section 19.1 0.4.401 .A, of the New Mexico Mining Act Rules:

After December 3 1 , 1994, no person shall engage in exploration operations in New Mexico without first obtaining a permit to conduct exploration from the Director.

\

Page 4 of 4 Section 19.10.1.7.E.(3), of the New Mexico Mining Act Rules:

"Exploration" means the act of searching for or investigating a mineral deposit, including R !, .

sinking shafts, tunneling, drilling core and bore holes, digging pits, making cuts and other - works for the purpose of extracting samples prior to commencement of development or extraction operations and the building of roads, access ways and other facilities related to such work; however, activities that cause no, or very little, surface disturbance, such as airborne sunleys and photographs, use of instruments or devices that are hand carried or otherwise transported over the surface to perform magnetic, radioactive or other tests and measurements, boundary or claim surveying, location work or other work that causes no greater disturbance than is caused by ordinary lawful use of the area by persons not engaged in exploration are excluded from the meaning of "exploration."

Section 19.10.7.L.(2), of the New Mexico Mining Act Rules:

"Location work" means the minimum amount of labor or improvements required to establish a federal mining claim.

Portion of the Operation to which Notice Applies:

All portions of the West Ranch Exploration project that involved surface disturbing activities (construction of roads and drill pads) and/or the development of boreholes drilled or re-drilled using mechanized equipment to conduct drilling.

Remedial Action RequiredIAbatement (includinq interim steps. if any):

1. Ree-Co must submit a comprehensive plan describing in detail the surface reclamation of each area ''.-A,

impacted by Ree-Co's exploration activities. The plan must provide a description and identify the locations on a map for each borehole related to the West Ranch project, including each of the 190 2-inch twinned assayed locations and each of the 34 6-inch diameter "washed" and gamma logged locations. The plan must also describe in detail the reclamation steps taken by Ree-Co for plugging and abandoning each of the boreholes, as well as for surface reclamation of each area disturbed by the drilling project. The plan must address reclamation requirements pursuant to 19.10. 3. 302 NMAC, and borehole plugging requirements pursuant to 19.27.4 NMAC.

2. Ree-Co must hire an independent contractor, acceptable to MMD, to assess the reclamation and abandonment work performed. The independent contractor will perform an evaluation and produce a . . r e p o r t r with .,

Time for Abatement (includinq time for interim steps, if any):

1. March 6,2009

. . * ' L- t . , *

N e w M e x i c o Energy, M i n e r a l s and N a t u r a l R e s o u r c e s D e p a r t m e n t -- -

Bill Richardson Governor

Joanna Prukop Cabinet Secretary Reese Fullerton Deputy Cabinet Secretary

Bill Brancard Division Director Mining and Minerals

7001 1940 000q 7920 q323

CERTIFIED MAIL - RETURN RECEIPT REQUESTED

August 12,2008

Mr. Oliver Reese Rico Uranium LP 140 1 West Route 66 Milan. NM 87021

RE: Notice of Unpermitted Exploration Drilling Activity, West Ranch Area, McKinley n County, New Mexico

Dear Mr. Reese:

The New Mexico Mining and Minerals Division (MMD) has received several reports of possible unpermitted drilling activity near Ambrosia Lake in the vicinity of T14N. R1 IW, Sections 1, 11, 12, and 13, N.IM.P.IM, McKinley County, NM. Please be advised that exploration drilling in New ~Mexico requires an approved permit from the New ~Mexico Mining and Minerals Division (hZMD). Pursuant to Section 19.10.3.401.A, of the New Mexico Mining Act Rules:

The reports we received allege that your company, Rico Uranium LP iRico), rnay be i n ~ o l \ . ~ c l in :in unperrnitrcd drilling \)perat ion withill the area clcsc~~ibecl dbove. A perriiit to c~.)riduct c ' .~plor ; i t i~~i tlrilli~zg must be c>l>r;~inetl \vhcther y o u ;ire ~!rillinp on private land or pirblic I;i!~tl. 7Flic permit nliist bt: vb[,iir~ecl pr.io1- I O ;in? ilrilling. Ti.) ~ o n c l u c l explor;ltion clrillir~p on pr iva~c 1.~11-

p~ihlic l~ind n.ithr!ut a start: permit \ \oulJ he a 1.iolatic)n o f [he NCLV hlcuico \lining Act . ancl \ . , i : ~ . ~ l ~ l incltlrl~: k.~~h.ir:~nti;~l pcri;~lticx ,Ac!di t i~;~i :~l l~~ ~ I I L ~ I I . < : n~itlc ( . l e ~ , t : l u ~ > ~ ~ ~ c t i ~ of ;I p1.01.)~1ty L!I:~.IC:I. \.iol;ltiol~ of 11ic Tcw ?vIe~ii.(j 1I.Iining / \ct [sill he hI(-tcketl fro1-n ohtainin;! a riiine pcr.rllit. Pur\uaiit t o Scl~!ion 19, l (i.(1.6!)6.U.( X!.(a) ( ) I ' thc ~ C W Ylexico h,lirilng Act Ki11t.i . ,~itc:

'-7 - - -. - -- - - - -- - - - -- -- -~

Mining and FAinerals Division ' 1220 South St. Francis Drive * Santa Fe, New Mexico 87505 fi .- .

' Phone: (505) 476-3400 ' Fax (505) 476-3402' http://www.emnrd.state.nm.us 3?-

&E: *, Notice of Illegal Exploration Drilling Activity, West Ranch Area, McKinley County, * New 'Mexico

August 12,2008 Page 2

No pemzit shull be issued clrttil the Directorfincls, in writing, that:

(8) The applicant, the operator or owner or any persoiis or entities ,

directly controlled by the applicant, operator, owner or arzy persons or entities tltat directly control the upplicunt, operator or owner:

(a) Are not c~lrreiztly in violatiorz of the terms of another perrnit issrled by the Division or in violatio)~ of any substanrial environmental law or s~lhstantive environmental re,grrlation crt a mining operation in the United States, which riolation is rrnabuted and is not the subject of appeal, ant1 have not fogeited or Izati fogeited jiltuncial assurance reqliirecl for any mining, reclan~ation or exploration pemzit in the United States. For prlrposes of this Section, a srrbstcrntial environ)nerztnl law or substantive erzvirorlmental regirlatiort is one rvhich is inten~lecl to protect natllral reso~irces from clegra~lution and does not inclrlcle violutions of recorrlkeeping or reporting requirements. If a violation occurred prior to the initiation of a legal relationship hehveen the pemzit applicarlt ant1 the violator, it shull not he considered for this PLlrpose; and

You must contact MMD immediately to discuss what information you may have about the alleged un-permi tted drilling activity. You may contact us by phone at 505-476-3400, or call me directly at 505-476-3435.

Ifaren W. Garcia. Chief Mine Reclamation Bureau New Mexico Mining and Minerals Division

c : Holland Shepherd. P1-ogram Mana~er . MARP Kurt Vollbrecht. 'rei11n Leatlttr. h,LIED/bIECS Andrcw B. Core, Hearing Officer. NPIOSE Ri l l Dalness, State Office, B L M

DOMENICI LAW FIRM, P.C. ATTORNEYS AT LAW

n Pete V. Domenici, Jr. 320 Gold Avenue SW, Suite 1000 Charles N. Lakins pdomenici@domenicilaw.com clakins@domenicilaw.com

Albuquerque, New Mexico 87 102-3228 Jeanne Cameron Washburn Lorraine Hollingsworth - jwashburn@domenicilaw.com Ihollingsworth@domenicilaw.com

(505) 883-6250 Telephone (505) 884-3424 Facsimile

Re: Report from Oliver Reese, Ree-Co Uranium "drilling project" in McKinley County

October 15, 2008

Dear Mr. Shepherd:

RECEIVED 1

O C J 2 1 2008

This Report pertains to Mr. Oliver Reese and Ree-Co Uranium LP's "drilling project" ("Project") in McKinley County, New Mexico. The N.M. Energy, Minerals and Natural Resources Department requested in its October 1 , 2008 letter that we address certain aspects of the Project for further clarification of what activities Oliver Reese and Ree-Co Uranium LP ("Ree-Co") have conducted and the reasons for these activities.

Holland Shepherd, Project Manager MININO 8 MINERALS DIV~SION Mining Act Reclamation Program N.M. Mining & Minerals Division 220 South St. Francis Drive Santa Fe, NM 87505

Ree-Co staked and noticed one-hundred ninety (1 90) Notice(s) of Location that cover five (5) full and one one-quarter (114) Sections in McKinley County. The areas covered by these notices are:

Township 14 North, Range 10 West, N.M.P.M.: a. Section 6 b. NW % Section 8 c. Section 18

Township 14 North, Range 11 West, N.M.P.M.: a. Section 4 b. Section 10 c. Section 12

These notices were executed by Oliver C. Reese and properly filed for record in McKinley County and with the Bureau of Land Management. Ree-Co's mining claim notices cover certain

(7 real estate that is the subject of various Mineral Leases between Ree-Co and the mineral estate

owners. The noticed claims were properly posted according to New Mexico mining law, which clearly requires proper location notice posting. and which sets forth that if the claimant does not follow the statutory requirements, such a failure to comply substantially therewith renders the location void. See Section 69-3-1 (A) NMSA; Blake v Cavins, 25 N.M. 574. 185 P. 374 (191 9); Upton v. Santa Rita Mining Co., 14 N.M. 96,89 P. 275 (1907). Under federal law, Ree-Co was required to follow both state and federal law to locate their mining claims. See 43 C.F.R. $3832.1 1 (a). A locator's failure to comply with federal requirements opens the claim or mine to relocation by others just as if no location had ever been made. United States v. Ztveijiel, 508 F.2d 11 50 (10th Cir. 1975).

Federal case law is clear that in order to create valid mining rights a discovery of mineral is essential, and a claim can be lost without diligent efforts and discovery. See Cole, et al., v. Ralph, 252 U.S. 286, 294-295 (1 920). New Mexico case law reflects these same requirements. See Adams v. Benedict, 64 N.M. 234, 327 P.2d 308 (1958). Under federal law, a valid mining location cannot be made without a discovery of valuable minerals within the claim. 30 U.S.C. $ 23; 43 C.F.R $S 3830.5 and 3832.1 I . American Colloid Co. v. Babbitt, 145 F.3d 1152 (10th Cir. 1998) (a location cannot be made without a discovery of a valuable mineral deposit). Under 43 C.F.R. $3 830.5, "discovery means that a mining claimant has found a valuable mineral deposit." What Ree-Co has been doing is following federal and state law to validate its noticed claims. To this end, Ree-Co undertook prudent efforts to discover valuable mineral deposits on its 190 noticed claim locations, and did so to ensure compliance with the requirements of the federal Mining Act.

For the 190 noticed claims, Ree-Co hired Mr. Tim Watts of Watts Drilling out of Fort Worth, TX to obtain assay samples from each of the 190 notice locations between April and July, 2008. Mr. Watts utilized an ATV to access each of the locations; no drilling rig was used, nor was any water used. Mr. Watts utilized a hand-held, air-hammer drill to sink a dry hole on each of the locations. Each hole was an approximately 2-inch (2") hole, using a 1 314" outside diameter bit. Each of the respective holes was located at the location where the notice was posted for each of the respective claims. This location was offset 20 feet to either the east or west side, as appropriate, of the line running north to south separating the eastern half and western half claims. In essence, these locations as shown on the maps previously provided are located 20 feet in from the noticed claims eastern or western edge, and equidistant from the north to the south boundary of each noticed claim area. For each of these locations. after an assay sample was obtained, the hole was filled in with existing local dirt. These holes were not logged. There was no other surface disturbance; no remediation or re-seeding was called for.

In order to meet State and federal requirements to verify its discoveries, Ree-Co utilized 34 bore holes that already existed. Ree-Co did not drill any new holes. For each of the holes, Ree-Co removed the existing plug, and washed each existing hole with a 20W Rotary Drill Rig using clean water only, which was trucked to each respective location. Once the hole was cleared of residual material from work done in the distant past, Ree-Co logged the hole, then plugged and

sealed it. The method and diagram for how the holes were plugged and sealed was previously provided to the BLM and Mining & Minerals. This work was done between mid-June and mid- August of 2008. A copy of the diagram of the plug and sealing method is attached to this letter. At several of the holes, Ree-Co discovered that the older, existing plugs were leaking, which was allowing surface water contamination of the sub-surface. The newer plug and seal eliminated this problem at each of the locations where this was discovered.

All material that was removed by the washing of the existing holes was buried at each respective site, and each of the sites were reclaimed by utilizing a B.L.M mix that was purchased from Aztec Feed in Aztec, N.M. The seed mix was the "B.L.M. less than 10 inch 2008-0202." In addition to the holes washed by Ree-Co, Ree-Co reclaimed and re-seeded several additional sites and/or locations that were left in disrepair by previous operators.

Water was discovered in three of the 34 holes. These were: 1) Hole 12-5D at 6 15 feet; 2) Hole 12-1 WD at 670 feet, and; 3) Hole 12-4D at 570 feet.

Ree-Co does not have any abandonment records for any of the respective 34 washed-hole locations. Because no pads, pits, roads or other related infrastructure were constructed, there was no reclamation of any associated pads, pits, roads or other related infrastructure.

Pictures documenting each of the 34 washed-hole locations are included on the accompanying CD. These pictures were taken using a Ricoh Caplio 500SE camera. The latitudellongitude

? coordinates are embedded in each picture, and for each respective set of pictures for a given .. ..

location, the latitudellongitude coordinates were fixed for that respective location. For some unknown reason, the compass heading of the direction the camera was facing in each picture does not display on the picture. If you desire, we will assemble an additional map to illustrate the locations of where these pictures were taken.

The surface and mineral owners of the respective sections are as follows:

Township 14 North, Range 10 West, N.M.P.M.: a. Section 6 Surface and mineral estate: BLM b. NW % Section 8 Surface and mineral estate: BLM c. Section 18 Surface and mineral estate: BLM

Township 14 North, Range 1 1 West. N.M.P.M.: a. Section 4 Surface: Lynn Elkins, Mineral estate: BLM b. Section 10 Surface: Lynn Elkins, Mineral estate: BLM c. Section 12 Surface and mineral estate: BLM

Ree-Co is extremely concerned about any possible disclosure of highly proprietary information that was obtained through the gamma logs produced for any of the 34 washed-hole locations, as

0 well as any assay information that has been determined from the 190 dry-hole discovery locations. While Ree-Co is not refusing to provide requested information to the N.M. Mining & Minerals Division, Ree-Co desires first to be apprised of the information that Mining & Minerals Division desires to have from the logs, so that Ree-Co may be able to provide information that the Division requires, while at the same time taking all measures necessary to ensure protection of its proprietary information. Please call me to discuss this so that we can work through this issue.

If you desire more detailed information on the above items let us know and we will work to get all of the information that the Mining & Minerals Divisions requires.

Sincerely, DOMENICI LAW FIRM, P.C.

Charles N. Lakins, Esq.

CC: 1858 client

~ c t U ~ I U M 11:uda Kee Lo U r a n l u m L P

4

N e w Mex i co r n e r o y 3 ) Minerals and Na tu ra l Resources Department

Bill Richardson Governor

Joanna Prukop Bill Brancard Cabinet Secretary D~vis~on Director R e e s e Fullerton Mining and Minerals Division Deputy Cabinet Secretary

Mr. Oliver Reese Ree-Co Uranium LP 1401 West Route 66 Milan, NM 87021

October 1,2008

via First Class Mail and Electronic Mail

Re: The Drilling Project Consisting of One Hundred Ninety (190), More or Less, Exploration Holes in McKinley County

Dear Mr. Reese:

I") This letter responds to your attorney's, Pete Domenici, Jr., September 29, 2008, cmail to James Hollen, wherein he advised that the report ("Report") on the above referenced drilling project ("Project") would not be ready before the site visit that is scheduled for tomorrow. We are, of course, disappointed. The Report would have been helpful during visit, and, at our meeting on September 9. 2008, you indicated that you believed that the Report would be submitted to us in ten days to two weeks of that meeting. As you know, one of the reasons we selected October 2, 2008, for the site visit was so that we could have the benefit of the Report as we looked at the property. We anticipate that you will forward the complete Report to us in the very near future, certainly no later than October 10, 2008. Please let me know immediately if you cannot deliver the Report to us on or before that date.

As I understand it, the report will be a description of the Project and the related abandonment and reclamation o f the drill holes and infrastructure, as well as the purpose and circurnstanccc surrounding the Project. I expect, then, that the Report will contain the Collowinz with respect to each drill hole, without limitation: the drilling method used; the date drilled; the location; the Township, Range and Section; the identity of the surface and mineral owner; the drilling/ga~nrn;~ log; the total depth; whether a water bearing formation was encountered and. if $0, at what depth; how the hole was plugged (method, materials and equipment): abandonment records; and reclanlation of all associated pads, pits and roads or other related infrastructure. :11so c ~ p c c t that rhe Report will contain a map that is more uscable in locating all o f the drill holes than rht: claims rui~p illat you earlier fonvarded to us, as well as a completc description o f [he ~ ~ u ~ p o s t : ;tt~d ~.~~t!:: .~rnst; lni~~s 01' thc Project.

7 -. - - - - - - - - - - - . - - . -. - -

Mining and Minerals Division 1220 South St. Francis Drive - Sarita Fe, New Mexico 87505 P- -

Phone (505) 476-3400 - Fax (505) 476-3402 - ~.an~nrd.state .r i rn.r!s , 'L~IbtD x

Mr. Oliver Reese R.:e-Co Uranium I,P October 1,2008 Page 2

We look forward to seeing you at the field visit tomorrow.

Sincerely,

Holland Shepherd Program Manager Mining Act Reclamation Program

cc: Pete Domenici, Jr., via facsimile and email

-

rals and Natural Resources Department

Bill Richardson Governor

Joanna Prukop Bill Brancard Cabinet Secretary Division Director Reese Fullerton Mining and Minerals Division Deputy Cabinet Secretary

November 12,2008

Charles N. Lakins, Esq. Domenici Law Firm, P.C. 320 Gold Avenue S W, Suite I000 Albuquerque, NM 87 102-3228

Re: Request for Additional Information: Report from Oliver Reese, Ree-Co Uranium LP's Drilling Prqject in McKinley County, New Mexico

(T Dear Mr. Lakins:

On October 15, 2008, the New Mexico Mining and Minerals Division (MMD) received a letter (Letter) from you, written on behalf of Oliver Reese and Ree-Co Uranium LP (Ree-Co), addressing certain aspects and providing technical details necessary for further clarification of mineral exploration activities completed by Ree-Co at 190 staked and noticed locations covering 5 full, and 1, one-quarter Section(s) situated on both private and federal surface and mineral estates in McKinley County, New Mexico. MMD has reviewed the Letter and herewith provides comments and requests information that was not included in your Letter. Please review the following comments and kindly submit your responses, and any additionally requested information, to MkZD no later than November 26,2008.

Specific Comments:

I . The Letter included no information proviciing a detailed explanation of intended use or final depths of the 2" twinned drill holes. Please provide the i~pproximate total depth for each of the 2" twinned drill holes completed at each of the 190 discovery claim locations and explain in detail the use to which Ree-Co put the information obtained in the drilling of such holes.

2. The fourth paragraph of Page 2 and the first paragraph of Page 3 briefly describe ;I process used by Rce-Co to remove any existing sh;lllo\.v, lit;\r \u1.1'ice p111gs to re-entcr ,,tjnle _'.4

, A=-> existing ~lrill holes i n orclcr to perform tlo:vn-holc " ~ 7 ; i ~ h i n g " ucirlg ;l rotary, 1.evt.1-se

Mining and Minerals Division ' 1220 South St. Francis Drive Santa Fe, New Mexico 87505 A'--

' Phone: (505) 476-3400 ' Fax (505) 476-3402' ~t tp: / /~~ww.~r! lnrd.stat t?~nrn. l~s HX-

w - Re: Request for Additional Information: Report from Oliver Reese, Ree-Co Urar~ium

LP's Drilling Project in McKinley County, New Mexico November 12,2008 Page 2

circulating drilling rig and water to clear each borehole of any residual material and to 1""5 r.'

facilitate down-hole gamma radiation logging. Upon completion of these activities (washing and gamma radiation logging), Ree-Co would then plug and seal the hole as shown on a schematic included with the Letter. Based on the descriptions of these activities, it remains unclear whether each of the 34 "washed" holes were plugged by using only a shallow, near-surface concrete plug, or were fully abandoned from total depth as shown on the schematic. Please clarify the abandonment and plugging procedure employed for each of the 34 "washed" holes, including the 3 boreholes in which Ree- Co encountered groundwater.

3. The Letter included a drawing that attempts to illustrate, schematically, the methodology utilized by Ree-Co to plug and abandon the 34 washed boreholes. The schematic has prompted the following requests for further information, each of which must be addressed:

a. Please provide a detailed description defining "40% Hole Plug" and "60% Hole Plug" and an explanation of their relevance to the abandonment of the boreholes. What does 40% or 60% represent, in terms of the type and percentage of materials used for the whole plug'?

b. Please provide dimensions of "cement plug," including information on whether o r not the plugs were buried o r remain exposed above ground level a s shown on the schematic.

c. Immediately below the "cement plug," there appears to be a void between the lower end of the "cement plug" and the top of the "40% Hole Plug." Please provide a description of this void located between the bottom of the "cement plug" and the top of the "40% Hole Plug."

d. The schematic indicates that the "water table" is encountered and provides some information on how Ree-Co abandoned boreholes encountering water. However, it is unclear how Ree-Co abandoned the boreholes that did not encounter groundwater. Please provide a schematic that details the abandonment process Ree-Co employed for dry holes.

e. 'fhe schematic identifies "PVC Casing." It is unclear how deep the casing extends down-llole. Please provide additional details describing t l ~ e length of casing for each borehole.

I. 'rhe first paragr:iph of Puge 3 indicates rhat "The niethod and diagram for how the holes were plugged and sealed was pre~ iou~~ly provided to the BL.M and Mining and Miner:ils." MMD has no record uf ~weiving juch infonnatlon. Please provide this information, as requested.

- ,. ?. The secnnd pnr:~gc~ph o f P:lze 3 c.lz:;cribc:s ii seed rnIx ("B.I ...M . !t:ss thxn 10 inch 3008-

0202") utili;?ed by Rre-Co for re-seccling surface dis~urhances cscakd at e x h of (tie 3 4 Ch

existing drill holes in ~vhich Ree-Co unplugged, re-c~ltercd atid "washed." No dates ... ")

describing when the seeding was corr~plcted and no descriptiori of the seeding n~ethods, i~iclucling rate and rnethod of applic3tion. were provided. Please provide the date when

. . . . J

Re: Request for Additional Information: Report from Oliver Reese, Ree-Co Uranium LP's Drilling Project in kIcKinley County, New Mexico

November 12,2008 Page 3

f? each of the reclaimed locations were seeded, plant species name, seed application rate (Ibs. seedlacre) and method used for re-seeding each of the reclaimed locations.

6. Paragraph two of Page 3 describes "several additional sites and/or locations that were left in disrepair by previous operators" and indicates, further, that Ree-Co reclaimed and re- seeded these locations. Please identify on a map, any such sites andlor locations left in disrepair by former operators and at which Ree-Co reclaimed said prior operations.

7. Paragraph 3 of Page 3 describes 3 of the 34 "washed" hole locations ( 1 2-5D, 12- 1 WD and 12-4D) in which Ree-Co reports having encountered groundwater. None of these locations correspond to any of the "notice discovery holes," as shown on a claim map provided to MMD via e-mail on September 24,2008. Please address this discrepancy and explain why none of these 3 locations appear within the listing of "notice discovery holes" as provided to l\iIMD on the September 24 claim map.

8. In Paragraph 4 of Page 3, you indicate that: "Because no pads, pits, roads or other related infrastructltre were constructed, there was no reclamation of any associated pads, pits, roads or other related infrastructure. " This appears to be inconsistent with Paragraph 2 on Page 3, which states that: "All material that was removed by the washing of the existing holes was buried at each respective site, and each of the sites were reclaimed.. . " Please address this discrepancy.

('7 , 9. Paragraph 4 of Page 3 describes map and photo documentation provided to MMD by Rce- Co and questions whether MMD desires an additional map depicting the photographic aspects for each of the 34 washed-hole locations. In lieu of providing that information, please provide a map that distinguishes which 34 of the 190 total claim locations were "washed" and at which of these locations groundwater was encountered.

10. The first paragraph of Page 4 expresses Ree-Co's concern regarding the disclosure of proprietary information requested by MMD and acquired by Ree-Co through the gamma logs and assay information. In lieu of providing that information, please provide the final total depth from each of the logs for each of the 34 washed-hole locations.

11. The Letter provides no listing of all chemicals used during Rce-Co's operation. nor does the Letter provide any information on containment, uqe and disposal for any chernicitls used. Please provide this information regarding containment, rise and disposal in addition to also including Material Safety Data Sheets (MSDS) for all chemicals used by the operation, including, hut not limited to, ahandonmentlplugging materiiils, drilling mud (bentonite products), polymers iind any drilling mud additives, lost circr~lation materials in addition to providing inforrnalion regarding their rlse :tnd disposal.

. - . He: Request for Additional Information: Iieport from Oliver Reese, Ree-Co Uranium

LP's Drilling Project in McKinley County, New Mexico November 12,3008 Page 4

If you have questions, please contact me at 505.476.3437, or James Hollen, of my staff, at ('7 ,a-

505.476.3436.

Sincerely,

Holland Shepherd, Manager mining Act Reclamation Program (MARP) Mining and Minerals Division

cc: Bill Brancard, Director, MMD Mark Smith, Counscl, MMD Douglas Rappuhn, Hydrologist, NM Office of the State Engineer, Hydrology Bureau Kurt Vollbrecht, Mining Act Team Leader, NM Environment Dept., GWQB/M ECS David Sitzler, Land and Realty Specialist, BLM James Hollen, Permit Lead, MMD/MARP Mine File (MK027EM)

DOMENICI LAW FIRM, P.C. ATTORNEYS AT LAW

Pete V. Domenici, Jr. 320 Gold Avenue SW, Suite 1000 Charles N. Lakins pdomenici@domenisihw.com clakins@domrnicilaw.corn

Albuquerque, New Mexico 87 102-3228 Jeanne Cameron Washburn Lorraine Hollingswonh - jwashburn@domenicilaw.corn Ihollingsworth@domenicilaw.com

(505) 883-6250 Telephone (505) 884-3424 Facsimile

Holland Shepherd, Project Manager Mining Act Reclamation Program N.M. Mining & Minerals Division 220 South St. Francis Drive Santa Fe. NM 87505

December 4,2008

DEC 0 8 2008

Re: Report from Oliver Reese, Ree-Co Uranium "drilling project'' in McKinley County

Dear Mr. Shepherd:

This letter is in response to the N.M. Energy, Minerals and Natural Resources Department f l November 12.2008 letter requesting that we provide responses addressing certain comments

.-. made by the Department in response to our October 15, 2008 letter pertaining to Mr. Oliver Reese and Ree-Co Uranium LP's "drilling project" ("Project") in McKinley Tounty, New Mexico.

1. Please provide the approximate total depth for each of the 2" twinned drill holes completed at each of the 190 discovery claim locations and explain in detail the use to which Ree-Co put the information obtained in the drilling of such holes.

The total depth of each 2" Twinned bore holes was from 26' to 45' penetrating bedrock. Each hole is listed and identified by depth on the attached Exhibit A.

The information obtained from each drill hole identified that uranium mineralization in place was sufficient to justify a prudent man to spend the money necessary to develop an ore body. This information was put to use by Ree-Co in noticing to the world that a mineral discovery had been made.

2. Please clarify the abandonment and plugging procedure employed for each of the 34 "washed" holes, including the 3 boreholes in which Ree-Co encountered groundwater.

The abandonment and plugging procedure on the 3 1 of the 34 holds that did not encounter ground water was as follows:

' 7

Ree-Co injected a solution of clean water and hold plug on a ration of 60% water and 40% hole plug from the bottom of the hole to within 6' of the surface for each of the bore holes. Each hole was cased to a depth of approximately 20'. A cement plug was then placed

f? in the top remaining approximately 6' to surface. The casing with the cement plug in place was left approximately 6" above the surface, where it was clearly marked with a 112" rear marker approximately 12" above the surface.

The three holes that encountered ground water were fully abandoned as follows:

From the bottom of the hole to ten feet above the ground water intercept a solution of 60% hole plug and 40% clean water was placed in the hole. From 10' above the ground water intercept level or elevation within 6' of the surface of the hole a solution of 40% hole plug and 60% water was placed in the bore hole to within 6' of the surface. A cement plug was placed in the hole to 6" above the surface, then a 112" rebar marker approximately 12" above the surface.

3.

a. Please provide a detailed description defining "40% Hole Plugn and "60% Hole Plugn and an explanation of their relevance to the abandonment of the boreholes. What does 40% and 60% represent, in terms of the type and percentage of materials used for the hole plug?

A detailed description of the materials (40% hole plug) means:

Forty percent (40%) of the total volume of materials placed in the holes was (hole plug). Sixty percent (60%) of the total volume of materials placed in the hole was (hole plug).

Composition of "hole plug" is" a commercial industry standardized material that consists of Bentonite Clay, which has the properties of expanding 15 times its normal weight when in contact with water.

Bentonite Clays are predominate in the Ambrosia Lake area as a naturally occurring substance that makes up a major portion of the surface and sub-surface material in the entire area. Ree-Co used a "hole plug" as a source to seal the hole from top to bottom to emulate as closely as possibly the natural materials contained in the surface and sub- surface of the hole or holes.

b. Please provide dimensions of "cement plug," including information on whether or not the plugs were buried or remain exposed above ground level as shown on the schematic.

The dimensions of the cement plus is as follows: Six (6) inches in diameter and six (6) feet in length. Five feet six inches (5'6") of each plug was buried underground with 6 inches (6") remaining exposed above ground.

c. Immediately below the "cement plug," there appears to be a void between the lower end of the "cement plugn and the top of the ''40% Hole Plug." Please provide a description of this void located between the bottom of the "cement plugn and the top of the "40% Hole Plug."

Immediately below the cement plug there is no void between the bottom of the cement and the top of the "40%" hole plug. The illustrated drawing from the original documentation of the plug was merely to demonstrate schematically a procedure of the hole plugging method used by Ree-Co. This is better shown by the explanation given in the previous paragraphs and descriptions.

d. The schematic indicates that the "water table" is encountered and provides some information on how Ree-Co abandoned boreholes encountering water. However, it is unclear how Ree-Co abandoned the boreholes that did not encounter groundwater. Please provide a schematic that details the abandonment process Ree-Co employed for dry holes.

See Schematics attached as Exhibits B and C.

e. The schematic identiiies "PVC Casing." It is unclear how deep the casing extends down-hold. Please provide additional details describing the length of casing for each bore hole.

The casing in question has been referenced in the above paragraph 2. The casing is 6'' x 20' composed of PVC Schedule 80.

4. Please provide information, as requested (about the method and diagram for how the holes were plugged and sealed as previously provided to the BLM and Mining and Minerals.)

. . This information is set out in answers to the above paragraphs.

5. Please provide the date when each of the reclaimed locations were seeded, plant species name, seed application rate (lbs. seedlacre) and method used for re-seeding each of the reclaimed locations.

The BLM mix is the Federal Government approved mix of native grasses used in not only reclaiming of environmentally-impacted locations, but also as a replacement seed for grasses grazed .on by livestock and game animals wherever the situation deems necessary to restore and maintain the surface integrity to avoid erosion and degradation of surface areas.

The dates that the seeding took place was during the time the referenced work was undertaken, starting in June 2008 and completed in August 2008.

We do not hve the plant species name that is contained in this seed mix that has been approved by the BLM.

The method used for reseeding teach of the reclaimed locations was a hand-cranked seed spreader that broadcast the seed over the effected area that was to be reclaimed.

6. Please identify on a map, any such sites and/or locations left in disrepair by former (-3 operations and at which Ree-Co reclaimed said prior operations.

Ree-Co is in the process of assembling the requested map to identify the prior sites left by previous operations that were reclaimed by Ree-Co in an effort to go above and beyond to

(I restore the surface area to its original condition prior to disturbance by prior operators. This map will be promptly forwarded to the Department upon completion.

7. Please address this discrepancy and explain why none of these 3 locations appear within the listing of "notice discovery holes" as provided to MMD on the September 24 claim map.

There is no discrepancy on the three locations of 12-5D, 12-1 WD and 12-4D. These were holes that previous operators had failed to provide sufficient plugs to maintain the integrity of the sub-surface water. Ree-Co washed these holes, logged them and proceeded to plug them properly (as explained above) in order to avoid any further surface contamination of the water table below.

8. Please address the discrepancy (about no pads, pits, roads or other related infrastructure were constructed, but further stated that all material that was removed was buried at each respective site.)

The discrepancy in the two paragraphs results from a confusing interpretation between the two. Ree-Co did not construct any normal pads, pits and roads or other related infrastructure that are traditionally related to drilling operations (such as oil and gas operations). In the process of washing the respective holes, Ree-Co utilized clean water that was re-circulated using a water tanker truck. In using this method. Ree-Co did not construct a traditional pad or pit at each drilled hole location. The only surface disturbance was where material mixed n with clean water ran out of any given hole. This small amount of "mud" material that was washed up from any hole was buried at the site of each respective hole, and then the surface area was re-seeded as explained above.

9. Please provide a map that distinguishes which 34 of the 190 total claim locations were "washedn and at which of these locations groundwater was encountered.

Ree-Co has not yet finalized this map. We anticipate that this will be done the week of December 8th, and will be promptly forward to the Department upon completion.

10. Please provide the frnal total depth from each of the logs for each of the 34 washed-hole locations.

See Exhibit D attached.

1 1. Please provide information regarding containment, use and disposal in addition to also including Material Safety Data Sheets (MSDS) for all chemicals used by the operation, including, but not limited to, abandonmentlplugging materials, drilling mud (bentonite products), polymers and any drilling mud additives, lost circulation materials in addition to providing information regarding their use and disposal.

The only materials used by Ree-Co were water and bentonite.

If you desire more detailed information on the above items let us know and we will work to get all of the information that the Mining & Minerals Divisions requires. We will promptly forward the maps, as set forth above, upon their completion. n Sincerely, DOMENICI LAW FIRM, P.C.

~ h a r l e s N. ~ak ins , Esq.

CC: 1858 client

NAME OF CLAIM DEPTH OF DISCOVERY HOLE IN FEET

0 OCR 1

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NAME OF CLAIM DEPTH OF DISCOVERY HOLE IN FEET

RM 1 32

RM 2 36

RM 3 2 6

DEC 0 8 2008

fl DRILL HOLE# DEPTH IN FEET

12 12-1 r\ -.

13 12-1WD water 5 bprn

14 12-2

12-3D duplicate TD 657

DEC 0 8 2008