OVERVIEW OF LAWS RELATING TO MINERAL EXPLORATION, DEVELOPMENT & MINING IN COLORADO by Mark T. Nesbitt Nesbitt & Associates LLC This is a brief summary of information regarding applicable laws, permit requirements, mining claim maintenance fees, and what permits and environmental studies would be required if a decision to proceed with a mining operation is made for properties in the State of Colorado,. Staking and Maintaining Mining Claims. Colorado State law requires the recording of mining claim location certificates within three months of the date of their location. Federal law and regulations require filing a location notice for each mining claim with the State BLM office within 90 days after the date of location. Bureau of Land Management ( BLM ) regulations governing the location, maintenance, amendment, and transfer of mining claims on Federal lands are set forth in 43 CFR Part 3800. The current filing fee for each claim is $170 (this includes a $30 location fee, $15 processing fee and $125 maintenance fee). In lieu of performing assessment work, an annual maintenance fee of $125 for each claim must be paid on or before 12:00 noon every September 1 to maintain the claim for the upcoming assessment year (Sec. 3834.11). In addition, filing a quitclaim deed, transfer or conveyance of a mining claim, or interest in a claim, requires payment of a $10 processing fee for each claim (Sec. 3833.30). Colorado law required an annual affidavit be recorded each year in the county where the mining claims are located. The fee is $6.00 for the first page and $5.00 for each subsequent page (usually the mining claim exhibit), plus $0.25 for each mining claim. Regulation of Exploration, Development and Mining on Claims To coordinate and avoid duplication in the regulation of prospecting and mining operations on public lands, the Colorado Department of Natural Resources, Division of Reclamation, Mining and Safety ( DRMS ), and the BLM entered into a Memorandum of Understanding ( MOU ) in December 2002. Under the MOU, the DRMS assumes primary responsibility for the administration, review and permitting of Notices of Intent (NOI) for prospecting and/or drilling and all other mining operations subject to Federal regulations (43 CFR Subpart 3809) which otherwise fall under the jurisdiction of the DRMS. These mining operations include the prospecting and mining of base and precious metals, uranium and other uncommon varieties of minerals locatable under the U.S. 1872 Mining Law. Colorado State Law Colorado law requires any person desiring to conduct prospecting or exploration on land within the State of Colorado to file a Notice of Intent to Conduct Prospecting Operations ( NOI ) with the Mined Land Reclamation Board ( MLRB ) and DRMS Page 1 of 5
prior to entry upon the subject land (CRS 34-32-113). Prospecting includes activities such as sinking shafts, tunneling, drilling reverse circulation and core drill holes, digging pits, trenches, cuts and other work for the purpose of extracting samples prior to the commencement of mineral development or extraction operations, and the building of roads, access ways, and other facilities related to such work (Rule 1.1.43). Note that prospecting under Colorado law does not include any single activity which results in the disturbance of a surface area of land totaling 1600 square feet or less, not to exceed two disturbances per acre, except that the cumulative total of such disturbances cannot exceed five acres statewide in any prospecting operation extending over 24 consecutive months (Rule 1.1.43). An NOI requires a $75 filing fee and must be filed with DRMS on a form approved by the MLRB. Upon receipt of the NOI, DRMS will notify the BLM. The submitting prospector must also send a copy of the NOI to the BLM. Processing of the NOI will not begin until the prospector has submitted evidence acceptable to DRMS that the NOI has been sent to the BLM. If the prospector fails to file the NOI with DRMS before conducting exploration or prospecting, the MLRB or DRMS may issue an immediate cease and desist order and the prospector may be subject to daily penalties for each day the land has been affected (CRS34-32-123). An NOI must be accompanied with location maps and drawings, a $75 application fee and a financial warranty. The prospector can either file a "One Site Prospecting Financial Warranty" or a "Statewide Prospecting Financial Warranty." A One Site Prospecting Financial Warranty is usually filed by small companies where prospecting activities are limited to a single area. The financial warranty must be filed in the amount of $2,000 per acre for the land to be disturbed, or such other amount as determined by the DRMS, based on the projected cost of reclamation. A Statewide Prospecting Financial Warranty is usually filed by larger companies with multiple prospecting sites. The financial warranty must be submitted and approved by the DRMS prior to entry on lands for the purpose of prospecting or exploration. Annual reports are required for all active prospecting operations. A prospector must file an annual reclamation report by December 31 of each year that an NOI is in effect, describing in detail the exploration and reclamation activities that occurred during that year and whether prospecting has been completed. For the purpose of reporting prospecting activities, the reporting year begins on November 1 and ends on October 31. Under the 2002 MOU, the BLM reviews each NOI to ensure that the proposed operation is in conformance with Subpart 3809 of the BLM s regulations. The BLM will complete an Environmental Assessment ( EA ) as required by the National Environmental Policy Act ( NEPA ), and will forward to DRMS all correspondence and additions to the NOI that are developed during the review and NEPA process. The BLM will send DRMS the EA and any conditions or modifications necessary to prevent what it considers undue and unnecessary degradation, and all BLM conditions and modifications will be incorporated into DRMS' final permit approval. DRMS and the BLM will review and consult regarding the terms and conditions of the proposed permit. A copy of the final issued prospecting permit will be provided to the BLM. Page 2 of 5
Because DRMS is the lead bonding authority under the terms of the MOU, Reclamation bonds will be issued in the name of both the State of Colorado and the Department of Interior, Bureau of Land Management, and the bonds will be administered by DRMS. The BLM will be consulted on the amount of the bond and retains authority to require a separate bond if such is deemed necessary. Other State & Federal Laws Depending on the nature and extent of the planned exploration and prospecting activities, other State laws and regulations may apply. Colorado has been delegated authority over enforcement programs concerning matters falling under Federal environmental laws, including those regarding the Clean Air Act, Clean Water Act, and Solid Waste Act as amended by the Resource Conservation and Recovery Act. Colorado has enacted laws and regulations implementing these programs, and they are administered by the Colorado Department of Public Health and Environment ( Department of Health ). As a result, no discharge of waste water off site or to groundwater is allowed without first obtaining a permit from the Department of Health. Likewise, emissions of fugitive dust or emissions from a point source are prohibited if not covered by a Department of Health air permit. An applicant must pay fees covering the cost of review and processing these environmental permits. Further analysis of the environmental permit requirements will be necessary once the scope of operations is better defined and a decision is made to proceed with development and commence production. Production Once a decision is made to commence production, a mining/reclamation permit must be obtained from the MLRB acting through the DRMS (CRS 34-32-109). The operator must file a written permit application with DRMS that contains a reclamation plan, maps and description of the area to be covered by the permit, ownership of the surface and minerals, the timing for various stages of the mining operation, and other details about the proposed operation (CRS 34-32-112). Depending on the nature and scope of the operation, fees are required for covering the cost of review and processing the permit application. The information submitted for the State reclamation permit will generally satisfy the requirement to file a plan of operations with the BLM. The BLM must concur with each State decision approving a plan of operations and it retains enforcement responsibility regarding compliance with the National Environmental Policy Act (43 CFR Sec. 3809.203). As noted above, further analysis will be necessary to fully describe the plan of operations and approval requirements for any proposed mining operation. County Laws and Regulations Teller County has no special requirements for mineral exploration and prospecting. However, the County will have an opportunity to review the NOI filed with DRMS for impacts of the proposed activities on County roads and services, including police and fire protection, and other matters where the County has some jurisdiction, such as sewage Page 3 of 5
septic systems and storm water runoff. The County's comments on the proposed activities, if any, will be submitted to DRMS, where they may or may not be incorporated into the permit issued by DRMS. Before major construction and mineral production starts, the County will require application for and approval of a Conditional Use Permit ( CUP ). The CUP will address all aspects of the mining operation, including drainage, land use and facilities, haulage and roads, storage of hazardous materials, reclamation, and mine water supply. As with the environmental and mining permits discussed above, once a decision is made to begin production, additional review will be necessary to properly specifically advise you on how County ordinances and regulations will apply to a proposed mining operation. Summary The following points summarize the major reporting and permit requirements in Colorado, including fees, applicable to acquisition and exploration of the Teller County mining claims being purchased by Hyde Park: 1. SEC Form 8-K requires reporting the acquisition of major assets within 4 business days of closing, including a brief description of and the consideration paid for the assets. 2. Within 3 months of the date of location, a certificate of location must be filed with the county Recorder where the mining claim is located. 3. Within 90 days of the date of location, a location notice must be filed with the State BLM office with the $170 filing fee for each claim. 4. An annual BLM mining claim maintenance fee of $125 per claim must be paid to BLM on or before 12:00 noon of September 1 for each subsequent assessment year. 5. An affidavit that BLM maintenance fees have been paid must be recorded with the county Recorder on or before December 30 of each year. 6. If a new mining claim is staked after August 31 but prior to January 1, a Notice of Intent to Hold describing all new mining claims must be filed with the BLM on or before December 30 of the year of location. 7. A processing fee of $10 per claim must be paid to BLM for any deed, transfer or conveyance of mining claims. 8. A Notice of Intent to Conduct Prospecting Operations must be filed with the Colorado Division of Reclamation, Mining and Safety, with a $75 application fee. 9. The Notice of Intent must be accompanied by a financial warranty of $2,000 per acre for all land that will be disturbed, or such other amount as determined by the Colorado Division of Reclamation, Mining and Safety, based on the projected cost of reclamation. Page 4 of 5
10. An annual reclamation report must be filed with DRMS by December 31 of each year that the NOI is in effect. 11. Other State environmental permits will be required if exploration or prospecting results in waste water discharges or air emissions. 12. Teller County will have the opportunity to review each NOI and request additional conditions in the prospecting permit, which will happen if the BLM deems the requested conditions necessary for compliance with local regulations. Finally, once a decision is made to commence production and the proposed mining operation is better defined, further analysis will be necessary to determine all permits and approvals required under Federal, State and local laws and regulations. Please do not hesitate to contact me if you have any additional questions. Page 5 of 5