Free Motion for Leave to File - District Court of Federal Claims - federal

Case 1:01-cv-00039-BAF

Document 88-3

Filed 04/23/2008

Page 1 of 14

EXHIBIT LIST

Exhibit 1

Letter dated September 5, 2003, from Richard Stephens to Otto Schumacher and Dr. Terry Maley Letter dated November 12, 1993, from Bradley Grenham to Richard Stephens Letter dated November 19, 2003, from Richard Stephens to Bradley Grenham "Contestee Walter Freeman's Brief on Authority of Administrative Law Judge to Determine Validity As Of Certain Dates" Excerpt of Contest Hearing transcript, March 14, 2007 Excerpt of Contest Hearing transcript, June 1, 2007 Order dated May 18, 2007 in United States v. Aloisi, CACA 41272 Excerpt of Contest Hearing transcript, March 16, 2007 "Interior Board of Land Appeals Monthly Report Average Time For Final Disposition Pending Cases Summary of Board Activity By Category" for March 2008. Letter dated April 22, 2008, from Margaret E. Walsh to Bradley Grenham.

Exhibit 2 Exhibit 3 Exhibit 4

Exhibit 5 Exhibit 6 Exhibit 7 Exhibit 8 Exhibit 9

Exhibit 10

Case 1:01-cv-00039-BAF

Document 88-3

Filed 04/23/2008

Page 2 of 14

, GROEN _ TEPHENS z.K_ LING E
ATTORNEYS AT LAW

TELEPHONE

(425) 453-6206
FACSIM]I~

(425) 453-6224

210[ II2TH AVENUE HE, SUITE if0 BELLEVUE, WASHINGTON 98004-2944

September 5, 2003 Mr. Otto Sch~tmacher Western Mine Engineering, Inc. 222 W. Mission Ave,, Ste. 218 Spokane, WA 99201 Re: Freeman Mineral Examination

Dr. Terry Maley Bureau of Land Management 1387 South Vinnell Way Boise, Idaho 83709-1657

Dear Otto and Terry: Walt and I appreciate the opportunity we had to meet with you and meet Corby Anderson and Alan Young. We look forward to an opportunity to respond to any questions you might have as you finalize your work on this project. Naturally, after our meeting was over, I realized there are several questions or comments I wished I had asked or made while we were together. First, in regard to endangered plants, I have changed my mind about wanting to know where they are. At this point in time, we don't want to know until the existence of the plants based on the existing data is confirmed. Considering last year's ftre, there may be a good chance that the species is no longer in the area or in fewer locations. I would not want to create an opportunity for someone to cast suspicion on Walt until the plants' post-fire existence has been verified. My suggestion is that Walt be able to accompany someone working on this project to the sites where the plants were previously found to determine whether the plant still exists at those locations. Second, at a previous meeting it was mentioned that the team was looking for seismic and other Inspiration data. Was anything ever found? If so, Walt would like a copy for his files. Third~ I believe Otto indicated that WME was not going to determine the quantity of reserves for the "unsampled" claims. I assumed that when you referred to "unsampled" you were referring to claims which were not sampled by Inspiration or by your team. Some of the claims which Inspiration did not sample still have data obtained by Len Ramp and others from the Oregon Department of Geology and Mineral Industries and the U.S. Bureau of Mines. Mr. Ramp is retired, but lives in Grants Pass.

EXHIBIT 1

Case 1:01-cv-00039-BAF

Document 88-3

Filed 04/23/2008

Page 3 of 14

Otto Schtunacher Terry Maley September 5, 2003 Page 2 of 6

GROEN STEPHENS &

KLINGE LLP

Assuming I understand correctly what are the "unsampled claims," this raises the question of how you anticipate handling these claims. Do you anticipate not forming an opinion on the validity of the "unsampled" claims? We hope not, because we believe the Court is expecting the Secretary of the Interior (based on your recommendations) to decide either that each claim is valid or to institute contest proceedings for any claims that the Secretary believes are invalid. We certainly were not expecting that any claims would be left in limbo. Or, do you anticipate forming an opinion about the validity of all the claims, but not forming an opinion as to the amount of resources or reserves? From my perspective, it seems strange that you would be comfortable forming an opinion as to the validity of the "unsampled" claims without any opinion as to the quantity of the material in the ground? Fourth, Otto had indicated at the meeting that he would be using the definitions from the Society for Mining, Metallurgy and Exploration, Inc.'s (SME) guide for reporting exploration information. There are differences between the S/vIE standards and those developed by the United States Geological Survey. The position of the Interior Department historically has been to use the latter, although we believe that all of Walt's claims are valid regardless of which definitions are used. Nevertheless, use of the correct standards is important in case the distinctions between them make any difference in the outcome. The longstanding precedent in mining law has been the Geological Survey standards. After all, the Geological Survey, rather than a private association, is charged with authority for classifying and determining the nation's mineral values. See 43 U.S.C. § 31; 16 U.S.C. § 1133(d)(2); 43 U.S.C. § 1782. The IBLA has approved the use of Geological Survey standards on numerous occasions. For instance, in United States v. Feezor, 74 IBLA 56 (1983), reconsidered 130 IBLA 146 (1994), the IBLA used the Geological Survey standards and that fact was expressly recognized again by the 1BLA in Vanderbilt Gold Corp., 126 IBLA 72 (1993); see also United States v. American Independence Mines and Minerals, 122 IBLA 177 (1992); Ark Land Co., 139 IBLA 196 (1997). In Vanderbilt, the IBLA discussed the similarity and differences between the SME and Geological Survey standards, particularly as it relates to "inferred reserves." [D]emonstrated reserves (i.e., measured and indicated) can clearly be used to show the quantity necessary to establish a discovery. We do not however, believe that any such broad ruling can be made insofar as inferred reserves are concerned. To the extent that such an estimate is based on assumed continuity or repetition for which there is geologic evidence, we feel such a reserve base can properly be considered. Where, however, a body is completely concealed, so that its actual existence must be predicated on

Case 1:01-cv-00039-BAF

Document 88-3

Filed 04/23/2008

Page 4 of 14

Otto Schumacher Terry Maley September 5, 2003 Page 3 of 6

GROEN STEPHENS c~: KLINGE LLP

geologic inference, use of geologic inference would, in effect, substitute for the exposure of the mineral. Such an exposure, however, is a necessary precondition to adiscovery. Therefore, an "inferred" reserve whose existence is dependent solely on geologic inference cannot serve as a predicate for finding quantity and quality sufficient to support a discovery." United States v. Feezor, 78 IBLA at 84-85. Although SME considers an "inferred reserve'" lacking "the requisite degree of assurance to be reported as a reserve," Feezor recognized that there may be circumstances in which an "inferred reserve" could be considered in support of a discovery finding. Vanderbilt,126 IBLA at 83. Those circumstances in which an "inferred reserve" could support a discovery are those in which the existence of the mineral is exposed on the surface and its actual existence is not dependent on geologic inference, rather merely the extent of the discovery is. Additionally, the propriety of using geological inference to show the extent of a deposit that has an otherwise observable existence is well-established in mining law and practice in addition to the Feezor and Vanderbilt decisions. While the use of geologic inference cannot be used to establish the existence of a mineral deposit, it can be used to show the extent of the deposit. United States v. Dresselhaus, 81 IBLA 252, 265 (1984). Other Board decisions describe the rule as a consistent view of the Department that "while geologic inference may not be relied upon to establish the existence of a mineral deposit, it may be accepted as evidence of the extent of a deposit." United States v. Hooker, 48 IBLA 22, 30 (1980) (quoting United States v. Larsen, 9 IBLA 247, 262 (1973), aff'dsub nom, Cir. No. 73-119 TUC-JAW (D. Ariz. Oct. 24, 1974)). This is important in this case because the existence of the nickel laterite deposit is exposed on the surface of the "unsampled" claims. While this may be verified by viewing the claims, we also understand that satellite imaging is available that will give a good picture of the entirety of the claims, especially since much of the vegetation burned last year and left the claims surface fully exposed to satellite "pictures." Because the ore body is on the surface of the ground or is "exposed," the use of geologic inference is appropriate to determine the extent of reserves. Additionally, the propriety of using geologic inference in a case where there is an exposure is not only confirmed in numerous IBLA decisions, the government's use of geologic inference was also extensively litigated in Wilderness Society v. Thomas, Civ No. 91-78-M-CCL (D. Mt. August i4, 1997), aft'd, Wilderness Society v. Dombeck, 168 F.3d 367 (9th Cir.1999).

Case 1:01-cv-00039-BAF

Document 88-3

Filed 04/23/2008

Page 5 of 14

Otto Schumacher Terry Maley September 5, 2003 Page 4 of 6

GROEN STEPHENS & KLINGE LLP

Additionally, even in using the SME standards, it is possible to determine the extent of resources on the "unsampled" claims and we have provided accurate estimates in the economic analysis. While we have not labeled these estimates as "indicted mineral resources" or "measured mineral resources," they would qualify as such because of their mineral character, the lateritic nature of the surface of the "unsampled" claims, exploration data by the Oregon Department of Geology and Mineral Industries, the U.S. Bureau of Mines, possibIy the U.S. Geological Survey, as well as appropriate geologicinference. The resources on the unsampled claims can be determined with more than a mere "uncertain quality and/or reliability." These claims are spaced closely enough for geologic continuity to be assumed for the resources to at least be classified as indicated mineral resources. On the other hand, these claims are not "too widely or inappropriately spaced to confirm geological continuity" and should qualify as "measured mineral resources." Sampled claims obviously gives you more information. However, it would be inappropriate to assume that there is no data regarding "u_nsampled" claims and that they do not contain significant resources for which a reasonable estimate of value can be made. Finally, on this issue, as I mentioned after the meeting adjourned, we are a little concerned that the use of the SME standards will miss the point of the prudent man standard. After all, the SME's Guide for Reporting Exploration, Resources, and Reserves was not intended to establish standards for determining the validity of mining claims under the General Mining Law. Rather, as its title suggests, it is concerned with the reporting of geologic exploration results to the public for investment purposes who may have limited understanding of geologic or mining industry terminology. The prudent man standard, however, is essentially a prudent miner standard--it assumes a person with mining expertise, including the knowledge of appropriate use of geologic inference. A prudent miner as opposed to a prudent bank or prudent financial investor is more likely to consider the value in "unsampled" claims when there is a surface exposure over the face of the claims. In the second Feezor decision, the IBLA rejected the replacement of the prudent miner with a prudent investor standard. United States v. Feezor, 130 IBLA at 184 (rejecting the Government's position that "a discovery cannot be demonstrated by anyth'mg less than a study of the economics of a particular operation at high enough level of accuracy to attract a "prudent" outside investor, presumably ... a "bankable" document or feasibility study"). The Use of SME standards runs the risk of ignoring this aspect of the Feezor decision. We hope that you reconsider departing from Interior Department precedent by using SME as opposed to the Geological Survey standards. Moreover, regardless of which standards are used, the exposure of the mineral resource along with the additional data on the "unsampled" claims makes the use of geologic inference appropriate to quantify the amount of resources present on those claims¯

Case 1:01-cv-00039-BAF
Otto Schttmacher Terry Maley September 5, 2003 Page 5 of 6

Document 88-3

Filed 04/23/2008

Page 6 of 14

GROEN

STEPHENS

t~

KLINGE

LLP

Fifth, at our meeting we talked about various dates relative to mineral prices and costs. We agree that a prudent person would look at historical prices for the minerals and likely future prices. My understanding from our meeting is that the BLM looks at the prices over a six year period, three years in the past and three years in the future. We do not necessarily agree that a prudent person would ignore historical prices that were more than three years back or market indications that extend further than three years into the future; however, we do not anticipate that issue making any difference as to the validity of Walt's claims. Nevertheless, the question is what date will be used as the midpoint of the six year period? We believe this process should try to determine the validity of Mr. Freeman's claims as of the date of the taking of them. We hope this case does not follow the path used in Skaw v. United States, 740 F.2d 932 (Fed. Cir. 1984) where BLM determined that claims were not valid as of a date well after the alleged taking of them. Essentially, the mining claimant in Skaw stopped paying fees during the validity process and BLM determined that the claims were invalid for that reason. The Federal Circuit ruled that the relevant time period for determining whether a claim was valid was at the time of the alleged taking and the loss of the claims by failure to pay the fees after that date was irrelevant. For this process, the Court has not determined the date of the taking. This leaves you with some uncertainty as to the relevant midpoint date. We believe there are two potential taking dates and that you should consider both in this process. The ftrst date is 1993 when the Forest Supervisor publicly stated in no uncertain terms that there was "no way in hell" that the Forest Service would allow Walt to mine his claims. That was when the decision maker announced his decision about Walt's proposal to mine his claims, even though it took several years lbr that decision to be formalized. The second potential date of taking is the date the Forest Service's formal process on Walt's Plan of Operations was completed when his appeal was denied in October of 2000. Because it remains to be seen which year the Court will use, we are urging you to consider the validity of Walt's claims under both years, 1993 and 2000. We realize that these dates may not be the most economically advantageous to Walt, but we believe the critical date should be the date the claims were taken. Naturally, we expect you to use a date or dates which makes your recommendation most useful to the Secretary of the Interior. I mentioned at our meeting that I expected the consideration of costs would follow a similar pattern as mineral prices (three years forward, and three years back), with the exception of fixed costs. For instance, labor costs and the cost of fuel might fluctuate and the fluctuation probably can be predicted. Capital costs are fixed, such as the cost of equipment that Walt has already purchased. In the same vein, electricity can be a fixed cost because of the availability of long term contracts. A prudent miner would not leave electricity costs to the whim of the market when long term contracts are available, but would lock in prices when they are low. On the other hand, when e!eetricity prices spike a prudent miner would not lock in a long term contract at the

Case 1:01-cv-00039-BAF
Otto Schumacher Terry Maley September 5, 2003 Page 6 of 6

Document 88-3

Filed 04/23/2008

Page 7 of 14

GROEN

STEPHENS

&; KLINGE LLP

spiked price. Rather, the prudent miner would either wait to implement the mining project or purchase electricity at the spiked price only on for the short term and sign a long term contract after the price subsided from the spike. In the present case, we believe the relevant time period for considering electricity prices at long term rates is in either 1993 or 2000. Finally, I would like to clarify my comments about whether the use of Alberg Road could be permitted. If there is some certain legal prohibition on the use of Alberg Road, we believe that prohibition may be considered in this process. However, if the denial of the use of Alberg Road would make the mining of these claims uneconomic, then we would argue to the Court that the denial of access to which Mr. Freeman has a fight is tantamount to a taking of his mining claims. However, at this point and for the purpose of determining whether Walt's claims are valid, I do not believe that argument needs to be made. Instead, my comments were directed toward the method of determining whether a particular course of action could be permitted. We do not believe that casual statements by Forest Service staff should be used to conclude that use of Alberg Road cannot be permitted. Staffmay have genuine beliefs about how the Forest Service would respond to any proposal to use Alberg Road, but those beliefs are no substitute for a clear legal prohibition. Thank you again for the meeting. Please feel free to contact us if you have further questions. Sincerely, GROEN STEPHENS & KLINGE LLP

rstephens~GSKonline.com RMS:lch cc: Walt Freeman Terry Petrie Bradley Greulaam

Case 1:01-cv-00039-BAF
u" L

Document 88-3

Filed 04/23/2008

Page 8 of 14

F

United States Department of the Interior
OFFICE OF THE SOLICITOR Pacific Northwest Region 500 N.E. Multnomah Street, Suite 607 Portland,' Oregon 97232 NOV I ~ Richard M. Stephens Groen Stephens & Klinge LLP Attorneys at Law 2101 112th Avenue NE, Suite 110 Bellevue, WA 98004-2944 Re." Freeman v. United States

Dear Mr. Stephens: I write in response to your September 5, 2003 letterI to Dr. Maley concerning the validity determination in Freeman v. United States. Your letter discusses questions or comments that occurred to you after a meeting of August 12, 2003 which included you, Mr. Freeman, Dr. Maley, and other members of the mineral exam team. Prior to this letter, you have raised on several occasions, including through motions to the Court, a concern that the mineral examination will not move quickly enough. As you are aware, Dr. Maley and the mineral exam team have made considerable progress and are now using the economic data provided by Mr. Freeman to conduct the economic analysis portion of the mineral examination. By moving forward in reliance on the data compiled to date, Dr. Maley expects to remain on schedule. As a preliminary matter, the government requests that your future inquiries or conversations concerning the substance of the examination be directed to government counsel. We do not object to your inquiring about non-substantive scheduling matters directly with Dr. Maley, but consistent with the more traditional rules governing counsel and represented parties, we request that counsel in this case communicate with counsel. 1. Endangered Plants

You suggest that Mr. Freeman accompany someone to confirm the post-fire presence of endangered plants. Dr. Maley indicates that he is not aware of any particular upcoming endangered plant surveys for the post-fire Nicore claim area, but he w~ill keep your suggestion in mind if he learns of such a survey. 2. Seismic and other Inspiration Data

You inquire whether the mineral exam team found seismic and certain other Inspiration data. Dr. 1We also address, at the end of this letter, your October 23, 2003 letter which we just recently received.

EXHIBIT 2

Case 1:01-cv-00039-BAF

Document 88-3

Filed 04/23/2008

Page 9 of 14

Mr. Richard Stephens Page 2 Maley indicates that the mineral exam team is still attempting to acquire additional information pertaining to seismic, density, and boulder factors from Tom Conto and other sources. As appropriate, Dr. Maley will share that information with Mr. Freeman. 3. "Unsampled" Claims

You raise questions concerning "unsampled" claims. Dr. Maley indicates that the exam team has spent a number of months and a great deal of effort attempting to find any existing sample data on the claims unsampled by Inspiration Mining Company. It is important that such data contain sufficient documentation concerning sample site locations, sampling procedure and assays. If Mr. Freeman had been relying on any particular data such as this to support his assertion of discovery, we presume he would have provided it in response to Dr. Maley's requests at the commencement of the mineral examination to Mr. Freeman for all documentation supporting his claims. Please advise immediately if Mr. Freeman has any such data which he has not provided. Dr. Maley and the team will endeavor to verify Mr. Freeman's assertion of a valuable discovery on each claim. The mineral exam team has now spent considerable field time and resources conducting a verification process for the Inspiration Mining Company sample data and any other data which Mr. Freeman provided the BLM. As you are aware, BLM is not obligated to engage in discovery work on Mr. Freeman's behalf. You are concerned that those claims for which Inspiration or other sampling data was not provided by Mr. Freeman will be left in "limbo." Dr. Maley expects that the mineral examination will report whether a discovery on each claim could be verified and that no claim will be left in limbo.
.

Society for Mining, Metallurgy and Exploration, Inc. and United States Geological Survey Definitions

You make a number of assertions regarding the proper use of these definitions. Your discussibn of these definitions appears to focus on the extent to which "geologic inference" or an. assumption of geologic continuity can be used to show the extent of a deposit in the absence of sampling. Dr. Maley is, of course, familiar with these concepts and will be guided by applicable caselaw and Department of the Interior policies concerning this matter. The specific application will be determined in the course of compiling the mineral examination report. 5. Dates of Alleged Taking

You question what date(s) of aileged taking will be used in the mineral examination. As you indicate on page five of your September 5, 2003 letter, the validity determination is focused on Mr. Freeman's alleged date of taking. The government is conducting the present validity determination due to ati order from the Court of Federal Claims. The Court ordered the determination in response to Mr. Freeman's complaint. Accordingly, we have focused on Mr. Freeman's complaint. Having considered your letter and the claims for relief in the complaint

Case 1:01-cv-00039-BAF

Document 88-3

Filed 04/23/2008

Page 10 of 14

Mr. Richard Stephens Page 3 involving Mr. Freeman's Plan of Operations, the validity determination will use October 6, 2000 as the date of alleged taking for the first, second, and third claims for relief. As you note, this is the date of the Deputy Regional Forester's decision affirming the August 4, 1999 Record of Decision (ROD) for the NICORE Mining Plan of Operations in response to Mr. Freeman's appeal of the ROD. You assert, in your letter, that a 1993 date should be considered based on your allegation of a verbal statement by a Forest Service official that there was "no way in hell" that the Forest Service would allow mining. As noted above, the mineral examination is focused on the complaint. This alleged event and date do not appear in Mr. Freeman's complaint. Even assuming, for argument's sake only, that such an event occurred, we do not view this as a final agency decision and it appears a tenuous action on which to focus the considerable and expensive analysis of this mineral examination. Your letter does not appear to discuss the "Fourth Cause of Action" in the complaint. This Cause of Action refers to "Temporary Taking of Rights to Patent" and refers to an alleged refusal "to issue Mr. Freeman's Application for a Patent for Mineral Title." Reviewing the complaint and the relevant statutes, we believe that October 1, 1994 is the date on which to focus the ¯ examination for the alleged taking in the Fourth Cause of Action because this is the date the moratorium on processing mineral patent applications became effective. Pub. L/No. 103-332 § 112, 108 Stat. 2499, 2519 (1994). Given the extraordinary expense of this validity determination and the tight time schedule, it is important that examination time and resources not be wasted. Consequently, we request that you notify me in writing by December 1, 2003 if you do not agree that the above dates are the dates of taking alleged by Mr. Freeman in the complaint. 6. Alberg Road

Regarding the Alberg Road, the examination team is still reviewing road options. 7. October 23, 2003 Letter

You inquire about the mineral exam team's plans to investigate below the water table in the outwash area. Dr. Maley presumes this is related to the Bureau of Mines information sheets located by the mineral exam team which Mr. Freeman discussed with Dr. Maley on his last trip to Cave Junction on October 8, 2003. As with all data timely obtained by the mineral exam team, Dr. Maley will review this information for its suitability for inclusion in the mineral examination. As above, we presume Mr. Freeman has already submitted all sampling data which he is aware of concerning this area. Concerning your question as to what exactly Dr. Maley will conclude or assume concerning this area, that awaits the conclusion of the mineral examination report.

Case 1:01-cv-00039-BAF

Document 88-3

Filed 04/23/2008

Page 11 of 14

Mr. Richard Stephens Page 4 Dr. Maley indicates the mineral exam team will take into consideration the recommendations Mr. Freeman has provided to date for processing to upgrade the lower grade ore. Dr. Maley understands that, in this circumstance, Mr. Freeman is relying on the Inspiration data on upgrading resources by using a trommel to remove saprolitic crusts. All remaining questions in the October 23, 2003 letter pertain to conclusions that have not yet been reached because the mineral examination report is not yet completed. If you have any further questions, I can be reached at (503) 231-6826.

Sincerely,

Attorney

ce:

Terry Maley, Bureau of Land Management Terry Petrie, United States Department of Justice Holly McLean, Department of Agriculture, Office of General Counsel

Case 1:01-cv-00039-BAF

Document 88-3

Filed 04/23/2008

Page 12 of 14

sGROEN ,-,. TEPHENSG KLINGE
ATTORNEYS AT LAW 2101 II2TH AVENUE NE, SUITE 110 BELLEVUE, WASHINGTON 98004-2944

IOPS'] M. GROEN RIt2HARD M. STEPHENS CHARLF~ A, KLINOE DIAhlA M. K]RCHHEIM

TELEPHONE FAO.S!MRE

(425) 453-6206
(425) 453-6224

November 19, 2003 Bradley Grenham U.S. Department of the Interior 500 N.E. Multnomah St., Suite 607 Portland, OR 97232 Re: Freeman Mineral Examination

Dear Mr. Grenham: Thank you for your response dated November 12, 2003 to my letter to Dr. Maley and Mr. Schumacher dated September 5, 2003. I thought a couple of points of my earlier should be clarified. Preliminarily, we will concede to your request that I not communicate directly with Dr. Maley, but instead communicate about anything substantive solely with you. As to whether something is substantive is not always a clear cut decision, but I will try to err on the side of communicating directly with you instead of Dr. Maley and trust that you will convey to him my reference to data we have submitted or questions as to the scope, direction or steps in this proceeding. Previously, Terry Petrie had authorized me to communicate directly with Dr. Maley. I presumed that was because Dr. Maley was in charge of an administrative process, rather than creating work product for litigation, and Mr. Freeman and the government are not necessarily adverse parties for purposes of mineral examination. I understand from your letter that you are withdrawing that previous authorization. In your November 12 letter in regard to *,he "ansampled" claims, you prestnne that Mr. Freeman has provided all data that he possesses to support the discovery on all of his claims. That is correct, ttowever, all of the so-called "unsampled" claims have a surface exposure of the mineral ore. This has been expressed to the mineral examination team on many occasions. The discovery is observable from walking each of the claims. In addition to walking the claims, we have suggested to the mineral examination team other more expeditious ways to confirm the existence of the lateritic material, namely aerial photography or satellite imaging. While we do not possess that such photography or imaging since observing the surface from the ground gives the same information, aerial photography or satellite imaging are available and may be more expeditious ways for Dr. Maley to confirm that a discovery does exist on the surface of every single claim. We agree that BLM is not obligated to engage in discovery work; however, if there is any concern that a discovery does not exist, it cannot ignore obvious surface exposure of the minerals.

EXHIBIT 3

Case 1:01-cv-00039-BAF

Document 88-3

Filed 04/23/2008

Page 13 of 14

Bradley Grenham U.S. Department of the Interior November 19, 2003 . . . Page 2 of 3

GROEN STEPHENS &; KLINGE LLP

As we have indicated before, if the Department of the Interior decides that it believes that some of Mr. Freeman's claims are invalid, it will need to institute the formal contest procedures for those claims so that Mr. Freeman's rights may be protected. Surely, in a contest the government cannot meet its burden of proof to establish a prima faciae case of no discovery when obvious surface exposure of mineral ore is ignored. In regard to the Society of Mining, Metallugy and Exploration, Inc. and the United States Geological Survey standards, it appears that Dr. Maley either has not yet decided which standard to use 0r a'decision has been made, but you have decided that we are not entitled to know. Please let me know whether the question at to which standards are being used is still tmdecided. If BLM is concerned about being consistent on the question as to the appropriate standards, BLM may benefit from further input on this question. You have also indicated that Dr. Maley will be guided by caselaw and Department of the Interior policies concerning this matter. Please send me a copy of the Department of the Interior policies to which you are referring. If you would rather that I direct this request to the Freedom of Information Act officer, please let me know and I will do so. In regard to the date of taking, we agree that October 6, 2000 is one possible appropriate date. We may, however, assert to the Court that 1993 is another potential date of taking since it was the date of an unqualified statement by the person who everyone knew would make the ultimate decision. We believe the decision was made in 1993 and only formalized in 2000. I understand why you would not want to agree with this point. Nevertheless, we believe this dispute in the date of taking may not turn out to be significant since Dr. Maley will also be using the October 4, 1994, date which is relatively close in time to our alternative taking date. We agree that October 4, 1994 is the appropriate date for the temporary taking of Mr. Freeman's rights to a patent. .In regard to my October 23, 2003, letter about the use of limited information about ore at or below the water table, you indicate that that Dr. Maley will review the information for its suitability for inclusion in the mineral examination. Your statement that your question as to what exactly Dr. Maley will conclude or assume concerning this area "awaits the conclusion of the mineral examination report." This, of course, is understandably being interpreted by Mr. Freeman (and me) that, if we ask whether the information is being disregarded because it is not detailed enough, ~ve will be told to just wait. Apparently, you do not want our views on how limited information should be used and would rather walt until Dr. Maley's report is done. Based on previous indications from Dr. Maley, we had expected a more open process. Be that as it may, the following is a reminder as to information that we received from the National Archives in Colorado. We understand that Mr. Schumacher received a copy of the same information from the same source. In 1977, the Spokane Division of the US Bureau of Mines conducted an extensive sampling program on the nickel laterites on the west side of the illinois Valley. This field work was directed by Fred Williams. During this time a number of pits were excavated and sampled in the "outwash" area. These pits were approximately 20 feet

Case 1:01-cv-00039-BAF

Document 88-3

Filed 04/23/2008

Page 14 of 14

Bradley Grenham U.S. Department of the Interior November 19, 2003 Page 3 of 3

GROEN STEPHENS & KLINGE LLP

in depth and exposed the lateritic material existing below the water table. Although nearly all of the data generated by this program cannot be located by Mr. Freeman, existing pit logs clearly describe the laterite at the full depth of the pits. A picture of the field work is included on page 1 of the "Investigation of Nickel in Oregon." Additionally, Mr. Freeman sampled two deep pits in Section 18 that exposed lateritic material at and below the water table. One of these samples in the southwest comer of Section 18 was upgraded by Mr. Freeman to produce material of the following grades: .68 % Ni; 12.3 % Fe and .36 %Cr. The random and widely-dispersed sample locations indicate a high probability that the entire outwash area is underlain by water table laterization. Mr. Freernan's own preliminary tests indicate that this material has economic value. Finally, in regard to Mr. Freeman's recommendations for upgrading the lower grade ore, there seems to be a serious misunderstanding. Mr. Freeman is not relying on the Inspiration data on upgrading resources by using a trommel.to remove saprolitic crusts. While Inspiration conducted such work, Mr. Freeman does not have access to the data produced during the socalled trommel tests. Instead, Mr. Freeman is relying on his own work in having developed a practical low-cost sYstem to up-grade the ore, detailed in Appendix B of his Economic Analysis. This work is the basis for our questions relating to Dr. Maley's plans relative to consideration of this part of the ore processing technology. If there are any additional questions the mineral examination team may have about Mr. Freeman's work on the upgrading process, we are more than willing to answer them. Thank you for your attention to these requests for information. Sincerely, GROEN STEPHENS & KLINGE LLP

[email protected]

RMS:lch cc: Walt Freeman Terry Petrie