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.Fremont Energy Corporation, by staking or conveyance, holds title to approximately 350,000 acres consisting of 18,604 unpatented lode mining claims situated in geologic configurations very favorable for uranium discovery. Fremont proposes an exploration venture in which they contribute selected unpatented lode mining claims and your company contributes $750,000 per year for a two year exploration program, thereby earning an undivided 50% interest in the selected claims. If this initial phase is successful and the parties desire, this annual expenditure can be continued for several more years.

The principals of this company have been several years in assembling this position and have about a million dollars cash in the venture to date. There has been some drilling done for the purpose of establishing sub-surface geology, and much of the property has been flown for spectrometry and color photogeologic surveys. of this information has been assimilated into a final report prepared by a well known consultant that has selected the ten most promising targets for our exploration program.

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Fremont Energy Corporation proposes that they be the operator of the exploration venture during its two year term and earn a nominal management fee of $50,000/yr. for operating the exploration venture. The balance of funds advanced by your company will be used in direct exploration expenses on the contributed acreage in programs to be mutually agreed upon. Progress reports to be submitted to you monthly and detailed geologic updates submitted quarterly. The staff of Fremont will be supplemented by the use of outside consultants as needed.

The venture will be controlled by a technical committee composed of representatives of all parties operating under a detailed joint venture agreement that will be arrived at between our companies. This agreement will include provisions for the partners to buy out, or continue to operate, in the event an ore body is discovered.

Management fee and exploration funds to be advanced quarterly as budgeted by the technical committee.

The principals of this company have an excellent track record for successfully and consistently finding commercial uranium ore bodies. We believe that it would be to our mutual advantage to pursue the details of this program, or other mutually beneficial avenues that might present themselves to us. Due to the large physical volume of material that exists on this project, it would be most effective if you and your technical representatives could come to our office. If this is not feasible for one reason or another, other arrangements can be made.

My assistant, Ursel Doran, is handling this project for us. Feel free to contact either of us at any time.

Proposed Program:

Footage cost estimates as noted include:
Sampling, logging, geology and documen-
tation.

Red Desert Area

18,604 claims

Completed aerial surveys (color photogeologic survey (radiometric survey

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$100,000

920,000

350,000

30,000

100,000

$1,500,000

Very truly yours,

FREMONT ENERGY CORPORATION

W.J. Murphy

J. Murphy
President

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THE S. M. STOLLER CORPORATION

A Subsidiary of Arthur D. Little, Inc.

Suite 815, Colorado Building
Boulder, Colorado 80302 (303) 449-7220
December 3, 1976

CONFIDENTIAL

Members and Staff Use Only
Subcommittee on Oversight
and Investigations.

Mr. Gordon T. Austin

Senior Fuel Resource Engineer

WASHINGTON PUBLIC POWER SUPPLY SYSTEM

P.0. Box 968

Richland, Washington 99352

Dear Mr. Austin:

On November 23, you instructed SMSC by phone to initiate an evaluation of a uranium exploration project with Fremont Energy Corporation. In that phone discussion, you provided us with a brief outline of the proposed arrangement and asked that we review the project as best we could with a goal of supplying you with a report on December 3, 1976. This letter and its attachments represent that report.

Immediately after your request, SMSC contacted Fremont Energy and a first discussion was held the evening of November 23. On November 30, a meeting was held between SMSC's technical people (including Mr. Don Hill, consultant to SMSC) and Fremont Energy in their offices in Denver at which you were present. I believe this record clearly indicates SMSC's attempt to fulfill your schedule requirements, which was difficult to say the least.

In addition to reviewing the material provided to us by Fremont Energy, we have also reviewed three draft Commercial Documents which form the basis of the exploration venture. We have several comments on these Commercial Documents which are contained in Attachment 1. Our comments concerning the technical portion of the program itself are contained in Attachment 2.

I believe our comments relative to the Commercial Documents to be quite significant and, accordingly, SMSC would not recommend their execution by WPPSS in their present form,

It is not possible to evaluate an exploration program at this early stage except by comparison with alternatives. It is my understanding that WPPSS has reviewed some 27 exploration proposals, of which several are deemed interesting, and this offer from Fremont Energy evaluated as the best within your current criteria of avoiding "grass roots" exploration at this time. SMSC is in no position to comment on this selection since we are neither aware of the alternative offers nor are we familiar with your detailed evaluation of their relative merits.

Main Office: 1250 Broadway, New York, New York 10001 (212) 868-2800

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