Terrene Investments, Ltd., Deerbrook Construction, Inc., Tax Matters Partner - Page 18




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          way of determining how much material will be unrecoverable due to           
          these setbacks.  We can calculate the approximate acreage taken             
          out of the evaluation by these setbacks:                                    
               • southern edge: 1022 feet and 25-foot setback                         
                 yields 0.59 acres;                                                   
               • eastern edge: 1575 feet (1600 feet - 25 feet                         
                 already counted) and 25-foot setback yields 0.90                     
                 acres;                                                               
               • northern edge: 670 feet (695 feet - 25 feet                          
                 already counted) and 10-foot setback yields 0.15                     
                 acres; and                                                           
               • western edge: 1515 feet (1550 feet - 35 feet already                 
                 counted) and 10-foot setback yields 0.35 acres.                      
          The setbacks therefore take up a total of 1.99 acres, which we              
          round to 2 acres.                                                           
               We also have to make some assumptions about the distribution           
          of the deposits beneath the property, which is inherently                   
          unknowable until mining begins.  Ebanks prepared his isopach map            
          using the data from the four boreholes taken on the property plus           
          three of the boreholes on the neighboring tracts.  This map                 
          suggests that the thickest deposits are in the southwestern                 
          corner of the parcel and the thinnest in the northwestern corner,           
          but without enough variation to allow one to easily calculate               
          different volumes for different parts of the property.  Because             
          the adjustment for setbacks affects the entire perimeter of the             
          property, we find that it is reasonable to assume for these                 
          calculations that the sand and gravel are uniformly distributed.            







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Last modified: November 10, 2007