Eron Lenders
Project Name: Marlat 1st and 2nd
Marlat Resources Ltd.
Lender update

January 30, 1998

Further to our letter dated November 6, 1997 we are writing to update you on the status of the above noted promissory notes secured by Deeds of Trust.


Project Status

The project consists of two promissory notes in the amounts of US$503,000 and US$146,500 on a 37.89 acre parcel of residential land located in Ferndale, Washington. The form of the development plans which envisages the development of 143 residential units, has not been determined nor approved by the governing body.

In addition, the Judicial Trustee has a 5th mortgage as collateral security for the promissory notes on a commercial building in Victoria known as Enterprise Business Park ("Enterprise") which has other loans to the Eron Mortgage Corporation ("Eron") group of companies. Price Waterhouse Limited is the Judicial Trustee of the other Eron companies holding security on Enterprise. We are currently assessing the validity, enforceability and priority of the prior encumbrances on Enterprise. Based on an appraisal commissioned by the Judicial Trustee of Enterprise, if the prior encumbrances are valid, enforceable, and in priority to our 5th mortgage, there will likely be no equity for the 5th mortgage.

The promissory notes are in arrears for interest and there are unpaid municipal taxes on the property.

An appraisal of the property commissioned by the Judicial Trustee indicates a potential for full recovery of the promissory notes before costs.

The borrower Marlat Resources Ltd. has changed its name to Renco Resources Ltd. along with a change in ownership.

In December 1997, the owners advised an offer of US$2 million was being put in place. It has since been confirmed with the borrower that the offer was never completed. No reason was given.

The owners now advise that they are returning to an earlier party interested in the property. At this time no formal offer has been submitted.

As the owners have not been able to bring a satisfactory offer to sell the property they were given until the close of business January 28, 1998 to bring forward an acceptable offer to the Judicial Trustee. No offer was received and we are now enforcing our security in order to gain control of the property.

We have conducted the activities, set out above, based on the information presently available.


Price Waterhouse Limited ("PWL") Activities

In previous communications we have noted the incompleteness and deficiencies in Eron's mortgage and accounting records. During the past several weeks we have been sorting and analysing these records which are essential to the recovery and distribution of funds.

A significant portion of the accounting and sorting of mortgage records has been completed. The final accounting and determination of accurate lender listings cannot be completed for the project until the accounting is completed for all projects due to the numerous inter-project transfers. We are using the information provided to us by lenders to cross check accounting records. We therefore request that you return to us the Lender Confirmation form enclosed with our October 6, 1997 letter, if you have not already done so.

We are minimising costs while seeking to maximise your recovery. In certain instances this goal is best served by using staff who are not PWL employees. Accordingly, we have retained the services of short term contract staff at rates significantly lower than PWL hourly rates to assist us as appropriate.


Price Waterhouse Fees and Disbursements

There are two components of PWL's fees and disbursements on each individual project, direct costs and an allocation of indirect costs. Direct costs will include costs specifically related to the project, such as, legal fees, time spent by the PWL/contract staff analysing the project and devising a strategy to maximise recovery and creating project accounting records. Indirect costs will include such items as general lender communications, analysis and creation of non project specific accounting records and all other costs which cannot be directly attributed to specific projects.

We are also incurring costs such as rent, utilities, insurance, appraisal fees and other costs. Certain of these costs will be direct costs to the project (e.g. appraisals) while others will be indirect (e.g. utilities). We have not discussed these costs in this letter.

At November 30, 1997 the direct fees incurred on this project totalled approximately $4,900 excluding legal fees. We are unable to estimate the future direct costs for the project with any degree of certainty. However, we estimate that the future monthly direct costs will significantly be reduced for the remainder of our engagement.

At November 30, 1997 the indirect fees totalled approximately $954,300 for the 81 projects. These indirect costs have been incurred as follows: 27% lender communications; 21% engagement planning management; 13% office, record and employee management; 9% general project matters; 9% preparation for and attendance at court; 6% banking and accounting matters; 2% meetings wit regulators and 13% out of pocket legal costs.

Ongoing indirect costs will be significantly reduced as we now have a framework for the administration in place, can increasingly shift administrative tasks from PWL staff to less expensive contract staff and have established low cost methods of communicating with lenders, such as the web site and voice mail information system discussed below. Our goal is to reduce the indirect costs to a level of approximately 20% of the total costs of administering the projects by December 15, 1997.

The method of allocating the indirect costs has not yet been determined, however, an allocation method based on the project's direct costs is considered to be an equitable method. We will seek Court approval of the selected allocation method at a later date.


Lender Communications

To facilitate communications with lenders we have established a voice mail information system with separate voice messages for several projects or groups of projects where we believe these mailboxes will provide a cost effective, useful means of providing current information to lenders. Please note that this project will not have a specific mailbox and any enquiries with respect it should be directed to our general voice mail box by dialling (604) 669-5087 ext. 501. Should you wish to access any of the project mailboxes, you can do so by dialling one of the following three numbers (604) 878-4201, (604) 878-4244 or (604) 878-4248 and selecting a mailbox number. A list of mailbox numbers is attached to this letter.

We have also now established a web site at http://www.eron-pwl.com. On this site you will find project specific updates as well as related court orders.

During November, as you may be aware, the Eron Lenders' Committee ("ELC") held an election to select ELC representatives. Approximately 30% of the Lenders in the Eron projects voted in this election with the significant majority voting in favour of establishment of the ELC. The ELC has been instrumental in establishing individual project committees. We have now met with most of the individual project committees and we intend to maintain regular communication with them.

We will continue to communicate directly with all lenders. We urge you to take advantage of the voice mail information system and web site so that you can receive first hand current information from PWL in the most cost effective manner we have available.

We will issue another letter as soon as we have significant new information to report. In the meantime, if you have any specific questions or information concerning the project please contact us in writing at 500 - 1380 Burrard Street, Vancouver, BC, V6Z 2H3 or by fax at (604) 688 6128 marked to the attention of Marlat Resources - Project Lead.


Yours truly

Judicial Trustee

Eron Lenders





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