This Consulting Agreement ("Agreement") is entered into this 17th day
of August 1998 (the "Effective Date"), by and between SGI International, a Utah
corporation ("SGI") and John W. Hart ("Consultant").

1. Performance by Consultant. Consultant agrees to provide consulting services
(the "Services") to SGI. Such Services will include consultation relative to the
performance, data, measurement, analysis, and recommendations as to the
development and improvement of the LFC Process, the products of such process,
and business related thereto. The Services shall also include, but not be
limited to, advice, assistance, and information supplied by Consultant, or
developed with the use of any of Consultant's information, equipment, personnel,
goods or facilities.

2. Payment for Services.

a. Consulting Fee. SGI agrees to pay Consultant for the Services at the rate 
of $______ per month, plus travel expenses. Consultant shall be paid by SGI
on the 15th and 30th of each month.

b. Expenses. Consultant shall be reimbursed for reasonable expenses, including, 
but not limited to, travel, long distance telephone charges, and mileage at the 
rate of $0.325 a mile for all business travel and for up to $_____ for a laptop
computer and SGI shall bear the costs of office space and facilities at the 
location in Denver specified in Section 17.

3. Personal Service Contract. SGI and Consultant agree that the Services will be
performed personally by Consultant. If the services are not performed by
Consultant, then SGI has the right to terminate this Agreement immediately.

4. Obligations of SGI. SGI agrees to make available to Consultant, upon
reasonable notice, computer programs, data, and any documentation required by
Consultant to complete the Services.

5. Term. This Agreement shall be effective and shall continue on a month to
month basis. Absent termination in writing by either party within a thirty day
period prior to the end of a one year term, the Agreement shall continue for an
additional one year term.

6. Ownership. Consultant agrees that SGI is the owner of all right, title and
interest in the technical information, data and business information and data
(the "Proprietary Information") relating to the business of SGI and to the LFC
Process, and to the drying, cleaning and other processing of coal, as well as
any developments or improvement related thereto, and as well as any related
process control technology, computational techniques or related trade secrets or
intellectual property. SGI shall also own all other technical information and
related material used by, developed for, or paid for, by it in connection with
the performance of any Services provided by Consultant before or after the date
set forth above. 7. Confidentially and Disclosure.

a. Disclosure. Consultant desires to have the Proprietary Information disclosed 
to him to enable him to render the Services to SGI, including but not limited 
to the Proprietary Information. SGI is prepared to make such Proprietary
Information as it deems necessary available to Consultant for the aforesaid
purpose on the following understanding:

For the purpose of the Agreement:

The term "Proprietary Information" shall not include any information which:

(i) is "publicly available" information. The phrase "publicly available" 
information shall mean readily accessible to the public in written publication, 
and shall not include information which is only available by a substantial 
searching of the published literature, and information the substance of which 
must be pieced together from a number of different publications and sources;

(ii) is known to Consultant from sources other than SGI or its Affiliates prior 
to the receipt of the same hereunder from SGI or its Affiliates;

(iii) is received by Consultant without restriction on disclosure from a third 
party who is legally in possession of such information and has a right to 
reveal the same to Consultant.

(iv) "Affiliate(s)" of SGI shall mean any person or entity directly or 
indirectly controlling, controlled by or under common control with SGI.

(v) "Developments" shall mean and include inventions, discoveries, 
modifications, and improvements, whether patentable or not, together with the 
physical embodiment of the same whether copyrightable or not, related to SGI's 
business.

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Notwithstanding anything herein to the contrary in this Agreement, Consultant 
shall have the right to use general skills and capabilities developed as a 
result of his performance of Services for his own benefit or the benefit of
others subject to the obligation of Consultant set forth hereinafter.

b. Confidentiality. Consultant agrees to hold the Proprietary Information in 
confidence and not to reproduce or disclose it to others nor to use it except 
as herein authorized in writing or as may later be authorized in writing by
SGI.

c. Usage. Both parties agree that the Consultant may use such Proprietary 
Information in connection with, but only in connection with, providing Services 
to SGI.

8. Developments and Assignment.

a. Developments. Consultant recognizes that Developments have occurred
and/or are expected and likely to occur in the future as the result of the
performance of Consultant's Services, and Consultant covenants and agrees to
hold all Developments as a result of the performance of such Services or based
on SGI's Proprietary Information in trust for the use and benefit of SGI, and
hereby assigns and agrees to assign all such Developments to SGI.

b. Consultant Disclosure. Consultant shall promptly disclose in writing
to SGI any and all Developments made by Consultant, and or by any members of his
staff, incident to or as a result of the performance of such Services; and
Consultant hereby assigns and agrees to assign all of its right, title and
interest, in all such Developments to SGI. All such Developments shall be
treated as Proprietary Information of SGI and the obligations of Consultant
under this Agreement shall apply thereto. Consultant further agrees to and does
hereby assign to SGI all right, title and interest in and to the intellectual
property, rights, and processes or techniques embodying the Developments,
including all rights of copyright or rights to patent or use as a trade secret
such Developments, both within the United States and throughout the world. The
obligation of Sections 7 and 8 are continuing and shall survive the termination
of this Agreement.

c. Assignment. Consultant shall execute and/or require his agents,
servants or employees to execute all applications, assignments, or other
instruments of any kind which SGI, at SGI's expense, shall deem proper or
necessary to apply for, obtain and enforce letters patent and/or copyrights of
the United States or of any foreign country or otherwise to protect SGI's
interest in such Developments.

d. Retention. Unless otherwise authorized in writing by SGI, all documents, 
drawings and writings provided to Consultant by SGI hereunder or developed by 
Consultant hereunder, and all copies thereof shall be returned promptly to SGI 
upon completion or termination of Services.

9. Warranties. Consultant hereby warrants that he will carry out his work in
accord with generally accepted professional practices applicable to the
services.

10. Termination. This Agreement shall be effective on the Effective Date and
continue in full force and effect until the parties agree to terminiate said 
agreement.

11. Independent Contractor. Consultant is and at all times during the term of
this Agreement shall be an independent contractor providing professional
consulting services to SGI. Nothing contained in this Agreement shall be
construed to create a relationship of principal and agent, employer and
employee, servant and master, partnership or joint venture between the parties.
Consultant shall have no power to commit or bind SGI in any manner whatsoever.

12. Limitation of Liability. In no event shall either of the parties hereto be
liable to the other for the payment of any consequential, indirect, or special
damages, including lost profits.

13. Assignment.

a. Consent Required. Consultant shall not assign or subcontract the whole or 
any part of this Agreement without SGI's written consent, which can be withheld
for any reason.

b. Subcontracting. Any subcontract made by Consultant with the consent of SGI, 
which must be obtained before Consultant enters into any subcontract, shall 
incorporate by reference all of the terms of this Agreement. Consultant
agrees to guarantee the performance of any subcontractor used in the performance
of the Services.

14. Conflicting Assignments. During the term of this Agreement, Consultant shall
not accept conflicting assignments, which would put Consultant in a position
where he would be rendering advice or providing information to any party who
might be a potential competitor of SGI presently or in the future, nor shall
Consultant provide any advice, which might disclose any Developments or
Proprietary Information.

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15. Disputes. If any dispute of any kind arises between the parties with respect
to the Consultant's performance under this Agreement, then the dispute shall be
submitted to arbitration in San Diego, California to the American Arbitration
Association ("AAA"). The dispute shall be submitted to an arbitrator selected
from a panel of arbitrators submitted to the parties by the AAA. If the parties
fail to agree on an arbitrator, the AAA shall appoint an arbitrator and in the
absence of such appointment, the parties may request an appointment by making an
application to the San Diego Superior Court to order an appointment. Reasonable
discovery, including but not limited to depositions and interrogatories, shall
be allowed in any such arbitration. The decision of the arbitrator shall be
binding to the same extent as if the award were made by a court of competent
jurisdiction.

16. Notices. Any and all notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given or received when delivered
personally or forty-eight (48) hours after being mailed, via first class,
postage prepaid, to the addresses set forth immediately below of the parties
hereto or to such other addresses as either of the parties hereto from time to
time designate in writing to the other party.

SGI: SGI International
1200 Prospect, Suite 325
La Jolla, California 90037
Attn: Richard J. Gibbens

Consultant: John W. Hart



17. Applicable Law. The provisions of this Agreement shall be construed and
enforced in accordance with the laws of the State of California.

18. Entire Agreement and Amendments. This Agreement constitutes the entire
understanding and agreement between the parties relating to the subject matter
hereof and supersedes any prior written or oral understanding or agreement
between the parties relating to the subject matter hereof. This Agreement shall
not be amended, altered, or supplemented in any way except by an instrument in
writing, signed by the duly authorized representative of the parties, that
expressly references this Agreement.

19. Waivers. The failure or delay of either party to exercise or enforce at any
time any of the provisions of this Agreement shall not constitute or be deemed a
waiver of that party's right thereafter to enforce each and every provision of
the Agreement and shall not otherwise affect the validity of this Agreement.

21. Severability. If any provision of this Agreement is finally determined to be
contrary to, prohibited by, or invalid under applicable laws or regulations,
such provision shall become inapplicable and shall be deemed omitted from this
Agreement. Such determination shall not, however, in any way invalidate the
remaining provisions of this Agreement.

IN WITNESS WHEREOF, the parties have executed this Agreement on the day and in 
the year first above written.

SGI Consultant

SGI International
a Utah Corporation


By: /s/ Richard Gibbens                         By:   /s/ John W. Hart 
_______________________                           __________________________
Richard J. Gibbens                                John W. Hart

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