2014-01-21_INSPECTION - C1981012 (2)

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January 8, 2014 C- 1981- 012/New Elk Mine LDS Inspection Topic Summary NOTE: Y= Inspected N =Not Inspected R= Comments Noted V= Violation Issued NA =Not Applicable Y - Air Resource Protection R - Availability of Records Y - Backfill & Grading R - Excess Spoil and Dev. Waste NA - Explosives Y - Fish & Wildlife R - Hydrologic Balance NA - Gen. Compliance With Mine Plan N -Other R - Processing Waste R - Roads N - Reclamation Success Y - Revegetation N - Subsidence N - Slides and Other Damage Y - Support Facilities On -site R - Signs and Markers R - Support Facilities Not On -site Y - Special Categories Of Mining R - Topsoil COMMENTS This was a complete inspection by Leigh Simmons of Colorado Division for Reclamation, Mining and Safety, (the Division). The inspection was accompanied by Vince Masarotti and John Terry of New Elk Coal Company, (NECC). The weather was fine, although there was still snow on the ground from a storm the preceding weekend. Several permitting actions are in progress, these are detailed under the heading GENERAL MINE PLAN COMPLIANCE. Two recent enforcement actions have been abated and terminated; a third has since been issued and is in the process of being abated. Details are given under the heading ENFORCEMENT ACTIONS. The New Elk Mine continues in Temporary Cessation whilst NECC searches for investors and coal customers. Louis Head explained that the current plan sees the mine able to return to full production over a 6- month period, if a sales contract were to be signed. This is a change in strategy from recent months, where the company maintained that the mine could be returned to production with 2- week's notice. On December 16, 2013, it was reported that Cline had entered into a 30 -day forbearance agreement with a trustee, following its default on two semi -annual interest payments, (the text of the report is copied below, from http://www.marketwired.com/press- release /cline- executes - forbearance - agreements- with - trustee- 1862793.htm). Mr Head explained that the forbearance agreement was entered into to give both parties enough time to renegotiate the financing agreement, since the original agreement was no longer appropriate given the changes to the business plan at the New Elk Mine; the reduced operating costs have reduced the amount of money that needs to be borrowed. December 16, 2013, 14:17 ET Cline Executes Forbearance Agreements with Trustee TORONTO, ONTARIO-- (Marketwired - Dec. 16, 2013) - Cline Mining Corporation ( "Cline" or the "Company') announced today that it has entered into a forbearance agreement with Computershare Trust Company of Canada (the "Trustee'). Due to Cline's present financial situation, a semi - annual interest payment in the amount of approximately US$3.3 million could not be made on its outstanding US$65.5 million 10% senior secured bonds and a semi - annual interest payment in the amount of approximately Cdn. $552, 000 could not be made on its outstanding Can. $12.3 million 10% senior secured convertible bonds. Cline has consequently entered into Number of Partial Inspection this Fiscal Year: 4 Number of Complete Inspections this Fiscal Year: 3 Page 2 of 16