2014-01-21_INSPECTION - C1981012 (2)

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January 8, 2014 C- 1981- 012/New Elk Mine LDS two forbearance agreements with Computershare Trust Company of Canada, the Trustee under the 10% senior secured bond trust indenture dated December 13, 2011, as supplemented, and the 10% senior secured convertible bond trust indenture dated July 8, 2013, as supplemented, pursuant to which the Trustee has agreed to forbear from taking any action to enforce certain of its rights under either indenture until January 16, 2014. The personnel situation at NECC and its parent company, Cline Mining, continues to evolve. As stated in previous reports, on November 26, 2013, Cline Mining announced that they had received the 90 -day notice of resignation of Mark Haywood as President, CEO and director. No appointments had been finalised at the time of the inspection. Mr Haywood was expected to leave his positions on February 20, 2014. It was envisaged that the positions of CEO of Cline and President of NECC would no longer be filled by the same person. Doug Blackburn continued to act as General Manager of New Elk Coal Company (NECC). Mr Blackburn is employed by Cline as a contractor on a 90 -day contract; he is not a permanent employee of either Cline or of NECC. A round of lay -offs took place at the end of 2013, which included Bobby Steele. Dennis Wilson has also recently left NECC, although this was not the direct result of a lay -off. In all, 16 people were employed by NECC at the time of the inspection, with Louis Head, Jeff Johnson and Greg Smith as heads of department. Vince Masarotti and Ron Tokar take care of surface maintenance and report to Mr Johnson. John Terry and Mike Valentine have varied duties and report to Mr Smith; of particular relevance to the Division, Mr Terry is in the process of taking over much of the responsibility for environmental monitoring and Mr Valentine has inherited responsibility for the prep plant since Mr Wilson left. Mr Smith continues to be the Division's main point of contact. He works closely with Ron Thompson who is no longer a NECC employee, but still works at the mine on a part-time basis as a contractor. On January 15, 2014, it was reported that Matthew Goldfarb had been appointed Chief Restructuring Officer, Acting Chief Executive Officer and a Director of Cline Mining, (the text of the report is copied below, from http: / /online.wso.com /article /PR -CO- 20140115- 909664.html) January 15, 2014, 11:38 a. m. ET Cline announces management changes TORONTO, Jan. 15, 2014 /CNW/ - Cline Mining Corporation ( "Cline" or the "Company') announced today that Matthew Goldfarb has been appointed Chief Restructuring Officer andActing Chief Executive Officer. Mr. Goldfarb has also been appointed a director of the Company. Cline has accepted Mark Haywood's resignation announced on November 26, 2013 effective as ofdanuary 13, 2014. From May 2012 until November 2013 Mr. Goldfarb served as Chief Executive Officer ofXinergy Ltd. (TSX-XRG), a Central Appalachian coal producer; having previously served as its Vice Chairman and lead independent director. Since 2000, Mr. Goldfarb has also acted in various roles including serving as a senior investment professional at The Blackstone Group /GSO Capital Partners, Pirate Capital LLC and Icahn Associates Corp. On November 6, 2013, the Division received notice from Wells Fargo that a Letter of Credit (LC) for $2,744,969 would be cancelled on February 26, 2014. Since this LC represents part of the bond for the New Elk Mine, it must be replaced. NECC were notified of this fact immediately and informed that the replacement bond should be supplied by January 26, 2014. Number of Partial Inspection this Fiscal Year: 4 Number of Complete Inspections this Fiscal Year: 3 Page 3 of 16