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• Christopher J.Sanchez <br /> Jeffrey A.Clark <br /> BBA Michael A.Sayler <br /> water consultants Daniel 0.Niemela <br /> Charles E.Stanzione <br /> B IS OP-B ROGDEN ASSOCIATES, INC. Jonathan D.George <br /> June 9,2014 <br /> Ms. Angela Bellantoni <br /> Environmental Alternatives Inc. <br /> 1107 Main Street <br /> Canon City,CO 81212 <br /> RE: Zephyr Gold USA Ltd. — Recommendations for Implementation of 15-Month Ground and <br /> Surface Water Monitoring Program at the Dawson Property <br /> Dear Angela: <br /> This letter presents our recommendations for ground water and surface water monitoring points at the <br /> Zephyr Gold mine. The monitoring points will be used to collect baseline water quality and quantity <br /> information regarding the local hydrology and to satisfy the 15-month baseline monitoring period <br /> required by the Colorado Division of Reclamation and Mine Safety(DRMS). <br /> Description of Mine and Hydrology <br /> The Dawson/Zephyr mine is located south of Canon City in an area of remote steep mountainous terrain. <br /> The mine location is at an area of complex bedrock geology. Bedrock units consist of Precambrian age <br /> hard rock metamorphic and igneous rocks, as well as Cretaceous aged sedimentary rocks, including the <br /> Dakota Sandstone. There are significant geologic faults at the mine location, which put the older <br /> Precambrian hard rock formations in contact with the younger sedimentary formations. A geologic map <br /> of the mine site is presented on Figure 1. There are also shallow alluvium and terrace deposits present <br /> down gradient of the Dawson mine pad area. <br /> Limited borehole data are available for the mine area, and based on information provided by Zephyr, the <br /> boreholes in the Windy Gulch area are dry and boreholes in the Dawson Mountain area encountered <br /> limited to no ground water. We interviewed the on-site geologist who completed the test borings across <br /> the mine property associated with the mine exploratory processes and he confirmed that ground water was <br /> not encountered during the test boring operations. In addition, we reviewed the mine technical reports <br /> which did not indicate any ground water present at the site. Based on this information, the mine <br /> excavations are expected to encounter very limited ground water, and drainage from the mine is expected <br /> to be very limited. Based on the slope of the mine excavation, the majority of the mine drainage is likely <br /> to;occur from west to east and the discharge from the mine,to the extent it occurs, will occur in Dawson <br /> mine pad area. <br /> There is very little land development in the area and we confirmed that the closest water supply well is <br /> approximately 0.65 miles from the mine excavation areas. All of the wells within an approximate two- <br /> bbawater.co 333 West Hampden Avenue,Suite 1050 Englewood,Colorado 80110 •0fax303.806.8953 <br />