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November 7, 2014 C- 1981- 012/New Elk Mine LDS <br />Inspection Topic Summary <br />NOTE: Y= Inspected N =Not Inspected R= Comments Noted V= Violation Issued NA Not Applicable <br />Y - Air Resource Protection Y - Roads <br />N - Availability of Records Y - Reclamation Success <br />Y - Backfill & Grading Y - Revegetation <br />R - Excess Spoil and Dev. Waste NA - Subsidence <br />NA - Explosives Y - Slides and Other Damage <br />Y - Fish & Wildlife R - Support Facilities On -site <br />R - Hydrologic Balance Y - Signs and Markers <br />R - Gen. Compliance With Mine Plan R - Support Facilities Not On -site <br />NA -Other Y - Special Categories Of Mining <br />R - Processing Waste Y - Topsoil <br />COMMENTS <br />This was a partial inspection by Leigh Simmons of Colorado Division for Reclamation, Mining and <br />Safety, (the Division). The inspection was accompanied by John Terry of New Elk Coal Company, (NECC). The <br />weather was fine. Several permitting actions are in progress, these are detailed under the heading GENERAL <br />MINE PLAN COMPLIANCE. <br />The status of the New Elk Mine is Active. <br />NECC had been in negotiations to sell coal to a cement company with local plants; at the time of the <br />inspection the negotiations had not been successful and the company had made the business decision to lay off <br />eight employees on Wednesday, November 5, reducing the workforce to 18. Among those laid off were Charley <br />King and Leonard Torres, both of whom had been involved in surface operations under the direction of Vince <br />Massarotti. Production had been halted in the East Mains of the Blue Seam, between cross -cuts 22 and 23. Work <br />was in progress to prepare the coal face so that it could be left, with the intention being to pull the mining <br />equipment back to the surface; a distance of 2500'. Louis Head remained optimistic that NECC could strike a <br />deal to give the mine a productive future; indeed, the two test burn shipments were still scheduled to be sent to the <br />cement plants. <br />The experiment with the screen had been unsuccessful. Apparently particle size was not sufficently <br />strongly correlated with ash content, so sorting the raw coal by size did not allow a sufficient reduction in ash. The <br />screen was ready to be returned to the company from which it was rented. All the raw coal had been consolidated <br />into a single pile of 4000 tons, with the intention that it would all be washed. Any coal to be shipped was <br />expected to be 100% washed. <br />At the time of the inspection there was a mechanical fault at the wash plant, so no coal was being washed. <br />EXCESS SPOIL and DEVELOPMENT WASTE — Rule 4.09 <br />Placement; Drainage Control; Surface Stabilization: <br />All development waste piles were inspected, with no problems noted. <br />Number of Partial Inspection this Fiscal Year: 3 <br />Number of Complete Inspections this Fiscal Year: 2 <br />Page 2 of 9 <br />