2015-06-17_INSPECTION - M1994117

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PERMIT #: M-1994-117 INSPECTOR'S INITIALS: MAC INSPECTION DATE: April 30, 2015 OBSERVATIONS The inspection was conducted by Michael Cunningham of the Division of Reclamation, Mining and Safety (Division). Mark Steen was present on behalf Gold Hill Mines, Inc. In addition, Mel Swanson and Dwight Cross were also in attendance for the inspection. On March 10, 2015, the Division received a Succession of Operators application to transfer the permit from Gold Hill Mines, Inc. to Colorado Milling Company, LLC. The application was found to be incomplete and a letter was sent to the Operator on March 17, 2015 which listed the missing materials which must be received before the Reclamation Permit can be transferred. The Permittee and the Prospective Successor waived their right to a decision of the application within 30 days. Therefore, the Division will calculate the required financial warranty once the Succession of Operators application is complete. The Gold Hill Mill is currently in temporary cessation. The first five year period of temporary cessation commenced on June 13, 2013 and will end on June 13, 2018. The Bureau of Land Management (BLM) owns portions of the surface of the permitted area. In April 2013, the BLM issued a Notice of Temporary Suspension for all of the Gold Hill Mines, Inc. operations. The initiation of mining or milling operations may not occur until such time as the BLM has completed the NEPA process, approved a Plan of Operations and lifted the Temporary Suspension Order. The Division's inspection focused on the surface facilities and surface disturbance. No additional disturbance has been created at the site since the Division's last inspection in 2012. All of the surface facilities remain unchanged and no new structures have been constructed at the mine. The Gold Hill Mill primarily consists of the mill building and the tailings impoundment. The various milling circuits within the mill are off-line and the Operator is in the process of servicing the equipment prior to resuming milling operations. The area immediately south of the mill building contained a substantial amount of refuse, scrap metal and dilapidated equipment. The Operator has hauled most of the material to the dump. In addition, the small office trailer located on the west side of the mill building has been removed from the site. There is approximately 30,000 tons of ore stockpiled to the east of the mill building. The ore stockpiles pre -date the issuance of the permit; however, the Operator intends to process them in the future. The tailings impoundment contained water from snowmelt. The freeboard of the impoundment was sufficient to handle additional precipitation without risk of overtopping. The Division inspected the toe of the impoundment and found the impoundment to be stable; no signs of erosion were noted. According to the Operator, a pump station and a water line from Left Hand Creek will be installed next year as a source of water for the mill. A technical revision will need to be submitted prior to the construction of these structures to address their location as well as to address any bonding implications. The Division and the Operator discussed the future plans to expand the permit boundary for the Gold Hill Mill to accommodate the construction of a new tailings impoundment. In addition, the Operator intends to use designated chemicals in the milling process. Specifically, the milling process will utilize xanthates, which are considered to be designated chemicals as defined by the Hard Rock Rules. The use of designated chemicals will require the Gold Hill Mill to operate as a Designated Mining Operation. The Operator will need to submit a conversion application to change the existing 110(2) Hard Rock Reclamation Permit to a 112 Designated Mining Operation. This concluded the inspection. Page 2 of 3