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PERMIT #: M-1977-342 <br />INSPECTOR'S INITIALS: PSH <br />INSPECTION DATE: July 28, 2015 <br />OBSERVATIONS <br />The Henderson Mill facility was inspected by the Division of Reclamation, Mining and Safety (Division/DRMS) <br />as part of the Division's monitoring inspection program. The following Division staff members were present <br />on the inspection; Peter Hays, Tyler O'Donnell, Stephanie Mitchell and Michael Cunningham. The DRMS staff <br />members are part of the new Henderson inspection team for the Henderson Mine and Mill. The team <br />members will be conducting future inspections at the site. The purpose of the inspection was to familiarize <br />the DRMS staff with the Henderson Mill facilities. Mr. Tim Haynes and Mr. Miguel Hamarat with Climax <br />Molybdenum - Henderson Operations (Henderson) were present during the inspection. <br />The inspection began with a meeting to discuss the ongoing permitting items at the site. The following topics <br />were discussed: Nokes Building repair, Fire Water Line leak repair, the source of the labor and equipment <br />rates used in the Henderson Closure Cost Model, the clarification memo for the NPL memo from the Division <br />dated April 14, 2015, the Tailings Storage Facility Liner System (TR -26) project and the Ute Park Extraction <br />Wellfield — Phase 2 (TR -25) project. <br />The following Henderson Mill facilities and areas were observed during the inspection; the west portal, the PC <br />2 / PC 3 transfer station, the PC2 and PC3 alignments, the sand and gravel mine, the tailings delivery lines, the <br />tailings storage impoundment, the topsoil storage areas, the barge pump house, the Nokes building, the mill <br />building and the milling process. <br />The sand and gravel mine was active during the inspection. The excavation was proceeding to the north and <br />was nearing the north mining limit. Fifty thousand (50,000) tons of material will be produced this year by a <br />contact crushing company. The drilling and well construction for the Ute Park Extraction Wellfield — Phase 2 <br />project is scheduled to start on August 3, 2015. The TSF sand seep liner system project was active. The sand <br />seep excavation was complete and low permeability material (clay) was being placed and compacted during <br />the inspection. The Nokes Building ventilation improvements and containment repairs were ongoing during <br />the inspection. The urethane liner placement on the inside of the building was complete and the ventilation <br />improvement should be completed soon. The Fire Water Line leak repair project is completed. The source of <br />the leak was determined to be the pipe joints at the bottom of the hydrant. The source of the leak was <br />repaired and the hydrant was replaced. The Division is working on the clarification memo regarding the <br />memo dated April 14, 2015 in response to the 5 -Quarter Water Quality Data and Baseline Parameters Report <br />dated May 29, 2014. The Division's review of the Henderson Closure Cost Model resulted in questions <br />regarding the source of the labor and equipment rates used by Henderson. Henderson staff will contact Ajax <br />Consulting regarding the rates used in the financial warranty calculation. A meeting between the Division, <br />Henderson and Ajax may be schedule to discuss the cost estimate. <br />Photographs taken during the inspection are attached. <br />Inspection Contact Address <br />Miguel Hamarat <br />Climax Molybdenum Company <br />19302 County Rd. #3 <br />Parshall, CO 80468 <br />Cc: Wally Erickson, DRMS <br />Page 2 of 4 <br />