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September 17, 2015 C-1981-018/Deserado Mine CCW <br />Inspection Topic Summary <br />NOTE: Y=Inspected N=Not Inspected R=Comments Noted V=Violation Issued NA Not Applicable <br />N - Air Resource Protection R - Roads <br />R - Availability of Records R - Reclamation Success <br />N - Backfill & Grading N - Revegetation <br />N - Excess Spoil and Dev. Waste N - Subsidence <br />N - Explosives N - Slides and Other Damage <br />N - Fish & Wildlife R - Support Facilities On-site <br />R - Hydrologic Balance Y - Signs and Markers <br />R - Gen. Compliance With Mine Plan N - Support Facilities Not On-site <br />N - Other N - Special Categories Of Mining <br />N - Processing Waste Y - Topsoil <br />COMMENTS <br />This was a complete inspection of the Deserado Mine conducted on the 17th of September, 2015. The inspection <br />was conducted by Clayton Wein accompanied by Jim Stark, both of the Colorado Division of Reclamation, <br />Mining and Safety (the Division). Scott Wanstedt of Blue Mountain Energy, Inc. (BME) also accompanied the <br />inspection. The weather was clear and in the low seventies (fahrenheit) and the ground was dry. Precipitation had <br />occurred the evening previous to the inspection. <br />AVAILABILITY OF RECORDS — Rule 5.02.4(1): <br />The records for the Deserado mine are kept at the main mine office with Scott Wanstedt. The records are in good <br />condition, please see the included Availability of Records form at the end of this report for more details. <br />HYDROLOGIC BALANCE - Rule 4.05 <br />Drainage Control 4.05.1, 4.05.2, 4.05.3; Siltation Structures 4.05.5, 4.05.6; Discharge Structures 4.05.7, 4.05.10; <br />Diversions 4.05.4; Effluent Limits 4.05.2; Ground Water Monitoring 4.05.13; Surface Water Monitoring 4.05.13; <br />Drainage — Acid and Toxic Materials 4.05.8; Impoundments 4.05.6, 4.05.9; Stream Buffer Zones 4.05.18: <br />Pond DP -1 was holding water at the time of the inspection. The inlet of the primary discharge point was clear of <br />debris. The embankments were well vegetated and there was no erosion. The outfall into Scullion Gulch was <br />clear and in good condition (Photo 1). <br />At the time of the inspection Ponds PP -1 and PP -2 were well vegetated and stable. There were no issues with <br />either of these ponds. <br />The B -Seam Dewatering Pond pump was not operating at the time of the inspection. The water pumped out of the <br />B -Seam passes through an artificial wetland into the Last Chance Pond. During the inspection water was <br />contained in the wetlands and Last Chance Pond. Last Chance Pond was not at capacity and there was no <br />discharge. <br />The Ponds RR -1 and RR -2 are located at the rail loop. The ponds are designed to collect runoff and wash down <br />water from the rail loadout. At the time of the inspection both ponds were stable and dry. Ponds SS -1 and SS -2 <br />Number of Partial Inspection this Fiscal Year: 2 <br />Number of Complete Inspections this Fiscal Year: 1 <br />Page 2 of 10 <br />