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PERMIT#: M-1988-112 <br />INSPECTOR'S INITIALS: WHE <br />INSPECTION DATE: October 11, 2016 <br />OBSERVATIONS <br />This inspection occurred as part of the Division's routine monitoring program for permitted operations. The <br />San Luis Project is a 112d-3 operation permitted for the extraction and milling of precious metals ore. Mining <br />and milling activities ceased on or before November 9, 1996. Since that time the Operator has pursued <br />completion of reclamation on all affected lands. During 2000, 2014 and 2015, the Division approved acreage <br />reduction requests for 399 acres (AR -01), 35 acres (AR -02), and 717 acres (AR -03), for successful completion of <br />reclamation. The current permit area encompasses approximately 1,049 acres, of which the Operator has <br />affected and is reclaiming approximately 372 acres. Affected lands are being reclaimed to support a variaty of <br />post -mining land uses, including industrial/commercial, rangeland, and wildlife habitat. The Division holds <br />$7.4 million financial warranty. This inspection report is accompanied by six photographs. <br />The water treatment plant was active. As shown in Photo 1, Pond 1 had been drained in preparation for <br />maintenance work. Survey crew was surveying the area. The previous liner for Pond 1 will be upgraded to a <br />concrete liner to facilitate easier removal of accumulated sediment. Mine water was bypassing Pond 1 to <br />Pond 2 for pre-treatment. Bird balls covered the entire surface of the fluid impounded in Pond 2. <br />The free water pool located on top of the tailings pond was positioned approximately 800 feet from the <br />embankment, significantly further from the embankment than required by permit conditions (200 feet <br />minimum). The water level of the free water pool appeared lower than previous levels, as evidenced by the <br />extended beach area void of vegetation, see Photo 2. The embankment for the tailings pond appeared stable, <br />evidence of seepage, slumping or excessive erosion was not observed. The collection pond, located at the toe <br />of the embankment for the tailings pond, exhibited low water levels. The low water levels observed at the <br />free water pool and collection pond suggest the volume of water received at the tailings pond has reduced <br />from previous years, see Photos 3 and 4. Seasonal maintenance work had occurred for portions of the upland <br />diversion ditch for the tailings pond. All portions of the upland diversion ditch appeared well maintained, with <br />adequate capacity to function in accordance with its design. The inlet for the drop structure of the ditch was <br />clear and functional, see Photo 5. The Operator discussed upgrades to the drop structure, to be submitted for <br />Division review and approval in the near future. <br />As noted above, the Operator pursues completion of reclamation of all affected lands and has secured the <br />release of approximately 1,151 acres for successful completion of reclamation. During each of the acreage <br />reductions the Operator specifically requested no adjustment in the financial warranty. The $7.4 million <br />financial warranty was intended to address a reclamation liability greater than current conditions. Therefore, <br />the existing $7.4 million financial warranty is sufficient to address current reclamation liability. <br />Inspection Contact Address <br />Julio Madrid, Steve Carino <br />Battle Mountain Resources, Inc. <br />P.O. Box 310 <br />San Luis, CO 81152 <br />Enclosure: Six photographs taken by the Division during the inspection. <br />Page 2 of 2 <br />