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GEOLOGY DESCRIPTION: UNDERGROUND MINING <br />SURFACE GEOLOGY <br />Only the upper two members of the Mesa Verde Group are exposed on <br />the property. The King II Mine is located on the north side of Hay Gulch <br />with entries to be driven into the coal bearing Menefee Formation. The <br />Cliff House Formation caps the higher ground on both sides of the gulch. <br />COAL GEOLOGY <br />Exploration drilling reports and analysis reports obtained by National <br />King Coal concluded that the two coal seams exposed at the current <br />mine coalesce into one "A" seam pod to the northwest of the current <br />operation. These reports state that holes were drilled approximately 300- <br />400 feet deep and no ground water encounters were reported. None of <br />these holes were located within the CDRMS permit boundary. At the <br />location of the King II Mine there is one "A" coal seam pod with a <br />thickness ranging from 5.9 to 11.7 feet, with an average of 9.9 feet. <br />Bedding at the project site dips 3-60 in a south -southwesterly direction. <br />COAL QUALITY <br />The coal within the "A" seam pod of the King II Mine is low ash, low <br />sulfur, and bituminous coal with a 5.0 free swelling index (blending <br />metallurgical coal). An average analysis of six samples as received <br />follows: <br />BTU <br />Moisture <br />Ash <br />Sulfur <br />12,743 <br />5.6% <br />7.5% <br />0.68% <br />Additional coal analysis as well as analysis of the immediate floor and <br />roof for the upper seam is included in Appendix 4. <br />GEOLOGIC HAZARDS <br />Geologist, David L. Gaskill, of the Conservation Division of the U.S.G.S. <br />reported no unusual geologic hazards are known that might adversely <br />affect mining in the upper or lower Menefee coal seams. He noted that <br />ground water tables were below the seams (See King I Mine existing <br />permit Appendix 4(3)). Mr. Gaskill's report was prepared in February, <br />1980, for the survey's consideration of National King Coal's application <br />for a new Federal Lease adjacent to the current lease holdings at the <br />current mine. <br />An inspection of the current King I Mine workings shows no significant <br />GCC Energy, LLC King II Mine <br />Section 2.04.6 <br />Page 5 June 26, 2014 <br />7X•22 <br />, �,opmveol <br />03 -Jul - 2014 <br />