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(Page 2) MINE ID # OR PROSPECTING ID # M-1977-285 INSPECTION DATE 8/30/07 INSPECTOR'S INITIALS RCO.AJW OBSERVATIONS This partial inspection by the Division was pertormed as part of its monitoring of Hard Rock/Metals 112 permits and as a pre- operation inspection of the areas proposed to be added to the permit under amendment application AM-2 which is currently under review. The operatorwas contacted about the scheduled inspection, and the inspectors met the operators at their office in Egnar and then proceeded to the site. The operator's representatives named on page one were present during this inspection. This is considered a partial inspection since several distant parts of the permit were not inspected, including: the vent shaft sites S-1 through S-7 and their roads, several of the power drops and their roads, and the GMG Mine. This mine is part of the Sunday Mines complex, a group of five neighboring mines that are all separately permitted by this operator but function together as one operational unit. This site has been reactivated, though no mining activity was observed at the time of the inspection. MONITORING INSPECTION: The site includes a portal, numerous structures on the pad around and below the portal, mine access roads, stormwater control structures, large waste rock dump, and a topsoil stockpile. The portal was open and recent activity was evident at the site, including removal of one of the compressor buildings and stormwater pond maintenance. The office building does not appear to be repaired sufficiently for use yet. There was aloes-grade ore pile on the east end of the pad, but no other ore observed. The far west end of the dump contained a helicopter landing site for medical emergencies. Hydrocarbons are not presently observed onsite. There is little debris or junk onsite. stormwater is adequately controlled on the pad and at the the of the dump. No noxious weeds were observed in the permitted area. The operator stated that the west end of the waste rock dump will be graded to final reclamation configuration in the near future. It is planned to be blended with the eastern edge of the dump on the adjoining Carnation Mine (M-1977-416). This is approved in the permit. The operator also stated that the GMG Mine opening, which has been closed for a couple years, is slated to be reopened for a vent. Since this is already a permitted opening, for which bond money exists to reclaim it, this is in conformance with the approved plan. As this or other approved activities are carried out or anticipated, they should be described in the operator's annual reports. The waste rock is predominantly angular sandstone, which can be stable at a fairly steep angle of repose. The outslope of the dump is presently about 1.5:1, but the approved reclamation gradient is 2:1 or gentler, mainly to blend with natural slopes nearby and so that it may be revegetated. New material may be placed at the final slope gradient, or graded down. All dump faces steeper than 2:1 that exist at reclamation time must be reduced. As stated above,in the southern upland areas there are several roads and vent shafts that are necessary for adequate ventilation of the underground mine, that are included in the affected area and are bonded for reclamation. No vent shafts were inspected at this time. During the life of the mine, the operator should ensure that surface runoff from the pads or roads is controlled to prevent accelerated erosion until the sites are vegetated and stabilized. AMENDMENT PRE-OPERATION INSPECTION: The operator has applied in AM-2 for more affected land to contain several more vent shaft sites, in upland locations south and west of the portal area. These will require new roads also. The facilities will conform to those already existing in this permit, and will be reclaimed similarly. They are currently under review by BLM, who manages the surface of these claims. As the sites become finalized and installed at their actual locations, the operatorwill inform this office with the updated maps and descriptions. Additional pertinent regulations, pursuant to Hard Rock/Metals Rule 7, will be evaluated after approval of this current amendment. The bond was recently recalculated and was found adequate. The bond will be reviewed at the conclusion of the amendment process and new figures will be forwarded to the operator at that time. No further items were observed during the inspection. Responses to this inspection report should be directed tq the Division of Reclamation, Mining and Safety, 701 Camino del Rio, Room 325, Durango, Colorado 81301, Attn: Bob Oswald; Phone no. 970- 247-5193. (Please note the new room number, and revise your records as necessary.) CONT.