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(Page 2) MINE ID # OR PROSPECTING ID # M-1992-045 INSPECTION DATE 09/27/04 INSPECTOR'S INITIALS ESC OBSERVATIONS This was an inspection of the Gold Basin Mine conducted by Erica Crosby and Carl Mount of the Colorado Division of Minerals and Geology. James and Deanna Van Ella were present during the inspection. The Gold Basin Mine is located 7 y, mile west of Granite at an elevation of 12,000 feet. The permit was issued on July 21, 1992 for 3 acres of disturbance. The site is located on private land. The operation is also used as a tourist mine. Mining is limited to a few months of the year due to the extreme weather conditions. The operator excavates alluvium material in the pit area and transports the material to the processing area where it is screened, washed and sent through a sluice box system. The Division currently holds a financial warranty in the amount of $3,400.00.00 The Division determined the permit boundary area to be 3.8 acres in size based on collecting data points in the Global Positioning System (GPS). The Division calculated the area based on three operator placed markers posted on site and one approximate location of the fourth marker. The permitted area was approved for 3 acres in size. The upper portion of the site consists of historic dredge piles. Disturbance on the permitted site consists of excavation of a stream channel. The channel elopes are steep i0.5h:1v) due to the excavation of the material. In some instances, the slope has been undercut by mining excavations or slope failure has occurred. Material that is excavated and washed has been placed in a pile below the shop area. The creation of this waste pile was not a component of the mining and reclamation plan. In fact, the operator stated in the permit that material excavated would be used as backfill for the mining slopes in the original mined area to achieve 3h:ly. In particular, the mining plan states: "An open ended pit will be dug to extract placer deposits from the channel, when the pit is large enough to turn a one yard loader freely a one yard bucket of material will go to the wash plant and a yard of the was rock and tailing sands will come back to the pit. With this plan I believe I can keep my reclamation plan in check." In addition, the mining plan states: "I can't see a reason in having waste rock dumps and tailing impounds if proper mining management is in practice. My project plan is to use the waste rock for back fill and keep grading to prevent erosion and to maintain hydrologic balance.." During the inspection, the Van Ellas stated that they are creating a flat bench area for future development on the property. The material consists entirely of washed fines. The Van Ellas stated that they have removed 600 cubic yards of material per season from the excavated channel over a period of 14 seasons. This amounts to approximately 8,400 cy of material located in the waste pile. Since the Division's last inspection, it appears that a large shop has been constructed on site. The permit does state that a maintenance building is planned for tools and processing concentrates. However, the reclamation cost estimate does not address removal of this building once mining is complete. The approved postmining land use for the site is residential. If the Van Ella's propose to keep the structure in place after mining (and therefore, do not need to be bonded for removal), it must be so stated in the permit. In addition, the Van Ellas will need to demonstrate that retaining the structure meets all local zoning rules and regulations via a letter from the local zoning authority. Two settling ponds exist on site as well as one fresh water pond. The water source for the sites originates above the affected area in the form of a small creek. The application states that water rights are for placer mining purpose and are decreed for a capacity of 15 cubic feet per second. The operator stated in the permit that in order to avoid litigation, they will purchase Twin Lakes Water Share or 34 share. The operator will need to demonstrate that they are in compliance with the permit and have the appropriate water rights for the placer operation.