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(Page 2) MINE ID # OR PROSPECTING ID # M-2000-090 INSPECTION DATE 6/13/02 INSPECTOR'S INITIALS ESC This was an inspection of the Lykins Gulch Quarry conducted by Erica Crosby of the Division of Minerals and Geology. Mike Loukonen of Loukonen Bros. Stone was present during the inspection. A 110c Mining and Reclamation Permit was issued to Loukonen Bros. Stone on February 1, 2001 for a total permit area of 9.9 acres. The Division holds a financial warranty in the amount of $21,000.00. A mine identification sign was posted at the entrance to the site. The site is located 4 miles south of Lyons in Boulder County, Colorado. The parcel of property is surrounded by Boulder County Open Space. The operator was actively mining sandstone from both the North and South Quarries. The permit area for the North Quarry is approximately 7.5 acres. The disturbed area associated with the North Quarry is a small pit approximately .5 acres in size. Some minor mining was noted within Lykins Gulch. The northern portion of the property has not been disturbed, and the operator stated that the rock might not be accessible in this area. Permit boundary markers were noted in the North Quarry, and mining was within the boundary. The South Quarry is approximately 1.5 acres in size. A large waste rock pile is located on the toe end of the Quarry on east end of the site. A portion of the pile is located outside of the permit boundary area, approximately 15 feet wide by 250 feet long. The Division considers this a possible violation of the Construction Material Rules & Regulations. Specifically, for mining outside of the approved permit boundary area and failure to protect the area outside the affected land from slides or damage during the mining operation (C.R.S. 34-32.5-116(1) and 34-32.5-116(4)(1)). This matter will be scheduled before the Mined Land Reclamation Board ("MLRB") for a possible violation. Such notice will be sent under separate cover. In between the North and South Quarries, the operator has cleared an area for pallet and equipment storage. The area is approximately 1 acre in size, and is located outside the permit boundary area. Again, the Division considers this to be a possible violation of the Rules & Regulations, and will be scheduled before the MLRB. In order to correct these two problems the operator has the following options; 1. Move the waste pile, pallets and mining related equipment inside the permit boundary area. In addition, the disturbance outside the permit area will need to be reclaimed by the operator in a similar fashion as to what was approved in the reclamation plan. Proof of compliance must be submitted in the form of photographs. OR 2. Submit a 112 Conversion Application to account for the disturbance associated with the waste pile and the pallet storage area. OR 3. Submit a 110 Amendment Application to revise the permit boundary. In order to amend the 110 permit, the operator will need to permit the new disturbed area and at the same time request an Acreage Release Request on a portion of the permit area that has not been disturbed by mining. This is considered an "acreage swap." The Amendment Application and the Acreage Reduction request must be two separate filings, and approval will be concurrent. Submittal of the items noted above must occur on or before July 22, 2002. Please see page 4 for additional information.