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(Page 2) MINE ID # OR PROSPECTING ID # M-1991-146 INSPECTION DATE 5/31/05 INSPECTOR'S INITIALS WHE OBSERVATIONS This inspection occurred as part of DMG's routine monitoring of 110c in-stream operations and to observe the permit area after peak flow of the 2005 spring runoff. Three photos accompany this report. The ZMK permit area is located within an aggrading reach of the Uncompahgre River where a reduction in the channel grade occurs as the river transitions from the steep upland topography to the relatively flat floodplain valley. The active floodplain is wide, sparsely vegetated, and contains multiple channels. The location and configuration of the interconnecting channels are altered by the seasonal deposition of excess bedload. Throughout this reach of river, the channel bed and banks are composed primarily of sand, gravel and cobble. Such bank materials have low cohesion and are easily eroded. Thus, the lateral stability of the channel is low within the boundaries of the active floodplain. The braided and relatively straight river channel is sensitive to disturbances. A significant modification to the channel occurred during the 1950's with the construction of flood protection levees. The levees were constructed by pushing alluvial materials from the channel to form dikes along the sides of the channel. The levees constrict flood flows to the channel and deny the river access to essential floodplain areas. Increased erosion of the channel is a natura! response to constriction of flood flow for this sensitive reach of the Uncompahgre River. The excavation and processing areas are located within the active floodplain but separated from the main channel by the historic flood protection levee. Permit conditions allow the operator to breach a portion of the levee during high flow season to allow the river to enter the extraction area, deposit its bedload and recharge the extraction area. After high flow the operator restores the levee at its approximate original alignment, replacing all flow to the main channel. DMG last inspected the site on May 9, 2005 and observed that the flood protection levee was intact for all portions of the levee located within the permit area and immediately upstream of the permit area on lands owned by ZMK. During the time of this May 31 St inspection, DMG observed that approximately 600 feet of the levee had been eroded by peak flows, similar to the erosion resulting from the 2003 peak flows. Approximately 200 feet of the eroded portion of the levee was located within the permit area with the remaining 400 feet of eroded levee located upstream of the permit area. Given the sensitive nature of this reach of river and the constriction of flood flow provided by the levees, the available evidence does not prove that the erosion observed during the inspection and recorded in this report have resulted from mining and reclamation activities conduced by ZMK. I & E Contact Address NAME OPERATOR STREET CITY/STATE/ZIP Richard Zannett ZMK Construction, Inc. P.O. Box 1817 Ouray. CO 81427 cc: Harry Posey, DMG X GOE, Sue Nall ^ BL p\FS ^ HW ^ HMWMD (CH) ^ SE ^ WQCD (CH) X R. Larson, Monadnock Mineral Services