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(Page 2) MINE ID # OR PROSPECTING ID # M-1978-091 UG INSPECTION DATE 10/13/04 INSPECTOR'S INITIALS RCO OBSERVATIONS This partial inspection was performed by the Division as part of its annual monitoring of this Hard Rock and Metals 110(2) permit. The operator was contacted about scheduling the inspection. The operator's representative named on page one was present during the inspection. Prior to inspection of the permitted areas o'f the operation, an off-permit meeting that was requested by the operator was conducted with the same parties (named on page one) present. Discussion during that meeting will be documented in a separate report and mailed under separate cover. The 6 Level area was the only area of the permit that was inspected. The :;ite was not active at the time of the inspection. There has been recent mining, as there were a couple dozen one-ton super sacks of ore awaiting shipment at the (off-permit) loading area near the highway, and a stockpile of ore on the 6-level pad. The stockpile was fairly well tarped against precipitation, and contained an estimated 40 cubic yards of uncrushed ore. There was no sacked ore on the pad. Equipment noted onsite included the crusher and conveyors, wheeled generator, underground loading and hauling equipment, flatbed truck and 10-yard dump truck. Other features noted there included the storage shack and modular office/dry room, and several piles of stored parts and supplies. The operating area was identified by permit ID sign, but boundary markers were not observed. The area of activity does not appear to have expanded, and no activity is believed to have exceeded the boundary. There is one location of concern, however, at the top of the cut slope at the northern borrow area, which is ver/near the permit boundary. The face is vertical and may slough, possibly causing offsite damage, which is a possible violation whether it is accidental or not. The operator is urged to perform the following stabilization activities before an enforcement situation becomes necessary: avoid future borrow activities there, and begin placing onsite-generated fill material in sufficiently compacted lifts to buttress the slope. The EPP maps submitted in 1997 dedpict the permit boundary, which does not exactly conform to the top of the existing face up. The map depicts the boundary to be a maximum of 20 feet (horiz.) from the inner edge of the access road. With no markers, the actual location of the permit boundary is not precisely known, but the Division believes that the borrow area may be over- excavated. Reducing or stabilizing the cut slope cannot be done by pushing material down from above or across the slope, due to lack of space. The problem of "signs and markers" noted on oage one must be corrected by carefully locating and clearly noted under "backfill and grading" or "offsite damage." The operator must mark the entire boundary above the portal and borrow cut face so that the relation between the boundary and the borrowing and/or sloughing activities maybe seen. (If the operator requires a copy of the EPP map one may be requested from this office.) See the last page for the correction date. The pad appeared to be properly bermed and graded to direct all precipitation away from the dump face and toward the stormwater sump south of the portal. Deadman Gulch was dry, and the gulch drainageway appeared isolated from the pad. There was no portal discharge. No revegetation has been performed to-date. The dump face will not be further affected, and it requires revegetation as part of the final reclamation. Due to the acidic nature of the dump material, and the expected delays in attaining adequate vegetation, the operator is encouraged to begin some level of revegetation sooner, rather than later. This is not noted as a problem. The 3 Level portion of the permitted area was not entered or inspected. No further items were observed during the inspection. Responses to this inspection report should be directed to the Division of Minerals and Geology, 701 Camino del Rio, Room 125, Durango, Colorado 81301, Attn: Bob Oswald; phone no.970-247-5193. I & E Contact Address NAME OPERATOR STREET CITY/STATE/Z!P Kve Abraham LKA International. Inc 3724 47'h St. Ct. NW G!g Harbor, WA 98335 c.;: Harry Posey, DMG ^ CE ^ BL ^ FS ^ HW ^ HMWMD (CH) ^ SE ^ WOCD (CH) ^ OTHER cc: Lance Barker, Au Mining, PO Box 821, Lake City, CO 81235