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(Page 2) MINE ID # OR PROSPECTING ID # M-1990-025 INSPECTION DATE 7/12/06 INSPECTOR'S INITIALS WHE OBSERVATIONS This inspection occurred as part of DRMS review of the operator's request for release of 31.3 acres for completion of reclamation (AR-04). The Hay Camp Pit is approved for 452.2 acres affected area. DMG holds $168,615 financial warranty. Mining and reclamation activities were active. Four photos and a reclamation cost estimation totaling $172,218 accompanies this report. Mine identification sign was posted. Boundaries of affected lands were delineated. Mining and reclamation activities appeared to be occurring in accordance with permit conditions and the Construction Materials Act and Rules. AR-04 Appearance of the 31.2 acres area addressed under AR-04 was consistent with the descriptions provided in the release request. Backfilling and grading had resulted in stable slopes, approximately 4H:1 V, which blended well with adjacent reclaimed lands and undisturbed areas. Vegetative cover was well established, diverse and at least equal in extent of cover to surrounding undisturbed lands. Observations made during the inspection and recorded in this report indicate that the operator has completed reclamation for the 31.2 acres addressed in AR-04 in accordance with the approved reclamation plan and Act and Rules. DRMS recommends approval of AR-04. With the approval of AR- 04 the permit area will be reduced from 452.2 acres to 420.9 acres. Financial Warranty Pursuant to Rule 4.2.1(4), DRMS has estimated the current cost of reclamation at $172,218. The reclamation cost estimation represents a $3603 increase over the existing $168,615 financial warranty. The reclamation cost estimation is based upon a phased mine plan with contemporaneous reclamation. Observations made during this inspection indicate that mining activities are following the phased plan and that reclamation is occurring contemporaneously in accordance with permit conditions. However, cost of equipment, labor and fuel have increased significantly, resulting in the increased cost of reclamation. Pursuant to Rule 4.2.1(2), the permit holder has 60 days to submit $3603 additional financial warranty to ensure a total bond not less than $172,218, OR complete additional reclamation to ensure that the existing $168,615 is adequate to address reclamation issues. Response to this report should be addressed to Wally Erickson, Division of Minerals and Geology, 701 Camino del Rio, Room 125, Durango, CO 81301, phone (970) 247-5469. I & E Contact Address NAME Arvol Brumley OPERATOR Four States Aggregates. LLC STREET P.O. Box 1568 CITY/STATE/ZIP Cortez. CO 81321-1568 cc: Tony Waldron, DMG ^ CE ^ BL ^ FS p HW ^ HMWMD (CH) ^ SE ^ WOCD (CH)