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i (Page 21 MINE ID if OR PROSPECTING ID aX M-78-342 INSPECTION DATE 07/17/97 INSPECTOR'S INITIALS TDG OBSERVATIONS This was a combination routine monitoring inspection and financial warranty evaluation done in response to a Succession of Operator application to transfer the permit from the current permittee Ryan Ltd. to Telluride Mining, Inc. Because the Successor Operator, Telluride Mining, Inc. elected to waive their right to a 30 day processing time to allow the Division to recalculate the Financial Warranty requirements, the DMG permittee will continue to be Ryan Ltd. until the Successor Operator submits the required Financial Warranty and becomes the new permittee. Financial Warranty Amount The Division has recalculated the amount of Financial Warranty for this operation at 510.750 as detailed in the attached cost estimate. This amount represents the minimum amount of Financial Warranty that must be provided to the Division. Since the operation is currently bonded with the Division of Minerals and Geology at 55,000.00, the additional bond amount of 55,750 can be provided either as a separate bond instrument, or a new bond in the amount of 510,750 can be provided in which case the existing 55,000.00 bond will be released. The successor operator has asked if the band requirement can be waived since the site may be already bonded with the D.O.E. The Division has allowed mine sites on U.S.F. S. and B.L.M, surface to provide a minimum S100.00 financial warranty to the Division of Minerals and Geology if the site is adequately bonded with the U.S.F.S. or the B.L.M. and the bond amounts held ny those agencies covers the estimated cost of completing all reclamation work required by the approved Division of Minerals and Geology permit. This arrangement has been worked out through a Memorandum of Understanding that has been executed between the Division of Minerals and Geology and the B.L.M. and U.S.F.S. However, the is no Memorandum of Understanding in place at the present time between the Division of Minerals and Geology and the D.O.E. As such, in order for the Division to accept any type of partial bond waiver or reduction, it will be necessary that the currem permittee (if the Successor Operator declines to complete the transfer of permit process) or the Successor Operator lif the Successor Operator accepts the bond increase and completes the permit transfer process) provide to the Division of Minerals and Geology within 60 days, written verification from the D.O.E. that: 11 The entire 9.0 acre area comprising the Division of Minerals and Geology Reclamation Permit area and delineated on the attached map is covered by a valid D.O.E. lease; 21 The current lease holder is either the current permittee Ryan Ltd. lif the permit transfer not completedl, or the Successor Operator Telluride Mining, Inc. (if the permit transfer is completedl; 31 The D.O.E. bond covers all reclamation activities and associated costs required by the approved Division of Minerals and Geology Reclamation Permit; and 41 The D.O.E. will accept reclamation responsibility for completing all reclamation work required by the Stale reclamation permit in the event the State reclamation permit is revoked by the Division of Minerals and Geology. Verification of Right to Enter During the inspection the site contact person, Mick Carter, produced a surface and subsurface ownership map that to some eMent clouded the issue of whether the current permittee Ryan Ltd. or the Successor Operator Telluride Mining, Inc. currently has the right to enter the entire 9.0 acre State reclamation permit area and conduct mining operations within that area. As such, it will be necessary that the permittee or Successor Operator provide adequate written documentation to the Division within 60 days verifying that right of entry by the permittee or successor operator still exists. The Division has attached to this inspection report the correct legal description, permit boundary, and original lease holder information taken from the approved Division of Minerals and Geology Reclamation Permit Application for the Ellison Mine. Routine Inspection Topics Signs and Markers - No mine identification sign was in place at the time of the inspection, and no permit area perimeter markers were observed. As such, a mine identification sign needs to be installed within the next 60 days at the entrance to the site. The sign needs to show the DMG permit number IM-78-3421, the name of the site (Ellison Mlnel, and a statement that a reclamation permit has been issued by the Colorado Division of Minerals and Geology. In addition, the permit area perimeter delineated on the attached map of the site will need to be accurately marked on the ground by installing a series of durable perimeter markers at each of the corner points shown on the attached map (points "ELL-1 "through "ELL-9"1. This work will also need to be completed within 60 days.