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(Page 2) MINE ID # OR PROSPECTING ID # M-1994-005 INSPECTION DATE 3/19/07 INSPECTOR'S INITIALS RCO OBSERVATIONS This inspection was pertormed by the Division as part of its monitoring of Construction Materials 112c permits, and as a pre- operation inspection for the amendment application (AM-2) currently under review. The operator was contacted about the scheduled inspection. The operator's representatives named on page one were present during the inspection. The required notice concerning the amendment was posted at the entrance to the site. The permit ID sign was also observed. The permit boundary is delineated by a combination of fence posts, fencelines, ditches, and berms. All activities are inside the boundaries. This inspector first met with the operators to discuss the amendment review, decision process and timeframe now that timely written objections were received, and the pre-hearing conference and Board hearing events that will be scheduled. The primary issue to be addressed in the amendment review is the impact to groundwater. It was explained that this matter is in the jurisdiction of the Division of Water Resources (DW R), and since their decision concerning exposure of groundwater as a result of mining may not be made for several months, that DRMS or the Board could place a stipulation on the approval to meet a future condition about groundwater compliance. (Further discussion with DWR confirmed that this timeframe is probably correct.) The site was active at the time of the inspection. Haul trucks were entering and leaving the site, and aggregate was being crushed and stockpiled in the north end of the pit. Most of the pit has been excavated, the exception being in the NE area where the haul road, fuel and water tanks, overhead electric, and office and storage buildings are located. This last area to mine will require that those structures are first removed. The crusher will advance with the highwall and remain onsite during the next (deeper) phase, and an office structure will probably be located somewhere else on the site. Other structures, as well as parts and debris currently present, will be removed permanently from the site. Mining is preceded by stripping and stockpiling topsoil. There is sufficient topsoil stockpiled in various locations of the site to perform the approved reclamation. Mining is creating a vertical highwall about 25 feet high. The fines are being used to gradually backfill the slopes at the final highwall locations along the pit perimeters. Much of the slopes in the north half have been backfilled and topsoiled. About half the slopes in the south half have been backfilled. Vertical highwalls exist in the NE and SE portions of the pit. The pit floor is level and dry. There is no evidence of seepage of groundwater into the pit from the walls or floor. A small sump and pump exist on the west side for periodically irrigating the vegetation on the permanent visual berm facing the highway. The sump was dry at the time of the inspection. Diesel fuel and other hydrocarbons are stored onsite in large steel tanks. Most of the tanks are set within concrete secondary containment. Other tanks that are not within such impermeable containment are either empty or are scheduled for moving to different onsite location. There was no evidence of leakage or spillage. The operator was reminded that impermeable containment was essential for all fluids stored onsite. He stated that a synthetic liner would be used, possibly a 40-mil HDPE, and covered byfine-textured earthen material to avoid punctures. At this time there is no problem, but future inspections will check to verify adequate containment. The PVC risers at the two ends of the buried siphon pipe are visible. An unmined strip will be left as a dike between the two proposed ponds to be created under this amendment. Other irrigation ditches were observed, but there is no irrigation occurring yet and no spring ditch cleaning has been pertormed yet. The adjoining properties were observed. There is no mining damage occurring on or encroaching on those lands. There is a large pond on one of the properties lying below the river terrace east of the permit area. The water level is down about two feet from the high water mark. This pond lies between the permit area and the Uncompahgre River, and the pond level responds at least in part tochanges in the river level. Deeper mining in the pit will expose groundwater, whose surface is expected to have a similar elevation, though it may respond more to irrigation water. No problems were observed at this time. Closer to the decision date for the amendment, the bond will be recalculated. At this time it is considered adequate. No further items were observed during the inspection. Responses to this inspection report should be directed to the Division of Reclamation, Mining and Safety, 701 Camino del Rio, Room 125, Durango, Colorado 81301, Attn: Bob Oswald; phone no. 970-247-5193.