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(Page 2) MINE ID # OR PROSPECTING ID # M-1982-020 INSPECTION DATE 9-7-2006 OBSERVATIONS INSPECTOR'S INITIALS SSS The steel locking door on the secondary escapeway does not appear substantial enough as a post-mine closure, to prevent unauthorized entry. The permittee will need to either strengthen the door, possiblywith some locking cross bars, or indicate that the reclamation bond can be increased to add these safeguards during reclamation. Documentation of reinforcement of the door must be submitted by 12-15-2006, or the reclamation bond will be increased to account for installation of the door reinforcement. The mine identification sign was not observed and must be installed per the requirements of Rule 3.1.12 (1) that state: The operator shall post a sign at the entrance to the mine site which shall be clearly visible from the access road and specify the following; a) the name of the operator; b) indicate that a reclamation permit for the operation has been issued by the Colorado Mined Land Reclamation Board, and; c) the permit number. The lack of an identification sign is noted as a problem with the corrective action(s) and correction date specified on the last page of this report. The above ground diesel fuel tank, located beside the engine building is now located within a spill containment berm. The spill containment does not appear to be adequately sized to contain all the fluid of the tank, in the event of a spill. The permittee will need to ensure that this tank and all hazardous material containers stored on site are located in adequate spill containment facilities. This includes drums and buckets of hazardous materials, batteries, etc. Documentation of adequate sizing of the spill containment berm must be submitted to DRMS by 12-15-2006. Explosives magazines were not noted during this inspection. No significant erosional features were noted on the affected areas of the site. The permittee indicated that they are currently importing ore from another mine site, processing it at this mill, and discharging the tailing to the lower tailings pond, risking the potential to make this a custom mill and possibly a Designated Mining Operation, DRMS understands that ownership of the Mill is now held by an entity other than the permittee. If ownership of the Lucky Strike mill and the mine from which the ore originates is held by the same entity, then the custom mill designation does not apply. However, DRMS recommends chat a Succession of Operator for the Lucky Strike be submitted to clarify the link between the mill and the mine from which the ore is being imported. At a minimum, documentation of common ownership of the Lucky Strike Mill and the mine from which the ore is being imported needs to be submitted. In absence of this documentation, the site may be considered to be a custom mill and procedures initiated to transferjurisdiction to the Colorado Department of Public Health and Environment (CDPHE). A memorandum of understanding between DRMS and the CDPHE and the law both say: (A) counties decide whether a facility can become a custom mill, and (B) CDPHE oversees the certificates of designation (as a custom mill). In the case of mining, where certificates of designation show the ores to be ordinary ores -not uranium ores and not mine wastes being re-processed that might contain foreign chemicals -they sometimes have deferred to DRMS for mills that are part of aDRMS-permitted operation. County Custom Mill Designation is a feature of local land use regulations or zoning. It secures land use decisions in the hands of the counties, and allows the county to impose local regulations on issues like noise, traffic, hours of operation, aesthetics, etc. In other words: the state, through certificates of designation and reclamation permits cannot impose a custom mill upon a county if the county doesn't want it. In 2004, the permittee committed to notifying DRMS prior to importing any ore for processing at this mill. This notification did not occur. Therefore, before any additional ore from an off-site mine is imported or processed, and by no later than the correction date noted, the permittee must submit documentation demonstrating that the Lucky Strike Mill does not meet the definition of a custom mill, or: 1. Gain county approval for a custom mill; 2. Contact CDPHE -Solid Waste Disposal Section -Glenn Mallory- regarding the need for getting a certificate of designation for the ores identified for importation and processing. 3. If CDPHE decides to test the ore and provide a certificate of designation, they have that authority. However, they cannot cause ores to be deposited onto a DRMS permitted site without a proper bond covering disposition and reclamation related to disposal of the mill waste related to that designated material.