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(Page 2) MINE ID # OR PROSPECTING ID #: ~-19Rd_nvd INSPECTION DATE: ~nniinry ~~, 9nns INSPECTOR=S INITIALS: ~11~L OBSERVATIONS This inspection was conducted at the request of one of the owner/partners of the site to determine if the financial warranty is adequate. The site is located approximately two miles west of Fairplay on the south side of the Middle Fork of the South Platte River and the pit is situated on an alluvial or glacial gravel terrace adjacent to the river. The site is divided onto two areas of operation including an approximately 3 acre pit in a 17 acre parcel that is mostly disturbed in the southwest corner of the site and a 7.86 acre shallow surface disturbance on the northwest side of the property. This shallow surface disturbance area was the subject of a recent violation and subsequent amendment to incorporate this area into the permitted area. Apparently, the operations had expanded beyond the approved permit area and onto this adjacent area. This amendment was approved in June of 2004 and a financial warranty calculation was conducted at that time which resulted in an increase to the bond of $11,500.00. This raised the total financial warranty for this site up to $33,114.00. This inspection was conducted at the request of one of the operators to determine if this financial warranty is adequate because there is apparently a potential sale of the property pending involving one of the existing partners buying out the other partner. Although it is not the Division's responsibility to conduct due diligence on real estate transactions, a cursory evaluation of this site was conducted. First of all, since the permit was amended very recently (June 2004), the financial warranty would have been evaluated at that time and the assumption would be that since it was increased at that time, the bond is adequate. Second, this financial warranty would not come up for review until the next regular inspection (conducted every 4 years) unless an administrative action (such as a technical revision, amendment, surety reduction request, acreage release, etc) triggered such a review. Third, when a permit is transferred to a new operator, the financial warranty is automatically evaluated and generally re-calculated at that time. If the site is sold it is likely that the permit will be transferred at time and the bond will automatically be re-calculated. With respect to this site, since the financial warranty was recently evaluated and raised, it is likely that the existing warranty is fairly accurate. However, it is not clear exactly what the approved reclamation plan is for this site and the size of the financial warranty obviously depends entirely upon what is included in that plan. In this case it appears that the final plan may be one of two things, either a storage reservoir, or a backfilled slope at 3H:1 V. If the approved plan is for a reservoir, the existing bond may be adequate, however, if it requires backfilling the existing pit and replacing a 3H:1 V slope, in the opinion of this inspector, the site may be slightly under-bonded. In any event, without conducting a detailed computer assisted bond evaluation, it is the opinion of this inspector that the existing financial warranty is reasonably close to existing reclamation liability, however, if the backfill needs to be completed, the site could be under bonded by as much as $10,000.00 to $20,000.00 depending upon the exact circumstances of the reclamation. This figure should not be considered hard and fast, it is simply a field estimation based on past inspection experience. This concluded the inspection. I & E Contact Address cc: Michael Pfister T CE NAME: Stephen McEvov T BL I' FS OPERATOR: Sanborn Sand and Gravel t HW STREET: 90(11 PlnttP f)r._ P.(7. Rnx 1346 T $E WMD (CH) CITY/STATE/ZIP: RrPCkPnririga Cr7 R0d9d I' WQCD (CH) t OTHER