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G ~~ (Page 2) MINE ID # OR PROSPECTING ID #: M-199 -058 INSPECTION DATE: 6-4-07 INSPECTOR'S INITIALS GRM OBSERVATIONS This inspection was conducted as part of the normal program established by the Colorado Division of Reclamation, Mining and Safety for permitted sites where complaints or inquiries have been received. On May 29`s, 2007 the Division received a written complaint from Steve and Kim McIntyre, the adjacent landowners, concerning waste rock and slurry that had been deposited on their ]ands over the winter. The Division met with Mine Foreman Scott Meader and Gary Bascom representatives for POLYCOR at the site. The mine identification sign and affected area boundary markers are in place and in compliance with Rule 3.1.12. A previous inspection had noted no sign and poor marking of the boundaries. The inspector noted the correct sign posted at the gate to the site. Boundary markers were set corner pins, signs and flagging that was observable from the mine entrance. The inspector visited the underground quarry working for a general inspection. The quarry is in full production with heavy equipment cutting, loading and transporting marble from the site. Spring run-off has the water within the mine at its highest levels of the year. Mr. Bascom noted that the mine is still well within its health department discharge permit parameters. The water is sent to sedimentation tanks prior to release into the drainage within the permit boundaries. Water coming down the drainage appeared clear although an up close inspection was not done at the official point of discharge. A 1 gallon container of transmission fluid was noted as having been compromised. The mine staff had put down absorbent cloth to contain the small spill and no evidence of escape was observed. Otherwise, the underground portion appeared to be in good condition. The inspector notes that the old generator has been removed and a temporary one has been brought in. The old generator was the subject of several phone calls over the winter due to excessive soot from a mechanical problem. Weather prevented the removal and replacement of the unit until eazlier this year. The oil leakage from the old generator has been addressed and other measures will be put in place when the permanent generator is brought on line at a later date. The inspector was able to observe test plots for vegetation. Grasses, pine trees and wood vine appear to be doing well in the protected areas of the plots. The inspector would recommend staking the trees to ensure that equipment does not dump or run over them. The subject ofthe complaint letter was discussed in detail with both Mr. Bascom and Mr. Meader. Over the winter some extra help from other POLYCOR mines in Canada came to the Yule Quarry. Language barriers and unfamiliarity with the site lead to the deposition ofwaste rock boulders in an area that allowed the rocks to roll onto the adjacent property. Compounding the issue was the deposition of some marble fines (slurry) on the slopes. Between the snow and the slung, the blocks slid down the slope farther than would normally have occurred as well. Mr. Bascom noted that both the dumping of rock in this area and the deposition of the marble fines is not normal operating procedures and that the issue was addressed as soon as it was noted so no further deposition occurred. The inspector notes these two issues as roroblems and corrective actions at the end of this report. The inspector understands that Mine Supervisor Scott Meader met with the McIntyres several days before this inspection. The McIntyres and Mr. Meader came to an agreement that POLYCOR would bring in a contractor to clear the trail area impacted by the boulders with explosives. The McIntyres noted a July 4`h, 2007 date of completion but the Division has nothing in writing to collaborate the agreement or dates. At this time, the matter appears to have been addressed so long as POLYCOR is timely in its completion of corrective work agreed upon.