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(Page 2) MINE ID # OR PROSPECTING ID # M-1999-042 INSPECTION DATE 1-13-2004 INSPECTOR'S INITIALS SSS The purpose of this inspection is two-fold. A brief inspection of the mine site was conducted to verify that all problems noted in the previous inspection report had been corrected, especially the problem regarding placement of mine waste in an unauthorized area. T'he second portion of this inspection involved visual inspection of damage to the home of Ms. Renata Scheder who filed a letter of concern with the U.S. Forest Service indicating that blasting at the mine caused cracks on the walls of her living area. The U.S. Forest Service forwarded the letter to the attention of DMG. Mine Site Insoection The mine identification sign was in place and in compliance with Rule 3.1.12. The partially full 55 gallon drum of waste oil was not observed on site. The permittee previously indicated that it had been removed and supplied a photograph showing no drum at the location where it had been stored. The waste rock pile located on the edge of the grove in the northeast corner of the lower storage area remains at that location though the permit has not been revised to allow for this storage. The recent bond recalculation incorporated costs for on-site disposal of this material, but the permit text and map were not subsequently revised. The permittee intended to have this pile moved by this time, as the material was to be used to construct a bypass road around the mine. Since the U.S. Forest Service and the permittee have not finalized the road construction details, the waste rock was not removed. The permittee hand delivered a technical revision application to DMG during this inspection, addressing temporary storage of the waste rock, at it's current location, until the road is constructed. No additional material has apparently been added to the pile since the previous inspection. The permittee indicated that no more waste rock will be added to the pile. Therefore, the currentfinancial warranty will remain adequate after this revision is finalized. The above noted technical revision application also addresses the proposal to use a foam injection method of mining. The process involves drilling of less holes than required for blasting. The holes are then injected with anon-toxic foam at high pressure. The foam is forced into the bedding planes of the rock and breaks it without blasting. The foam is created from a powder that is mixed up daily, with approximately 2 gallons per day (shift) being used. This process is still in the experimental stage, with testing occurring at the White Banks Mine. The permittee indicates that this method of mining is much less labor intensive and much cheaper than blasting. If the testing process works out the'bugs' in the system, the permittee indicates that he fully intends to usc: this process to mine and resort to blasting only in situations where the foam injection will not provide desired results. The reclamation cost estimate was not recalculated as part of this inspection. The current estimate was recalculated this past summer and the operation is now in compliance with the approved mine plan and reclamation plan. Therefore, the current financial warranty is believed to be adequate to reclaim the site per the approved reclamation plan. Scheder Home Insoection -10:00 A.M. Ms. Renata Scheder pointed out cracks in the front wall and ceiling of her A frame style home (see enclosed photographs). The crack in the ceiling and top of front wall on the south side of the center pillar is the most noticeable. This crack appears to be 1/8 to 1/4 inch wide for an estimated 1.5 - 2 feet, tapering as it gets farther from the front wall. The crack disappears an estimated 8 feet from the front wall. Other cracks appear to be less than 1 /8 inch wide and are located along either side of the center pillar, in drywall between the upper and mid-level windows and between the mid-level windows and the sliding glass doors. One crack is also located on the north side of the north windows, in the drywall between the mid-level window and the sliding glass door (behind the hanging plant). Ms. Scheder indicated that these cracks were not present when she left for vacation during the summer of 2003, but that they were there when she returned in late summer. The foundation of the front house wall was inspected. There is one crack in the foundation that appears to have been repaired in the past. The crack is located directly below the south side of the center pillar, where the worst of the cracking has occurred, and may be the source of the damage. Ms. Scheder did not mention the foundation crack, or any repairs made to the foundation, leading DIUG to believe that the foundation crack and repair was done prior to this summers blasting. That is not to say that the White Banks Mine blasting did, or did not contribute to, or exacerbate the existing foundation crack.