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(Page 2) MINE ID # OR PROSPECTING ID # M-1992-045 INSPECTION DATE 08/25/06 INSPECTOR'S INITIALS ESC OHSERVATIONS This was an inspection of the Gold Basin Mine conducted by Erica Crosby of the Colorado Division of Reclamation, Mining and Safety. Mark Gilbert and Dick Wells of Gold Mountain Metals, Inc. were present during the inspection, The purpose of the inspection was investigate a citizen complaint letter regarding discharge from the Gold Basin Mine settling ponds. The letter was received by the Division via fax on August 7, 2006. In summary, the letter states that on July 30, 2006 an orange brown water was observed flowing into Lost Creek. The letter notes that there were two small settling ponds at the mine and each contained orange-brown water. It was also noticed that orange- brown water was being discharged from a pipe in the lower settling pond into the stream channel. The discolored water appeared to be flowing down the creek towards the valley which eventually intersects the Arkansas River. The site was actively being mined during the inspection. Mining involves removing material from the banks of the slope using a small loader and putting the material into a sluice box. Water to facilitate the mining operation was obtained from a small pond slightly downstream from the sluice box. The water was constantly being recycled via the pond with the use of a water pump and hose. Lost Creek was flowing immediately adjacent of the activity but was not in contact with the sluicing operation. However, the creek has to flow through the mining property before it reached its natural channel. The small incised pond that contained the recycled mine water was the brown orange color as described in the letter. However, during the inspection the water was contained within the pond and was not being discharged into Lost Creek. Lost Creek flows across the property into a culvert that goes under the mine access road. Once the water leaves the culvert, it enters two sediment ponds located in the permit area. No other water flows into these ponds and does not come in contact with the recirculated mine water. However, by routing this Lost Creek though the sediment ponds the operator may be required to obtain a National Pollutant Discharge Elimination System (NPDES) Permit from the Colorado Department of Public Health and the Environment. The operator should contact that agency in regard to the need to obtain a NPDES permit for routing Lost Creek through the two sediment ponds. The operator will need to clarify in the permit as to the routing of the mine water, and describe in further detail how the mining operation will minimize disturbance to the hydrologic balance (i.e. Lost Creek). The clarification must be submitted in the form of a revision to the permit. See page 4 for further detail. The Division collected two surface water samples from the site to determine the impact from mining on Lost Creek. The first sample was taken upstream of the mining operation, and the second was collected downstream of where the creek flowed out of the sediment ponds. The water leaving the ponds was clear in nature. The two sampling locations were marked using the GPS and are displayed on the map attached to the inspection report. Field parameters were taken and are as follows: o Upstream Sample (#1)- pH 9.2, 6°C o Downstream Sample (#2)- pH 8.3, 8.8°C The operator declined the split water sample offered by the Division. Three bottles were collected for each of the locations. The samples were stored on ice and refrigerated until delivered to the CDPHE lab on August 28, 2006. Both upstream and downstream samples were analyzed and compared with drinking water standards. Although parameters analyzed in the downstream sample were higher than the upstream sample, they still met the drinking water standard. The Division received the analysis of the samples, and is attached to the inspection report.