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(Page 2) MINE ID # OR PROSPECTING ID # M-1991-146 INSPECTION DATE 6/13/03 OBSERVATIONS INSPECTOR'S INITIALS WHE This inspection occurred in response to a complaint from James O'Callaghan Patterson, Principal with The Uncompahgre Land Partners, LLC. The complaint from Mr. Patterson alleges adverse impacts to his property and to the Uncompahgre River, resulting from activities conducted by ZMK. Mr. Patterson's property is located approximately 400 feet south (upstream) from the south boundary of the ZMK permit area. The inspection occurred in accordance with DMG policy to investigate such complaints within 30 days of receipt of the written complaint. On October 6, 2003, DMG received a second complaint from Mr. Patterson, which specifically mentioned head cutting and requested copy of reports pertaining to the ZMK property. Copies of Mr. Patterson's complaints are attached to this report. The ZMK Gravel Pit is located approximately 5 miles north of Ouray, in portions of the NW '/4 of the SW '/< of Section 2, T44N, R8W, NMPM, Ouray County. The reclamation permit is approved for 8.72 acres affected area, for the extraction and processing of alluvial materials from the Uncompahgre River channel. Affected lands will be reclaimed to support industrial post mining land use. DMG holds $3,750 financial warranty. Permit status is active. Mining activities were dormant due to the high water season. Background Geography and Pre-permit Disturbances The ZMK permit area and Mr. Patterson's property are located within an aggrading reach of the Uncompahgre River where a reduction in the channel grade occurs as the river transitions from the steep upland topography to the relatively flat floodplain val{ey. The grade of the river channel immediately upstream of Ouray is approximately 6.4% but through the permit area the channel grade is only 1%. The steep upland topography imparts high flow velocity to the river. Rivers with high flow velocity can carry great quantities of sediment, to include cobbles and boulders, along its channel bed. However, where flow velocity is reduced, the river's capacity to carry heavy bedload materials is also reduced. Aggrading rivers, such as this reach of the Uncompahgre River, often form several interconnecting channels, separated by unvegetated gravel bars or sparsely vegetated islands. The active floodplain is wide, sparsely vegetated, and contains several high-water channels. The location and configuration of the interconnecting channels are often altered by the seasonal deposition of excess bedload. Throughout this reach of river, the channel bed and banks are composed primarily of sand, gravel and cobble. Such bank materials have low cohesion and are easily eroded. Thus, the lateral stability of the channel is quite low within the boundaries of the active floodplain. In its natural state, the braided and relatively straight river channel is sensitive to disturbances. Prior to the issuance of the ZMK permit the natural channel had been heavily modified. A significant modification to the channel occurred during the 1950's with the construction of flood protection dikes. Flood protection dikes were observed throughout the reach of river where Mr. Patterson's property and the ZMK permit area are located. The flood protection dikes appeared to have been constructed by pushing alluvial materials from the channel to form dikes along the sides of the channel banks. The dikes constrict flood flows to the channel and deny the river access to essential floodplain areas. Increased erosion of the channel bed and banks are a natural response to constriction of flood flow for this reach of the Uncompahgre River.