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J\ <br />1 <br />Mr. Jeff Deatherage - August 6, 2010 <br />Page Two <br />Prior to consummating the June 15 acquisition, AGC conducted due diligence investigations to <br />determine both the prior operator's and the physical site's permitting and compliance status with <br />regard to a wide-range of environmental and operational permits that would typically be in place <br />for a mining and milling operation such as that carried out by Mount Royale Ventures, LLC. It <br />was during their period of onsite presence (circa 2005 to late 2008) that Mount Royale <br />Ventures, LLC. developed/completed (the previously non-existent) 3`d Level adit, intercepting <br />the Cash Mine workings at that level, and in doing so, significantly altering site hydrologic <br />characteristics. <br />The undersigned met with you on March 29, 2010 as part of this due diligence effort. Our due <br />diligence effort determined that there were numerous and significant permitting gaps, <br />deficiencies, and/or potential violations associated with this operation/site, including a number of <br />concerns with respect to regulation of site features that would typically fall under the purview of <br />the Division of Water Resources. <br />AGC Initial Activities <br />As a result of our due diligence findings, and in order to correct inherited deficiencies in both <br />operational permitting and current site conditions, AGC is programmatically moving forward on a <br />number of fronts with various agencies, with our initial emphasis on immediate response to <br />adverse physical site conditions (thus this proposed environmental mitigation program). <br />Concurrently, we are diligently working toward establishing the requisite "fully permitted" status <br />for the site prior to a re-start of operations. <br />In undertaking these actions, we wish to make it clear that AGC in no way condones prior <br />methods of operation at the site, nor do we wish that certain conditions continue unabated. In <br />AGC's efforts to re-establish active production status at the site, AGC will undertake doing so in <br />a manner that is consistent with applicable laws, statutes, and ordinances. AGC is committed to <br />ensuring that non-permitted features or operational functions are appropriately addressed prior <br />to re-commencing active production. <br />We have been undertaking certain engineering evaluations to identify and catalog all site <br />features that we believe must be incorporated into site and/or operational permitting. In <br />addition, AGC has retained the services of Robert F. T. Krassa, Esq. of Krassa and Miller, LLC, <br />Boulder, Colorado as legal counsel to assist in areas specifically relating to "water resources". <br />We have undertaken the technical efforts necessary to identify, evaluate, and define those <br />features onsite that can be considered "wells", points of diversion, water storage features, etc., <br />and have completed (subject to project definition limitations) a preliminary analysis of the site <br />water balance and operational water usage requirements. <br />We anticipate scheduling an appointment for meaningful dialogue with DWR in the very near <br />future to commence those actions necessary to establish both "legal" and "physical" access to a <br />practicable water supply, and to establish "legally permitted" status for other onsite water <br />resources related features, as appropriate.