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Mr. Jeff Deatherage -August 6, 2010 <br />Page Four <br />Option 2 - Enhanced Evaporation and/or Discharge to Ground Surface <br />DRMS advises that the site is currently permitted for, and has in the past, conducted spray <br />evaporation and/or land application measures to alleviate surplus water volume concerns, such <br />as when the tailing pond volume had exceeded permit-stipulated minimum freeboard levels. <br />Authorization and oversight authority for dispersal of fluids in this manner is apparently under <br />the purview of DRMS. <br />AGC does not currently conduct, nor has AGC conducted to date, any processing activities <br />whatsoever at the site. Therefore, tailing pond inflow since Mount Royale Ventures, LLC's <br />termination of site activities has been limited solely to meteoric precipitation contributions. <br />AGC has, after preliminary discussions with DRMS, commenced certain preliminary actions <br />(absent "permittee" status at the site) toward prospective deployment of a limited-area spray <br />evaporation action to be carried out internal to the lined tailing pond perimeter in order to <br />incrementally deplete the surplus water volume. To date, these preliminary actions have been <br />limited to assessment of the existing spray system (in disrepair), determinations as to needed <br />equipment and parts, and preliminary layout of the system. While the system has not been fully <br />deployed or made operational as of yet, AGC is fully cognizant of the limitations in productivity <br />associated with spray evaporation, particularly given the site-specific conditions and shortness <br />of season ahead. <br />Regardless, AGC also recognizes that tailing pond volume reductions that can be directly <br />attributed to evaporation and/or land application processes may (or do) constitute a <br />consumptive use. However, the following conditions exist: <br />DRMS permit stipulations for the Gold Hill Mill (Permit No. M1994-141) require that a <br />minimum two-feet of freeboard (as measured from the top of the synthetic liner) be <br />maintained during all non-operational periods, with a one-foot freeboard requirement for <br />operational periods. Under current conditions, the DRMS-stipulated minimum of two- <br />feet of freeboard applies. <br />There is limited natural evaporation occurring at the site elevation (approximately 8,425 <br />ft. amsl) and as such, the water level has remained relatively consistent (at well less <br />than one foot) since the April 2010 due diligence period and the subsequent June 15, <br />2010 acquisition date. As measured on July 22, 2010, the available freeboard was <br />determined to be approximately 4-inches. Thus, the pond level is non-conforming with <br />respect to the permit stipulation regarding freeboard. <br />• Under current conditions, the available tailing pond capacity is insufficient to handle a <br />major precipitation event, were such to occur. Design calculations require a minimum <br />1.3 feet of freeboard to accommodate the design basis 100-yr/24-hr precipitation event.