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Mr. Michael Cunningham - February 15, 2011 <br />Page Three <br />sequently pulled waste rock and/or fall rock, and is effectively isolated and irretrievable in its <br />current configuration. Access to the affected area is currently precluded due to the mine <br />flood level. Future mining in these stopes (if undertaken) would serve to further isolate the <br />material with additional waste rock placement atop the matrix. Thus, AGC proposes no <br />action with regard to the stope fill material. <br />AGC's review of the permit file indicates that DRMS specifically prohibited disposition of mill <br />tailing in such a manner until the operator satisfied the requirements of certain DRMS <br />informational requests and completed DRMS-required hydrologic characterization studies. It <br />is our further understanding that U.S. EPA Region VIII "suspended" the associated Rule <br />Authorization for a Class V Underground Injection Control (UIC) permit due to insufficient <br />data and/or the lack of approval by DRMS. In order to further clarify permit files and resolve <br />the status of this situation between the two agencies, AGC recently made a request to U.S. <br />EPA Region VIII (Ms. Valois Shea) that the associated Rule Authorization (CO 50000- <br />08061) be administratively terminated. It is AGC's understanding (from EPA) that there is <br />no basis within the regulatory framework to "terminate" a rule authorization; however, AGC <br />has been advised that a formal notification is forthcoming from EPA wherein the agency <br />reconfirms the "suspended" status and advises AGC that a new, full and complete <br />application submittal package (with DRMS approval) would be required before EPA could in <br />the future act on any request for authorization of such action. <br />2) Problem: A thin layer of tailing was deposited on the out-slope of the tailing dam. <br />Corrective Action: Describe the cause of tailing deposition onto the dam and the <br />measures that will be taken to prevent tailing deposition in the future. <br />Any attempt by AGC to express an opinion as to the cause of tailing deposition onto the <br />dam out slope would be speculative, at best. AGC did observe and note (prior to and at the <br />time of site acquisition, effective June 15, 2010) the presence of tailing materials on and <br />about the dike, as well as the unorthodox manner in which tailings had been spigoted into <br />the impoundment during prior (pre-AGC) operations. It is evident that the operator had <br />emplaced tailings directionally from the dike perimeter, advancing the beach toward the rear <br />of the feature. The tailing solids were observed to be stacked to an elevation exceeding the <br />permitted operating freeboard limit, and at some locations approached or exceeded the <br />maximum elevation of the liner along the inner (upstream anchor trench) periphery of the <br />dam face. At the time of ownership transfer, the tailing matrix was completely inundated <br />and the TSF liquid level was at capacity (within 3 to 4-inches of overtopping the liner). <br />Since AGC takeover of the site, no pumpage of the Cash Mine Well has occurred (other <br />than for sampling purposes) due to the fact that AGC determined the well to be non- <br />permitted. Since June 15, 2010 the liquid level within the TSF has declined from an <br />estimated initial elevation of about 4,919.7 ft. amsl to approximately 4,915 ft. amsl as a <br />result of evaporation. The minimum non-operational freeboard compliance limit of 2.0 ft. <br />was achieved by late summer/early fall 2010 and the TSF level has remained at or below <br />that level since. Minimal impact, if any, from spring snowmelt is anticipated as the TSF is