2011-02-15_INSPECTION - M1994117

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Mr. Michael Cunningham - February 15, 2011 Page Four subject only to footprint precipitation contributions due to the presence of an immediately upgradient surface water diversion channel. AGC project planning is in its early stages; however, it is anticipated that the existing tailings storage facility (TSF) will likely be augmented by a new TSF that is preliminarily planned to be sited on Horsfal Flat somewhat east of the current TSF location. In the interim, AGC proposes to implement a program (commencing the week of February 28, 2011) wherein site personnel monitor/observe the tailing matrix on a routine basis. This will include maintenance of a log book or notation record wherein conditions and observations are noted by the inspector. In the event significant wind-borne tailing dispersal occurs (i.e., visible dust cloud and/or evidence of deposition on the tailing dike) mitigation processes will be deployed. If seasonal conditions allow, mitigation will take the form of re- distribution of tailing pond supernatant over the tailing matrix (utilizing a sprinkler system) in order to maintain sufficient moisture content to preclude wind-borne transport from occurring. Alternatively, precipitation events such as ice and/or consistent snow cover and/or naturally rising water level within the tailing impoundment are anticipated to produce equivalent results. In the event natural wetting or encapsulation processes do not result in the desired level of containment and/or dust suppression, AGC will apply a chemical binder across the exposed tailings beach to establish an artificial surface crust encapsulating layer. 3) Problem: Incorrect financial warranty bond form on file. Corrective Action: Provide a fully executed BLM bond form. AGC RESPONSE. This situation apparently evolves from prior (pre-AGC) operations wherein there was an apparent failure to provide copies of and/or properly inform all known/identified underlying and adjacent landowners (i.e., BLM), most recently occurring during the Permit No. M1983-141 Amendment 02 application process. Such action would have triggered standard project permitting requirements consistent with the National Environmental Policy Act (NEPA), culminating in the proper bond format. AGC discussed this outstanding issue with BLM (Ms. Stephanie Carter - Canon City Field Office) and DRMS personnel on June 20, 2010 during a joint agency onsite meeting. At that time, AGC was informed that (and in agreement with) posting of adequate financial warranty with BLM as joint obligee (with DRMS) should occur in conformance with NEPA procedures and policies wherein bond amount is determined subsequent to completion of the Plan of Operations (POO) and Environmental Assessment (EA) process. Accordingly, AGC was prepared to resolve the issue with upcoming permit modifications which would by law incorporate the requisite NEPA components. Regardless, AGC has no problem addressing this issue at this juncture, so long as BLM is cognizant of the fact that bonding is being put in place for a project encompassing (in part) BLM surface and for an operation that has not yet fulfilled NEPA requirements. In this regard, we have subsequently discussed this aspect with BLM