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OBSERVATIONS <br />PERMIT #: P- 2011 -010 <br />INSPECTOR'S INITIALS: RCO <br />INSPECTION DATE: July 28, 2011 <br />This was a monitoring inspection of the recently- approved prospecting project. Surface activities approved <br />under this NOI are presently limited to moving a small volume of talus and waste rock, to expose a mine entry <br />portal and a ventilation portal, that were constructed by a former operator on the site. All exploration activity <br />will be performed underground from existing workings. An access road to the site and a waste rock pad at the <br />portal location pre- existed at the site, and surface disturbance necessary for commencement of prospecting <br />was therefore minimized. The steel sets of the adits and doors of the two portals were rehabilitated for safety <br />and security. Surface disturbance currently consists of the two piles of talus rock that have been moved aside <br />to open the portals, parking of several modular support units and pieces of portable equipment, dozing up a <br />safety berm around the west margin of the working area, and installation of a security gate at the south <br />entrance to the pad. <br />Underground ventilation was occurring prior to and during the inspection, to facilitate the underground work <br />being carried out. The operator and this inspector walked several hundred feet into the workings, checking <br />the ventilation crosscut, and the upper portion of the decline. There are some steel sets to replace and caved <br />material to remove, and new electrical supply cable needs to be installed. The lower portion of the decline <br />and lower levels were not inspected at this time. A small amount of surface water was dripping into the mine <br />from the unconsolidated rock (from the portal to about 200 feet inby of the portal) and was being directed <br />down the decline to an existing underground sump. <br />There is no surface discharge from the portal or seepage expressing from the toe of the talus slope, and no <br />visible mineralized materials included in the rock on the pad. There are no uncontained or spilled <br />contaminants. Stormwater is contained by the berm and by the permeable nature of the rock on the pad. <br />There was a crew onsite working underground to rehab the workings. A small amount of debris from the <br />workings has been hauled to the surface, and will be removed. An elevated water tank was on the north edge <br />of the pad for use in drilling. No fuel for equipment is stored onsite. A buried concrete slab is present near <br />the elevated water tank, which the operator may uncover and, if usable, may use for placing a temporary <br />structure to support the project. If so, reclaiming that footprint will involve re- covering the slab with the <br />onsite rock. <br />There was no topsoil present on the site, to be salvaged or replaced for reclamation. Reclamation will consist <br />of closing the steel doors, covering the portals with the stockpiled talus, and removal of all other items and <br />features from the staging area. <br />All activity was contained within the approved one -acre project area. If the operator anticipates that future <br />activities may differ from those currently approved or require more acreage, a modification to this NOI may be <br />filed. There were no problems noted in this inspection. <br />For questions concerning this report, please contact this inspector at the Division's Durango Field Office: <br />DRMS — Durango Field Office <br />691 CR 233, Room A -2 <br />Durango, CO 81301 <br />Telephone: 970 - 247 -5193 <br />Page 2 of 4 <br />