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completed as specified by SWRCE. Refer to the attached plan and section detail <br />maps for Pond #2. Liner material for both ponds will be 80 mil HDPE. Prior to <br />installation of the liner, the earthen material used for the construction of the ponds <br />will be inspected. If this material is too coarse to meet the required specifications, <br />a sub -base will be brought in that can be compacted and smoothed to cover the <br />floor and sides to avoid perforation of the liner. <br />Great Basin Environmental located in Hermiston, Oregon has been contracted to <br />install the liners in the two holding ponds. This company has installed liners <br />recently for Hecla at the Lucky Friday Mine and the Grouse Creek reclamation <br />project with excellent results. The installation process will include a QA/QC <br />component to verify proper installation. <br />Monitoring well HW -3 was sampled on August 24, 2011. The well was sampled <br />in accordance with the Colorado Department of Public Health and Environment <br />(CDPHE) groundwater monitoring well sampling protocol. Analytical results will <br />be forwarded to the Durango DRMS office as soon as the data becomes available <br />to Rio Grande Silver, Inc. (RGS). Sampling of the HW -3 monitoring well will <br />continue on a regular basis during the construction of the new decline. <br />Additionally, RGS is planning to take samples of the water encountered in the <br />decline. Results from these samples will be forwarded to DRMS. <br />To date, the RGS water sampling program, with the exception of the HW -3 <br />samples, has been for surface water only. The CDPHE Hard Rock Mining and/or <br />Milling Discharge Application requires establishment of ambient (baseline) surface <br />water quality prior to any mining activity. A minimum of one year of data <br />collected on (at least) a quarterly basis that is reflective of the water quality prior to <br />mining is required. In addition, the CDPHE Water Quality Control Division sets <br />forth regulations that identify water quality standards based on location within <br />major water basins in Colorado. RGS initiated a monthly reconnaissance <br />sampling program that began in 2008 to establish ambient surface water quality <br />conditions within the project area. Sampling continued on a monthly basis until <br />June 2010. Quarterly water sampling of all sample locations along Rat, Miners <br />and West Willow creeks began in September 2010. See attached RGS Water <br />Sample Location Map. Results from the pertinent sample sites will be forwarded <br />in a separate transmittal. <br />112 East 12 Street P.O. Box 610 Creede, CO 81130 <br />719 - 658 -1080 Fax 719 - 658 -1082 <br />