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OBSERVATIONS <br />PERMIT #: M -1994 -117 <br />INSPECTOR'S INITIALS: MAC <br />INSPECTION DATE: August 24, 2011 <br />The inspection was conducted by Michael Cunningham and Tony Waldron of the Division of Reclamation, <br />Mining and Safety (Division). Janis Whisman, Conrad Lattes and Jim Daus were present on behalf of Boulder <br />County and the landowner, Mark Steen, was also present. No one from AGC Resources LLC was present during <br />this inspection. The Gold Hill Mill is located approximately 10 miles northwest of Boulder, Colorado. The site is <br />permitted for 8.4 acres and the post- mining land use is forestry. The purpose of this inspection was to assess <br />the condition of the mill and the tailings storage facility (TSF). <br />The Gold Hill Mill Reclamation Permit was transferred from Mount Royal Ventures, LLC to AGC Resources LLC <br />on August 2, 2010. The Division conducted an inspection of the site on December 22, 2010. During that <br />inspection, the Division identified several outstanding problems which had been cited during prior inspections. <br />The problems were cited under the previous Operator, Mount Royale Ventures, LLC; however, AGC Resources <br />LLC has assumed the liability of correcting the outstanding problems. Following the inspection conducted on <br />December 22, 2010, the Division provided AGC Resources LLC with a list of outstanding problems and their <br />associated corrective actions and compliance dates. Mr. Jim Beck and Mr. Paul Jones were retained by the <br />Operator as technical consultants and were working with the Division to bring the site back into compliance so <br />that milling operations could resume. The Operator made progress in resolving several of the outstanding <br />problems and the Division granted the Operator several extensions of the corrective action dates. <br />On July 8, 2011, the Division was notified that Mr. Beck and Mr. Jones were no longer affiliated with AGC <br />Resources LLC and that their involvement with the project would cease immediately. The Division contacted <br />Mr. Mark Nesbitt, the permitting contact for this site, in order to determine if AGC had retained a new <br />technical consultant. Mr. Nesbitt informed the Division that AGC Resources LLC had been acquired by Devtech <br />Management Limited and that his status as the primary contact for Gold Hill Mill was uncertain. The Division <br />has attempted to contact Mr. Lars Pearl and Mr. Mick Montgomery, the president and technical director of <br />Aurora Gold Corporation respectively; all attempts to contact anyone with AGC Resources LLC have been <br />unsuccessful. <br />Acid And Toxic Materials: <br />The Division did not have direct access to the mill building or the TSF during this inspection; the mill building <br />was locked and the TSF is enclosed by a chain -link fence with a locked gate. The Division walked around the <br />perimeter of the TSF and observed tailing deposition on the out - slopes of the impoundment. The tailings have <br />been deposited in a thin and even layer across the crest and out -slope of the impoundment, indicating the <br />material is being transported by wind. There was standing water at the south end of the TSF, which was likely <br />from precipitation events. The majority of the tails within the TSF were desiccated which increases the <br />susceptibility of wind transport. The transport of tailings outside of the TSF is part of an ongoing problem <br />which the Division has documented in previous inspections. Following the last inspection, the Operator <br />committed to weekly monitoring of the TSF and periodic wetting of the tailings to prevent wind -borne <br />dispersion. It is not clear as to when the mine personnel were last on site; however, based on the observations <br />made during the inspection it is evident that the Operator has been negligent in monitoring the TSF and taking <br />the appropriate measures to prevent tailings from being transported. <br />Page 2 of 6 <br />