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OBSERVATIONS <br />PERMIT #: M- 1985 -112 <br />INSPECTOR'S INITIALS: PSH <br />INSPECTION DATE: January 20, 2012 <br />The Loloff Mine was inspected by Peter Hays with the Division of Reclamation, Mining and Safety (Division) as <br />part of the Division's monitoring inspection program and to discuss the permittee's options in order to comply <br />with the Division's April 30, 2010 letter to mining operations with exposed groundwater. Mr. Don Loloff was <br />present during the inspection. The Loloff Mine is permitted to Don Loloff and operated by Richardson <br />Consolidated, Inc. Mr. Richardson was not available during the inspection. <br />The April 30, 2010 letter from the Division required all sand and gravel mining operators to comply with the <br />requirements of the Colorado Reclamation Act and the Mineral Rules and Regulations for the protection of <br />water resources. The letter required operators to provide information to the Division to demonstrate they <br />can replace long term injurious stream depletions that result from mining related exposure to ground water. <br />The letter indentified four (4) approaches to satisfy this requirement. This information was due by April 30, <br />2011. The Permittee /Operator failed to comply with the requirements of the letter by the due date. Mr. <br />Loloff contacted the Division in December to acknowledge the error and agreed to work with the Division to <br />resolve the issue. Since Mr. Loloff contacted the Division and acknowledged the error, the Division will not <br />issue a possible violation for failure to comply with CRS 34- 32.5- 116(4)(h), Rule 3.1.6(1)(a) and 6.4.5(2)(c) at <br />this time. To avoid a future possible violation the Permittee must continue to work with the Division and <br />account for the long -term groundwater exposure at the site. <br />Complete Inspection: <br />The mine site was active during the inspection. The processing plant located at the center of the site was <br />operational and material was being removed from the site by trucks. The site is permitted for 55.2 acres of <br />disturbance. The approved reclamation plan is for one 35.9 acre open water lake. Currently, approximately <br />20.2 acres of groundwater is exposed according to the 2011 Substitute Water Supply Plan renewal sent to the <br />Division of Water Resources. <br />The site is currently being wet mined with a backhoe by the Operator. The approved mining plan indicates the <br />site will be excavated by dragline. The backhoe has limited the minable depth to approximately five (5) feet <br />below groundwater instead of the projected thirty two (32) foot depth accomplished by a dragline. The <br />change in mining equipment and method has exposed more groundwater at a faster rate than originally <br />expected and therefore increased the short term augmentation liability at the site. <br />Financial Warranty: <br />The Division currently holds a financial warranty in the amount of $52,200, which is inadequate to account for <br />the exposed groundwater at the site. Mr. Loloff provided the Division with three documents discussing the <br />cost and construction of a slurry wall and the water shares required to augment the exposed groundwater at <br />the site. The Division will use the observations from this inspection and the document provided by Mr. Loloff <br />to recalculate the required financial warranty at the site. The financial warranty estimate and additional <br />details related to posting a bond to comply with the Division March 30, 2010 letter will be sent under separate <br />cover. <br />Support Facilities On -site: <br />A processing plant was located in the middle of Mining Area II along the western side. Mining related <br />equipment was observed near the plant and along the southern boundary of the site. <br />Page 2 of 4 <br />