2012-09-25_INSPECTION - P2012006

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PERMIT #: P- 2012 -006 INSPECTOR'S INITIALS: MAC INSPECTION DATE: September 6, 2012 OBSERVATIONS The inspection was conducted by Michael Cunningham of the Division of Reclamation, Mining and Safety (Division). Scott Hazlitt of Gold Hill Minerals and Bruce Humphries of Regulatory Permits Management were present on behalf of the Operator. Also, Mike Johnson and Eric Schroder of the US Forest Service were present for the inspection. The Gold Hill Minerals Bueno Mine and Mill Exploration site is located on the west side of Jamestown, Colorado. The drilling operation is occurring on patented claims and unpatented claims on US Forest Service land. On September 5, 2012, the Division received notice from the Operator that there was a loss of containment of drilling fluid at the site. The loss of containment of drilling fluid was discovered at approximately 11:OOam on September 5, 2012. The drilling operations are taking place on top of a historic mine dump located near the 350 level portal entrance. According to the Operator, the depth to bedrock at the location of the drill pad is approximately 50 ft. The drill casing did not extend to bedrock, but only went to a depth of 15 ft. below the ground surface. The drilling fluid saturated the mine dump and was found to be discharging from the toe of the mine dump located adjacent to the 450 level portal entrance. From the toe of the mine dump, the discharge entered into a natural drainage basin and traveled down the drainage basin for a distance of approximately 0.2 miles. The discharge terminated at a point where an old road intersected the drainage basin. The drainage basin flows into Little James Creek; the discharge did not reach the creek. Once it was determined that there was a loss of containment of drilling fluid, the Operator shut down the drill and constructed a makeshift detention basin at the toe of the mine dump. The detention basin was constructed of tarps and timber and helped to capture several gallons of drilling fluid. The Operator followed the Division's spill reporting procedures as defined by Hard Rock Rule 3.1.13(1), which requires the Operator to notify the Division and other agencies with jurisdiction over the spill within 24 hours. The Operator estimated that approximately 1,440 gallons of drilling fluid was lost. This estimate was based on four hours of drilling; the drill uses six gallons per minute. The drilling fluid consists of water, bentonite, fines and Poly -Plus. Poly -Plus is a multi - functional synthetic co- polymer used as a viscosifier, shale inhibitor, flocculant and lubricant in most water -based drilling fluids. The Material Safety Data Sheet for the product has a HMIS Health rating of 1, which indicates the product only poses a slight risk to human health. It should be noted that the HMIS rating applies to the concentrated form of Poly -Plus. According to the Operator, the Poly - Plus, which is in a liquid form, was added at a rate of 1.5 gallons to approximately 1,500 gallons of water. The Poly -Plus accounted for approximately 0.1% of the drilling fluid solution. The Division traversed the entire length of the drainage basin, beginning at the toe of the mine dump. The discharge from the mine dump had ceased by the time the Division arrived at the site. The temporary detention basin was full of drilling fluid. The areas where drilling fluid came into contact with the ground surface were evident by a white discoloration. There were small areas within the basin which contained pools of the drilling fluid; however, most of the areas in between the pools were no longer moist. The residue of the drilling fluids was, on average, 1/8" to 1/2" deep. The Division and the USFS discussed possible cleanup methods which included shallow excavation of any areas where the drilling fluid had pooled and was still moist and raking in the surface of areas where the drilling fluid was dry. The Division feels this would be an appropriate way to handle the cleanup of the drilling fluid in the drainage basin based on the amount of drilling fluid which was lost and the relatively benign nature of the Page 2 of 5