2013-08-26_ENFORCEMENT - C1981012 (2)

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July 23, 2013 C- 1981- 012/New Elk Mine LDS Inspection Topic Summary NOTE: Y= Inspected N =Not Inspected R= Comments Noted V= Violation Issued NA =Not Applicable Y - Air Resource Protection R - Availability of Records N - Backfill & Grading R - Excess Spoil and Dev. Waste R - Explosives Y - Fish & Wildlife R - Hydrologic Balance R - Gen. Compliance With Mine Plan N - Other R - Processing Waste R - Roads N - Reclamation Success R - Revegetation N - Subsidence N - Slides and Other Damage Y - Support Facilities On -site R - Signs and Markers R - Support Facilities Not On -site Y - Special Categories Of Mining R - Topsoil COMMENTS This was a complete inspection by Leigh Simmons and Dan Hernandez of Colorado Division for Reclamation, Mining and Safety, (the Division). The inspectors were accompanied by Ron Thompson of New Elk Coal Company, (NECC). The weather was varied: overcast on Tuesday and Wednesday, fine for most of Thursday with rain late in the day, and fine on Friday morning. The area had received several rainstorms, on the order of the l0y /24hr event, over the preceding few weeks. A significant rain event also occurred overnight on Wednesday. The New Elk mine continues in Temporary Cessation. No coal is being produced, and virtually all stockpiled coal has been shipped in 4 train loads, to a broker, for sale as steam coal. The parent company of NECC, Cline Mining, announced on July 9, 2013, that it had agreed a new financing arrangement with Marret Asset Management designed to ensure that Cline would be able to meet its short- to medium -term obligations, whilst continuing discussions with other potential investors. Cline voluntarily de- listed from the Toronto Stock Exchange on July 13, 2013. Two separate groups of potential investors visited the New Elk mine during the inspection. Several employees have left the mine, including David Stone, Rachel Ford, Wayne Schiller and Dick Tribble. The new Executive Director of Cline Mining, Mark Haywood, is acting Mine Manager at New Elk and is on -site. He took time to meet with DRMS inspectors. Ron Thompson was a NECC employee at the time of the inspection, but may continue his relationship with the mine as a consultant from August 1, 2013. Dennis Wilson, Bobby Steele, Vince Massaroti remain employed, with responsibilty for surface operations. Randy Acre has been re- focused on safety (Safety Manager). Greg Smith remains as Technical Services manager, with responsibility for permitting, among other things. Mr Wilson and Mr Smith will each report to the Mine Manager. The mine currently employs 24 people. The staff at New Elk have continued to make an effort to bring the mine into full compliance with the regulations and permit, however some issues that have been raised in previous inspection reports have not been completely addressed meaning that enforcement action has become necessary. Consistent with the format of recent inspection reports, items needing action will be highlighted using bold text. Where possible, these items should be addressed before the next inspection. Several permitting actions are in progress, these are detailed under the heading GENERAL MINE PLAN Number of Partial Inspection this Fiscal Year: 0 Number of Complete Inspections this Fiscal Year: 1 Page 2 of 29