Report of Inspector of Mines

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1 Inspection No.: Province of British Columbia MINISTRY OF ENERGY AND MINES Report of Inspector of Mines (Issued pursuant to Section 15 of the Mines Act) File: Mine No.: Permit No.: M-242 Emp/Cont: 8 / 82 Orders H&S: 3 RECL 0 Stop Work: 0 Mine Name: Silvertip Location: Liard MD / , Owner/Operator: JDS Silver Inc Address: West Hastings Street Vancouver BC V6C 2W2 Manager: Kevin Weston Areas Inspected: Mine Construction Site Date of Inspection: 2016/02/23 Accompanying Inspector(s): Michael Henny, Yukon Workers Compensation Board Persons Contacted Management: OHS Committee: Kevin Weston, Mandy Sarfi, G. Bussieres, Don Ethelston R. Vance # Workers Contacted: 0 A copy has been forwarded to the Joint Occupational and Safety Committee and the union as applicable. The Mine manager shall complete the right hand column noting specific corrective actions taken by a specified date, and return a copy to the Inspector within 15 days of receiving the report. Further the manager shall post a copy to the bulletin board, to be replaced by a copy showing the manager s response. In this document, Code means Health, Safety and Reclamation Code for Mines in British Columbia. INSPECTION ORDERS MANAGER S RESPONSE: This inspection tour and report is the first to be done at this site under the current construction program. In order to make sure all major points of interest are addressed the report is written as a review of the most pertinent Mines Act Legislation and Code requirements applicable to the site at this time. Mines Act: Section 10: Permits: A review of M-242 was done on the morning of February 23 rd with Mandy Sarfi. All relevant clauses were discussed in order to make sure the company was aware of the need for certain plans and documents especially those required in the immediate future. Some points were discussed which require further work to make sure the company is in compliance with the permit conditions. Those items will be addressed later in this report. Doug Flynn, P. Eng Inspector of Mines Signature Inspector of Mines Bag Alfred Avenue Smithers BC V0J 2N0 Address Signature Manager Copies To Report Date: 2016/03/07

2 Report of Inspector of Mines Page 2 of 5 Section 21: Appointment of a Mine Manager: This requirement has been fulfilled. No further action is required at this time. Section 23: Manager s absence: The Mine Manager is required to appoint qualified persons to act in their absence and to advise the local office of Ministry of Energy and Mines of the appointments. It is also advisable that the mine manager communicate their time off site to the local MEM office and to advise on who the delegated manger is in their absence. Application of the Code and General Rules: Health, Safety and Reclamation Code for Mines in British Columbia: Part Authority to Enter a mine; Signage needs to be on all road entrances. Manager s contact information needs to be on the signs. Part Occupational Health and Safety Committees; A committee has been struck and minutes of first meeting received by the writer. Adequate training for members is required so that they will be able to perform the functions expected by the code. The manager is to provide to the writer a training plan for the OHSC members within 21 days of receipt of this report. Part Health and Safety Program; The manager is to develop a program which will address the items listed in the code. This plan shall be submitted to the writer within 30 days of receipt of this report. Part & 2 Industrial First Aid. Pursuant to Part of the code the Project site shall have at least 1 Level 3 First Aid attendant available at all times. First Aid supplies shall be consistent with the needs for rendering First Aid in an isolated location more than 20 minutes travel time to a hospital. These standards shall be in place at all times.

3 Report of Inspector of Mines Page 3 of 5 Part Mine Rescue and Emergency Response The Silvertip Project Mine Emergency response Plan has been reviewed by the writer and a shortfall has been identified. The MERP, as submitted, is written, on the assumption that the mine is operational. There isn t any recognition of the construction phase that the project is going through at this time. The Manager is directed to produce a supplement to the February 14 th Plan which shall address the need for Emergency planning and capacity to deal with issues during mine construction. This plan shall include, but not be limited to providing Emergency Response capacity in the event of a serious incident on site or on the road to site. There are any number of multi passenger vehicles travelling to and from site at any given time day or night. This MERP Plan supplement shall address how the company will appoint and train a suitable number of personnel to respond to an emergency in a timely manner. This plan and training schedule shall be submitted to the writer within 21 days of receipt of this report. Fixed Equipment [plant and machinery] Part Fall Arresting Devices All employees that will be working at heights greater than 3m shall be issued and trained in the care and use of Fall Arrest harnesses, safety belts, lanyards and lifelines. The fall arresting devices shall comply with the design and performance requirements as listed under Part [2] of the code. This requirement is to be considered applicable at all times. Part Underground Ventilation Fans Once work commences underground this part of the code will come need to be addressed. It will be expected that the fans will be suitably muffled or silenced as well. Your attention is drawn to Part [compressors] and Part [ Mine Air Heaters.]. Part Diesel Equipment Underground and Part Trackless Diesel Equipment. Your attention is drawn to the CSA Standards referenced in the above Parts of the code. If there is any question regarding the appropriateness of a piece of equipment planned for underground use you are encouraged to call the writer or the Mechanical Inspectors.

4 Report of Inspector of Mines Page 4 of 5 Part [1] Vehicle Requirements. All vehicles over 7000 kgs GVW are required to have two wheel chocks available for use at all times. It was noted by the writer that a large number of pick-up trucks are in use at the mine and that most appeared to be parked on a slope of some sort. It is quite common on mine sites now to apply the wheel chock rule to pick-ups as well as the heavier equipment. Management is encouraged to consider taking this action. Part Lock-out Procedures Your attention is drawn to this regulation as it will become more relevant as construction proceeds and multiple trades start to work in close proximately to each other. Part 4.20 & 4.21 Rigging and Slings As construction proceeds forward rigging and slings will be required to be monitored on a frequency necessary to identify damaged fiber, web and wire rope slings so that damaged ones can be removed from service before there is a failure. Part 5 Electrical Power Systems Your attention is drawn to Part and the need for electrical line diagrams prior to entering the construction and equipping phase for mill, plant and underground development. Part 6.12 Mine Openings A second means of egress is required prior to going into production. Part &.4 provide some direction on location and ladderways, if applicable. Part Refuge Stations Information on Refuge station location and design. Prior to locating refuge stations underground it is highly recommended that the company contact the local Health and Safety Inspectors to make sure all of the regulations are met. Part outlines some of the requirements for u/g mine rescue stations. Part &.2 Remote Control Operations

5 Report of Inspector of Mines Page 5 of 5 In the event any of the underground activities involve remote control operation your attention is drawn to the above parts of the code. Part Underground mine air heating systems. No furnace or device for heating mine air shall be installed without the written permission of an inspector. Part Air Measurements Underground Ventilation surveys of an underground mine shall be done at least every three months. In areas where diesel equipment is operating quantity flows shall be done weekly and air quality monitoring shall be done at least once a shift. Part 8. Explosives As soon as there is a need for an Explosives Storage and Use Permit the manager is urged to apply for it with as much lead time as possible. There are also new Federal Explosives Act regulations around qualifications of blasters. As of Feb 1 st, 2016 all blasters are to have criminal records checks done prior to the issuance of a blasting ticket. Magazines and locations of same are to be reviewed and accepted prior to explosives being delivered to site. Given the location of the mine an exemption to the Federal requirement for 24 hour electronic surveillance may be available. Part 9 Exploration Exploration is not applicable to current construction activities at this time. Part 10 Reclamation and Closure - Operations Part Impoundments. Your attention is drawn to the need for an as-built report prepared by a professional engineer certifying the facility was designed and constructed according to Part of this code. Part requires an Operation, Maintenance and Surveillance Manual to be prepared and supplied to an inspector prior to commissioning.