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March 30, 2016

2015 ANNUAL DAM SAFETY INSPECTION

South Dam Quinsam Mine

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Reference Number: 1528261-004-R-Rev0-1000

Distribution: 1 Electronic Copy - Hillsborough Resources Limited 2 Hard Copies - Hillsborough Resources Limited 1 Hard Copy - Golder Associates Ltd.

Submitted to: Hillsborough Resources Limited Quinsam Coal Corporation PO Box 5000 Campbell River, BC V9W 8A3 Attention: Mr. Gary Gould

2015 ANNUAL INSPECTION - SOUTH DAM

Executive Summary

The Quinsam Mine (Quinsam) is an underground coal mine operation owned by Hillsborough Resources Limited (Hillsborough), located approximately 15 kilometres west of the town of Campbell River on Vancouver Island, British Columbia. The mine produced coal in 2015 and Quinsam staff have reported a cease in coal mining in early 2016, with the intent to enter a state of active care and maintenance.

This draft report presents the 2015 annual dam safety inspection for the South Dam in the 2-North Pit at Quinsam, prepared based on a site visit carried out on May 26, 2015, and a review of data provided by Hillsborough.

Dam Classification Following the Canadian Dam Association (CDA) Dam Safety Guidelines (CDA 2013), the South Dam is classified as a “Very High” consequence structure.

Operations, Maintenance and Surveillance Manual, Emergency Preparedness Plan, and Dam Safety Review The Operations, Maintenance and Surveillance (OMS) Manual for the 2-North Pit Tailings Disposal Facility and South Dam (Quinsam 2014) was updated on August 31, 2014. The Emergency Preparedness Plan is incorporated as Section 10 of the OMS manual. Additionally, an updated version of the OMS manual has been prepared for care and maintenance (Quinsam 2016).

A Dam Safety Review was last completed for the South Dam in 2013, and is reported by Thurber Engineering Ltd. (Thurber 2014). The next Dam Safety Review should be scheduled for 2018 or earlier.

2015 Annual Dam Safety Inspection The 2015 annual dam safety inspection indicates that the South Dam generally performed as expected, with a stable configuration and sufficient flood storage capacity. No significant changes in instrumentation, visual monitoring records, dam stability, or surface water control were noted. A summary of the dam and tailings impoundment operations is presented below:

In 2015, no construction was carried out for the South Dam.

No tailings were discharged to or removed from the impoundment area of the South Dam.

No significant changes to the South Dam were noted in monitoring records. The South Dam has no instrumentation.

The pond north of the South dam was at approximately elevation 302.5 m (metres), in May 2015 and well below the dam crest elevation of 309 m. The freeboard was well above the minimum requirement of 1 m.

No significant changes in stability of the South Dam or surface water control were noted.

Pumping from the sumps in the downstream toe area was ongoing in 2015.

No seepage was noted at the downstream toe of the South Dam at the time of inspection.

March 30, 2016 Reference No. 1528261-004-R-Rev0-1000 i


Key Recommendations Key issues identified during the 2015 Dam Safety Inspection, and the associated recommended actions are as follows:

Address outstanding recommendations from 2014:

High phreatic surface may reduce Factor of Safety against instability. Install a staff gage, or otherwise measure and record the elevation of the pond immediately upstream and north of the South Dam. Elevation of the pond should be documented on a weekly basis.

Remove vegetation from the dam, specifically cut the tree on the downstream slope to within 30 cm of the dam surface. Roots should be left in place.

Maintain upstream and downstream slopes and crest of the South Dam free of vegetation.

Continue to inspect the dam for signs of movement, instability, and erosion on a weekly basis.

Carry out detailed inspections following seismic events and significant precipitation events. Should any change to the dam occur, then the Design Engineer (Golder) should be notified immediately, as per the OMS manual. Otherwise, documentation of inspections following seismic events and significant precipitation events should be sent to Golder within a week of each event. Documentation should include photographs.

Quinsam has notified Golder of the intent to change from operations to a phase of active care and maintenance in 2016. The following are recommended:

The consequence classification of the South Dam should be reviewed and updated to reflect the change from mine operation to active care and maintenance in 2016.

The frequency of review of inspection and collection of monitoring data, and for reporting of the same inspections and data to the Design Engineer for review should be confirmed.

− Actions or changes resulting from the change to care and maintenance should be captured in an update to the OMS manual.

The Design Engineer should review the updated OMS manual and any subsequent changes.

The Design Engineer should be notified in advance of any plan to re-start operations or implement closure works that would impact or change the South Dam, including plans to:

− discharge tailings to the facility or remove tailings from the facility;

− complete any earthworks with the potential to impact the dam; and

− change to water management in the north 2N pit, including flooding or dewatering of the areas adjacent the South dam, such as:

• the sump at the 2 North Portal; and

• the pond north of the South Dam.

March 30, 2016 Reference No. 1528261-004-R-Rev0-1000 ii


Table of Contents

EXECUTIVE SUMMARY ............................................................................................................................................................ i

1.0 INTRODUCTION ............................................................................................................................................................... 1

2.0 METHOD ........................................................................................................................................................................... 2

2.1 2015 Site Visit ...................................................................................................................................................... 2

2.2 Review of Background Information ...................................................................................................................... 2

3.0 BACKGROUND ................................................................................................................................................................ 3

3.1 Site History .......................................................................................................................................................... 3

3.2 Overview of Design and Previous Operation ....................................................................................................... 3

3.3 Previous Issues of Concern ................................................................................................................................. 4

4.0 OPERATION AND CONSTRUCTION DURING 2014 ...................................................................................................... 5

4.1 Construction and Operation ................................................................................................................................. 5

4.2 Pond .................................................................................................................................................................... 5

5.0 REVIEW OF CLIMATE DATA AND WATER BALANCE ................................................................................................. 6

5.1 Review of Climatic Information ............................................................................................................................ 6

5.2 Water Balance ..................................................................................................................................................... 6

6.0 DAM CONSEQUENCE CLASSIFICATION ...................................................................................................................... 8

7.0 DAM SAFETY ANALYSIS .............................................................................................................................................. 10

7.1 Potential Failure Modes ..................................................................................................................................... 10

7.1.1 Piping ........................................................................................................................................................... 10

7.1.2 Instability ...................................................................................................................................................... 10

7.1.3 Overtopping ................................................................................................................................................. 11

7.2 Operational Documents ..................................................................................................................................... 12

7.2.1 Operations, Maintenance and Surveillance Manual ..................................................................................... 12

7.2.2 Emergency Preparedness Plan ................................................................................................................... 12

7.3 Comments on Previous Issues .......................................................................................................................... 13

8.0 FINDINGS AND RECOMMENDED ACTIONS ............................................................................................................... 14

9.0 CLOSURE ....................................................................................................................................................................... 16

REFERENCES ......................................................................................................................................................................... 17

March 30, 2016 Reference No. 1528261-004-R-Rev0-1000 iii


STUDY LIMITATIONS ............................................................................................................................................................. 18

TABLES Table 1: Climate Data................................................................................................................................................................. 6

Table 2: South Dam Pond Elevations ........................................................................................................................................ 7

Table 3: Dam Classification in Terms of Consequences of Failure ............................................................................................ 8

Table 4: Design Material Properties ......................................................................................................................................... 11

Table 5: Design Geometry ....................................................................................................................................................... 11

Table 6: Maximum Allowable Pond Levels ............................................................................................................................... 12

Table 7: Summary of Comments on Previous Issues .............................................................................................................. 13

Table 8: Schedule for Next Dam Safety Review ...................................................................................................................... 15

FIGURES Figure 1: South Dam Plan ........................................................................................................................................................ 19

Figure 2: South Dam Sections A and B .................................................................................................................................... 20

Figure 3: South Dam Sections C and D ................................................................................................................................... 21

APPENDICES APPENDIX A Photographs

APPENDIX B Record of Dam Inspection

March 30, 2016 Reference No. 1528261-004-R-Rev0-1000 iv


1.0 INTRODUCTION The Quinsam Mine (Quinsam) is an underground coal mine operation owned by Hillsborough Resources Limited (Hillsborough), located approximately 15 kilometres west of the town of Campbell River on Vancouver Island, British Columbia. The mine produced coal in 2015, and Quinsam staff have reported a cease in coal mining in early 2016, with the intent to enter a state of active care and maintenance.

At the request of Hillsborough, Golder Associates Ltd. (Golder) has completed an annual dam safety inspection of the South Dam at Quinsam Mine.

This dam safety inspection report has been prepared in accordance with Part 10 of the Health, Safety and Reclamation Code for Mines in British Columbia (BC MEM 2008), and it is understood that this report will be submitted by Hillsborough to the Chief Mines Inspector. The guidelines for annual dam safety inspection reports by the British Columbia Ministry of Energy and Mines (BC MEM 2013) were followed during the preparation of this report.

The report is based on a site visit carried out on May 26, 2015, discussion with Quinsam staff, and review of data provided by Hillsborough. The report includes the following items:

site conditions and background information of the facility;

a summary of the construction, operating, and/or repair activities for the 2015 period;

dam classification and required operational documents review;

site photographs and record of dam inspection;

a review of:

climate data;

water balance;

failure modes; and

recommendations for future operation, monitoring, and inspection.

No instrumentation data was reviewed, as the dam does not have any instrumentation.

The previous annual dam safety inspection for was carried out in August 2014, and is reported in Golder (2014b).

March 30, 2016 Reference No. 1528261-004-R-Rev0-1000 1


2.0 METHOD 2.1 2015 Site Visit A site inspection was carried out on May 26, 2015, by Ben Wickland, P.Eng., and Erin Thomas of Golder, and accompanied by Mauricio Figueroa of Hillsborough.

The temperature during the visit was approximately 21 degrees Celsius (°C). The weather was sunny and no rainfall or snowfall occurred during the site inspection.

2.2 Review of Background Information Quinsam provided the following information for this dam safety inspection:

2015 Quinsam monthly site climate data from January to December;

summary of operation of the South Dam and activity in the impoundment upstream of the dam;

records of Quinsam visual inspections from January to December 2015; and

Operation, Maintenance, and Surveillance (OMS) Manual and Emergency Preparedness Plan of 2-North Pit Tailing Disposal Facility and South Dam, Revision 2016-1. Dated April 1 2016 (Quinsam 2016).



3.0 BACKGROUND The Quinsam Mine (Quinsam) began operations in 1986 and has historically produced approximately 500,000 tonnes (t) of thermal coal per year. Coal production at the Quinsam mine in 2015 was reduced to 130,000 t.

3.1 Site History Quinsam originally developed the 2-North Pit as an open pit, mining an approximately 3 to 4 metre (m) thick coal seam which dips at about 10 degrees towards the east. The operation was then transformed to underground mining. The underground mine is located to the east of the 2-North Pit and is accessed by two portals located at the bottom of the east high wall, near the middle of the pit. Between 1986 and 1994, the fine refuse (tailings) that were generated from the coal wash plant were deposited in the Old Tailings Facility, located in northern portion of the pit. Starting in 1994, tailings were deposited in the 2-North Pit Tailings Disposal Facility located in the south end of the pit. The Old Tailings Facility includes (from north to south) the North Dam, the Central Dam, and the South Dam.

The South Dam is located immediately north of the underground mine portals and has a northwest to southeast orientation, shown in Figure 1 and in the Photographs in Appendix A. The South Dam defines the southern limit of the Old Tailings Facility.

3.2 Overview of Design and Previous Operation No as-built or engineering design drawings are available for the original construction of the South Dam. However, Quinsam has provided drawings showing survey data of the tailings and dam surfaces at various times, as well as photographs taken during construction of the dam. The South Dam is understood to be founded on a waste rock layer approximately 7 m thick placed over the original pit floor bedrock. According to the photographic records and staff at Quinsam, the South Dam was constructed using un-compacted coarse coal rejects (visible on surface), waste rock, and possibly till. Coarse coal rejects are, a gravel sized bi-product of cleaning the coal. Waste rock is rock without economically recoverable coal content that is moved to allow coal recovery. Till is a glacial deposit consisting of clay, silt, sand and gravel particle sizes.

The South Dam is operated as a “flow through” structure. Seepage water is collected in sumps at the downstream toe of the South Dam and at the 2-North Portal Sump (immediately south of the portals) and then pumped back to either the 2-North Pit Sump (north of the North Dam) or to the Brinco Pond wetlands.

Previous assessments of the South Dam have included the following:

Levelton (1994) completed a stability assessment that considered the South Dam as stable, and provided recommendations including placement of coarse coal rejects along the east abutment to limit piping (development of a hole due to flow through the dam). Levelton (1994) also indicated that the phreatic surface, or water table elevation within the dam, had an influence on the stability of the dam and recommended installation of piezometers within the dam.



Golder (2010a) evaluated the configuration of the South Dam.

Golder (2010b) provided recommendations for a raise of the South Dam crest elevation to increase the flood storage capacity in the area north of the dam.

The South Dam was raised in 2010 to increase flood storage capacity of the area north of the dam. The configuration of the South Dam following the raise was reported by Golder (2011). Tailings were excavated from the area immediately north of the South Dam, though the resulting increase of storage capacity has not been quantified. A pond has developed in the area excavated area since 2011.

3.3 Previous Issues of Concern The following concerns were noted for the South Dam in the previous dam safety inspection (Golder 2014b):

Frequency of dam inspections is not adequate. There is potential to miss signs of instability, seepage and other dam safety issues. Update inspection frequency from monthly to weekly inspection.

High phreatic surface may reduce factor of safety against instability. Measure and record pond elevation adjacent the South Dam; update Operations, Maintenance and Surveillance for action levels, e.g., contact design Engineer if the water level is greater than 304 m.

The tree on the downstream slope can create preferential flow pathways leading to piping failure. Cut the tree flush with the ground and leave the roots in place.

These issues are reviewed in Section 7.3.



4.0 OPERATION AND CONSTRUCTION DURING 2014 4.1 Construction and Operation Quinsam reported that no construction was carried out on the South Dam during the period from August 2014 to May 2015. No tailings were discharged to the impoundment, and no tailings were removed from the area in 2015. Coarse coal rejects were placed in the impoundment area to the north of the South Dam in 2015, seen in Photograph 2, in Appendix A.

The last survey of the South Dam was completed in November 2011. The November 2011 configuration of the South Dam is shown in Figures 1, 2, and 3. Photographs 1 to 13, and 15 of the crest, upstream and downstream slopes, toe areas, abutments, and impoundment area are included in Appendix A.

The approximate tailings removal limit is shown in Figure 1 and is based on observations in September 2012 and October 2013.

4.2 Pond The pond adjacent to the South Dam was observed to be within approximately 6.5 m of the upstream slope of the South Dam during the May 26, 2015, site visit. Observations in 2012, 2013, and 2014 (Photos 15 to 18) indicate that the pond area has increased with time. Water was observed in the sumps at the downstream (south) toe of the South Dam during the May 26, 2015, inspection and pumping from Sump #1 was ongoing at the time of the site visit. The sumps are pictured in Photographs 19 and 20, and shown in plan in Figure 1.



5.0 REVIEW OF CLIMATE DATA AND WATER BALANCE 5.1 Review of Climatic Information Quinsam operates a weather station on the mine site that records the local climatic conditions. Monthly precipitation and temperature data from this weather station are provided in Table 1.

Table 1: Climate Data

Month Year Total Precipitation (mm)

Average Temperature (degrees Celsius)

January 2015 109.0 4.0

February 2015 126.0 6.2

March 2015 113.0 7.0

April 2015 33.0 7.6

May 2015 3.0 13.9

June 2015 20.0 16.9

July 2015 41.0 18.7

August 2015 89.0 16.7

September 2015 76.8 11.9

October 2015 98.2 10.4

November 2015 112.6 2.0

December 2015 263.9 1.1

Average 90.5 9.7 Total 1085.4 Not calculated

For comparison, the climate normals provided by Environment Canada for the Campbell River Airport weather station for the period of 1981 to 2010 had an average annual temperature of 9.0 degrees Celsius, and annual precipitation of 1,489 millimetres (mm).

5.2 Water Balance The pond upstream of the South Dam is fed by sources including seepage from the ponds in the north end of the pit and precipitation falling on the 7-hectare catchment area of the impoundment (Golder 2010a). Seepage must pass through the North Dam and Central Dam or must pass through the foundations of these dams to reach the South Dam pond. Berms along the highwall (east side) act to control surface water flows to the impoundment.

The pond does not have a permanent water discharge system. The water level is controlled primarily by seepage through the dam and waste rock foundation.



The outputs from the impoundment area include evaporation, seepage through the South Dam and foundation to the sumps at the downstream toe of the dam, and seepage to the 2 North Portal Sump located immediately south of the underground mine portals.

Inputs and output quantities have not been estimated, and the pond adjacent the South Dam has grown in area and was closer to the dam than previously observed. A summary of pond elevations since 2011 are presented in Table 2, and are presumed to be influenced by seasonal rainfall, and pumping rates.

Table 2: South Dam Pond Elevations

Date Elevation (m) Comment

August 4, 2011 No pond Tailings excavated in 2011 February 5, 2013 302.1 Tailings excavated in 2013 February 11, 2014 302.4 None August 26, 2014 300.8 None May 26, 2015 302.5 Estimated

The water level in the pond is expected to be near elevation 301.5 m (Golder 2010b). The pond water level should be monitored and pumping in the sumps should continue to collect seepage water.



6.0 DAM CONSEQUENCE CLASSIFICATION Guidelines for the classification of dams are presented in the Canadian Dam Association (CDA) Dam Safety Guidelines (CDA 2013). Tailings dams in British Columbia are regulated under the Health, Safety and Reclamation Code for Mines in British Columbia (BC MEM 2008), which uses the same classifications as CDA (2013).

Consequence categories are based on the incremental losses that a failure of the dam might inflict on downstream or upstream areas or at the dam location itself. Incremental losses are those over and above losses that might have occurred in the same natural event or condition had the dam not failed. The classification assigned to a dam is the highest rank determined among the four loss categories.

Table 3 presents the dam classification criteria by the CDA (2013).

Table 3: Dam Classification in Terms of Consequences of Failure

Dam Class Population at Risk(a)

Incremental Losses

Loss of life(b) Environmental and Cultural Values Infrastructure and Economics

Low None 0 Minimal short term loss. No long term loss.

Low economic losses; area contains limited infrastructure or service.

Significant Temporary Only Unspecified

No significant loss or deterioration of fish or wildlife habitat. Loss of marginal habitat only. Restoration or compensation in kind highly possible.

Losses to recreational facilities, seasonal workplaces, and infrequently used transport routes.

High Permanent 10 of fewer

Significant loss or deterioration of important fish or wildlife habitat. Restoration or compensation in kind highly possible.

High economic losses affecting infrastructure, public transport, and commercial facilities.

Very High Permanent 100 of fewer

Significant loss or deterioration of critical fish or wildlife habitat. Restoration or compensation in kind possible but impractical.

Very high economic losses affecting important infrastructure or services (e.g., highway, industrial facility, storage facilities for dangerous substances).

Extreme Permanent More than 100

Major loss of critical fish or wildlife habitat. Restoration or compensation in kind impossible.

Extreme losses affecting critical infrastructure or services (e.g., hospital, major industrial complex, major storage facilities for dangerous substances).

Source: CDA (2013). a) Definition for population at risk:

None – There is no identifiable population at risk, so there is no possibility of loss of life other than through unforeseeable misadventure. Temporary – People are only temporarily in the dam-breach inundation zone (e.g., seasonal cottage use, passing through on transportation routes, participating in recreational activities). Permanent – The population at risk is ordinarily located in the dam-breach inundation zone (e.g., as permanent residents); three consequence classes (high, very high, extreme) are proposed to allow for more detailed estimates of potential loss of life (to assist in decision-making if the appropriate analysis is carried out).

b) Implications for loss of life: Unspecified – The appropriate level of safety required a dam where people are temporarily at risk depends on the number of people, the exposure time, the nature of their activity, and other conditions. A higher class could be appropriate, depending on the requirements. However, the design flood requirement, for example, might not be higher if the temporary population is not likely to be present during the flood season.



The underground mine portal is located approximately 100 m to the southwest of the crest of the South Dam. Failure of the South Dam could potentially result in release of tailings or water that could occlude the underground mine portal and result in a threat to workers in the underground mine. It was noted that during the inspection of May 26, 2015, that the impoundment area immediately north of the South Dam contained tailings and a pond that has grown in area with time. Without an understanding of the potential for liquefaction of the tailings, it must be assumed that such a potential exists. It is also possible that a large rainfall event would deposit a significant volume of water in the impoundment area that could be released in the case of failure of the South Dam.

It is expected that more than 10 but less than 100 workers could be in the underground mine at any given time during mine operation and could potentially be impacted by a failure. The South Dam is therefore classified as a “Very High” consequence structure.

The status of the mine has changed as of early 2016 from operations to care and maintenance. Recommendations for update to the classification of the dam are presented in Section 8.0.



7.0 DAM SAFETY ANALYSIS This section presents the dam safety analysis for the 2-North Pit South Dam based on the observations and data review for each of the failure modes that are most relevant to this type of dam. The record of inspection for the dam is presented in Appendix B. Key photographs are presented in Appendix A.

7.1 Potential Failure Modes 7.1.1 Piping Piping occurs due to the development of erosion to the extent that a hole develops through the embankment with rapid loss of water from the storage pond.

Design Basis

The South Dam is intended to retain tailings solids but allow water to flow through the dam and foundation. The dam is constructed from till, waste rock, and coarse rejects. It is expected that the waste rock and coarse rejects are not filter compatible with the tailings (Golder 2010b), so some loss of fines would be possible if water flowed through the dam. (Golder 2010b) therefore recommended that periodic inspection of the dam crest and downstream slopes be completed with documentation and communication of any anomaly (development of sinkholes, growing of plants, unusual seepage, etc.) with an Engineer. The South Dam has successfully contained tailings deposited against it, and it is considered that piping can be managed by monitoring and remedial works, if necessary (Golder 2010a).

Observed Performance

No evidence of piping was observed during the May 26, 2015, site visit. No seepage was observed in the downstream toe area or on the downstream slopes.

Between January and April 2015 Quinsam reported minor seepage during the weekly inspection at the road near the stop sign. The seepage rate was not quantified.

7.1.2 Instability Instability occurs due to imbalance of forces resulting in movement of a part of the dam with possible loss of integrity of the dam.

Design Basis

The South Dam is designed to meet or exceed the design criteria for stability based on recommended minimum values for Factor of Safety of 1.5 against slope instability under static loading conditions, and a minimum Factor of Safety of 1.0 under seismic loading conditions, as recommended in the CDA guidelines (CDA 2013).



The assumed material properties used for stability analysis are presented in Table 4 and the design geometry is presented in Table 5. The South Dam raise was designed based on a 1/5,000 year earthquake event with application of a horizontal seismic coefficient of kh = 0.0185, which is 50% of the peak ground acceleration, in stability analyses (Golder 2010b). The dam has been designed assuming a high phreatic surface within the dam fill. A review of dam stability considering a revised seismic hazard assessment for the site and was in progress during the preparation of this report.

Table 4: Design Material Properties

Material Unit Weight (kN/m3)

Cohesion (kPa)

Friction Angle (degrees)

Waste rock 20 0 37 Dam fill 19 0 32 Tailings 14.1 0 30

kN/m3 = kilonewtons per cubic metre, kPa = kilopascals.

Table 5: Design Geometry Item Design Value

Upstream slope 1.3 horizontal (H): 1 vertical (V) to 2H:1V Crest width 6 to 15 m Downstream slope 3H:1V to 8H:1V


The South Dam was inspected for signs of instability during the May 26, 2015, site visit.

The South Dam did not exhibit any evidence of instability such as cracks, slumps, bulges, or sinkholes on the crest, downstream face, upstream face, or at the toe of the dam. Minor surface erosion was observed on the downstream face, as shown in Photograph 8 in Appendix A.

A fall of material from the highwall deposited material at the surface of the dam near the east abutment. The material had no effect on dam performance.

7.1.3 Overtopping Overtopping occurs when the pond level rises above the dam crest level, resulting in flow over the dam that may result in progressive erosion of the dam and loss of the pond.

Design Basis

Review of dams in the Old Tailings Facility (Golder 2010a) indicated that the South Dam must accommodate an inflow design flood (IDF) of 22,000 m3 (cubic metres) above elevation 304 m and maintain 1 m freeboard. An IDF is based on 310 mm precipitation over the estimated 7 hectare catchment area of the impoundment. The crest elevation of 309 m of the South Dam provides sufficient storage capacity in the impoundment to store the IDF. A review of the flood storage and freeboard requirement was in progress during the preparation of this report.



Instrumentation Data

The South Dam does not have any instrumentation, though three sumps are located in the downstream area of the toe. The dam raise to 309 m crest elevation has been designed on the assumption of a high phreatic surface.


Survey data from August 2014 indicated that the pond adjacent the South Dam had an elevation of 300.8 m. Water levels in the sumps at the toe of the South Dam were observed to be below 298 m (ground level), with a north to south gradient in the pit.

Available freeboard from the pond (estimated elevation 302.5 m) to the crest of the South Dam (elevation 309 m) was near 6.5 m during the May 26, 2015, site visit. The allowable pond levels adjacent the South Dam is presented in Table 6, based on a design dam crest elevation of 308.5 m. The South Dam crest was built to 309 m and therefore carries an additional 0.5 m of freeboard against overtopping. Additional flood storage capacity in the impoundment has also been gained by removal of tailings from the impoundment, but the additional capacity has not been quantified.

Table 6: Maximum Allowable Pond Levels

Item Design Value (m)

Maximum operating level under seismic event 304

Minimum required freeboard under inflow design flood 1.0 Allowance for inflow design flood of 22,000 m3 (2/3 between 1-in-1,000 year flood and the probable maximum flood) 3.25

The freeboard requirements were met at the time of the site visit.

7.2 Operational Documents 7.2.1 Operations, Maintenance and Surveillance Manual The Operations, Maintenance and Surveillance (OMS) Manual for the 2-North Pit Tailings Disposal Facility and South Dam (Quinsam 2014) was updated on August 31, 2014.

Additionally, an updated version of the OMS manual has been prepared for care and maintenance (Quinsam 2016).

7.2.2 Emergency Preparedness Plan The Emergency Preparedness Plan (EPP) is incorporated as Section 10 of the OMS manual (Quinsam 2014). Additionally, a version of the EPP is included in Quinsam (2016).



7.3 Comments on Previous Issues Comments on previous issues of concern presented in Section 3.3 are provided in Table 7.

Table 7: Summary of Comments on Previous Issues Issue Comment

Update inspection frequency from monthly to weekly inspection to reduce potential to miss signs of instability, seepage and other dam safety issues.

Weekly inspections of the South Dam were carried out in 2015.

Measure and record pond elevation adjacent the South Dam. Not addressed.

Cut the tree on the downstream slope as roots create preferential flow pathways leading to piping failure. Not addressed.



8.0 FINDINGS AND RECOMMENDED ACTIONS The South Dam in the 2-North Pit was observed to be in generally good condition at the time of the 2015 site visit. No significant changes in condition were noted, based on visual monitoring records, dam stability, and surface water control. The 2015 Dam Safety Inspection key issues and recommended actions for the South Dam are as follows:

Address outstanding recommendations from 2014:

High phreatic surface may reduce Factor of Safety against instability. Install a staff gage, or otherwise measure and record the elevation of the pond immediately upstream and north of the South Dam. Elevation of the pond should be documented on a weekly basis.

Remove vegetation from the dam, specifically cut the tree on the downstream slope to within 30 cm of the dam surface. Roots should be left in place.

Maintain upstream and downstream slopes and crest of the South Dam free of vegetation.

Continue to inspect the dam for signs of movement, instability, and erosion on a weekly basis.

Carry out detailed inspections following seismic events and significant precipitation events. Should any change to the dam occur, then the Design Engineer (Golder) should be notified immediately, as per the OMS manual. Otherwise, documentation of inspections following seismic events and significant precipitation events should be sent to Golder within a week of each event. Documentation should include photographs.

Quinsam has notified Golder of the intent to change from operations to a phase of active care and maintenance in 2016. The following are recommended:

The consequence classification of the South Dam should be reviewed and updated to reflect the change from mine operation to active care and maintenance in 2016.

The frequency of review of inspection and collection of monitoring data, and for reporting of the same inspections and data to the Design Engineer for review should be confirmed.

− Actions or changes resulting from the change to care and maintenance should be captured in an update to the OMS manual.

The Design Engineer should review the updated OMS manual and any subsequent changes.

The Design Engineer should be notified in advance of any plan to re-start operations or implement closure works that would impact or change the South Dam, including plans to:

− discharge tailings to the facility or remove tailings from the facility;

− complete any earthworks with the potential to impact the dam; and

− change to water management in the north 2N pit, including flooding or dewatering of the areas adjacent the South dam, such as:

• the sump at the 2 North Portal; and

• the pond north of the South Dam.



Table 8 summarizes the date of the last Dam Safety Review, regulatory frequency requirements, and schedule for next Dam Safety Review for the South Dam.

Table 8: Schedule for Next Dam Safety Review

Structure Date of Last Dam Safety Review

Dam Safety Review Frequency by CDA(a)

Suggested Schedule for Next Dam Safety Review

South Dam 2013 5 years 2018 or earlier

a) CDA (2013). CDA = Canadian Dam Association.



REFERENCES BC MEM (British Columbia Ministry of Energy, Mines and Natural Gas). 2013. Guidelines for Annual Dam

Safety Inspection Reports. August 2013.

BC MEM (British Columbia Ministry of Energy, Mine and Petroleum Resources). 2008. Health, Safety and Reclamation Code for Mines in British Columbia. Mining and Minerals Division, Victoria, British Columbia.

CDA (Canadian Dam Association). 2007. Dam Safety Guidelines.

CDA. 2013. Dam Safety Guidelines 2007 (Revised 2013).

Golder (Golder Associates Ltd.). 2010a. Review of Dam Safety of Old Tailings Area – Quinsam Coal Mine, BC. Technical Memorandum. May 17.

Golder. 2010b. Proposed Old Tailings South Dam Raise – Quinsam Coal Mine, BC. Technical Memorandum. June 21, 2010.

Golder. 2011. As-Built Summary of Dam Raise, 2N Pit Old Tailings Area – Quinsam Coal Mine, BC. Technical Memorandum. April 1, 2010.

Golder. 2013. 2012 Annual Dam Safety Inspection Report, 2N-Pit South Dam, Quinsam Coal Mine. April 11, 2013.

Golder. 2014a. 2013 Annual Dam Safety Inspection Report, 2N-Pit South Dam, Quinsam Coal Mine. June 6, 2014.

Golder. 2014b. 2014 Annual Dam Safety Inspection Report, 2N-Pit South Dam, Quinsam Coal Mine. October 29, 2014.

Levelton (B.H. Levelton and Associates Limited). 1994. Geotechnical Evaluation of South Dam. Report Doc. No. 694-029.001. March 4, 1994.

Quinsam (Quinsam Coal Corporation). 2014. Quinsam Coal Operation, Maintenance and Surveillance Manual, 2-North Pit Tailings Disposal Facility and South Dam. V3, dated August 31, 2014.

Quinsam (Quinsam Coal Corporation). 2016. Quinsam Coal Operation, Maintenance and Surveillance Manual, 2-North Pit Tailings Disposal Facility and South Dam. Revision 2016-1, dated April 1, 2016.

Thurber (Thurber Engineering Ltd.). 2014. Quinsam Coal Mine, 2013 Dam Safety Review, Tailings Disposal Facilities at the 2-North Pit. Report to Quinsam Coal Corporation. File:17-770-1. January 7, 2014.



STUDY LIMITATIONS Golder Associates Ltd. (Golder) has prepared this document in a manner consistent with that level of care and skill ordinarily exercised by members of the engineering and science professions currently practising under similar conditions in the jurisdiction in which the services are provided, subject to the time limits and physical constraints applicable to this document. No warranty, express or implied, is made.

This document, including all text, data, tables, plans, figures, drawings and other documents contained herein, has been prepared by Golder for the sole benefit of Hillsborough Resources Limited. It represents Golder’s professional judgement based on the knowledge and information available at the time of completion. Golder is not responsible for any unauthorized use or modification of this document. All third parties relying on this document do so at their own risk.

The factual data, interpretations, suggestions, recommendations and opinions expressed in this document pertain to the specific project, site conditions, design objective, development and purpose described to Golder by Hillsborough Resources Limited, and are not applicable to any other project or site location. In order to properly understand the factual data, interpretations, suggestions, recommendations and opinions expressed in this document, reference must be made to the entire document.

This document, including all text, data, tables, plans, figures, drawings and other documents contained herein, as well as all electronic media prepared by Golder are considered its professional work product and shall remain the copyright property of Golder. Hillsborough Resources Limited may make copies of the document in such quantities as are reasonably necessary for those parties conducting business specifically related to the subject of this document or in support of or in response to regulatory inquiries and proceedings. Electronic media is susceptible to unauthorized modification, deterioration and incompatibility and therefore no party can rely solely on the electronic media versions of this document.


PORTAL TOUNDERGROUND MINE

2

1

4

9

3

POND El. ~302.5MAY 26, 2015SEE NOTE 3

16

APPROXIMATE TAILINGS EXCAVATION LIMIT(OCT. 24, 2013)

7

8

15

17

18

14

OLD TAILINGS AREA

5

10

11

103 300 N 103 300 N

99 6

50 E

99 6

50 E

103 350 N 103 350 N

103 250 N 103 250 N

99 6

00 E

99 6

00 E

99 5

50 E

99 5

50 E

99 5

00 E

99 5

00 E

99 7

00 E

99 7

00 E

99 7

50 E

99 7

50 E

12

13

4

6

20

103 200 N 103 200 N

99 6

00 E

99 6

00 E

103 400 N 103 400 N

103 000 N 103 000 N

102 800 N 102 800 N

102 600 N 102 600 N

99 4

00 E

99 4

00 E

99 2

00 E

99 2

00 E

99 8

00 E

99 8

00 E

NOTES1. ALL DIMENSIONS AND ELEVATIONS ARE IN METRES

UNLESS OTHERWISE NOTED. COORDINATE SYSTEM ISMINE GRID.

2. AS-BUILT SOUTH DAM AREA CONTOUR INTERVAL 1 m ;OTHER AREAS CONTOUR INTERVAL 2 m.

3. POND ELEVATION ESTIMATED BASED ON AVAILABLEFREEBOARD.

CENTRAL DAM

REFERENCES

B2

ACCESS ROAD TO PORTALSTO UNDERGROUND MINE

AS-BUILT SOUTH DAM RAISEOUTLINE/SURVEY LIMIT

1. BASE PLAN PROVIDED BY QUINSAM COAL CORPORATION, APRIL 2010.2. AS-BUILT SOUTH DAM CONTOURS ARE BASED ON SURVEY DATA

PROVIDED BY QUINSAM COAL CORPORATION, NOVEMBER 2011.

A2

SCALE 1:750

15 30 45m0

LEGEND

SUMP #2SUMP #1

SOUTH DAM MAJOR CONTOUR (NOVEMBER 2011)

SUMP

C3

D3

AS-BUILT CREST

El. 308.8 - 309.6

NOVEMBER 2011

SURVEY

SOUTH DAM MINOR CONTOUR (NOVEMBER 2011)MAJOR CONTOUR (APRIL 2010)

MINOR CONTOUR (APRIL 2010)

ACCESS ROAD

SUMP #3

PHOTOGRAPH LOCATION1

SOUTH DAMPLAN

HILLSBOROUGH RESOURCES LIMITED2-NORTH PIT OLD TAILINGS FACILITY

CAMPBELL RIVER, BC.

FIGURE 1

KEY PLANSEE SCALE B

SCALE 1:10,000

200 400 600m0

SOUTH DAM PLANSEE SCALE A

PLANT

NORTH DAM

SOUTHDAM

2-NORTH PITTAILINGSFACILITY

B1

SECTIONSCALE 1:500

NORTHEAST (UPSTREAM) SOUTHWEST (DOWNSTREAM)

? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ?

21

DESIGN SOUTH DAM RAISEEL. 308.5

OLD TAILINGSSOUTH CELL

31

NOVEMBER 2011 SURFACEDESIGN DAM SURFACE

APPROXIMATE ORIGINALGROUND SURFACE(FEBRUARY 19, 1994)

280

290

300

310

320

ELEV

ATIO

N (m

etre

s)

ELEV

ATIO

N (m

etre

s)

290

280

300

310

320

POND ELEVATION 302.5(MAY 26, 2015)SEE NOTE 2

INFERRED WASTE ROCK

BEDROCK


NOVEMBER 2011 SURFACE


DESIGN DAM SURFACE

A1

SECTIONSCALE 1:500

21

31


280

290

300

310

320

ELEV

ATIO

N (m

etre

s)

ELEV

ATIO

N (m

etre

s)

290

280

300

310

320

WASTE ROCK OVER BEDROCK (INFERRED)

NOTES

1. ALL DIMENSIONS AND ELEVATIONS ARE IN METRES UNLESSOTHERWISE NOTED.

2. POND ELEVATION ESTIMATED BASED ON OBSERVEDFREEBOARD.

LEGENDPIT FLOOR

INFERRED WASTE ROCK

INFERRED DAM SLOPE

REFERENCES

1. BASE DRAWINGS PROVIDED BY QUINSAM COAL MINECAD FILES: 94-QC-15.DWG, 94-QC-17.DWG, 94-QC-19.DWG,AND 94-QC-21.DWG DATED: FEBRUARY 19, 1994.

2. AS-BUILT SOUTH DAM CONTOURS ARE BASED ON SURVEYDATA PROVIDED BY QUINSAM COAL CORPORATION,NOVEMBER 2011.

? ?

PREVIOUS CONSTRUCTION


DESIGN DAM SURFACE

SCALE 1:500

10 20 30m0

Xref REV BLOCK.dwg

SOUTH DAMSECTIONS A AND B


CAMPBELL RIVER, BC.

FIGURE 2

POND ELEVATION


D1

SECTIONSCALE 1:500



DESIGN DAM SURFACE

1.31

21


280

290

300

310

320

ELEV

ATIO

N (m

etre

s)

ELEV

ATIO

N (m

etre

s)

290

280

300

310

320

INFERRED WASTE ROCK


? ? ? ? ? ? ? ? ? ? ?

21

ACCESS ROAD TO PORTALSTO UNDERGROUND MINEOLD TAILINGS

SOUTH CELL

1.31


C1

SECTIONSCALE 1:500

DESIGN DAM SURFACE



POND ELEVATION 302.5(MAY 26, 2015)SEE NOTE 2

280

290

300

310

320

ELEV

ATIO

N (m

etre

s)

ELEV

ATIO

N (m

etre

s)

290

280

300

310

320

INFERRED WASTE ROCK

INFERRED BEDROCK

NOTES

REFERENCES

LEGENDPIT FLOOR

INFERRED WASTE ROCK

INFERRED DAM SLOPE

? ?

PREVIOUS CONSTRUCTION


DESIGN DAM SURFACE

SCALE 1:500

10 20 30m0

1. ALL DIMENSIONS AND ELEVATIONS ARE IN METRES UNLESSOTHERWISE NOTED.

2. POND ELEVATIONS ESTIMATED BASED ON OBSERVEDFREEBOARD.

1. BASE DRAWINGS PROVIDED BY QUINSAM COAL MINECAD FILES: 94-QC-15.DWG, 94-QC-17.DWG, 94-QC-19.DWG,AND 94-QC-21.DWG DATED: FEBRUARY 19, 1994.

2. AS-BUILT SOUTH DAM CONTOURS ARE BASED ON SURVEYDATA PROVIDED BY QUINSAM COAL CORPORATION,NOVEMBER 2011.

Xref REV BLOCK.dwg

SOUTH DAMSECTIONS C AND D


CAMPBELL RIVER, BC.

FIGURE 3

POND ELEVATION


APPENDIX A Photographs

March 30, 2016 Reference No. 1528261-004-R-Rev0-1000


Photograph 1: Old Tailings Area, Looking North, May 26, 2015

Photograph 2: Old Tailings Area, Looking East, May 26, 2015

SOUTH DAM NORTH DAM

SOUTH DAM

CENTRAL DAM

NORTH DAM

March 30, 2016 Reference No. 1528261-004-R-Rev0-1000 1/11


Photograph 3: South Dam Crest, Looking East, May 26, 2015

Photograph 4: South Dam Crest And West Abutment, Looking Northwest, May 26, 2015



Photograph 5: South Dam Upstream Slope, Looking East, May 26, 2015

Photograph 6: South Dam Upstream Slope, Looking Southeast, May 26, 2015



Photograph 7: South Dam, Downstream Slope and Toe, Looking Northeast, May 26, 2015

Photograph 8: South Dam Erosion on East Side of Downstream Slope, Looking North, May 26, 2015



Photograph 9: South Dam Downstream Toe, Looking West, May 26, 2015

Photograph 10: South Dam Downstream Toe, Looking Southeast, May 26, 2015



Photograph 11: South Dam East Abutment with Slope Failure and Debris on Crest, Looking East, May 26, 2015

slope failure



Photograph 12: South Dam East Abutment Slope Failure, Looking East, May 26, 2015



Photograph 13: South Dam East Abutment Rock Fall, Looking North, May 26, 2015

Photograph 14: Pond South of North Dam, Looking South, May 26, 2015



Photograph 15: Pond North of South Dam, Looking Northwest, May 26, 2015

Photograph 16: Pond North of South Dam, Looking Northwest, August 26, 2014 (from Golder 2014a)



Photograph 17: Pond North of South Dam, Looking North, October 24, 2013 (From Golder 2014b)

Photograph 18: Impoundment North of South Dam, Looking North, September 20, 2012 (from Golder 2013)



Photograph 19: South Dam Sump #1, Pumping Underway, May 26, 2015

Photograph 20: South Dam Sump #2, May 26, 2015

o:\final\2015\3 proj\1528261 hillsboro_2015consultsrvcs_quinsam\1528261-004-r-rev0-1000\appendices\appendix a\appendix a - south dam photographs_2015 15mar_16.docx




March 30, 2016 Reference No. 1528261-004-R-Rev0-1000


CLIENT: Hillsborough Resources Limited BY: Ben Wickland and Erin Thomas PROJECT: Quinsam Coal Mine DATE: May 26, 2015 LOCATION: Campbell River, BC REVIEWED:

GENERAL INFORMATION

Dam Name: South Dam, Old Tailings Area, 2-North Pit Dam Type: Earthfill

WEATHER CONDITIONS: Mainly sunny TEMP: 21°C

INSPECTION ITEM OBSERVATIONS/DATA PHOTO COMMENTS & OTHER DATA 1. DAM CREST

1.1 Crest elevation

1.2 Reservoir Level

Freeboard

1.3 Distance To Pond

(if applicable)

1.4 Surface Cracking

1.5 Unexpected Settlement

1.6 Lateral Movement

1.7 Other Unusual Conditions

~309 m

~302.5 m

~6.5 m

~8 m

None

None

Not observed

None

3, 4

The crest is relatively flat.

Minor rutting observed.

Minor settlement observed near

west abutment (at crest and

road intersection).

2. UPSTREAM SLOPE

2.1 Slope angle

2.2 Signs of Erosion

2.3 Signs of Movement

(Deformation)

2.4 Cracks

2.5 Face liner condition

(if applicable)


~ 2H:1 V

Not observed

Not observed

Not observed

Not applicable.

Yes

5, 6

Benched in tailings.

Minor vegetation extending

from approximately the

midpoint to the east abutment;

Erosion from previous waterline

visible ~2 m above pond.



INSPECTION ITEM OBSERVATIONS/DATA PHOTO COMMENTS & OTHER DATA 3. DOWNSTREAM SLOPE 3.1 Slope angle



(Deformation)

3.4 Cracks

3.5 Seepage or Wet Areas

3.6 Vegetation Growth


3H:1V

Yes

None

Yes

No

Yes

None

1, 7, 8, 9,

10

Minor erosion gullies to 30 cm,

with the deepest gullies near

the east end.

Minor.

One small tree.

4. DOWNSTREAM TOE AREA

4.1 Seepage from Dam


4.2 Signs of Turbidity in Seepage

Water

4.5 Discoloration/staining

4.6 Outlet operating problem

(if applicable)


No

Yes

None

Yes

Not applicable

None

7, 8, 9, 10

Road ditch and – erosion

related to site drainage at

downstream toe.

5. ABUTMENTS 5.1 Seepage at contact zone

(abutment/embankment)


5.3 Excessive Vegetation

5.4 Presence of Rodent Burrows


Not observed

Yes

Not observed

Not observed

Not observed

11, 12, 13

Fall of ground from highwall

onto east abutment;

Minor rock fall onto downstream

slope at the east abutment.

Minor vegetation growth at

east, tree at west abutment.



INSPECTION ITEM OBSERVATIONS/DATA PHOTO COMMENTS & OTHER DATA 6. RESERVOIR

6.1 Stability of Slopes

6.2 Distance to Nearest Slide

(if applicable)

6.3 Estimate of Slide Volume

(if applicable)

6.4 Floating debris


Locally over-steepened

Not applicable

Not applicable

Not observed

Not observed

15

Salt stains 2.0 m above water.

7. EMERGENCY SPILLWAY/ OUTLET STRUCTURE 7.1 Surface Condition



(Deformation)

7.4 Cracks

7.5 Settlement

7.6 Presence of Debris or

Blockage

7.7 Closure mechanism

operational

7.8 Slope Protection

7.9 Instability of Side Slopes


None

8. INSTRUMENTATION

8.1 Piezometers

8.2 Settlement Cells

8.3 Thermistors

8.4 Settlement Monuments

8.5 Accelerograph

8.6 Inclinometer

8.7 Weirs and Flow Monitors

8.8 Data logger(s)

8.9 Other

None

Sumps

19, 20

Sumps at downstream toe.



INSPECTION ITEM OBSERVATIONS/DATA PHOTO COMMENTS & OTHER DATA 9. DOCUMENTATION 9.1 Operation, Maintenance and

Surveillance (OMS) Plan

9.1.1 OMS Plan exists

9.1.2 OMS Plan reflects current

dam conditions

9.1.3 Date of last revision

9.2 Emergency Preparedness Plan

(EPP)

9.2.1 EPP exists

9.2.2 EPP reflects current

conditions

9.2.3 Date of last revision

Yes

Not reviewed

April 1, 2016

Yes

Not reviewed

April 1, 2016

Combined OMS Manual and

EPP.

10. NOTES

None

INSPECTOR’S SIGNATURE DATE:

o:\final\2015\3 proj\1528261 hillsboro_2015consultsrvcs_quinsam\1528261-004-r-rev0-1000\appendices\appendix b\appendix b - south dam record of dam inspection 26may_15.docx


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