IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ALASKA ) ) ) ) ) ) ) ) ) ) ) ) ) ) )

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1 KAREN L. LOEFFLER United States Attorney Kevin Feldis Assistant U.S. Attorney Federal Building & U.S. Courthouse 222 West Seventh Avenue, #9, Room 253 Anchorage, Alaska Phone: ( Fax: ( Todd S. Mikolop Trial Attorney Environmental Crimes Section 601 D St., NW, Room 2132 Washington, DC Phone: ( Fax: ( todd.mikolop@usdoj.gov Attorneys for Plaintiff IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ALASKA UNITED STATES OF AMERICA, vs. Plaintiff, XS PLATINUM, INC., BRUCE BUTCHER, MARK BALFOUR, ROBERT PATE, JAMES SLADE, AND JAMES STAEHELI, Defendants. No. COUNT 1: CONSPIRACY Vio. of 18 U.S.C. 371 COUNT 2-3: CLEAN WATER ACT PERMIT VIOLATIONS Vio. of 33 U.S.C. 1319(c(2(A COUNT 4: CLEAN WATER ACT, SUBMISSION OF FALSE REPORT Vio. of 33 U.S.C. 1319(c(4 Case 3:14-cr SLG-DMS Document 2 Filed 11/18/14 Page 1 of 28

2 COUNT 5: FALSE STATEMENT Vio. of 18 U.S.C. 1001(a(2 The Grand Jury charges: I N D I C T M E N T GENERAL ALLEGATIONS At all times material to this Indictment: Regulatory Background 1. The Clean Water Act, 33 U.S.C. 1251, et seq., was enacted by Congress to restore and maintain the chemical, physical, and biological quality of the Nation's waters. 33 U.S.C. 1251(a. In addition, the Clean Water Act was enacted to prevent, reduce, and eliminate water pollution in the United States and to conserve the waters of the United States for the protection and propagation of fish and aquatic life and wildlife, recreational purposes, and the use of such waters for public drinking water, agricultural, and industrial use. 33 U.S.C. 1252(a. 2. The Clean Water Act prohibits the discharge of any pollutant into waters of the United States, except in compliance with a permit issued pursuant to the Clean Water Act under the National Pollutant Discharge Elimination System ("NPDES" by the United States Environmental Protection Agency ( EPA or an authorized state. 33 U.S.C. 1311(a and The term "discharge of a pollutant" is defined as the addition of any pollutant to navigable waters from any point source. 33 U.S.C. 1362(12. A point Page 2 of 28 Case 3:14-cr SLG-DMS Document 2 Filed 11/18/14 Page 2 of 28

3 source is defined by the Clean Water Act as any discernible, confined and discrete conveyance from which pollutants are discharged, including, but not limited to, a pipe, ditch, or channel. 33 U.S.C. 1362( Placer mines use large amounts of water to extract precious metals from alluvial deposits and from the tailings of previously-mined deposits. The water used in the process is directed to settling ponds, where fine particulates separate from the water and sink to the bottom of the pond basin. Settling ponds fall within the definition of a point source under the Clean Water Act. 33 U.S.C. 1362( The waste water produced from placer mining can include industrial waste, including sediment, toxic metals, and suspended particles, which are considered pollutants under the Clean Water Act. 33 U.S.C. 1362(6. As a result, the discharge of wastewater from placer mining settling ponds into waters of the United States requires a NPDES permit issued pursuant to the Clean Water Act by the EPA or an authorized state. 33 U.S.C. 1311(a and The Defendants 6. Defendant XSP, INC., was incorporated in Delaware in November Defendant XSP, INC. was a wholly-owned subsidiary of an off-shore limited corporation that was registered in 2007 in Jersey, Channel Islands. The parent corporation was capitalized at $34 million, by more than 100 international investors primarily from Australia and Europe. From approximately November 2007 to November 2011, the parent corporation s Board of Directors included Defendants BRUCE BUTCHER and MARK BALFOUR. The parent corporation dissolved completely in September Page 3 of 28 Case 3:14-cr SLG-DMS Document 2 Filed 11/18/14 Page 3 of 28

4 7. Defendant XSP, INC., operated the Platinum Creek Mine ( PCM in southwest Alaska, from approximately 2008 to XSP, INC., held 159 federal placer mining claims and 36 federal hard-rock claims totaling more than 4,000 acres at the PCM, which was situated along the Salmon River and its tributaries. The Salmon River was a navigable water of the United States that had been catalogued by the Alaska Department of Fish and Game ( ADFG as an anadromous fish stream, important for the spawning of all five species of Pacific salmon (chinook, chum, coho, pink, and sockeye and the rearing of coho and sockeye salmon. After flowing through BLM land, the Salmon River crossed the Togiak National Wildlife Refuge before entering the Pacific Ocean at Kuskokwim Bay. All but 21 of XSP, INC. s placer mining claims were on land managed by the federal Bureau of Land Management (hereinafter BLM, with the remaining (undeveloped claims lying within the Togiak National Wildlife Refuge. 8. Defendant BRUCE BUTCHER (hereinafter, Defendant BUTCHER was a resident of Sydney, New South Wales, Australia. Defendant BUTCHER served as the Chairman, Chief Executive Officer, and Managing Director of XSP, INC. s parent corporation, and as the Chairman, Chief Executive Officer and President of XSP, INC. from November 2007 through November Defendant BUTCHER frequently authored and participated in internal communications regarding water quality issues at the PCM and had been advised by company staff and government officials about the Clean Water Act requirements. As XSP, INC. s most senior official with knowledge of the Clean Water Act requirements and XSP, INC. s compliance issues, Defendant BUTCHER was in a position to prevent or report Clean Water Act violations. Page 4 of 28 Case 3:14-cr SLG-DMS Document 2 Filed 11/18/14 Page 4 of 28

5 9. Defendant MARK BALFOUR (hereinafter, Defendant BALFOUR was a resident of Attadale, Western Australia, Australia. Defendant BALFOUR served as a Director and Joint Company Secretary of XSP, INC. s parent corporation, and as Executive Vice President and Director of XSP, INC., from November 2007 to October Defendant BALFOUR was the corporate officer identified by name on XSP, INC. s Clean Water Act permit as the Cognizant Official and, as such, was directly responsible for all aspects of permit compliance. Defendant BALFOUR frequently authored and participated in internal communications regarding water quality issues at the PCM. As XSP, INC. s second-most senior official with knowledge of the Clean Water Act requirements and XSP, INC. s compliance issues, Defendant BALFOUR was in a position to prevent Clean Water Act violations or report violations as required to federal and state regulators, with whom Defendant BALFOUR frequently interfaced. 10. Defendant ROBERT PATE (hereinafter, Defendant PATE was a resident of Spokane, Washington. Defendant PATE served as General Manager of XSP, INC., from February 2010 to June As General Manager, Defendant PATE managed and oversaw operations and mining activities at the PCM, and was one of XSP, INC. s primary points of contact to federal and state government agencies. Defendant PATE also prepared technical information on behalf of XSP, INC. for submittal to regulatory agencies regarding mining, occupational health and safety, occupancy and environmental issues, and advised XSP, INC. on compliance with regulatory requirements. Defendant PATE occasionally authored or participated in internal communications regarding water quality issues at the PCM. Through mid-july 2010, Page 5 of 28 Case 3:14-cr SLG-DMS Document 2 Filed 11/18/14 Page 5 of 28

6 Defendant PATE was the most-senior corporate officer on site at the PCM, and was thus in a position to prevent Clean Water Act violations or report violations as required to federal and state regulators. 11. Defendant JAMES SLADE (hereinafter, Defendant SLADE was a resident of Calgary, Canada. Defendant SLADE served as Chief Operating Officer, consultant and independent contractor to XSP, INC. from approximately March 2010 through In these roles, Defendant SLADE provided hands-on consulting and advisory services in the development of specialized production techniques at the PCM, including the installation and commissioning of production plants at the mine site. During most of the 2010 and 2011 mining seasons, Defendant SLADE was the senior onsite corporate representative at the PCM, and was thus in a position to prevent Clean Water Act violations or report violations as required to federal and state regulators. 12. Defendant JAMES STAEHELI (hereinafter, Defendant STAEHELI was a resident of Cle Elum, Washington. Defendant STAEHELI served as an hourly-wage Plant Operator at the PCM, supervising the loading of feed material into the process plant, from approximately April 2010 to April Defendant STAEHELI later served as the salaried Process Manager from approximately April 2011 to August As the Process Manager, Defendant STAEHELI managed and oversaw the operations and mining activities of the PCM and was a primary point of contact to government agencies. When the Chief Operating Officer was not present at the PCM, Defendant STAEHELI was the senior corporate officer on site. Defendant STAEHELI s responsibilities also Page 6 of 28 Case 3:14-cr SLG-DMS Document 2 Filed 11/18/14 Page 6 of 28

7 included actively supervising and managing the process plant, including oversight of compliance with environmental policies and avoiding breaches of Defendant XSP, INC. s regulatory obligations. Defendant STAEHELI occasionally authored and participated in internal company communications regarding water quality violations at the PCM. As the Process Manager, Defendant STAEHELI was directly responsible for operating the plant to achieve maximum production. The Permit 13. On August 24, 2005, the EPA issued a General Permit pursuant to Section 402 of the Clean Water Act to all owners and operators of mechanical placer mines, authorizing discharges in compliance with specific effluent limitations and ascribing specific monitoring and reporting requirements, which became effective on October 7, This permit was valid until October 4, 2010, but was administratively extended to remain in effect indefinitely until re-issued by the EPA or the State of Alaska. 14. On October 31, 2008, the EPA authorized the State of Alaska Department of Environmental Conservation ( ADEC to administer, within the State of Alaska, most of the elements of the NPDES program, including issuance of NPDES permits. See 73 Fed. Reg (November 7, Prior to that date, EPA issued NPDES permits to regulated entities in the State of Alaska. On October 31, 2010, ADEC assumed the administration of NPDES permits for mechanical placer mines in Alaska, while the EPA retained federal enforcement authority. Page 7 of 28 Case 3:14-cr SLG-DMS Document 2 Filed 11/18/14 Page 7 of 28

8 15. On February 25, 2009, XSP, INC., submitted to the State of Alaska, Department of Natural Resources ( ADNR, a Multi-Agency Permit Application for Placer Mining (also known as an Alaska Placer Mining Application ( APMA, application number A115585, for the period In the application, XSP, INC. certified that its application served as its intent to operate the PCM under the NPDES General Permit described above, as a zero-discharge facility. The EPA assigned XSP, INC. General Permit Number AKG ( General Permit or the Permit. On March 24, 2010, XSP, INC. submitted to the ADNR its amendments to the 2009 APMA, for the 2010 season. The amendments did not address nor amend XSP, INC. s intent to operate as a zero-discharge facility. On April 11, 2011, XSP, INC. submitted to the ADNR its amendments to the 2009 APMA, for the 2011 season. The amendments did not address nor amend XSP, INC. s intent to operate as a zero-discharge facility but did specifically notify ADNR that XSP, INC. would recycle its process water. 16. As a No-Discharge Facility, operating pursuant to the General Permit, XSP, INC., was prohibited from discharging effluent from the PCM into the Salmon River except from the following: an overflow of untreated wastewater resulting from a 5- year, 6-hour precipitation event; an upset; or a bypass. In accordance with the General Permit, if a discharge occurred during dry weather, XSP, INC. would be considered a discharging facility and subject to additional requirements. 17. The General Permit prohibited effluent discharges for Discharge Facilities during periods when new water was allowed to enter the plant site. Additionally, the Permit prohibited discharges as a result of the intake of new water. Page 8 of 28 Case 3:14-cr SLG-DMS Document 2 Filed 11/18/14 Page 8 of 28

9 18. The Clean Water Act required individuals and companies that have been issued permits to monitor their discharges to determine whether they comply with the pollution limits set forth in their permits. Individuals and companies that have been issued permits must regularly collect discharge samples and test those samples for pollutants that are covered by the permits. The samples must be representative of the volume and nature of the monitored discharge. These provisions of a Clean Water Act permit are called monitoring requirements. 19. The General Permit issued to XSP, INC. established the following monitoring and reporting requirements, among others, in the event of a discharge: i. Settleable solids are limited to 0.2 milliliters per liter and must be monitored by taking a grab sample once per day each day a discharge occurs. A grab sample is a single sample or measurement taken at a specific time. ii. Turbidity is limited to 5 nephelometric turbidity units ( NTUs above natural conditions and must be monitored by taking a grab sample at the point of discharge and upstream from the point of discharge, three times per week. iii. Flow must be monitored in gallons per minute, daily and instantaneously. 20. The General Permit required XSP, INC. to report the monitoring results to the EPA or ADEC on a regular basis. These reports are known as Discharge Monitoring Reports, commonly referred to as "DMRs." The monitoring results summarized in a DMR include the quantity or concentration levels for each of the pollutants covered by the permit. Page 9 of 28 Case 3:14-cr SLG-DMS Document 2 Filed 11/18/14 Page 9 of 28

10 21. Under the General Permit, XSP, INC. was required to collect and test grab samples for turbidity three times per week; to record the results of all samples collected and tested using the methods required by the permit; and to summarize the monitoring results monthly and report those results annually to the EPA or ADEC. Turbidity was limited to 5 NTUs above natural conditions, which, in the Salmon River, typically measured 2 NTUs or less. 22. Under the General Permit, XSP, INC. was required to record in its log books and to include in its monthly DMR any other sample results collected and tested using the methods required by the permit, in addition to the three samples required each week by General Permit Number AKG Under the General Permit, XSP, INC. was required to report to the EPA or ADEC any noncompliant sample results which showed violations that may endanger health or the environment as soon as it became aware of the circumstance. XSP, INC. also was required to report any violation of a maximum daily discharge limitation for any of the pollutants listed in its permit, in writing and in the shortest reasonable period of time after it became aware of the circumstances. Defendant s Knowledge of Regulatory Requirements and Mine Operations 24. On or about February 14, 2008, Defendant BUTCHER met with representatives from the BLM, ADFG, and Defendant XSP, INC. s environmental consultant and was advised of the importance of water quality, that discharges to the Salmon River must meet state water quality standards, and that the EPA and ADEC considered visibly turbid discharges from tailings to be regulated discharges. Page 10 of 28 Case 3:14-cr SLG-DMS Document 2 Filed 11/18/14 Page 10 of 28

11 25. On or about February 12, 2009, Defendants BUTCHER and BALFOUR received an from Defendant XSP, INC. s environmental consultant that explained that, if Defendant XSP, INC. filed a Notice of Intent to operate under the General Permit, then XSP, INC. agreed to operate the PCM within the provisions of the General Permit, a copy of which was attached to the On or about July 31, 2009, Defendant BUTCHER received an from Defendant XSP, INC. s environmental consultant that discussed permit compliance issues and advised Defendant BUTCHER to pay particular attention to the General Permit, which was attached to the On or about July 6, 2010, Defendants BUTCHER, BALFOUR, and SLADE received an from Defendant XSP, INC. s environmental consultant, stating that XSP, INC. s current mining plan indicated zero discharge to the Salmon River, and that if discharges were occurring, Defendant XSP, INC. needed to begin sampling in accordance with the General Permit. 28. On or about July 12, 2010, Defendants BUTCHER, BALFOUR, and SLADE received a report from XSP s environmental consultant that explained the significance of the mine s General Permit, its monitoring requirements, and the penalties associated with noncompliance. The next day, SLADE sent an to an XSP, INC., employee, with a copy to BUTCHER and BALFOUR, asking the employee to have a turbidimeter sent to the mine, asap [so] I can begin monitoring our Inconvenient Truth. A turbidimeter is a hand-held device that measures turbidity, or opacity, of a Page 11 of 28 Case 3:14-cr SLG-DMS Document 2 Filed 11/18/14 Page 11 of 28

12 water sample. On or about July 26, 2010, XSP, INC. first began using the hand-held turbidimeter, to monitor and record discharges to the Salmon River. 29. On or about July 30, 2010, Defendant BALFOUR received a letter from the EPA s NPDES Permit Manager with a copy of the General Permit attached and explaining that the General Permit s Annual Report must include any monitoring results or a report of No Mining or No Discharge, whichever was applicable. 30. On or about January 8, 2011, Defendant BUTCHER sent an with a subject line of Priorities to SLADE and copied BALFOUR, in which BUTCHER stated that, in order to maximize metals recovery for the 2011 mining season, XSP, INC. needed to have a standalone recovery room. BUTCHER included a list of required productionrelated equipment to purchase, but did not include a process water clarifier. A process water clarifier is used in the mining industry to remove settleable solids and other effluent from process water such that the water can be recycled back into the process plant and reused, rather than being discharged. Regarding the purchase of a process water clarifier, BUTCHER stated, while it is nice to have, it should be shelved. Later the same month, SLADE prepared a memo to BUTCHER entitled PCM Equipment List. In that memo, SLADE did not include the process water clarifier as an item that was planned to be installed at the PCM during the 2011 season. 31. On or about January 19, 2011, PATE sent an to BALFOUR, BUTCHER and SLADE that included a highlighted copy of XSP, INC. s General Permit, and which explained in detail what XSP, INC. s monitoring and reporting requirements were under that permit, including the discharge limits for turbidity, the prohibition of Page 12 of 28 Case 3:14-cr SLG-DMS Document 2 Filed 11/18/14 Page 12 of 28

13 discharge to waters of the United States, and the limitations on the use of fresh water entering the mining process. 32. On or about January 28, 2011, PATE received an from ADEC (in response to an earlier from PATE stating that XSP, INC. s Annual Report to ADEC must indicate whether or not the facility discharged. The further stated that, if the facility did discharge, monitoring results, as required in the permit, should be included in the Annual Report. 33. On or about March 1, 2011, BUTCHER, BALFOUR, and SLADE received an from XSP, INC. s environmental consultant, in which the consultant explained the monitoring and reporting requirements contained in the NPDES General Permit, and advised BUTCHER, BALFOUR, and SLADE not to withhold monitoring data required by the permit. 34. On or about August 20, 2011, during a meeting of the XSP, Ltd. Board of Directors, Defendant BUTCHER advised that the lack of a process water clarifier had exacerbated, if not caused [the] issue of XSP, INC. causing discharges from the PCM that exceeded the General Permit limits. 35. On or about August 26, 2011, SLADE wrote an to BUTCHER, BALFOUR, STAEHELI, and XSP, INC. s environmental manager, stating, in part, The turbidity level has been decreasing over the last few days because we are not currently overflowing the primary pond into pond #2 yet. That will likely happen in the next 24 to 48 hours based on our production. Once it does, the NTU levels will increase as #2 seeps Page 13 of 28 Case 3:14-cr SLG-DMS Document 2 Filed 11/18/14 Page 13 of 28

14 into the Salmon. SLADE further stated, The only permanent fix for this problem is a closed circuit water recycling facility, a clarifier or concrete pond system. History of Regulatory Enforcement 36. On August 10, 2011, a U.S. Fish and Wildlife Service ( FWS fisheries biologist flew over the PCM and the Salmon River and observed and photographed turbid water from the PCM to the mouth of the Salmon River at Kuskokwim Bay. On the same day, Defendant XSP, INC., measured turbidity at the point of discharge to be 554 NTUs, well in excess of the General Permit limit of 5 NTUs above background. The following day, the Alaska Department of Fish and Game ( ADFG notified Defendant XSP, INC., of the FWS observations. 37. Between August 23, 2011, and August 25, 2011, representatives from the BLM, FWS, U.S. Army Corps of Engineers, ADEC, and ADFG, conducted a compliance inspection, during which turbidity at the point of discharge was measured by an ADEC water quality specialist using a turbidimeter to be 468 NTUs. 38. On or about September 1, 2011, Defendant XSP, INC. received an Order of Noncompliance from the BLM, directing it to comply with ADEC water quality monitoring protocols. On September 2, 2011, Defendant XSP, INC. received a Notice of Violation from ADEC, requesting the company to immediately minimize or eliminate ongoing discharge to the Salmon River, such that there were no additional water quality violations. Page 14 of 28 Case 3:14-cr SLG-DMS Document 2 Filed 11/18/14 Page 14 of 28

15 COUNT ONE Conspiracy [18 U.S.C. 371] The Conspiracy and its Objects 39. Beginning on or about July 3, 2010, and continuing to on or about March 22, 2013, in the District of Alaska and elsewhere, Defendants XS PLATINUM, INC., BRUCE BUTCHER, MARK BALFOUR, ROBERT PATE, JAMES SLADE, and JAMES STAEHELI did knowingly combine, conspire, confederate, and agree, together and with others known and unknown to the Grand Jury, to commit acts in violation of the laws of the United States, namely: a. to knowingly violate the Clean Water Act, in violation of Title 33, United States Code, Section 1251, et. seq.; and b. to knowingly make a materially false, fictitious, and fraudulent statement and representation to the EPA and ADEC, and make and use a false writing or document, knowing the same to contain any materially false, fictitious, and fraudulent statement or entry, in violation of Title 18, United States Code, Section 1001 (a(2 and (3. The Purpose of the Conspiracy 40. During the period of time relevant to the charges in this Indictment, Defendants XS PLATINUM, INC., BRUCE BUTCHER, MARK BALFOUR, ROBERT PATE, JAMES SLADE, and JAMES STAEHELI and others known and unknown to the Grand Jury, knowingly operated the PCM in violation of the requirements of the General Page 15 of 28 Case 3:14-cr SLG-DMS Document 2 Filed 11/18/14 Page 15 of 28

16 Permit and Clean Water Act regulations as described above and further concealed those violations by making false material statements in order to save costs and avoid regulatory scrutiny. In order to achieve the objectives of the conspiracy, the Defendants: a. knowingly discharged a pollutant, namely effluent from a platinum mine, during periods when new water was allowed to enter the plant site and as a result of the intake of new water, in violation of the mine s National Pollutant Discharge Elimination System General Permit, in violation of Title 33, United States Code, Sections 1319(c(2(A and 1342(a; b. knowingly discharged a pollutant, namely effluent from a platinum mine, with turbidity more than five NTUs above natural conditions, in violation of the mine s National Pollutant Discharge Elimination System General Permit, in violation of Title 33, United States Code, Sections 1319(c(2(A and 1342(a; c. knowingly failed to report the unauthorized discharge of a pollutant, namely effluent from a platinum mine, with turbidity more than five NTUs above natural conditions, in violation of the mine s National Pollutant Discharge Elimination System General Permit, in violation of Title 33, United States Code, Sections 1319(c(2(A and 1342(a; d. knowingly failed to monitor for turbidity at the point of discharge three times per week and knowingly failed to maintain records of all information resulting from the same observations, in violation of the mine s National Pollutant Discharge Elimination System General Permit, in violation of Title 33, United States Code, Sections 1319(c(2(A and 1342(a; Page 16 of 28 Case 3:14-cr SLG-DMS Document 2 Filed 11/18/14 Page 16 of 28

17 e. knowingly failed to monitor daily for settleable solids representing the discharge, at a point prior to entering the receiving stream, in violation of the mine s National Pollutant Discharge Elimination System General Permit, in violation of Title 33, United States Code, Sections 1319(c(2(A and 1342(a; f. knowingly failed to monitor at least once per day each day a discharge occurred, effluent flow at the discharge prior to entering the receiving water, in violation of the mine s National Pollutant Discharge Elimination System General Permit, in violation of Title 33, United States Code, Sections 1319(c(2(A and 1342(a; g. knowingly made a material false statement, representation, or certification in a 2010 Annual Report to the Alaska Department of Environmental Conservation for placer mining at the Platinum Creek Mine that there was no discharge during 2010, a statement the defendants knew to be false, in violation of Title 33, United States Code, Sections 1319(c(4 and 1342(a; and h. knowingly and willfully made a materially false, fictitious, or fraudulent statement or representation, and made and used a false writing or document, knowing the same to contain any materially false, fictitious, and fraudulent statement or entry, in violation of Title 18, United States Code, Section 1001 (a(2 and (3. Overt Acts 41. In furtherance of the conspiracy, and in order to achieve its objects, the Defendants, along with others known and unknown to the Grand Jury, committed, or caused to be committed, the following acts in the District of Alaska or elsewhere, each constituting an overt act in furtherance of the conspiracy: Page 17 of 28 Case 3:14-cr SLG-DMS Document 2 Filed 11/18/14 Page 17 of 28

18 Overt Act 1. On or about July 3, 2010, PATE prepared a Daily Report that summarized the PCM s daily operations. In the report, PATE wrote that the mine was discharging turbid wastewater into ponds adjacent to the Salmon River and attached a photograph showing turbid wastewater from the ponds entering the Salmon River. Neither Defendant XSP, INC. nor PATE monitored or reported the discharge to the EPA or ADEC as required by the General Permit. Overt Act 2. On or about July 4, 2010, PATE directed XSP, INC. employees to dig an unpermitted ditch to allow the unauthorized drainage of mine wastewaters from the PCM directly into Squirrel Creek, a navigable water of the United States. Overt Act 3. On or about July 4, 2010, BUTCHER sent an electronic mail ( to SLADE with a copy to BALFOUR and PATE, urging concealment of permit violations. It stated, I would prefer that we not be engaging the regulators at this stage on our so-called 'zero-discharge' plant as all that will do is immediately raise expectations to the point that that will become today's standard. A standard that we cannot presently meet. A standard that we may never meet. A standard which if imposed will have serious implications for the project. We have known for some time about the turbidity and porosity matters that we need to address, and we need to continue to work responsibly at addressing them. But these things take time. We are not in a position to presently commit to the [process water] clarifier. Overt Act 4. On or about July 8, 2010, according to a Daily Report, BALFOUR observed a discharge of turbid wastewater into the Salmon River which he then knowingly failed to report to the EPA or ADEC as required by the General Permit. Page 18 of 28 Case 3:14-cr SLG-DMS Document 2 Filed 11/18/14 Page 18 of 28

19 Overt Act 5. On or about July 9, 2010, STAEHELI sent an to SLADE that stated that turbidity was in the Salmon River and reaching the ocean. Neither STAEHELI nor SLADE reported the turbidity to the EPA or ADEC as required by the General Permit. Overt Act 6. On or about July 29, 2010, SLADE ed BUTCHER, with a copy to BALFOUR, stating, [o]ur discharge halfway down our drainage to the fishing hole is in the 300 s right now I am concerned that when we double our production volume we may significantly effect [sic] the river prior to the final visit of BLM this October without this treatment [with a flocculent]. Neither SLADE, BUTCHER, nor BALFOUR reported the discharge to the EPA or ADEC as required by the General Permit. Overt Act 7. On or about and between September 1, 2010, and September 30, 2010, knowing that XSP, INC. was causing discharges to the Salmon River in excess of 5 NTUs above background, SLADE ed BUTCHER, BALFOUR and PATE, stating, among other things, that he is continuing to pound[] dirt through the plant, [t]he plant is running this morning at full throttle on Squirrel, and [t]he plant is running nonstop now. Neither SLADE, BUTCHER, BALFOUR, nor PATE reported the discharges to the EPA or ADEC as required by the General Permit. Overt Act 8. On or about July 26, 2010, through on or about October 31, 2010, XSP, INC. caused and measured or observed turbidity discharges exceeding NPDES General Permit limits, on 68 days, with a high of 329 NTUs, well above the 5 NTUs above background specified in the XSP, INC. NPDES General Permit. XSP, INC. did Page 19 of 28 Case 3:14-cr SLG-DMS Document 2 Filed 11/18/14 Page 19 of 28

20 not report these monitoring results to the EPA or ADEC as required by the General Permit. Overt Act 9. On or about November 8, 2010, BALFOUR and SLADE met with officials from BLM and informed BLM of XSP, INC. s plans to install a process water clarifier for the 2011 mining season. Such a clarifier could have enabled XSP, INC. to clean and recycle its process water and prevent discharges to the Salmon River. During this meeting, BALFOUR and SLADE did not inform the BLM that XSP, INC. and the PCM had multiple discharges in 2010 that exceeded the permit s turbidity limits. Overt Act 10. On or about January 31, 2011, PATE sent ADEC an that served as XSP, INC. s Annual Report for the 2010 mining season. PATE copied BUTCHER, BALFOUR, and SLADE on the . The stated that XSP, INC. had no discharge of waste water from the mine to the Salmon River or any other surface water, a statement that PATE, BUTCHER, BALFOUR, and SLADE knew was false. Overt Act 11. On or about February 9, 2011, BUTCHER, BALFOUR, and SLADE participated in a conference call with the BLM, FWS, and the United States Army Corps of Engineers regarding, among other things, the importance of Salmon River water quality. During this call, BUTCHER, BALFOUR, and SLADE did not inform the agencies that XSP, INC. and the PCM had multiple discharges in 2010 that exceeded the General Permit s turbidity limits. Overt Act 12. On or about April 11, 2011, BALFOUR submitted to the ADNR XSP, INC. s APMA for the 2011 season and asserted, After primary settling, the Page 20 of 28 Case 3:14-cr SLG-DMS Document 2 Filed 11/18/14 Page 20 of 28

21 process water will be returned by pumping to the water source pond for final settling, a statement that BALFOUR knew was false. Overt Act 13. On or about June 17, 2011, four days after obtaining its first recovery of platinum from the mine operations that season, XSP, INC. measured the first turbidity exceedances in the Salmon River for the 2011 season. XSP, INC. did not report the excess turbidity to the EPA or ADEC as required by the General Permit. Overt Act 14. On or about July 3, 2011, SLADE and STAEHELI received an e- mail originally written by an XSP, INC. employee, stating, [t]he turbidity levels at the fishing hole have now acceded [sic] legal limits. Last season the turbidity did not exceed the legal limits that far downstream until the 15 th of October. The plant is currently running one shift and double shifts will only be [sic] exacerbate the problem. The issue should be addressed before things get too out of hand. Perhaps the coagulant/flocculant dosages should be investigated further. Neither the XSP, INC. employee, SLADE or STAEHELI reported the excess turbidity to the EPA or ADEC as required by the General Permit. Overt Act 15. On or about July 7, 2011, BALFOUR and XSP, INC. s environmental manager, met with the BLM to discuss a revised Mining Plan of Operation ( MPO regarding XSP, INC. s proposed mine expansion. In that plan, XSP, INC. indicated that it was going to install a process water clarifier during the 2011 mining season, and that the process plant was designed with a full water recirculating wash system that will have only minor discharge. Discharge volumes are not expected to exceed 5% of the total process water utilized. In that MPO, XSP, INC., also stated Page 21 of 28 Case 3:14-cr SLG-DMS Document 2 Filed 11/18/14 Page 21 of 28

22 [w]ater quality monitoring is an integral part of the long range plan and vision for the PCM. XS Platinum views water quality, along with the complementary component of water quantity, as the life blood of the PCM and the surrounding area. During this meeting, BALFOUR did not inform the BLM that XSP, INC. and the PCM had multiple discharges in 2010 that exceeded the permit s turbidity limits. Overt Act 16. On or about July 26, 2011, SLADE ed BUTCHER and BALFOUR and wrote that XSP, INC. s new environmental manager had seen excess turbidity in the Salmon River and that the environmental manager was concerned that the PCM would be shut down by the BLM. SLADE also wrote that if XSP, INC. had any hope of passing the BLM visit in August, the settling ponds needed to be re-configured. Neither SLADE, BUTCHER, BALFOUR, nor XSP, INC. s environmental manager reported the excess turbidity to the EPA or ADEC as required by the General Permit. Overt Act 17. On or about August 11, 2011, the day after a U.S. Fish and Wildlife Service ( FWS fisheries biologist flew over the PCM and the Salmon River and observed and photographed turbid water from the PCM to the mouth of the Salmon River at Kuskokwim Bay, an XSP, INC. employee sent an to XSP, INC. s environmental manager with a copy to SLADE, attaching the turbidity monitoring results for 2011 and noting, As I mentioned, the turbidity numbers went through the roof. Neither the XSP, INC. employee, environmental manager, nor SLADE reported the turbidity monitoring results to the EPA or ADEC as required by the General Permit. Overt Act 18. On or about August 25, 2011, BALFOUR received an from XSP, INC. s environmental manager that stated, he [a FWS biologist] has requested our Page 22 of 28 Case 3:14-cr SLG-DMS Document 2 Filed 11/18/14 Page 22 of 28

23 monitoring data, so if you are okay with that, I will be sending it to him upon your approval. I do not see how we can avoid sending the data to him but there is a downside. The downside is it will show how long the monitoring results have been exceeding the permit limits. On or about August 26, 2011, BALFOUR responded to XSP, INC. s environmental manager, stating, Although I agree with your suggestion concerning our data, in principle, I would like to discuss that whole hydrology debacle with you before we do anything substantive. Neither XSP, INC., BALFOUR, nor the environmental manager reported the monitoring results to the EPA or ADEC as required by the General Permit. Overt Act 19. On or about September 8, 2011, less than a week after receiving the Notice of Violation from ADEC and knowing that XSP, INC. was causing discharges to the Salmon River in excess of 5 NTUs above background, SLADE wrote a memo to BUTCHER and BALFOUR, stating that the PCM would continue to produce 24/7 until the wheels fall off and that the major focus is to produce enough concentrate to exceed the [] contract this season. Neither XSP, INC., SLADE, BUTCHER, nor BALFOUR reported the discharges to the EPA or ADEC as required by the General Permit. Overt Act 20. From on or about September 1, 2011, through September 20, 2011, XSP, INC., caused and measured the average turbidity in the Salmon River to be 877 NTUs, while producing more than 680 ounces of platinum concentrate worth approximately $800,000. XSP, INC. did not report any excess turbidity to the EPA or ADEC as required by the General Permit. Page 23 of 28 Case 3:14-cr SLG-DMS Document 2 Filed 11/18/14 Page 23 of 28

24 Overt Act 21. On or about May 22, 2011, through on or about October 19, 2011, XSP, INC. caused and monitored or observed turbidity discharges in the Salmon River that exceeded General Permit limits on 90 days, with an average of 289 NTUs and 13 days when turbidity exceeded 1,000 NTUs, well above the 5 NTUs above background specified in the XSP, INC., General Permit. XSP, INC. did not report any excess turbidity to the EPA or ADEC as required by the General Permit. Overt Act 22. On or about June 13, 2011, through on or about October 10, 2011, XSP, INC. caused, but failed to monitor for, turbidity discharges that exceeded the General Permit limits on 37 days. Overt Act 23. On or about June 17, 2011, through October 5, 2011, XSP, INC. failed to submit to the EPA or ADEC the turbidity monitoring results for 2011 as required by the General Permit. As a result of the Conspiracy, Defendant XSP, INC. produced approximately 3,800 Troy Ounces of platinum concentrate containing platinum and other platinum group metals that Defendant XSP, INC. sold for approximately $3.2 million. All in violation of Title 18, United States Code, Section 371. COUNT TWO Violation of Clean Water Act Permit [33 U.S.C (c(2(a, 18 U.S.C. 2] 42. The allegations contained in Paragraphs 1 through 38 of this Indictment are realleged and incorporated herein as though set forth in full. Page 24 of 28 Case 3:14-cr SLG-DMS Document 2 Filed 11/18/14 Page 24 of 28

25 43. From on or about July 3, 2010, to October 31, 2010, in the District of Alaska and elsewhere, Defendants XS PLATINUM, INC., BRUCE BUTCHER, MARK BALFOUR, ROBERT PATE, JAMES SLADE, and others, knowingly violated a permit condition and limitation in a permit issued under Title 33, United States Code, Section 1342, by: discharging a pollutant, namely effluent from a platinum mine, with turbidity more than five NTUs above natural conditions; failing to report the unauthorized discharge of a pollutant, namely effluent from a platinum mine, with turbidity more than five NTUs above natural conditions; discharging a pollutant, namely effluent from a platinum mine, during periods when new water was allowed to enter the plant site and as a result of the intake of new water; failing to monitor for turbidity at the point of discharge at least three times per week; failing to monitor daily for settleable solids at a point prior to entering the receiving stream; and failing to monitor at least once per day each day a discharge occurred, effluent flow at the discharge prior to entering the receiving water. All in violation of Title 33 United States Code, Sections 1319(c(2(A and 1342(a and Title 18, United States Code, Section 2. COUNT THREE Violation of Clean Water Act Permit [33 U.S.C (c(2(a, 18 U.S.C. 2] 44. The allegations contained in Paragraphs 1 through 38 of this Indictment are realleged and incorporated herein as though set forth in full. Page 25 of 28 Case 3:14-cr SLG-DMS Document 2 Filed 11/18/14 Page 25 of 28

26 45. From on or about June 17, 2011, to October 19, 2011, in the District of Alaska and elsewhere, Defendants XS PLATINUM, INC., BRUCE BUTCHER, MARK BALFOUR, JAMES SLADE, JAMES STAEHELI, and others, knowingly violated a permit condition and limitation in a permit issued under Title 33, United States Code, Section 1342, by: discharging a pollutant, namely effluent from a platinum mine, with turbidity more than five NTUs above natural conditions; failing to report the unauthorized discharge of a pollutant, namely effluent from a platinum mine, with turbidity more than five NTUs above natural conditions; and discharging a pollutant, namely effluent from a platinum mine, during periods when new water was allowed to enter the plant site and as a result of the intake of new water. All in violation of Title 33, United States Code, Sections 1319(c(2(A and 1342(a and Title 18, United States Code, Section 2. COUNT FOUR Submission of False Report [33 U.S.C (c(4, 18 U.S.C. 2] 46. The allegations contained in Paragraphs 1 through 38 of this Indictment are realleged and incorporated herein as though set forth in full. 47. On or about January 31, 2011, in the District of Alaska and elsewhere, Defendants XS PLATINUM, INC., BRUCE BUTCHER, MARK BALFOUR, JAMES SLADE and ROBERT PATE did knowingly make a false material statement, representation, or certification in a required report, to wit, the defendants did state to the Alaska Department of Environmental Conservation in the 2010 Annual Report for placer Page 26 of 28 Case 3:14-cr SLG-DMS Document 2 Filed 11/18/14 Page 26 of 28

27 mining at the Platinum Creek Mine that there was no discharge during 2010, a statement the defendants knew to be false. All in violation of Title 33, United States Code, Sections 1319(c(4 and 1342(a and Title 18, United States Code, Section 2. COUNT FIVE False Statement [18 U.S.C (a(2, 18 U.S.C. 2] 48. The allegations contained in Paragraphs 1 through 38 of this Indictment are realleged and incorporated herein as though set forth in full. 49. On or about April 11, 2011, in the District of Alaska and elsewhere, Defendants XS PLATINUM, INC., and MARK BALFOUR, did knowingly and willfully make a materially false, fictitious, and fraudulent statement and representation in a matter within the jurisdiction of the executive branch of the Government of the United States, by submitting to the Alaska Department of Natural Resources XSP, INC. s, Alaska Placer Mining Application for the 2011 season, that also served as XSP, INC. s Application and Notice of Intent to the United States Environmental Protection Agency to operate the Platinum Creek Mine under a National Pollutant Discharge Elimination System General Permit for mechanical placer mining operations. The Application stated, After primary settling, the process water will be returned by pumping to the water source pond for final settling, when XS PLATINUM, INC. and MARK BALFOUR then and there knew the statement and representation was false. Page 27 of 28 Case 3:14-cr SLG-DMS Document 2 Filed 11/18/14 Page 27 of 28

28 All in violation of Title 18, United States Code, Sections 1001(a(2 and Title 18, United States Code, Section 2. A TRUE BILL: s/ Grand Jury Foreperson GRAND JURY FOREPERSON s/ Todd S. Mikolop for Kevin Feldis Assistant United States Attorney s/ Todd S. Mikolop Todd S. Mikolop Trial Attorney Environmental Crimes Section s/ Karen L. Loffler KAREN LOEFFLER United States Attorney DATE: Page 28 of 28 Case 3:14-cr SLG-DMS Document 2 Filed 11/18/14 Page 28 of 28