The Lava Cap Mine is located about 6 km east of the city of Grass Valley, Nevada County, California, at an elevation of about 900 m. Gold was hosted in quartz-carbonate veins typical of the Sierran Gold Belt, but the gold grain size was smaller and the abundance of sulfide minerals higher than in typical deposits. The vein system was discovered in 1860, but production was sporadic until the 1930s when two smaller operations on the site were consolidated, a flotation mill was built, and a 100-foot deep adit was driven to facilitate drainage and removal of water from the mine workings, which extended to 366 m. Peak production at the Lava Cap occurred between 1934 and 1943, when about 90,000 tons of ore per year were processed. To facilitate removal of the gold and accessory sulfide minerals, the ore was crushed to a very fine sand or silt grain size for processing. Mining operations at Lava Cap ceased in June 1943 due to War Production Board Order L-208 and did not resume after the end of World War II.

Two tailings retention structures were built at the Lava Cap Mine. The first was a log dam located about 0.4 km below the flotation mill on Little Clipper Creek, and the second, built in 1938, was a larger earth fill and rip-rap structure constructed about 2 km downstream, which formed the water body now called Lost Lake. The log dam failed during a storm that began on December 31, 1996, and continued into January 1997; an estimated 8,000-10,000 m³ of tailings were released into Little Clipper Creek during this event. Most of the fine tailings were deposited in Lost Lake, dramatically increasing its turbidity and resulting in a temporary 1-1.5 m rise in lake level due to debris blocking the dam spillway. When the blockage was cleared, the lake level quickly lowered, leaving a "bathtub ring" of very fine tailings deposited substantially above the water line. The U.S. Environmental Protection Agency (EPA) initiated emergency action in late 1997 at the mine site to reduce the possibility of future movement of tailings, and began an assessment of the risks posed by physical and chemical hazards at the site.

The EPA's assessment identified arsenic (As) as the primary hazard of concern. Three main exposure routes were identified: inhalation/ingestion of mine tailings, dermal absorption/ingestion of As in lake water from swimming, and ingestion of As-contaminated ground water or surface water. Lost Lake is a private lake which is completely surrounded by low-density residential development. Prior to the dam failure, the lake was used by the local residents for swimming and boating. An estimated 1,776 people reside within one mile of the lake, and almost all residents of the area use potable groundwater for domestic use. Risk factors for human exposure to As derived from mine wastes were high enough to merit placement of the mine site and surrounding area on the National Priority List (commonly called "Superfund").

The Lava Cap Mine Superfund site (LCMS) encompasses approximately 33 acres that include the mine site, the stretch of Little Clipper Creek between the mine and Lost Lake, the lake itself, and the area between the lake and the confluence of Little Clipper Creek with its parent stream, Clipper Creek. The area between the two creeks is named the "deposition area" due to the estimated 24 m thick layer of tailings that were laid down there during and after active mining. The lobate structure of Lost Lake is also due to deposition in this area. The deposition area and Lost Lake are together estimated to contain 382,277 m³ of tailings.

The primary goals of the EPA have been to minimize tailings movement downstream of Lost Lake and to ensure that residents in the area have drinking water that meets national water quality standards. EPA has officially decided to construct a public water supply line to deliver safe water to affected residences, since some residential wells in the area have As concentrations above the current drinking water standard (10 ppb). However, some deeper monitoring wells in the deposition
area have As concentrations that are as much as 100 times the As drinking water standard (EPA, 2001). Fracture-dominated groundwater flowpaths complicate measurement of the rate and direction of groundwater flow in the area. Investigations of groundwater movement at the LCMS are planned by the EPA, but have not been undertaken at the time of this writing.