Contract analysis

I. Executive Summary On November 1, 2023, the United States Department of Justice, Antitrust Division, through Trial Attorney Denise Kowalski and Senior Trial Attorney Marcus Reeves of the San Francisco Field Office, communicated to Calderwood & Harkness its willingness to negotiate a non-prosecution agreement ("NPA") with Torchlight Mining Corp. ("TMC" or "the Company") in resolution of the grand jury investigation

II. Privileged Nature of This Memorandum This memorandum is protected by the attorney-client privilege and constitutes attorney work product prepared in anticipation of litigation within the meaning of Federal Rule of Civil Procedure 26(b)(3) and applicable state-law equivalents. It reflects the legal analysis, mental impressions, and strategic assessments of counsel and is being provided to the Board of Directors of

III. Background and Current Posture of the Investigation A. Investigation Origins and Timeline The DOJ Antitrust Division formally opened its investigation on February 10, 2022, when it empaneled Grand Jury No. GJ-22-0194 in the United States District Court for the Northern District of California, San Francisco Division. The investigation was initiated by the San Francisco Field Office of the Antitrust Division and h

IV. DOJ's Communication of Willingness to Negotiate NPA A. The November 1, 2023 Communication On November 1, 2023, Trial Attorney Denise Kowalski of the DOJ Antitrust Division, San Francisco Field Office, communicated to Elaine Forsythe of Calderwood & Harkness by telephone that the DOJ is prepared to negotiate a non-prosecution agreement with TMC. Senior Trial Attorney Marcus Reeves also participated in the call. Th

V. Anticipated NPA Terms Based on Calderwood & Harkness's experience with DOJ Antitrust Division NPAs and DPAs, our analysis of the specific facts of this investigation, and our discussions with the DOJ to date, we anticipate that the NPA will include the following principal terms. Each is discussed in detail below. A. Monetary Payment The DOJ Antitrust Division applies a standard methodology for calculating monetary

VI. Financial Impact Assessment A. Monetary Payment Impact The estimated monetary payment of USD 45–50 million would be payable to the United States Treasury within sixty (60) days of the execution of the NPA. This is the standard payment timeline in DOJ Antitrust Division NPAs, and Calderwood & Harkness does not anticipate that the DOJ will agree to a longer payment period absent exceptional circumstances. TMC's cur

VII. Recommended Negotiation Strategy A. Negotiation Objectives Calderwood & Harkness recommends that the following negotiation objectives guide TMC's approach to the NPA negotiations:

1. Monetary Payment. Target a payment in the range of USD 45–50 million, representing approximately 47–52% cooperation credit against the USD 95.6 million starting-point penalty. To support this target, Calderwood & Harkness will argue for maximum credit based on TMC's voluntary cooperation, the thoroughness of its internal investigation, the voluntary proffer sessions of Chu and Eriksen, and the Company's proactive

2. Cooperation Period. The cooperation period should be no more than three years from the date of NPA execution. A three-year period is consistent with recent DOJ antitrust precedent and provides the DOJ with adequate time to complete its related investigations while limiting the duration of TMC's ongoing obligations.

3. Compliance Monitor. The monitor term should be two years maximum. Meridian Compliance Partners LLC should be proposed as the approved monitor, and the monitor's scope should be limited to antitrust-compliance matters. The monitor should not have authority to review or opine on general corporate governance, financial controls, or matters unrelated to the antitrust compliance program.

4. No-Prosecution Protections. The NPA's no-prosecution protections should cover TMC, all of its subsidiaries (including Torchlight Mining (U.S.) Inc.), and all current TMC employees, with the Holt carve-out accepted. Calderwood & Harkness will seek to ensure that the no-prosecution protections are as comprehensive as possible and that they survive the expiration of the NPA term.

5. Agreed Statement of Facts. The SOF should avoid language constituting a corporate admission of criminal liability. Conduct should be attributed to individual actors, primarily Gavin Holt. Factual recitations should be narrow and accurate, limited to the specific products, customers, and time period at issue. Calderwood & Harkness will resist any DOJ effort to include broad corporate-responsibility language or char

6. Material-Breach Standard. The NPA should include a clearly defined material-breach standard, specifying what conduct would constitute a breach and providing TMC with notice-and-cure provisions before the DOJ may terminate the agreement and proceed with prosecution. The notice period should be no less than thirty (30) days, and TMC should have the right to respond to any alleged breach in writing before the DOJ mak

VIII. Status of Co-Subjects / Related Matters For the Board's awareness, the following is a summary of the status of the investigation with respect to the other entities and individuals involved: Ridgecrest Minerals Inc. Ridgecrest is separately represented by Davenport, Kline & Archer LLP, with partner Helen Marchetti serving as lead counsel. The status of Ridgecrest's negotiations with the DOJ is unknown to Calderw

IX. Board Action Items and Requested Authorization A. Immediate Authorization Requested The Board is respectfully asked to authorize Søren Dalmqvist (CEO) and Priya Anand (General Counsel) to direct Calderwood & Harkness to proceed with NPA negotiations within the parameters described in Section VII above. This authorization would empower management and counsel to engage in substantive negotiations with the DOJ upon

X. Conclusion The DOJ Antitrust Division's willingness to negotiate a non-prosecution agreement represents the most favorable realistic outcome for Torchlight Mining Corp. in this investigation. An NPA will resolve the matter without the filing of criminal charges, without a corporate conviction, and without the severe collateral consequences that would accompany an indictment, a deferred prosecution agreement, or a