Contract analysis

I. Executive Summary On May 20, 2022, Torchlight Mining Corp. ("TMC" or the "Company") received a target letter (the "Target Letter") from the Antitrust Division of the United States Department of Justice ("DOJ"), San Francisco Field Office, in connection with Grand Jury Investigation No. GJ-22-0194 (the "Investigation"), pending before the United States District Court for the Northern District of California, San Fra

II. Background and Procedural History A. Opening of the Investigation The DOJ Antitrust Division formally opened Grand Jury Investigation No. GJ-22-0194 on or about February 10, 2022. The Investigation is being conducted through the DOJ's San Francisco Field Office, which has jurisdiction over antitrust matters originating in the Western United States, and is proceeding before a grand jury empaneled in the Northern D

III. Legal Significance of the Target Letter A. Definition of "Target" Under DOJ Policy The DOJ's policies governing grand jury investigations, now codified in the Justice Manual (formerly the U.S. Attorneys' Manual), establish three categories of persons in relation to a grand jury investigation: targets, subjects, and witnesses. The relevant provision, Justice Manual § 9-11.151, defines these categories as follows:

IV. Assessment of TMC's Potential Exposure A. Criminal Exposure — Sherman Act Violations

Section 1 of the Sherman Antitrust Act, 15 U.S.C. § 1, makes it a felony to enter into any contract, combination, or conspiracy in restraint of trade or commerce among the several states, or with foreign nations. The Supreme Court has long held that certain categories of agreements among competitors are so plainly anticompetitive that they are deemed illegal per se, without any inquiry into whether they unreasonably

V. TMC's Strategic Options TMC faces four principal strategic options in responding to the Target Letter and the broader Investigation. We set forth each option below, together with our assessment of its advantages, disadvantages, and suitability. A. Option 1: Proactive Cooperation with DOJ Description. Under this option, TMC would pursue a strategy of proactive, comprehensive cooperation with the DOJ Antitrust Divis

VI. Key Considerations Regarding Gavin Holt The position of Gavin Holt requires careful attention and raises several interrelated issues that will affect TMC's strategy going forward. Employment Status and Absence of Corporate Control. Holt is a former TMC employee who resigned effective September 30, 2021. As a former employee, Holt is not subject to TMC's direction or control. TMC cannot compel Holt to participate

VII. Public Disclosure and Securities-Reporting Obligations TMC is subject to continuous-disclosure obligations under both Canadian and U.S. securities law, and the receipt of the Target Letter must be evaluated in light of those obligations. Prior Disclosure. TMC initially disclosed the existence of the DOJ Investigation in its FY 2021 annual report, filed on SEDAR+ and with the SEC on Form 40-F on March 28, 2022. T

VIII. Recommended Immediate Next Steps Based on the foregoing analysis, we recommend that TMC take the following actions on an expedited basis. A. Strategic Decision TMC should formally adopt Option 1 (Proactive Cooperation with DOJ) as its primary strategy for responding to the Target Letter and the Investigation. This strategy offers the best risk-adjusted outcome and positions TMC to pursue an NPA or DPA. We reque