Contract analysis

I. Executive Summary This memorandum presents the findings of a joint analysis conducted by Calderwood & Harkness LLP and Hargrove Forensic Advisory LLC examining the pricing behavior of Torchlight Mining Corp. ("TMC") in the U.S. specialty-minerals market relative to the pricing behavior of its two principal competitors, Ridgecrest Minerals Inc. ("Ridgecrest") and Pinnacle Earth Resources Ltd. ("Pinnacle"), over the

II. Scope and Methodology A. Engagement Background Hargrove Forensic Advisory LLC ("Hargrove") was retained by Calderwood & Harkness LLP on July 1, 2022, under Kovel protections, to provide forensic economic advisory services in connection with the DOJ Antitrust Division's grand jury investigation of pricing practices in the U.S. specialty-minerals market. The engagement was authorized by TMC's General Counsel, Rebec

III. Market Overview A. Industry Structure The North American specialty-minerals market for high-purity feldspar, industrial talc, and rare-earth concentrates is a highly concentrated market in which a small number of producers account for a substantial share of total U.S. supply. This concentrated structure is relevant to the pricing analysis because, as noted in Section II.D, some degree of pricing correlation is e

IV. Pricing Analysis Results This section presents the detailed results of the pricing analysis for each of the three product categories. For each product, results are reported for each of the three analytical windows: the pre-conspiracy baseline (January 2015 – December 2016), the alleged conspiracy period (January 2017 – August 2021), and the post-conspiracy period (September 2021 – September 2022). Detailed data t

1. Pre-Conspiracy Period (January 2015 – December 2016) During the pre-conspiracy baseline period, TMC and Ridgecrest feldspar prices exhibited a moderate positive correlation, with a Pearson correlation coefficient of approximately r ≈ 0.52. This level of correlation is consistent with the two firms operating in the same concentrated market, responding to common input cost fluctuations (particularly energy and trans

2. Alleged Conspiracy Period (January 2017 – August 2021) The pricing relationship between TMC and Ridgecrest feldspar changed markedly during the alleged conspiracy period. The Pearson correlation coefficient between TMC and Ridgecrest feldspar prices increased from approximately 0.52 in the baseline period to approximately 0.91 during the conspiracy period, a difference that is statistically significant at the p <

3. Post-Conspiracy Period (September 2021 – September 2022) Following Gavin Holt's departure from TMC, effective September 30, 2021, and the approximate cessation of the alleged conspiracy in August 2021, the pricing relationship between TMC and Ridgecrest feldspar reverted toward the pre-conspiracy baseline. The Pearson correlation coefficient declined from approximately 0.91 during the conspiracy period to approxim

1. Pre-Conspiracy Period (January 2015 – December 2016) The TMC-Ridgecrest price correlation for industrial talc during the pre-conspiracy baseline period was somewhat higher than for feldspar, with a Pearson r ≈ 0.58 and a Spearman ρ ≈ 0.55. This higher baseline correlation reflects several features of the industrial talc market: the number of significant market participants is smaller than in the feldspar market, t

2. Alleged Conspiracy Period (January 2017 – August 2021) During the alleged conspiracy period, the TMC-Ridgecrest talc price correlation increased from the baseline level of approximately 0.58 to approximately 0.88 (p < 0.001). The TMC-Pinnacle talc price correlation increased from approximately 0.44 to approximately 0.79 (p < 0.001). Both increases are statistically significant and economically substantial, indicat

3. Post-Conspiracy Period (September 2021 – September 2022) The TMC-Ridgecrest talc price correlation declined to approximately Pearson r ≈ 0.50 during the post-conspiracy period, approaching the pre-conspiracy baseline of approximately 0.58. The TMC-Pinnacle talc price correlation declined to approximately Pearson r ≈ 0.41, closely approximating its pre-conspiracy level of 0.44. As with the feldspar analysis, the di

1. Pre-Conspiracy Period (January 2015 – December 2016) Rare-earth concentrate pricing is inherently more volatile than feldspar or talc pricing due to the influence of geopolitical factors, global supply-chain dynamics (particularly the dominance of Chinese production), and the relatively small size of the North American spot market. This heightened volatility has implications for the interpretation of correlation c

2. Alleged Conspiracy Period (January 2017 – August 2021) During the alleged conspiracy period, the TMC-Pinnacle rare-earth price correlation increased from the baseline level of approximately 0.61 to approximately 0.85 (p < 0.001). The TMC-Ridgecrest rare-earth correlation increased from approximately 0.33 to approximately 0.62 (p < 0.05), a more modest increase consistent with Ridgecrest's smaller role in the rare-

3. Post-Conspiracy Period (September 2021 – September 2022) During the post-conspiracy period, the TMC-Pinnacle rare-earth correlation declined to approximately Pearson r ≈ 0.55, representing a partial but meaningful reversion toward the pre-conspiracy baseline of approximately 0.61. The fact that the post-conspiracy correlation (0.55) is slightly below the pre-conspiracy baseline (0.61) may reflect ongoing market tu

V. Structural Break Analysis — Detailed Results The structural break analysis was designed to test whether the pricing dynamics between TMC and its competitors changed at specific points in time, and whether those change points align with the alleged conspiracy start and end dates. Two complementary methodologies were employed: the Chow test, which tests for a structural break at a specified date, and the Bai-Perron

VI. Event Study — VaultChat Communications and Price Changes A. Methodology The event study analysis was designed to examine whether TMC pricing events — specifically, the dates on which TMC published changes to its posted prices for high-purity feldspar, industrial talc, or rare-earth concentrates — were temporally associated with documented VaultChat communications between Gavin Holt and Carl Edgerton (Ridgecrest)

VII. Regression Analysis — Controlling for Market Factors A. Model Specification To distinguish between pricing correlation attributable to common market factors and pricing correlation potentially attributable to coordinated behavior, Hargrove estimated a series of OLS regression models for each product category. The models were specified as follows: Dependent Variable: Monthly average TMC price for the relevant pro