Contract analysis

I. PURPOSE AND SCOPE The purpose of this memorandum is to summarize and analyze all pending, threatened, and recently settled litigation and other contingent liabilities involving Torchlight Mining Corp. ("TMC" or the "Company") and its subsidiaries — specifically, Wolverine Lake Mining Ltd. ("WLML"), Torchlight Milling & Processing Inc. ("TMPI"), and Torchlight U.S. Holdings, Inc. ("TUSHI") — in connection with the

1. Offering Memorandum Disclosure. We assess the materiality of each identified matter for purposes of disclosure in the Offering Memorandum, including both the Preliminary Offering Memorandum circulated to prospective investors on February 4, 2022 (the "Preliminary OM") and the Final Offering Memorandum dated March 14, 2022 (the "Final OM"). Our analysis addresses whether each identified matter warrants specific dis

2. Purchase Agreement Representations and Warranties. We assess the potential impact of identified litigation and contingencies on the representations and warranties contained in the Purchase Agreement executed March 29, 2022 (the "Purchase Agreement") among TMC (as Issuer), WLML, TMPI, and TUSHI (as Guarantors, and together with the Issuer, the "Obligors"), and the Initial Purchasers: Kelvantis Capital Markets LLC,

3. Indenture Event of Default Analysis. We evaluate whether any litigation or contingency constitutes, or could reasonably be expected to constitute, an Event of Default under the Indenture dated as of April 19, 2022 (the "Indenture") among TMC, the Guarantors, and Northern Dominion Trust Company, as Trustee and Collateral Agent (the "Trustee"). 4. 10b-5 / Negative Assurance Analysis. This memorandum is intended to i

II. SOURCES AND METHODOLOGY A. Document Review Our document review was conducted in multiple phases, commencing with the initial due diligence request list issued to TMC on January 24, 2022 and continuing through the Closing Date. The principal documents and materials reviewed are summarized below. Officer and Director Questionnaires. We reviewed completed officer and director questionnaires from the following indivi

III. SUMMARY OF FINDINGS — OVERVIEW TABLE Set forth below is a summary table listing each identified matter, together with key classification information, exposure estimates, accrual status, and our materiality assessment. The detailed analysis of each matter follows in Sections IV through VI of this memorandum. Summary by Category: Overall Conclusion. Based on our review, no individual pending or threatened matter,

IV. PENDING LITIGATION A. Employment and Labor Matters

1. Wrongful Dismissal Claim — Former Mine Supervisor Claimant: A former mine shift supervisor at the Wolverine Lake mine site (name redacted for purposes of this memorandum in accordance with privilege protocols). Defendant: Wolverine Lake Mining Ltd. Forum: Ontario Superior Court of Justice, Thunder Bay. Date Filed: Approximately mid-2021 (Statement of Claim issued in or around June 2021). Allegations: The claimant

2. Grievance Arbitrations — Collective Agreement Matters Parties: United Steelworkers local (the "Union") representing hourly employees at WLML and TMPI, on behalf of various individual grievors. Forum: Arbitration proceedings conducted under the grievance and arbitration provisions of the collective bargaining agreements between the Union and WLML and between the Union and TMPI, respectively. Nature of Grievances: A

3. Ontario Ministry of the Environment Compliance Order — Tailings Management Issuing Authority: Ontario Ministry of the Environment, Conservation and Parks ("MOECP"). Recipient: Wolverine Lake Mining Ltd. Nature of Order: In approximately late 2020, a Provincial Officer issued a Provincial Officer's Order (the "Compliance Order") under the Ontario Environmental Protection Act ("EPA") requiring WLML to implement enha

4. Fisheries Act Investigation (Federal) Nature: In 2021, officers of Environment and Climate Change Canada ("ECCC") conducted a routine compliance inspection at the Wolverine Lake mine site regarding water discharge into fish-bearing waterways. The inspection was conducted under the federal Fisheries Act, which prohibits the deposit of deleterious substances into waters frequented by fish. The Wolverine Lake propert

5. Dispute with Former Drilling Contractor Claimant: A former underground drilling services contractor engaged by WLML to provide diamond drilling and related services at the Wolverine Lake mine site (name redacted in accordance with privilege protocols; the "Contractor"). Defendant: Wolverine Lake Mining Ltd. Forum: Ontario Superior Court of Justice, Thunder Bay. Date Filed: The Contractor's Statement of Claim was i

6. Equipment Lien Dispute Nature: A dispute arose between WLML and a heavy equipment supplier (the "Supplier") regarding the Supplier's assertion of retention of title and/or lien claims on certain pieces of underground mining equipment that had been delivered to the Wolverine Lake mine site. The Supplier asserted that full payment had not been received for the equipment and that it was entitled to assert a lien or r

7. Workplace Injury Claims Statutory Framework. WLML and TMPI operate in the Province of Ontario, where workplace injuries sustained by workers in the mining sector are generally covered by the statutory workers' compensation scheme administered by the Workplace Safety and Insurance Board ("WSIB"). Under the Ontario Workplace Safety and Insurance Act, 1997 ("WSIA"), employers who are covered by the WSIB scheme are af

8. Canada Revenue Agency Audit — Transfer Pricing Nature of Audit. The Canada Revenue Agency ("CRA") commenced a limited-scope audit of TMC's transfer pricing arrangements with Torchlight U.S. Holdings, Inc. for the FY 2019 and FY 2020 taxation years. The audit is focused on the intercompany pricing applied to nickel and copper concentrate marketing and offtake arrangements between the Canadian operations (WLML and T

9. First Nations Consultation Claim — Threatened Nature of Claim. In late 2021, counsel for a First Nations community (the "First Nation") located in proximity to the Wolverine Lake mine site sent a demand letter (the "Demand Letter") to TMC and WLML asserting that TMC had failed to adequately consult with the First Nation in connection with the planned Phase II expansion of the Wolverine Lake mine. The Phase II expa

10. Potential Product Quality / Off-Spec Concentrate Claim Nature. A customer of TMC/WLML raised informal complaints in Q3 2021 regarding alleged off-specification nickel concentrate deliveries. The customer asserted that certain shipments of nickel concentrate did not meet the contractual quality specifications with respect to grade and/or deleterious element content. Status. No formal demand letter, notice of claim

VI. RECENTLY SETTLED MATTERS (PAST 24 MONTHS) The following matters have been settled or otherwise resolved within the 24 months preceding the Closing Date. They are included in this memorandum for completeness and to confirm that no residual liabilities or obligations remain outstanding that could affect the Offering or the collateral package.

11. Surface Rights Access Dispute — Settled Nature. A dispute arose between WLML and a private landowner (the "Landowner") regarding surface access rights for exploration activities on a portion of the Wolverine Lake property. The Landowner asserted that WLML did not have valid surface rights to certain parcels of land overlying WLML's mineral claims and that WLML's exploration activities (including drill pad constru

12. Employment Class/Group Action Threat — Withdrawn Nature. In mid-2020, a group of approximately 15 former contract workers at the Wolverine Lake mine site sent a demand letter to TMC through counsel, alleging that they had been misclassified as independent contractors rather than employees. The demand letter threatened class proceedings under the Ontario Class Proceedings Act, 1992, seeking a declaration of employ

VII. CONTINGENT LIABILITIES — FINANCIAL STATEMENT ANALYSIS We have reviewed the audited consolidated financial statements of TMC for the fiscal years ended December 31, 2019, December 31, 2020, and December 31, 2021, as audited by Aldgate Thornton LLP (engagement partner: Francesca Hui, CPA, CA), with specific focus on the disclosures relating to litigation-related accruals and contingent liabilities in the notes to

VIII. INSURANCE COVERAGE SUMMARY TMC and its subsidiaries maintain a comprehensive insurance program that provides coverage relevant to the litigation and contingent liability matters identified in this memorandum. The following is a high-level summary of the key policies: General Commercial Liability Insurance. TMC maintains a general commercial liability insurance policy providing coverage for third-party bodily in