Contract analysis

ARTICLE 1 — INTERPRETATION AND DEFINITIONS

Section 1.1 — Definitions In this Agreement, unless the context otherwise requires, the following terms shall have the following meanings: "Accounts" means all accounts, accounts receivable, book debts, and other forms of monetary obligations now or hereafter owing to any Grantor, whether or not earned by performance, and all rights of any Grantor to receive any payment of money or other form of consideration, includ

Section 1.2 — PPSA Definitions Terms defined in the PPSA (Ontario) and used but not otherwise defined in this Agreement shall have the respective meanings given to them in the PPSA (Ontario). Where the PPSA of a jurisdiction other than Ontario is applicable to the perfection, priority, or enforcement of the Security Interest in any Collateral, reference to terms defined in the PPSA shall be deemed to be references to

Section 1.3 — Rules of Interpretation In this Agreement, unless the context otherwise requires: (a) headings are inserted for convenience of reference only and shall not affect the construction or interpretation of this Agreement; (b) words importing the singular include the plural and vice versa, and words importing any gender include all genders; (c) references to "dollars" or "$" mean United States dollars unless

Section 1.4 — Conflict with Indenture and Collateral Agency Agreement In the event of any conflict or inconsistency between any provision of this Agreement and any provision of the Indenture or the Collateral Agency Agreement, the applicable provisions of the Indenture or the Collateral Agency Agreement shall prevail to the extent of such conflict or inconsistency. Nothing in this Agreement shall be construed to limi

ARTICLE 2 — GRANT OF SECURITY INTEREST

Section 2.1 — Security Interest As general and continuing collateral security for the due and punctual payment and performance of all Secured Obligations, each Grantor hereby grants, assigns, conveys, mortgages, pledges, hypothecates, and charges to and in favour of the Collateral Agent, for the benefit of the holders of the Notes and the Trustee, a first-priority security interest in all of such Grantor's present an

Section 2.2 — Excluded Property Notwithstanding the provisions of Section 2.1, the "Collateral" shall not include the following (collectively, "Excluded Property"): (a) any contract, permit, licence, authorization, or agreement to the extent that the grant of a security interest therein is prohibited by the express terms thereof or by applicable law, but only to the extent that such prohibition is valid and enforceab

Section 2.3 — Attachment Each Grantor acknowledges and confirms that: (a) value has been given by the Collateral Agent and the holders of the Notes in connection with the transactions contemplated by the Indenture and this Agreement; (b) such Grantor has rights in the Collateral or the power to transfer rights in the Collateral to the Collateral Agent; and (c) the Security Interest has attached to the Collateral and,

Section 2.4 — Purpose of Security The Security Interest secures the due and punctual payment and performance of all Secured Obligations, including without limitation all principal, interest (including post-petition interest to the extent permitted by applicable law), premium (if any), fees, costs, charges, expenses, and indemnification obligations owing by the Grantors under or in connection with the Notes, the Inden

ARTICLE 3 — REPRESENTATIONS AND WARRANTIES Each Grantor hereby represents and warrants to the Collateral Agent, for the benefit of the holders of the Notes and the Trustee, as follows, as of the date hereof:

Section 3.1 — Organization and Good Standing (a) Torchlight Mining Corp. is a corporation duly incorporated, validly existing, and in good standing under the Canada Business Corporations Act, R.S.C. 1985, c. C-44. Its registered office is located at 1600 – 925 West Georgia Street, Vancouver, British Columbia V6C 3L2, Canada, and its headquarters and principal place of business is located at 2200 – 400 Burrard Street,

Section 3.2 — Power and Authority Each Grantor has full corporate power and authority to execute, deliver, and perform its obligations under this Agreement and to grant the Security Interest contemplated hereby. Each Grantor has full corporate power and authority to own, hold, and operate its properties and to carry on its business as presently conducted.

Section 3.3 — Authorization The execution, delivery, and performance of this Agreement and the granting of the Security Interest have been duly authorized by all necessary corporate action on the part of each Grantor, including resolutions of the board of directors of each Grantor approving and authorizing the execution, delivery, and performance of this Agreement, the granting of the Security Interest, and the consu

Section 3.4 — Enforceability This Agreement has been duly executed and delivered by each Grantor and constitutes a legal, valid, and binding obligation of each Grantor, enforceable against each Grantor in accordance with its terms, subject to: (a) applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, and similar laws of general applicability affecting the enforcement of creditors' righ

Section 3.5 — No Conflict The execution, delivery, and performance of this Agreement and the granting of the Security Interest do not and will not: (a) contravene, conflict with, or result in any violation or breach of, any provision of the articles of incorporation, articles of amalgamation, by-laws, or other constating documents of any Grantor; (b) contravene, conflict with, or result in a violation or breach of, a

Section 3.6 — Title to Collateral Each Grantor is the sole legal and beneficial owner of all of its Collateral, free and clear of all liens, claims, charges, encumbrances, and security interests of any kind, except for: (a) the Security Interest created under this Agreement; and (b) Permitted Liens. Each Grantor has good and valid title to, or valid leasehold interests in, all of its tangible Collateral, and has the

Section 3.7 — Mining Rights (a) Torchlight Mining Corp. and/or Wolverine Lake Mining Ltd. hold valid and subsisting mining rights, mineral claims, and surface rights comprising Ontario Mining Claim Nos. WL-4492-01 through WL-4492-47, covering an aggregate area of approximately 12,400 hectares located at the Wolverine Lake property, situated approximately 85 kilometres northeast of Thunder Bay, in the Province of Onta

Section 3.8 — Location of Collateral Schedule B hereto sets forth the locations of all tangible Collateral having a fair market value in excess of CAD $500,000 as of the date hereof. The principal locations of tangible Collateral are: (a) the Wolverine Lake mine site and concentrator facilities at 44 Lakeshore Boulevard, Wolverine Lake, Ontario P0L 1R0, Canada; and (b) the headquarters of Torchlight Mining Corp. at 2

Section 3.9 — Equity Interests Torchlight Mining Corp. is the sole legal and beneficial owner of one hundred per cent (100%) of the issued and outstanding common shares of each of Wolverine Lake Mining Ltd. and Torchlight Milling & Processing Inc., free and clear of all liens, claims, charges, encumbrances, and security interests other than the Security Interest created under this Agreement. No options, warrants, con

Section 3.10 — No Prior Security Interests No financing statement, financing change statement, registration, notice, or other filing under the PPSA or any similar personal property security legislation is currently effective with respect to any Collateral of any Grantor, except: (a) filings made by or on behalf of Ridgeline Bank of Canada, as administrative agent, in connection with the CAD $225,000,000 revolving cre

Section 3.11 — Trade Names and Other Names Schedule C hereto sets forth a complete and accurate list of all trade names, former names, and other names under which any Grantor has conducted business or been known at any time within the five-year period preceding the date hereof. No Grantor operates or conducts business under any name other than its legal name and the trade names listed in Schedule C.

Section 3.12 — Intellectual Property Schedule D hereto sets forth a complete and accurate list of all registered intellectual Property and all pending applications for registration of intellectual Property owned by each Grantor as of the date hereof. Schedule D also identifies all material unregistered intellectual Property of each Grantor, including geological databases, proprietary mine plans, and metallurgical pro

Section 3.13 — Compliance with Laws Each Grantor is in compliance in all material respects with all applicable federal, provincial, and municipal laws, regulations, rules, orders, permits, licences, authorizations, and governmental approvals, including without limitation all environmental laws (including the Canadian Environmental Protection Act, 1999, the Ontario Environmental Protection Act, and the Ontario Water R

ARTICLE 4 — COVENANTS Each Grantor covenants and agrees with the Collateral Agent, for the benefit of the holders of the Notes and the Trustee, as follows:

Section 4.1 — General Covenants of the Grantors (a) Maintenance of Collateral. Each Grantor shall maintain, preserve, and protect the Collateral in good working order, condition, and repair (ordinary wear and tear excepted) and shall not permit or commit any waste, destruction, or material diminution in value of the Collateral. Each Grantor shall operate and maintain the Wolverine Lake mine, concentrator, and associa

Section 4.2 — Permitted Liens The Security Interest is subject only to the following liens (collectively, "Permitted Liens"), which term shall have the meaning given to "Permitted Liens" in the Indenture and shall include the following: (a) liens for taxes, assessments, royalties, or governmental charges not yet delinquent or being contested in good faith by appropriate proceedings diligently conducted, provided that

Section 4.3 — Negative Covenants Without the prior written consent of the Collateral Agent (acting at the direction of the Trustee or the holders of the Notes as provided in the Collateral Agency Agreement and the Indenture), no Grantor shall: (a) create, incur, assume, or permit or suffer to exist any lien, charge, mortgage, pledge, hypothec, security interest, or other encumbrance on or with respect to any Collater

Section 4.4 — Mining Rights Maintenance Each applicable Grantor shall, at its own cost and expense: (a) maintain in full force and effect all Mining Rights, including without limitation Ontario Mining Claim Nos. WL-4492-01 through WL-4492-47 and all surface rights at the Wolverine Lake property, and shall not permit any Mining Right to expire, lapse, be forfeited, or be cancelled for any reason within the control of

Section 4.5 — Delivery of Collateral (a) Each Grantor shall, promptly upon request by the Collateral Agent following the occurrence and during the continuance of an Event of Default, deliver to the Collateral Agent (or its designated custodian) all certificated Securities, Instruments, Chattel Paper, and Documents of Title constituting Collateral, duly endorsed or accompanied by duly executed instruments of transfer

Section 4.6 — Intellectual Property Covenants Each Grantor shall: (a) maintain and renew all material intellectual Property registrations in a timely manner and take all actions necessary to preserve and protect such registrations, including the filing of renewal applications, maintenance fees, and affidavits of use; (b) not abandon, dedicate to the public, or fail to maintain or renew any material intellectual Prope

Section 4.7 — Notification Requirements Each Grantor shall promptly (and in any event within five (5) business days after obtaining knowledge thereof) notify the Collateral Agent in writing of: (a) any material loss of, damage to, or diminution in the value of any Collateral (being a loss, damage, or diminution in value in excess of CAD $1,000,000 in the aggregate); (b) any lien, claim, charge, or encumbrance on any

Section 5.1 — PPSA Registrations Each Grantor hereby irrevocably authorizes the Collateral Agent (and its counsel) to file, register, and record financing statements, financing change statements, and other registrations under the PPSA in all jurisdictions where such filing, registration, or recording is necessary or desirable to perfect, protect, and maintain the first-priority Security Interest in the Collateral, an

Section 5.2 — Mining Act Registrations The parties shall make, or cause to be made, all filings, registrations, and recordings under the Ontario Mining Act, R.S.O. 1990, c. M.14, and the regulations thereunder, as may be required or advisable to register, record, or note the Security Interest against the Mining Rights, including Ontario Mining Claim Nos. WL-4492-01 through WL-4492-47 and all surface rights associated

Section 5.3 — Other Registrations The Grantors shall cooperate with the Collateral Agent in making such filings, registrations, and recordings as the Collateral Agent may determine to be necessary or desirable to perfect the Security Interest in all categories of Collateral, including without limitation: (a) filings under the Bank Act (Canada), S.C. 1991, c. 46, to the extent applicable; (b) registrations with the Ca

Section 5.4 — Control Agreements To the extent required for perfection of the Security Interest by "control" under the PPSA or any other applicable law, each Grantor shall, promptly upon request by the Collateral Agent, enter into control agreements, acknowledgements, or other arrangements satisfactory to the Collateral Agent with respect to: (a) all deposit accounts maintained by such Grantor with any financial inst

Section 5.5 — Discharge of Prior Registrations Each Grantor confirms and represents that all PPSA registrations, financing statements, and other security filings in favour of Ridgeline Bank of Canada, as administrative agent under the CAD $225,000,000 revolving credit facility (the "Ridgeline Facility"), are being discharged and terminated on or promptly after the date hereof, in coordination with Pendleton Ross LLP,

ARTICLE 6 — RIGHTS AND REMEDIES OF THE COLLATERAL AGENT

Section 6.1 — Rights Upon Event of Default Upon the occurrence and during the continuance of an Event of Default (as defined in Section 7.1), the Collateral Agent shall have, in addition to all other rights and remedies available to it at law or in equity and under the Collateral Agency Agreement and the Indenture, the following rights and remedies: (a) all rights and remedies of a secured party under the PPSA and an