Contract analysis

I. EXECUTIVE SUMMARY This memorandum sets forth the results of our comprehensive analysis of Torchlight Mining Corp.'s ("TMC" or the "Company") statutory liability exposure under three principal federal environmental statutes: the Clean Water Act ("CWA") Section 301, 33 U.S.C. § 1311; the Resource Conservation and Recovery Act ("RCRA") Sections 3004 and 3005, 42 U.S.C. §§ 6924–6925; and the Comprehensive Environmenta

1. Ridgecrest Copper-Molybdenum Mine, located near Drummond, Granite County, Montana;

2. Gallatin Chemical Works, located in Belgrade, Gallatin County, Montana;

3. Bonanza Creek Gold Mine, located in Lander County, Nevada; and

4. Kanawha Bend Chemical Plant, located in Institute, Kanawha County, West Virginia. The named defendants in the enforcement action include the following entities within the TMC corporate family: • Torchlight Mining Corp. (CBCA corporation, dual-listed TSX/NYSE, ticker: TRC); • Torchlight Mining (U.S.) Inc. (Delaware corporation, EIN 83-2047156); • Torchlight Specialty Chemicals, Inc. (Delaware corporation, EIN 47-38

II. PROCEDURAL BACKGROUND A. Pre-Litigation Regulatory History The four sites at issue have extensive regulatory histories, the relevant portions of which are summarized below. Ridgecrest Copper-Molybdenum Mine. Mining operations at the Ridgecrest site commenced in 1978 under the predecessor ownership of Ridgecrest Minerals, Inc., which was acquired by TMC in 1996. Active copper and molybdenum extraction and processi

III. CLEAN WATER ACT § 301 ANALYSIS A. Statutory Framework The CWA establishes a comprehensive regulatory framework for the control of pollutant discharges to the waters of the United States. Section 301(a) of the CWA, 33 U.S.C. § 1311(a), provides the foundational prohibition: "Except as in compliance with this section and sections 1312, 1316, 1317, 1328, 1342, and 1344 of this title, the discharge of any pollutant

1. March 17, 2022: First release discovered during routine inspection; estimated volume of 48,000 gallons of process solution released through a tear in the secondary liner.

2. August 9, 2022: Second release discovered following a precipitation event; estimated volume of 72,000 gallons released through a separate liner failure in the eastern cell.

3. January 22, 2023: Third release discovered during quarterly monitoring; estimated volume of 35,000 gallons released through degraded liner material in the southwestern cell. In each instance, the released process solution traveled via surface flow and shallow subsurface pathways to an ephemeral tributary of the Reese River. Contaminant Profile. The released process solution contained the following contaminants at

IV. RCRA §§ 3004 AND 3005 ANALYSIS A. Statutory Framework The Resource Conservation and Recovery Act establishes a "cradle-to-grave" regulatory framework for the management of hazardous waste. The statutory provisions most relevant to this analysis are: RCRA § 3004, 42 U.S.C. § 6924, establishes standards applicable to owners and operators of hazardous waste treatment, storage, and disposal ("TSD") facilities. These

V. CERCLA § 107 ANALYSIS A. Statutory Framework

Section 107(a) of CERCLA, 42 U.S.C. § 9607(a), establishes liability for response costs incurred by the government in cleaning up releases or threatened releases of hazardous substances at facilities. CERCLA liability is notable for its breadth: it is strict (no fault or negligence required), joint and several (each liable party may be held responsible for the entire cost of response), and retroactive (liability atta

1. Current owners and operators of the facility;

2. Owners and operators at the time of disposal of hazardous substances;

3. Generators who arranged for disposal or treatment of hazardous substances at the facility; and

4. Transporters who selected the facility for disposal or treatment of hazardous substances. Liable parties must reimburse EPA for "all costs of removal or remedial action" that are "not inconsistent with the national contingency plan" ("NCP"), 40 C.F.R. Part 300. The statutory defenses under Section 107(b) are narrow: (1) act of God; (2) act of war; and (3) an act or omission of a third party who is not in a contrac