Contract analysis

I. BACKGROUND AND RECITALS A. Procedural History

1. On January 18, 2024, the United States of America ("United States"), on behalf of the United States Environmental Protection Agency ("EPA"), by and through the undersigned attorneys of the United States Department of Justice ("DOJ"), Environment and Natural Resources Division ("ENRD"), Environmental Enforcement Section, filed its Complaint in this action, Civil Action No. 9:24-cv-00087-DWM, in the United States Di

2. The State of Montana, through the Montana Attorney General's Office, joined as a co-plaintiff in the Complaint. Subsequently, the State of Nevada, through the Nevada Attorney General's Office, and the State of West Virginia, through the West Virginia Attorney General's Office, each intervened and joined this action as co-plaintiffs, with the United States' consent and by leave of the Court.

3. The United States has been represented throughout this action by the DOJ, ENRD, Environmental Enforcement Section. Philip Orenstein served as Lead DOJ Trial Attorney, and Katherine Rowe-Halpern served as Supervising DOJ Attorney. Margaret Coulson, of the EPA Office of Enforcement and Compliance Assurance ("OECA"), served as Lead EPA Case Attorney.

4. State counsel in this action has included: Annika Hedstrom, Assistant Attorney General, Environmental Bureau, Montana Attorney General's Office, representing the State of Montana; Ricardo Fuentes, Deputy Attorney General, Nevada Attorney General's Office, representing the State of Nevada; and Loretta May Hatcher, Assistant Attorney General, West Virginia Attorney General's Office, representing the State of West Vi

5. On March 5, 2024, Defendants filed their Answer to the Complaint, denying the material allegations and asserting various affirmative defenses.

6. On April 22, 2024, the Parties entered into a Tolling Agreement tolling the applicable statutes of limitations through December 31, 2025, so as to facilitate settlement negotiations without prejudice to any Party's substantive rights.

7. On May 15, 2024, the Court referred this matter to Magistrate Judge Clara Finnegan for court-ordered mediation. The Parties participated in mediation sessions before Magistrate Judge Finnegan and, through extensive negotiations, reached an agreement in principle on a consent-decree framework on July 30, 2024.

8. Following the agreement in principle, the Parties, through their counsel, engaged in further detailed negotiations to finalize the terms of this Consent Decree, including the remediation obligations, financial assurance requirements, civil penalty amounts, supplemental environmental projects, and monitoring provisions set forth herein. B. Description of the Defendants

9. Torchlight Mining Corp. ("TMC") is a corporation incorporated under the Canada Business Corporations Act ("CBCA"), with its principal offices located at 1800 Bayfield Tower, 401 Bay Street, Toronto, Ontario M5H 2Y4, Canada. TMC is dual-listed on the Toronto Stock Exchange (TSX: TRC) and the New York Stock Exchange (NYSE: TRC). TMC maintains its U.S. headquarters at 750 Copper Ridge Boulevard, Suite 200, Helena, Mo

10. Torchlight Mining (U.S.) Inc. ("TM(US)") is a corporation organized and existing under the laws of the State of Delaware, with Employer Identification Number ("EIN") 83-2047156. TM(US) is a wholly owned subsidiary of TMC and serves as the direct operator of TMC's mining operations within the United States. TM(US) maintains its registered agent for service of process as Ashgrove Services Inc., 1209 Orange Street,

11. Torchlight Specialty Chemicals, Inc. ("TSC") is a corporation organized and existing under the laws of the State of Delaware, with EIN 47-3819204. TSC is a wholly owned subsidiary of TMC, held through TM(US), and is the operator of the Gallatin Chemical Works facility in Belgrade, Montana, and the Kanawha Bend Chemical Plant in Institute, West Virginia. TSC is engaged in the manufacture of specialty chemicals use

12. Ridgecrest Mine Holdings, LLC ("RMH") is a limited liability company organized and existing under the laws of the State of Montana, Montana Secretary of State Identification Number E1042738. RMH is wholly owned by TM(US) and holds real property interests and mineral rights associated with the Ridgecrest Copper-Molybdenum Mine in Drummond, Granite County, Montana.

13. Bonanza Creek Mining, LLC ("BCM") is a limited liability company organized and existing under the laws of the State of Nevada, Nevada Secretary of State Entity Number E0518294731. BCM is wholly owned by TM(US) and holds real property interests, mineral rights, and water rights associated with the Bonanza Creek Gold Mine in Lander County, Nevada. C. Description of the Sites

14. Ridgecrest Copper-Molybdenum Mine ("Ridgecrest Site"): The Ridgecrest Site is located at 14200 Ridgecrest Mine Road, Drummond, Granite County, Montana 59832. The mine footprint encompasses approximately 3,200 acres, with the total controlled property area comprising approximately 8,700 acres. The Ridgecrest Site is an open-pit copper-molybdenum mine that became operational in 1978. Active mining operations ceased

15. Gallatin Chemical Works ("Gallatin Site"): The Gallatin Site is located at 8800 Industrial Park Lane, Belgrade, Gallatin County, Montana 59714. The facility occupies approximately 145 acres and is engaged in specialty chemical manufacturing, including the production of flotation reagents, sodium xanthate, and dithiophosphate collectors. The Gallatin Site has been in operation since 1993 and remains an active manu

16. Bonanza Creek Gold Mine ("Bonanza Creek Site"): The Bonanza Creek Site is located at County Road 447, Mile Marker 12, Lander County, Nevada 89820. The mine footprint encompasses approximately 5,600 acres, with the total controlled property area comprising approximately 12,400 acres. The Bonanza Creek Site is an open-pit heap-leach gold mine that has been in operation since 2001 and where active mining operations

17. Kanawha Bend Chemical Plant ("Kanawha Bend Site"): The Kanawha Bend Site is located at 2200 Chemical Valley Road, Institute, Kanawha County, West Virginia 25112. The facility occupies approximately 78 acres and is engaged in chemical manufacturing, including the production of leaching agents and sulfuric acid regeneration. The Kanawha Bend Site has been in operation since 1985 and remains an active facility. The

18. Clean Water Act Violations. The Complaint alleges violations of Section 301 of the CWA, 33 U.S.C. § 1311, at multiple Sites, as follows: (a) Ridgecrest Site: Unpermitted discharges of acid mine drainage ("AMD") to Flint Creek, a water of the United States. The AMD discharges contained dissolved copper at average concentrations of 47 mg/L, in excess of the Montana chronic aquatic life standard of 0.0087 mg/L; moly

19. RCRA Violations. The Complaint alleges violations of Sections 3004 and 3005 of RCRA, 42 U.S.C. §§ 6924, 6925, at all four Sites, as follows: (a) Ridgecrest Site: Mismanagement of hazardous waste generated from the solvent-extraction/electrowinning ("SX-EW") circuit, including improper storage, treatment, and disposal of spent organic extractant and electrolyte solutions containing hazardous constituents. (b) Gall

20. CERCLA Cost Recovery. The Complaint seeks recovery of past costs incurred by EPA pursuant to Section 107 of CERCLA, 42 U.S.C. § 9607, in the total amount of $18,100,000, consisting of: (a) $14,300,000 for EPA removal actions conducted at the Ridgecrest Site between January 15, 2021, and May 30, 2023; and (b) $3,800,000 for EPA emergency response at the Kanawha Bend Site following a sulfuric acid release to a trib

21. Migratory Bird Treaty Act. The Complaint further alleges violations of the Migratory Bird Treaty Act ("MBTA"), 16 U.S.C. §§ 703–712, based on seventeen (17) documented avian mortalities at process-solution ponds at the Bonanza Creek Site during the period 2021–2023.

22. Defendants' Position. Defendants do not admit any liability or wrongdoing with respect to the claims alleged in the Complaint and consent to the entry of this Decree solely for purposes of settlement and to avoid the burden, expense, and uncertainty of protracted litigation. Nothing in this Consent Decree shall constitute an admission by Defendants of any fact, finding, conclusion of law, or liability. E. Purpose

23. This Consent Decree resolves and settles all claims alleged in the Complaint, including all claims arising under the CWA, RCRA, CERCLA, and the MBTA, subject to the reservations of rights set forth in Section XVIII of this Decree.

24. The purpose of this Consent Decree is to establish the remediation obligations, civil penalties, supplemental environmental projects, financial assurance requirements, and compliance monitoring mechanisms necessary to address the environmental contamination and violations at the Sites, to restore and protect human health and the environment, and to ensure Defendants' future compliance with applicable environmenta

25. The Parties agree, and the Court, by entering this Decree, finds, that this Consent Decree is fair, reasonable, and in the public interest, and that this Decree adequately protects the interests of the United States, the State co-plaintiffs, the affected communities, and the environment.

26. This Consent Decree is being lodged with the Court on February 19, 2025, for a thirty (30)-day public comment period pursuant to 28 U.S.C. § 7003(d) and Department of Justice policy. The public comment period closes on March 21, 2025. The United States will consider any public comments received during the comment period and will file a response to such comments, together with a motion for entry of this Decree. NO

27. This Court has subject matter jurisdiction over this action and the claims asserted herein pursuant to 28 U.S.C. §§ 1331 and 1345; Section 309(b) of the CWA, 33 U.S.C. § 1319(b); Section 3008(a) of RCRA, 42 U.S.C. § 6928(a); and Sections 106, 107, and 113 of CERCLA, 42 U.S.C. §§ 9606, 9607, and 9613. This Court also has personal jurisdiction over the Defendants.

28. Venue is proper in the District of Montana pursuant to Section 309(b) of the CWA, 33 U.S.C. § 1319(b); Section 3008(a) of RCRA, 42 U.S.C. § 6928(a); and 28 U.S.C. § 1391(b) and (c), inasmuch as a substantial part of the events or omissions giving rise to the claims alleged in the Complaint occurred in the State of Montana, and Defendants conduct substantial business operations within this District.

29. Defendants consent to and shall not challenge the jurisdiction of this Court over the subject matter of this action or over the Defendants, and Defendants waive all objections to venue in this District.

30. For purposes of this Consent Decree, Defendants agree that they are and shall remain subject to the personal jurisdiction of this Court for the entire duration of this Decree, including for purposes of the interpretation, implementation, and enforcement of any and all terms of this Decree and the resolution of any disputes arising hereunder.

31. Solely for purposes of this Consent Decree, Defendants further agree that the Complaint states claims upon which relief may be granted against Defendants under the CWA, RCRA, CERCLA, and the MBTA.

32. This Consent Decree shall be binding upon the United States of America; the States of Montana, Nevada, and West Virginia; and the Defendants — Torchlight Mining Corp., Torchlight Mining (U.S.) Inc., Torchlight Specialty Chemicals, Inc., Ridgecrest Mine Holdings, LLC, and Bonanza Creek Mining, LLC — and upon their respective officers, directors, agents, employees, successors, and assigns.

33. Torchlight Mining Corp. shall ensure that all of its subsidiaries and affiliated entities, including but not limited to TM(US), TSC, RMH, and BCM, comply with all obligations imposed upon the Defendants by this Consent Decree. TMC's obligation to ensure subsidiary compliance is joint and several with the obligations of each subsidiary Defendant with respect to that subsidiary's specific Site obligations.

34. No change in the ownership, corporate status, or organizational structure of any Defendant, including but not limited to any merger, acquisition, divestiture, dissolution, reorganization, or bankruptcy, shall in any way alter, diminish, or otherwise affect any Defendant's obligations under this Consent Decree.

35. Defendants shall provide written notice to Plaintiffs, Co-Plaintiffs, the Independent Monitor, and the Court not less than sixty (60) Days prior to any proposed transfer of ownership or operations of any of the Sites, or any transfer of a controlling interest in any Defendant entity. Such notice shall identify the proposed transferee, describe the nature and terms of the proposed transfer, and specify the measure

36. Defendants shall provide a copy of this Consent Decree to each contractor, subcontractor, laboratory, and consultant retained to perform any work required by this Decree within fourteen (14) Days of the later of: (a) the Effective Date; or (b) the date of retention of such contractor, subcontractor, laboratory, or consultant.

37. Unless otherwise expressly provided in this Consent Decree, terms used herein that are defined in the CWA, RCRA, CERCLA, or in regulations promulgated under those statutes shall have the meanings assigned to them in those statutes or regulations. The following additional definitions shall apply to this Consent Decree: (a) "Consent Decree" or "Decree" shall mean this Consent Decree and all appendices attached here

V. CIVIL PENALTY A. Total Civil Penalty

38. Defendants shall pay a total civil penalty in the aggregate amount of $31,500,000 (Thirty-One Million Five Hundred Thousand Dollars), apportioned among the Sites as follows:

39. The civil penalty reflects the Parties' negotiated resolution of the statutory penalty claims for violations of the CWA, RCRA, and the MBTA, taking into account the statutory penalty factors including the seriousness of the violations, economic benefit of noncompliance, history of such violations, good faith efforts to comply, and ability to pay. B. Payment Schedule

40. The total civil penalty of $31,500,000 shall be paid in four (4) equal quarterly installments as follows: (a) First Installment: $7,875,000 due and payable within thirty (30) Days of the Effective Date (i.e., by approximately July 14, 2025). (b) Second Installment: $7,875,000 due and payable twelve (12) months after the Effective Date (i.e., by approximately June 14, 2026). (c) Third Installment: $7,875,000 due a

41. Each installment of the civil penalty shall be paid by electronic funds transfer ("EFT") to the United States Department of Justice, in accordance with instructions to be provided by DOJ following the Effective Date, or as otherwise directed by the DOJ Financial Litigation Unit. Each payment shall reference Civil Action No. 9:24-cv-00087-DWM, the DOJ case number, and the Defendants' Employer Identification Number

42. Concurrent with each penalty payment, Defendants shall send written notice of payment, including the EFT confirmation number, to the DOJ ENRD, the EPA OECA, and each state co-plaintiff, at the addresses set forth in Section XVII.C of this Decree. D. Interest on Late Payments

43. If any installment of the civil penalty is not paid by the applicable due date, interest shall accrue on the unpaid amount from the due date until the date payment is received, at the rate established by 28 U.S.C. § 1961, which is the weekly average one-year constant maturity Treasury yield as published by the Board of Governors of the Federal Reserve System for the calendar week preceding the date of the Court's

44. Interest accrued under this Paragraph shall be in addition to, and shall not diminish, any stipulated penalties that may accrue under Section XII of this Decree for failure to make timely payments. E. State Shares

45. The allocation of civil penalty proceeds among the United States, the State of Montana, the State of Nevada, and the State of West Virginia shall be as agreed among the Plaintiffs and Co-Plaintiffs, and as set forth in a separate inter-governmental agreement among those parties, which is not a part of this Consent Decree. Defendants shall not be responsible for, and shall not be required to resolve, any dispute a

VI. EPA PAST-COSTS REIMBURSEMENT A. Total Amount

46. Defendants shall reimburse EPA for past response costs in the total amount of $18,100,000 (Eighteen Million One Hundred Thousand Dollars), consisting of: (a) $14,300,000 for response costs incurred by EPA in connection with removal actions conducted at the Ridgecrest Site during the period January 15, 2021, through May 30, 2023, including but not limited to the construction and operation of interim AMD treatment

47. The past-cost reimbursement amount of $18,100,000 represents the total documented past costs incurred by EPA at both Sites as of the date of this Decree and constitutes full and final reimbursement of all EPA past costs at those Sites, subject to the reservations set forth in Section XVIII. B. Payment

48. The full past-cost reimbursement amount of $18,100,000 shall be due and payable within sixty (60) Days of the Effective Date (i.e., by approximately August 13, 2025).

49. Payment shall be made by EFT to the EPA Hazardous Substance Superfund, Cincinnati Finance Center, or as otherwise directed by EPA. Each payment shall reference Administrative Order on Consent Docket No. CERCLA-08-2022-0039 (for the Ridgecrest Site costs) and Civil Action No. 9:24-cv-00087-DWM. Defendants shall provide written confirmation of payment to EPA OECA, EPA Region 8, and the DOJ ENRD at the addresses set

50. If the past-cost reimbursement is not paid by the applicable due date, interest shall accrue on the unpaid amount from the due date until the date payment is received, at the rate specified in Section 107(a) of CERCLA, 42 U.S.C. § 9607(a), which is the rate established by the Secretary of the Treasury for interest payments made pursuant to Section 6621(a)(2) of the Internal Revenue Code, 26 U.S.C. § 6621(a)(2).

VII. REMEDIAL ACTION OBLIGATIONS — RIDGECREST SITE A. Scope of Remedy

51. Defendants shall design, construct, implement, operate, maintain, and monitor a comprehensive remedy at the Ridgecrest Site that shall include, at a minimum, the following components: (a) Acid Mine Drainage Treatment System. Defendants shall design, construct, and operate an active water treatment system to collect and treat acid mine drainage from the open-pit mine, waste-rock dumps, and associated disturbed are

52. The total estimated cost of the Ridgecrest Site remedy over the thirty (30)-year remediation period is $198,600,000 (One Hundred Ninety-Eight Million Six Hundred Thousand Dollars) in nominal dollars. This amount reflects the negotiated resolution of the Parties' differing cost estimates, with Defendants having estimated total remedy costs at approximately $187,500,000 and EPA having estimated total remedy costs a

53. Defendants shall bear all costs of the Ridgecrest Site remedy, including but not limited to the costs of design, construction, operation, maintenance, monitoring, sampling, reporting, and any necessary modifications to the remedy. The negotiated cost amount set forth in Paragraph 52 reflects the Parties' best estimate of total remedy costs at the time of lodging; however, Defendants' remedial obligations are defi