Contract analysis

I. EXECUTIVE SUMMARY The purpose of this memorandum is to provide TMC's leadership with a comprehensive analysis of the stipulated penalty provisions contained in the Department of Justice's ("DOJ") first draft consent decree (the "Government Draft"), which was circulated to TMC on November 8, 2024, and to set forth our recommended negotiation positions for the ongoing consent-decree negotiation. These positions have

II. BACKGROUND AND CONTEXT A. The Consent Decree Framework This matter arises from the consolidated enforcement action styled United States of America and State of Montana v. Torchlight Mining Corp. et al., Civil Action No. 9:24-cv-00087-DWM, pending in the United States District Court for the District of Montana, Missoula Division, before the Honorable Donald W. Molloy, Senior United States District Judge. The proce

III. ANALYSIS OF GOVERNMENT'S PROPOSED STIPULATED PENALTY PROVISIONS A. Structure of the Government's Three-Tier Rate Schedule

Section XIV of the Government Draft, entitled "Stipulated Penalties," sets forth the proposed penalty framework. The relevant provisions are found at paragraphs 87 through 102 of the Government Draft. The structure is as follows: Rate Schedule. The government proposes a three-tier escalating penalty schedule: • Tier 1: $1,500 per day, per violation, for each day of noncompliance from day one (1) through day thirty (3

IV. RECOMMENDED NEGOTIATION POSITIONS Based on the foregoing analysis, we recommend that TMC pursue the following negotiation positions with respect to the stipulated penalty provisions. For each position, we set forth the recommended primary position, the supporting rationale, and an identified fallback position that TMC may accept as a compromise if the primary position is not achievable. Proposed redline language

V. FINANCIAL IMPACT ANALYSIS A. Impact on TMC's Environmental Reserve and Financial Statements TMC's current environmental reserve, as reflected in its Q3 2024 financial statements (quarter ended September 30, 2024), stands at C$340.0 million, equivalent to approximately US$251.4 million at the quarter-end exchange rate of 0.7394 C$/US$. Against the grand total nominal obligation of approximately US$409.9 million und