Contract analysis

I. Executive Summary The purpose of this memorandum is to analyze whether the obligations arising from the consent decree entered in United States of America and State of Montana v. Torchlight Mining Corp. et al., Civil Action No. 9:24-cv-00087-DWM, pending before the United States District Court for the District of Montana, Missoula Division (Hon. Donald W. Molloy), may require Torchlight Mining Corp. ("TMC" or the

II. Background A. The Consent Decree Obligations On February 19, 2025, the United States Department of Justice, on behalf of the United States Environmental Protection Agency ("EPA"), and the State of Montana, Department of Environmental Quality ("MDEQ"), lodged a proposed consent decree with the United States District Court for the District of Montana, Missoula Division, in United States of America and State of Mont

1. Total Remediation Costs: $343.5 Million Nominal ($245.1 Million NPV) The consent decree requires TMC to perform or fund remediation activities at four sites, with estimated costs broken down as follows: (a) Ridgecrest Copper-Molybdenum Mine (Drummond, Granite County, Montana). The Ridgecrest site is a former open-pit copper-molybdenum mine that operated from 1958 through 1992 under TMC's predecessor-in-interest, C

2. Civil Penalties: $31.5 Million The consent decree imposes civil penalties totaling $31.5 million. These penalties are payable in four quarterly installments of $7.875 million each, with the first installment due 30 days after the Effective Date (i.e., on or about July 14, 2025), and subsequent installments due at 12 months, 24 months, and 36 months after the date of entry of the consent decree.

3. EPA Past-Costs Reimbursement: $18.1 Million Pursuant to CERCLA § 107, 42 U.S.C. § 9607, TMC is required to reimburse the EPA for past response costs incurred at two of the four sites. The past-costs reimbursement obligation totals $18.1 million, comprised of $14.3 million for costs incurred at the Ridgecrest site and $3.8 million for costs incurred at the Kanawha Bend site. The timing and payment terms for this re

4. Supplemental Environmental Projects (SEPs): $12.0 Million The consent decree requires TMC to fund three supplemental environmental projects with a combined value of $12.0 million: • Flint Creek Watershed Restoration Project (Granite County, Montana): $5.5 million, to be implemented in coordination with the Flint Creek Conservation District and the Montana Department of Fish, Wildlife and Parks; • Battle Mountain C

5. Independent Monitor Costs: $4.8 Million The consent decree requires the appointment of an independent monitor, Verdant Analytics, Inc., to oversee TMC's compliance with remediation milestones and quality assurance/quality control standards. The estimated cost of the independent monitor over the five-year monitoring period is $4.8 million (approximately $960,000 per year). TMC is required to fund the monitor's cost

III. Analysis of Covenant Provisions Potentially Triggered by the Consent Decree This Section presents a detailed analysis of the specific covenant provisions in the RCF that may be implicated by TMC's obligations under the consent decree. For each covenant category, we assess the risk level, identify the specific consent decree obligation or transaction that may trigger the covenant, and recommend a course of action

1. Surety Bond Indemnity Agreement (GAI) Analysis As described in Section II.B above, the $165.0 million surety bond to be issued by Ironbark Surety of America, Inc. is conditioned upon the execution of a General Agreement of Indemnity (the "GAI") by TMC and its subsidiary, Torchlight Mining (U.S.) Inc. The GAI is a standard instrument in the surety industry and typically includes the following provisions that are re

2. Remediation Trust Fund Considerations The $80.0 million deposit to the Larchfield Trust Company, N.A. remediation trust fund presents a related but analytically distinct set of negative pledge issues. If the trust is structured as irrevocable and the trust assets are beyond TMC's control — as is typically required by EPA for CERCLA remedial action trusts — then the deposit effectively removes $80.0 million in cash

IV. Summary of Potential Covenant Triggers and Recommended Actions A. Summary Table The following table summarizes the potential covenant triggers, risk levels, and recommended actions identified in Section III: B. Recommended Course of Action Based on the analysis set forth above, we recommend the following course of action, organized by priority and timeline:

1. Immediate Step — Complete Credit Agreement Review. As a threshold matter, Calderwood & Harkness should complete a comprehensive, line-by-line review of the RCF's negative covenants, permitted lien baskets, permitted indebtedness definitions, restricted payment provisions, and any capital expenditure limitations. This review should be conducted against the specific mechanics of the surety bond GAI (Ironbark), the r

2. Engagement with Ironbark on GAI Terms. Calderwood & Harkness should coordinate with Thomas Rennick, account executive at Ironbark Surety of America, Inc., to obtain a draft of the GAI and understand the precise nature and scope of any security interest or collateral requirements. Ideally, this coordination should occur before TMC executes the GAI so that the GAI's lien provisions can be structured to minimize conf

3. Proactive Lender Engagement. TMC should initiate preliminary discussions with Harborstone National Bank, N.A. — both in its capacity as Administrative Agent and as a relationship lender — to preview the potential need for a limited amendment or consent under the Credit Agreement. The objective of this initial engagement is to: (a) Confirm Harborstone's receipt and review of the Disclosure Letter dated March 1, 202

4. Amendment vs. Waiver Decision. Based on the results of the Credit Agreement review and the Ironbark GAI analysis, TMC and Calderwood & Harkness should determine whether the appropriate remedy is a formal amendment to the Credit Agreement or a one-time written waiver from the Required Lenders. Our preliminary view is as follows: (a) For the negative pledge carve-out, we recommend pursuing a formal amendment rather

5. Timeline. The critical external deadline driving this analysis is the September 12, 2025 financial assurance posting deadline under the consent decree. Any amendment or waiver process must be completed before this date to ensure that TMC can execute the GAI, issue the surety bond, and fund the remediation trust without violating the Credit Agreement. Syndicate lender consent processes typically require 30 to 60 da

6. Northspire Coordination. TMC should continue working with Vivian Okafor, Managing Director at Northspire Capital Markets, Inc., on modeling the cash-flow impact of the consent decree obligations on TMC's overall credit profile and debt capacity. Northspire's analysis should include updated financial projections reflecting the consent decree payments, covenant sensitivity models under various cost escalation and ex

V. Impact on Credit Facility Utilization and Liquidity In addition to the covenant compliance analysis set forth above, TMC must assess the impact of the consent decree obligations on its overall credit facility utilization and liquidity position. Even if the covenant provisions are addressed through an amendment or waiver, the near-term cash demands of the consent decree will affect TMC's available borrowing capacit