Contract analysis

I. Introduction and Purpose The purpose of this memorandum is to set forth the proposed staffing plan, projected hours by engagement phase, and estimated professional fees and expenses for the representation of Torchlight Mining Corp. ("TMC") in connection with the multi-site environmental enforcement action and consent-decree negotiation described herein. This memorandum is intended to provide TMC's legal department

II. Matter Overview and Scope A. Description of the Engagement C&H has been retained to represent TMC and its four U.S. subsidiaries in a multi-site environmental enforcement action brought by the United States of America, acting through the United States Environmental Protection Agency ("EPA") and the United States Department of Justice, Environment and Natural Resources Division ("DOJ ENRD"), with the States of Mon

1. Torchlight Mining Corp. (parent; TSX-listed, headquartered in Vancouver, British Columbia);

2. Torchlight Mining (U.S.) Inc. (U.S. holding subsidiary; incorporated in Delaware);

3. Torchlight Specialty Chemicals, Inc. (chemical manufacturing subsidiary; incorporated in Delaware);

4. Ridgecrest Mine Holdings, LLC (mine holding subsidiary; organized in Montana); and

5. Bonanza Creek Mining, LLC (mine operating subsidiary; organized in Nevada). B. Sites Covered The enforcement action encompasses operations, releases, and alleged violations at four sites across three states:

1. Ridgecrest Copper-Molybdenum Mine — Drummond, Granite County, Montana. An active open-pit and underground copper-molybdenum mining operation with associated tailings storage facilities. Allegations center on acid mine drainage to Flint Creek and inadequate RCRA corrective action at on-site waste management units.

2. Gallatin Chemical Works — Belgrade, Gallatin County, Montana. A specialty chemical manufacturing facility producing mining reagents and industrial solvents. Allegations relate to RCRA corrective action obligations for historical solvent contamination in groundwater and Clean Water Act violations arising from unpermitted stormwater discharges.

3. Bonanza Creek Gold Mine — Lander County, Nevada. A heap-leach gold mining operation in central Nevada. Allegations include cyanide-bearing solution releases to ephemeral surface waters in violation of the Clean Water Act, inadequate liner systems under RCRA, and migratory bird mortality in process solution ponds in violation of the Migratory Bird Treaty Act ("MBTA").

4. Kanawha Bend Chemical Plant — Institute, Kanawha County, West Virginia. A chemical blending and distribution facility adjacent to the Kanawha River. Allegations involve historical CERCLA contamination requiring remediation, RCRA corrective action for on-site waste management areas, and Clean Water Act permit exceedances at the facility's outfall. C. Statutes at Issue The Government's complaint and the anticipated

III. Engagement Team — Core C&H Personnel The following C&H attorneys and support staff have been assigned to this engagement. The team has been structured to provide senior strategic leadership at the partner level, robust day-to-day legal analysis and drafting capacity at the associate level, and comprehensive document management and administrative support through paralegal resources. A. Partners Harrison Wexford —

IV. Co-Counsel and External Advisors A. Local Counsel TMC has retained, or will retain, the following local counsel firms to provide state-specific legal services in the three jurisdictions implicated by the enforcement action. Each firm's engagement is separate from C&H's engagement and is governed by its own engagement letter and fee arrangements with TMC. Local counsel fees are not counted against the C&H $4.5 mil

1. Holcroft, Dane & Weiss LLP (Helena, Montana) Lead Partner: Russell Dane Scope: Montana-licensed local counsel for the Ridgecrest Copper-Molybdenum Mine (Drummond, MT) and the Gallatin Chemical Works (Belgrade, MT). Holcroft, Dane & Weiss ("HDW") will be responsible for coordination with the Montana Department of Environmental Quality ("MT DEQ"), state-court filings as needed, and state environmental permit matters

2. Sagebrush Law Group, PLLC (Las Vegas, Nevada) Lead Partner: Denise Quartaro Scope: Nevada-licensed local counsel for the Bonanza Creek Gold Mine (Lander County, NV). Sagebrush will be responsible for coordination with the Nevada Division of Environmental Protection ("NV DEP"), state environmental permits related to heap-leach operations and process water management, and Nevada state law issues relevant to the cons

3. Baxter, Tully & Crane PLLC (Charleston, West Virginia) Lead Partner: Nathan Tully Scope: West Virginia-licensed local counsel for the Kanawha Bend Chemical Plant (Institute, WV). Baxter, Tully & Crane ("BTC") will be responsible for coordination with the West Virginia Department of Environmental Protection ("WV DEP"), state environmental permits for the Kanawha Bend facility, and West Virginia state law issues rel

V. Phased Work Plan and Projected Hours Overview The engagement has been organized into eight discrete phases, each with defined deliverables, responsible team members, and projected hours. This phased structure is designed to align the work plan with the anticipated negotiation timeline, provide clear milestones for progress assessment, and facilitate budget monitoring against the $4.5 million fee cap. The total pro

1. Conflict check memorandum — Completed October 18, 2024. C&H's conflicts committee has confirmed that no disqualifying conflicts of interest exist with respect to this engagement.

2. Litigation hold / preservation memorandum — October 23, 2024. Memorandum to TMC identifying custodians, data sources, and categories of documents and electronically stored information subject to preservation obligations in connection with Civil Action No. 9:24-cv-00087-DWM.

3. Staffing memorandum and budget estimate — October 25, 2024. This memorandum.

4. Co-counsel coordination agreement — Target: November 1, 2024. Agreement among C&H, HDW, sagebrush, and BTC establishing protocols for information sharing, document review, work allocation, privilege maintenance, and coordinated communication with the Government.

5. Preliminary case assessment memorandum — all four sites — Target: November 4, 2024. Comprehensive memorandum assessing the factual record, regulatory history, and legal exposure at each of the four sites, drawing on files transferred from Whitfield, Palmer & Goss LLP and TMC's internal records.

6. Regulatory exposure analysis — CWA, RCRA, CERCLA liability summary — Target: November 8, 2024. Detailed legal memorandum analyzing TMC's potential liability under each applicable federal statute at each site, including an assessment of available defenses and mitigation arguments.

7. Penalty calculation analysis — Target: November 12, 2024. Memorandum applying the EPA penalty policy and federal penalty guidelines to the alleged violations at each site, including an analysis of the statutory maximum penalties, the economic benefit component, the gravity component, and available mitigating factors.

8. Settlement strategy memorandum — Target: November 15, 2024. Memorandum setting forth C&H's recommended negotiation strategy, including target ranges for penalties, remediation scope, SEP commitments, and financial assurance levels, with a recommended approach to the Government's opening positions on each issue. Staffing and Projected Hours Phase 2: Consent Decree Negotiation — First Round Period: November 8 – Dece

1. Annotated review of DOJ first draft consent decree — November 12, 2024. Section-by-section analysis of the Government's first draft, identifying problematic provisions, areas requiring negotiation, and provisions acceptable as drafted.

2. Comparative consent decree analysis — precedent EPA mining decrees — November 20, 2024. Research memorandum surveying recent EPA consent decrees in the mining sector, including penalty levels, remediation timeframes, financial assurance structures, and stipulated penalty schedules, to benchmark the Government's positions against comparable settlements.

3. Memorandum on MBTA exposure at Bonanza Creek — November 22, 2024. Dedicated legal memorandum analyzing TMC's exposure under the Migratory Bird Treaty Act at the Bonanza Creek Gold Mine, including the applicability of the incidental-take doctrine, available mitigation measures, and precedent enforcement actions involving process solution ponds.

4. Internal redline and comment compilation — November 25, 2024. Consolidated compilation of comments and redline suggestions from C&H, local counsel, Pinnacle Creek, and TMC's internal environmental team, organized by consent-decree section.

5. TMC revised draft consent decree — redline to DOJ first draft — December 16, 2024. TMC's proposed revisions to the Government's first draft consent decree, in full redline format with accompanying explanatory annotations.

6. Transmittal letter — C&H to DOJ/EPA with TMC redline — December 16, 2024. Cover letter transmitting TMC's redline to the Government, summarizing the principal areas of revision and the rationale for TMC's proposed changes.

7. Memorandum on stipulated penalty provisions — December 20, 2024. Analysis of the Government's proposed stipulated penalty schedule, comparison with precedent decrees, and recommendation for TMC's counter-proposals on penalty amounts, grace periods, and force majeure exceptions. Staffing and Projected Hours Phase 3: Consent Decree Negotiation — Second Round and Finalization Period: January 1 – February 3, 2025 Obje

1. Memorandum on force majeure and excusable delay provisions — January 3, 2025. Memorandum analyzing the Government's proposed force majeure and excusable delay provisions, identifying gaps in protection for TMC (e.g., supply chain disruptions, permitting delays, severe weather events), and recommending negotiation positions.

2. Memorandum on dispute resolution mechanism — January 6, 2025. Analysis of the proposed informal dispute resolution, formal dispute resolution, and judicial review procedures in the consent decree, with recommendations for modifications to protect TMC's interests, including burden-of-proof allocations and escalation timelines.

3. Analysis of government counter-redline — January 17, 2025. Comprehensive section-by-section review of the Government's counter-redline (anticipated receipt on or about January 14, 2025), identifying areas of agreement, remaining areas of disagreement, and recommended strategies for resolving open issues.

4. TMC second redline and transmittal letter — January 24, 2025. TMC's second set of proposed revisions and accompanying cover letter, incorporating responses to the Government's counter-redline and TMC's final negotiating positions on remaining open issues.

5. Consent decree — substantially final agreed text — February 3, 2025. Following the in-person negotiation session, a clean version of the consent decree reflecting all agreed-upon terms, subject only to final technical review and formatting.

6. Side letter — open issues resolved at February 3 in-person session — February 3, 2025. Memorialization of any issues resolved through oral agreement at the in-person session, to be incorporated into the final consent decree text. Staffing and Projected Hours Phase 4: Remediation Schedules, Work Plans, and SEPs Period: January 28 – February 24, 2025 Objective: Develop the detailed remediation schedules, site-specif

1. SEP descriptions and budgets — January 28, 2025. Detailed descriptions, budgets, and implementation schedules for three Supplemental Environmental Projects: (a) Flint Creek Watershed Restoration Project — $5,500,000. Riparian habitat restoration and water quality monitoring in the Flint Creek watershed downstream of the Ridgecrest Mine, in partnership with the Montana Department of Fish, Wildlife & Parks. (b) Batt

2. SEP compliance and reporting schedule — February 1, 2025. Detailed schedule of SEP implementation milestones, reporting obligations, and compliance verification procedures.

3. Ridgecrest remedial action work plan — framework and outline — February 10, 2025. Framework for the comprehensive remedial action at the Ridgecrest Mine, including acid mine drainage treatment, tailings facility closure, and long-term water management, developed in collaboration with Pinnacle Creek.

4. Ridgecrest 30-year milestone table — February 10, 2025. Detailed milestone table for the Ridgecrest Mine remediation, spanning the full anticipated 30-year remediation timeline, with annual and semi-annual milestones for each major remediation component.

5. Gallatin corrective measures study — scope of work — February 14, 2025. Scope of work for the corrective measures study at the Gallatin Chemical Works, addressing groundwater solvent contamination and stormwater management improvements.

6. Bonanza Creek liner repair and containment plan — scope of work — February 14, 2025. Scope of work for the heap-leach pad liner repair and process solution containment improvements at the Bonanza Creek Gold Mine, including cyanide-bearing solution management and migratory bird deterrent systems.

7. Kanawha Bend interim stabilization measures — scope of work — February 18, 2025. Scope of work for interim stabilization measures at the Kanawha Bend Chemical Plant, addressing immediate contamination migration risks while the full CERCLA remediation is designed and implemented.

8. Consolidated remediation milestone matrix — all four sites — February 20, 2025. Master matrix consolidating all remediation milestones across the four sites into a single tracking document, cross-referenced to consent decree sections and appendices.

9. Performance standards and completion criteria memo — February 22, 2025. Memorandum defining the performance standards and completion criteria for each site's remediation, including cleanup levels, monitoring endpoints, and institutional control requirements that must be met to achieve consent-decree compliance at each phase of remediation.

10. Draft sampling and monitoring plan — February 24, 2025. Comprehensive sampling and monitoring plan for all four sites, developed in collaboration with Pinnacle Creek, specifying sampling locations, frequencies, analytical methods, quality assurance/quality control procedures, and data reporting formats. Staffing and Projected Hours Phase 5: Financial Assurance and Trust Instruments Period: November 28, 2024 – Feb

1. Financial assurance requirements memorandum — RCRA/CERCLA — November 28, 2024. Comprehensive memorandum analyzing the financial assurance requirements under RCRA and CERCLA applicable to the four sites, including a comparison of available financial assurance mechanisms (surety bonds, trust funds, letters of credit, insurance, corporate guarantees, and financial tests) and a recommendation for the optimal structure

2. Surety bond application draft — Ironbark — December 10, 2024. Draft application to Ironbark Surety of America, Inc. for issuance of a $165.0 million environmental remediation surety bond, including supporting documentation, indemnity agreement terms, and collateral requirements.

3. Remediation trust agreement draft — Larchfield — January 10, 2025. Draft remediation trust agreement with Larchfield Trust Company, N.A. as trustee, establishing an $80.0 million trust for the funding of remediation activities at the four sites, with provisions for disbursement procedures, investment of trust assets, trustee reporting, and trust termination upon completion of remediation obligations.

4. Independent monitor selection memo — January 15, 2025. Memorandum analyzing the qualifications and proposed terms for the independent environmental monitor, recommending Verdant Analytics, Inc. and Dr. Kamal Osei, and identifying issues for negotiation with the Government regarding the monitor's scope of authority and independence.

5. Draft independent monitor agreement — Verdant Analytics — January 30, 2025. Comprehensive agreement defining the independent monitor's scope of work, reporting obligations, access rights, confidentiality protections, dispute resolution procedures, and compensation terms.

6. Surety bond execution version — February 15, 2025. Final execution version of the surety bond (Bond No. ISA-ENV-2025-08934; face amount $165,000,000), ready for execution by Ironbark Surety of America, Inc., TMC, and the applicable obligees.

7. Independent monitor agreement execution version — February 15, 2025. Final execution version of the independent monitor agreement, incorporating all negotiated terms and approved by all parties.

8. Remediation trust agreement execution version — February 17, 2025. Final execution version of the remediation trust agreement (Trust No. LTC-REM-2025-1177; initial funding $80,000,000), ready for execution by Larchfield Trust Company, N.A. and TMC.

9. Escrow agreement for stipulated penalty deposits — February 17, 2025. Agreement establishing an escrow account for the deposit of stipulated penalty amounts, with provisions for release conditions, interest accrual, and return of unused funds.

10. Financial assurance adequacy and annual adjustment memo — February 20, 2025. Memorandum addressing the annual review and adjustment mechanism for the financial assurance instruments, including the methodology for adjusting the surety bond face amount and trust funding levels based on changes in estimated remediation costs, completed work, and inflation adjustments. Staffing and Projected Hours Phase 6: Insurance,

1. Insurance coverage analysis — Meridian PLL Policy — November 14, 2024. Comprehensive analysis of TMC's Pollution Legal Liability policy (Policy No. MEI-ENV-2021-04738) with Meridian Environmental Insurance Company, including coverage terms, exclusions, conditions, and an assessment of Meridian's coverage positions at each site.

2. Letter to Meridian — reservation of rights response and coverage demand — November 30, 2024. Formal response to Meridian's reservation of rights letters, disputing the coverage denials at Ridgecrest (known-conditions exclusion) and Kanawha Bend (late notice), and demanding coverage under the policy for all four sites.