Contract analysis

I. Executive Summary The purpose of this memorandum is to analyze the financial assurance obligations that will attach to Torchlight Mining Corp. ("TMC") and its U.S. subsidiaries under the proposed consent decree currently being negotiated with the United States Environmental Protection Agency ("EPA") and the United States Department of Justice ("DOJ") in connection with four sites located across Montana, Nevada, an

II. Background A. The Four Sites and Associated Regulatory Programs The consent decree encompasses four sites across three states, each subject to distinct but overlapping regulatory programs. The following provides a summary of each site, its operational history, regulatory status, and the remediation costs negotiated under the proposed consent decree.

1. Ridgecrest Copper-Molybdenum Mine The Ridgecrest Copper-Molybdenum Mine is located at 14200 Ridgecrest Mine Road, Drummond, Granite County, Montana 59832. The property comprises approximately 3,200 acres of mine footprint within a total controlled property area of approximately 8,700 acres. The Ridgecrest Mine is a large-scale open-pit copper-molybdenum mining operation that was operational from 1978 through 2019,

2. Gallatin Chemical Works The Gallatin Chemical Works is located at 8800 Industrial Park Lane, Belgrade, Gallatin County, Montana 59714. The facility occupies approximately 145 acres and is engaged in the manufacture of specialty chemicals used in the mining industry, including flotation reagents, sodium xanthate, and dithiophosphate collectors. The facility has been in continuous operation since 1993 and is current

3. Bonanza Creek Gold Mine The Bonanza Creek Gold Mine is located on County Road 447, Mile Marker 12, in Lander County, Nevada 89820. The property comprises approximately 5,600 acres of mine footprint within a total area of approximately 12,400 acres. The Bonanza Creek Mine is an open-pit heap-leach gold mining operation that has been in active production since 2001 and continues to operate as an active mining site.

4. Kanawha Bend Chemical Plant The Kanawha Bend Chemical Plant 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 the regeneration of sulfuric acid. The facility has been in continuous operation since 1985 and is currently active. The Kanawha Bend

III. Statutory and Regulatory Bases for Financial Assurance A. RCRA Financial Assurance Requirements The Resource Conservation and Recovery Act, as amended, provides EPA with broad authority to require financial assurance from owners and operators of hazardous waste treatment, storage, and disposal ("TSD") facilities. Section 3004(a)(6) of RCRA, codified at 42 U.S.C. § 6924(a)(6), directs EPA to promulgate regulation

Section 106(b) of CERCLA, codified at 42 U.S.C. § 9606(b), authorizes EPA to require financial assurance as a condition of consent decrees and administrative orders directing PRPs to undertake response actions. The EPA has issued guidance on the use of financial assurance provisions in CERCLA consent decrees, including the Interim Guidance on Financial Assurance in Consent Decrees (2015), which sets forth EPA's polic

IV. Acceptable Financial Assurance Instruments — Analysis This Section analyzes each category of financial assurance instrument that is potentially available to TMC, including the instrument selected (surety bond and trust fund) and those that were considered but not adopted (letter of credit, insurance, and financial test). For each instrument, we address the applicable regulatory requirements, the terms available t

V. Calculation of Required Financial Assurance Amount A. Methodology The consent decree requires TMC to demonstrate and maintain financial assurance in an amount sufficient to cover the estimated cost of completing the remedial actions at all four sites. The required amount is $245.0 million, derived from the net present value ("NPV") of total remediation obligations across all sites, calculated at a 3% discount rate

VI. Proposed Financial Assurance Structure A. Surety Bond — $165.0 Million The larger component of TMC's financial assurance structure is a performance surety bond in the amount of $165.0 million, to be issued by Ironbark Surety of America, Inc. The bond will guarantee TMC's performance of its remedial obligations under the consent decree, with the EPA as obligee. All five Torchlight entities will be named as princip

VII. Annual Adjustment Mechanism The consent decree requires an annual review and adjustment of the financial assurance amounts to reflect changes in the estimated cost of completing the remedial actions. This annual adjustment mechanism is consis