Contract analysis

I. Purpose and Policy Identification We write on behalf of our client, Torchlight Mining Corp. ("TMC"), and its U.S. subsidiaries identified herein, in connection with a multi-site environmental enforcement matter brought by the United States Environmental Protection Agency ("EPA") and the United States Department of Justice ("DOJ"), as more fully described below. Calderwood & Harkness LLP serves as counsel to TMC an

II. Identification of the Insured The Named Insured under the Policy is Torchlight Mining Corp., a corporation incorporated under the Canada Business Corporations Act ("CBCA"). TMC is dual-listed on the Toronto Stock Exchange (ticker symbol: TRC) and the New York Stock Exchange (ticker symbol: TRC). TMC's Canadian headquarters is located at 1800 Bayfield Tower, 401 Bay Street, Toronto, Ontario M5H 2Y4, Canada. TMC's

1. Torchlight Mining (U.S.) Inc., a Delaware corporation (EIN: 83-2047156);

2. Torchlight Specialty Chemicals, Inc., a Delaware corporation (EIN: 47-3819204);

3. Ridgecrest Mine Holdings, LLC, a Montana limited liability company (Montana Secretary of State ID: E1042738); and

4. Bonanza Creek Mining, LLC, a Nevada limited liability company (Nevada Secretary of State Entity No.: E0518294731). Each of the foregoing subsidiaries is wholly owned, directly or indirectly, by TMC.

III. Description of the Underlying Enforcement Matter A. Overview of the Government Action On January 18, 2024, the DOJ, acting through the Environment and Natural Resources Division ("ENRD"), filed a civil complaint in the United States District Court for the District of Montana, Missoula Division, captioned: United States of America and State of Montana v. Torchlight Mining Corp., Torchlight Mining (U.S.) Inc., Tor

1. Ridgecrest Copper-Molybdenum Mine. The Ridgecrest Copper-Molybdenum Mine is located at 14200 Ridgecrest Mine Road, Drummond, Granite County, Montana 59832. The facility is an open-pit copper-molybdenum mine that has been operational since 1978. Active mining operations ceased in December 2019, and the site is currently in a closure and reclamation phase. The mine footprint encompasses approximately 3,200 acres. Th

2. Gallatin Chemical Works. The Gallatin Chemical Works is located at 8800 Industrial Park Lane, Belgrade, Gallatin County, Montana 59714. The facility is a specialty chemical manufacturing plant that has been operational since 1993 and remains active. The facility encompasses approximately 145 acres and operates under RCRA Permit No. MTD098712456. The government's complaint alleges the following violations at the Ga

3. Bonanza Creek Gold Mine. The Bonanza Creek Gold Mine is located at County Road 447, Mile Marker 12, Lander County, Nevada 89820. The facility is an open-pit, heap-leach gold mine that has been operational since 2001 and remains in active production. The mine footprint encompasses approximately 5,600 acres. The government's complaint alleges the following violations at the Bonanza Creek site: • Unpermitted CWA disc

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 is a chemical manufacturing plant that has been operational since 1985 and remains active. The plant encompasses approximately 78 acres and operates under RCRA Permit No. WVD048823915. The government's complaint alleges the following violations at the Ka

IV. Financial Magnitude of the Enforcement Matter The total estimated financial obligations arising from the enforcement action, as reflected in the current state of consent decree negotiations, are summarized below. These figures are based on the most current information available as of the date of this letter and are subject to change as negotiations continue. A. Remediation Obligations The total negotiated remedia

I. TMC Financial Context To provide context for the foregoing figures, TMC's key financial metrics are as follows: • Fiscal Year 2023 Revenue: C$4.82 billion (approximately US$3.56 billion) • Fiscal Year 2023 EBITDA: C$1.14 billion (approximately US$843 million) • Market Capitalization (as of October 2024): approximately C$7.6 billion • Global Workforce: approximately 11,400 employees worldwide, of which approximatel

V. Circumstances Giving Rise to Potential Claims Under the D&O Policy A. Potential Director and Officer Exposure from the Enforcement Action The government's complaint and proposed consent decree involve allegations that TMC and its subsidiaries, through the actions and decisions of their directors and officers, violated federal environmental statutes—specifically the CWA, RCRA, CERCLA, and the MBTA—at four separate

VI. Insurance Coverage Considerations and Related Matters A. Meridian PLL Policy Coverage Dispute We wish to bring to Clearwater Mutual's attention that TMC separately maintains a Pollution Legal Liability ("PLL") insurance policy with Meridian Environmental Insurance Company, Policy No. MEI-ENV-2021-04738, with a per-occurrence limit of $50.0 million, an aggregate limit of $75.0 million, and a self-insured retention

VII. Reservation of Rights TMC and its directors and officers expressly reserve all rights under Policy No. CMI-DO-2023-10221, including but not limited to: (a) all rights under Side A coverage (insuring individual directors and officers for non-indemnifiable losses); (b) all rights under Side B coverage (reimbursing TMC for indemnification payments made to directors and officers); (c) all rights under Side C coverag

VIII. Request for Confirmation and Contact Information We respectfully request that Clearwater Mutual provide written confirmation of receipt of this notice within ten (10) business days of the date of this letter. Please confirm that this notice has been duly recorded in Clearwater Mutual's files as a notice of circumstances under Policy No. CMI-DO-2023-10221. All communications regarding this notice and any claims

IX. Confidentiality Notice This letter and all enclosures and attachments hereto contain information that is privileged, confidential, and commercially sensitive. This letter is protected by the attorney-client privilege, the attorney work product doctrine, and such other privileges and protections as may be applicable. The transmission of this letter to Clearwater Mutual and Clearwater Mutual Services, Inc. is not i