Contract analysis

I. INTRODUCTION AND PURPOSE This firm represents Torchlight Mining Corp. ("TMC"), a corporation organized under the Canada Business Corporations Act ("CBCA") and dual-listed on the Toronto Stock Exchange (TSX: TRC) and the New York Stock Exchange (NYSE: TRC), and its relevant United States subsidiaries: Torchlight Mining (U.S.) Inc., a Delaware corporation (EIN 83-2047156); Torchlight Specialty Chemicals, Inc., a Del

II. BACKGROUND — THE UNDERLYING ENVIRONMENTAL ENFORCEMENT ACTION A. Case Overview On January 18, 2024, the United States Department of Justice ("DOJ"), acting on behalf of the EPA, filed a civil enforcement complaint captioned United States of America, State of Montana, State of Nevada, and State of West Virginia v. Torchlight Mining Corp., et al., Civil Action No. 9:24-cv-00087-DWM, in the United States District Cou

1. Ridgecrest Copper-Molybdenum Mine. Location: 14200 Ridgecrest Mine Road, Drummond, Granite County, Montana 59832. Property Description: The Ridgecrest Copper-Molybdenum Mine (the "Ridgecrest Mine" or "Ridgecrest") encompasses an approximately 3,200-acre active mine footprint situated within a total controlled property area of approximately 8,700 acres in western Montana. The property is owned and operated by Ridge

2. Gallatin Chemical Works. Location: 8800 Industrial Park Lane, Belgrade, Gallatin County, Montana 59714. Property Description: The Gallatin Chemical Works (the "Gallatin Facility" or "Gallatin") comprises approximately 145 acres of improved industrial property located in the Belgrade industrial corridor, Gallatin County, Montana. The facility is owned and operated by Torchlight Specialty Chemicals, Inc. Operational

3. Bonanza Creek Gold Mine. Location: County Road 447, Mile Marker 12, Lander County, Nevada 89820 (approximately 28 miles south of Battle Mountain, Nevada). Property Description: The Bonanza Creek Gold Mine (the "Bonanza Creek Mine" or "Bonanza Creek") encompasses an approximately 5,600-acre active mine footprint within a total controlled property area of approximately 12,400 acres in north-central Nevada. The prope

4. Kanawha Bend Chemical Plant. Location: 2200 Chemical Valley Road, Institute, Kanawha County, West Virginia 25112. Property Description: The Kanawha Bend Chemical Plant (the "Kanawha Bend Facility" or "Kanawha Bend") comprises approximately 78 acres of improved industrial property located along the Kanawha River in the Institute area of Kanawha County, West Virginia. The facility is owned and operated by Torchlight

III. THE POLICY — KEY TERMS AND COVERAGE PROVISIONS The Policy at issue is Pollution Legal Liability Policy No. MEI-ENV-2021-04738, issued by Meridian Environmental Insurance Company to Torchlight Mining Corp. as the named insured. The scheduled subsidiaries designated under the Policy are Torchlight Mining (U.S.) Inc., Torchlight Specialty Chemicals, Inc., Ridgecrest Mine Holdings, LLC, and Bonanza Creek Mining, LLC

IV. MERIDIAN'S RESERVATION OF RIGHTS — SUMMARY AND REBUTTAL In its ROR Letter, Meridian raised certain coverage objections with respect to two of the four sites — the Ridgecrest Copper-Molybdenum Mine and the Kanawha Bend Chemical Plant — while acknowledging coverage for the Gallatin Chemical Works and the Bonanza Creek Gold Mine, subject to the SIR. We address each of Meridian's positions in turn and explain why eac

V. FORMAL DEMAND FOR COVERAGE — ALL FOUR SITES Based on the foregoing analysis, and on behalf of the Torchlight Entities, we hereby make the following formal demands upon Meridian Environmental Insurance Company: First, we demand that Meridian immediately withdraw its denial of coverage for the Ridgecrest Copper-Molybdenum Mine. As set forth in Section IV.A above, the grounds cited by Meridian for its denial — the po

VI. RESERVATION OF RIGHTS — TORCHLIGHT MINING CORP. The Torchlight Entities hereby expressly reserve all rights, claims, defenses, and remedies against Meridian Environmental Insurance Company, whether arising under the Policy, at common law, in equity, or by statute, including but not limited to the following: (a) Breach of Contract. Claims for breach of Meridian's obligations under Policy No. MEI-ENV-2021-04738, in

VII. REQUEST FOR POLICY FILE AND CLAIMS DOCUMENTATION Pursuant to the Torchlight Entities' rights as insureds under the Policy and under applicable law, we request that Meridian provide the following documentation within thirty (30) days of the date of this letter: (a) A complete copy of Meridian's claims file related to Policy No. MEI-ENV-2021-04738 and the TMC claims, including but not limited to all coverage analy

VIII. DIRECTION FOR FURTHER COMMUNICATIONS All further communications regarding the claims under Policy No. MEI-ENV-2021-04738, the coverage issues addressed in this letter, and any other matters related to the Enforcement Action or the Consent Decree Framework should be directed to the undersigned at the following address: Harrison Wexford, Partner Calderwood & Harkness LLP One Liberty Plaza, 48th Floor 165 Broadway

1. Copy of EPA Notice of Violation dated September 12, 2023

2. Copy of DOJ Complaint, United States of America, et al. v. Torchlight Mining Corp., et al., Civil Action No. 9:24-cv-00087-DWM (filed January 18, 2024)

3. Summary Table of Site-by-Site Remediation Cost Estimates and Civil Penalty Allocations Category | Amount Total Remediation Costs (Nominal) | $343,500,000 — Ridgecrest Copper-Molybdenum Mine | $198,600,000 — Gallatin Chemical Works | $42,800,000 — Bonanza Creek Gold Mine | $63,200,000 — Kanawha Bend Chemical Plant | $38,900,000 Total Civil Penalties | $31,500,000 — Ridgecrest | $14,200,000 — Gallatin | $5,800,000 —