Contract analysis

I. Introduction and Purpose of Letter I write in my capacity as a partner at Calderwood & Harkness LLP ("C&H") and lead outside counsel to Torchlight Mining Corp. ("TMC"), including its U.S. subsidiaries Torchlight Mining (U.S.) Inc., Torchlight Specialty Chemicals, Inc., and Ridgecrest Mine Holdings, LLC (collectively, the "TMC Parties" or "Defendants"). C&H serves as lead outside counsel to the TMC Parties in conne

II. Case Background On January 18, 2024, the United States of America, acting through the U.S. Department of Justice on behalf of the U.S. Environmental Protection Agency ("EPA"), filed a civil enforcement 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., et al., Civil Action No. 9:24-cv-000

III. Summary of Consent Decree — Overall Structure The consent decree, as substantially finalized on February 3, 2025, resolves the alleged violations of the Clean Water Act ("CWA"), 33 U.S.C. §§ 1251 et seq.; the Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C. §§ 6901 et seq.; and the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), 42 U.S.C. §§ 9601 et seq., at all four f

1. Total Remediation Costs (All Sites): Approximately $343.5 million (nominal), which represents an estimated net present value of $245.1 million using a 3% discount rate. This figure encompasses remediation, corrective action, and long-term monitoring obligations across all four facilities over periods ranging from 15 to 30 years.

2. Civil Penalties (All Sites): $31.5 million, allocated among the four facilities and payable in accordance with the schedule set forth in the consent decree.

3. EPA Past-Costs Reimbursement (CERCLA § 107): $18.1 million, reflecting reimbursement to the United States for past response costs incurred by EPA. Of this total, $14.3 million is attributable to EPA removal actions conducted at the Ridgecrest site between January 2021 and May 2023, and $3.8 million is attributable to EPA response activities at the Kanawha Bend facility.

4. Supplemental Environmental Projects ("SEPs"): $12.0 million, allocated among multiple projects designed to provide environmental and public health benefits in the communities affected by the facilities at issue.

5. Independent Monitor Costs (Five-Year Estimate): Approximately $4.8 million, representing an estimated annual cost of approximately $960,000 per year over the initial five-year monitoring term. B. Financial Assurance The consent decree requires the TMC Parties to establish and maintain financial assurance in the aggregate amount of $245.0 million, structured as follows: • Surety Bond: $165.0 million, to be issued b

IV. Ridgecrest Copper-Molybdenum Mine — Site-Specific Terms A. Site Description The Ridgecrest Copper-Molybdenum Mine (the "Ridgecrest Site" or "Ridgecrest") is located at 14200 Ridgecrest Mine Road, Drummond, Granite County, Montana 59832. The site is operated by Torchlight Mining (U.S.) Inc. Real property and mineral rights at the site are held by Ridgecrest Mine Holdings, LLC, a Montana limited liability company r

1. CWA § 301 (33 U.S.C. § 1311): Unpermitted discharges of acid mine drainage ("AMD") from the mine site to surface waters, including Flint Creek and its tributaries, without authorization under the facility's MPDES permit or any other applicable National Pollutant Discharge Elimination System permit.

2. RCRA § 3004 (42 U.S.C. § 6924): Mismanagement of hazardous waste generated from the solvent-extraction/electrowinning ("SX/EW") circuit at the Ridgecrest processing facility, including failure to properly characterize, store, and dispose of spent organic solvents and electrowinning cell residues in accordance with applicable RCRA regulations.

3. CERCLA § 107 (42 U.S.C. § 9607): Cost recovery by the United States for EPA removal actions conducted at the Ridgecrest Site from January 2021 through May 2023, totaling $14.3 million. C. Principal Contaminants The principal contaminants of concern at the Ridgecrest Site, as documented in EPA's site investigation reports and the TMC Parties' own environmental assessments, include the following: • Acid Mine Drainag

1. Submission of Ridgecrest Remedial Action Work Plan: No later than December 14, 2025 (six months following the target Effective Date).

2. Commencement of Ridgecrest Remedy Construction: No later than June 14, 2027 (two years following the target Effective Date).

3. End of 30-Year Remediation Obligation: June 14, 2055. The remediation activities to be performed at the Ridgecrest Site include, but are not limited to, the following principal components: • Design, construction, and operation of acid mine drainage treatment systems, including both active and passive treatment technologies, to address AMD discharges from the mine pit, waste rock dumps, and tailings impoundment; •

V. Gallatin Chemical Works — Site-Specific Terms A. Site Description The Gallatin Chemical Works (the "Gallatin Site" or "Gallatin") is located at 8800 Industrial Park Lane, Belgrade, Gallatin County, Montana 59714. The facility is operated by Torchlight Specialty Chemicals, Inc., a Delaware corporation (EIN: 47-3819204) and a wholly owned subsidiary of Torchlight Mining (U.S.) Inc. The Gallatin Site encompasses appr

1. RCRA §§ 3004 and 3005 (42 U.S.C. §§ 6924, 6925): Operation of an unpermitted hazardous-waste storage unit at the Gallatin facility and failure to perform corrective action at three identified solid waste management units ("SWMUs") as required under the facility's RCRA permit and applicable regulations.

2. CWA § 301 (33 U.S.C. § 1311): Exceedances of effluent limitations established under the facility's Montana Pollutant Discharge Elimination System ("MPDES") permit for carbon disulfide (CS₂) and total suspended solids ("TSS") on fourteen (14) occasions during the period from January 2021 through June 2024. C. Principal Contaminants The principal contaminants of concern at the Gallatin Site, as identified through EP

1. Submission of Gallatin Corrective Measures Study ("CMS"): No later than June 14, 2026 (one year following the target Effective Date).

2. Implementation of Corrective Action: Following EPA approval of the CMS, the TMC Parties will be required to implement corrective action measures addressing all three SWMUs, the CS₂ groundwater plume, and VOC contamination in subsurface soils. The consent decree sets forth detailed performance standards and completion criteria for the Gallatin corrective action, including groundwater remediation objectives designed

VI. Stipulated Penalties and Enforcement Provisions The consent decree contains stipulated penalty provisions applicable to both Montana facilities, as well as the Nevada and West Virginia sites. The stipulated penalties are structured on a per-violation, per-day basis as follows: • $1,500 per day per violation for the first thirty (30) days of noncompliance; • $3,000 per day per violation for days thirty-one (31) th

1. Informal Negotiation: The parties will attempt to resolve any dispute through informal negotiations for a period of thirty (30) days following written notice of the dispute.

2. Formal EPA Decision: If the dispute is not resolved through informal negotiation, EPA will issue a formal written decision within thirty (30) days of the conclusion of the informal negotiation period.

3. Judicial Review: If the TMC Parties disagree with EPA's formal decision, the TMC Parties may petition the Court for judicial review within thirty (30) days of receipt of EPA's decision. The standard of review applicable to the Court's evaluation of EPA's decision is set forth in the consent decree.

VII. Financial Assurance Applicable to Montana Sites As noted in Section III above, the consent decree requires the TMC Parties to establish and maintain financial assurance in the total amount of $245.0 million. This financial assurance package covers all four facilities addressed in the consent decree, including both Montana sites. The financial assurance is structured as follows: • Surety Bond: $165.0 million, to

VIII. Independent Monitor As described in Section III above, the consent decree provides for the appointment of Verdant Analytics, Inc. as the court-ordered independent environmental monitor for all four facilities, including the Ridgecrest and Gallatin sites. The appointment is made pursuant to the consent decree provisions authorizing the Court to designate an independent auditor to oversee the TMC Parties' complia

IX. State of Montana as Co-Plaintiff — Joinder and Signature The TMC Parties acknowledge and confirm the State of Montana's role as a co-plaintiff and intervenor in this action with respect to the Ridgecrest and Gallatin facilities. The State of Montana's participation in the consent decree is essential to ensure the effective coordination of federal and state regulatory authorities and the comprehensive resolution o

X. Request for Coordination on State Permit Requirements The TMC Parties acknowledge that the federal consent decree operates alongside, and does not supersede, state environmental regulatory requirements applicable to the Ridgecrest and Gallatin facilities. The consent decree itself contains express reservations preserving the authority of the State of Montana and its agencies to enforce applicable state environment

1. MPDES Permits: Montana Pollutant Discharge Elimination System permits applicable to both the Ridgecrest and Gallatin facilities will likely require review, modification, or reissuance in connection with the implementation of consent decree remediation activities. The installation and operation of new acid mine drainage treatment systems at Ridgecrest, in particular, may necessitate amendments to the facility's MPD

2. Hard Rock Mining Reclamation Permits: The Ridgecrest Site is subject to permitting under Montana's Metal Mine Reclamation Act, Title 82, Chapter 4, Part 3, MCA. The consent decree remediation activities, including tailings impoundment stabilization and mine closure measures, will need to be coordinated with the applicable state reclamation permit requirements administered by MT DEQ's Hard Rock Mining Bureau.

3. State RCRA-Authorized Permit Obligations: The Gallatin facility operates under RCRA Permit No. MTD098712456, issued by MT DEQ pursuant to Montana's authorization under RCRA § 3006. The corrective action measures to be implemented under the consent decree will need to be coordinated with the corrective action requirements of the state-issued RCRA permit, and the permit may require modification to reflect the correc

4. State Water Quality Certifications and Other Environmental Permits: The remediation activities contemplated by the consent decree may require state water quality certifications under Section 401 of the Clean Water Act, as well as other state environmental permits, including but not limited to stormwater discharge permits, land application permits, and air quality permits associated with remediation construction ac

XI. Confidentiality and Privilege Reservation The TMC Parties respectfully note that certain information exchanged between the parties during the course of consent decree negotiations is subject to confidentiality protections established by agreement of the parties and by applicable rules governing settlement communications. Nothing in this letter or the enclosed consent decree text is intended to waive or diminish t

XII. Closing The TMC Parties wish to express their sincere appreciation for the State of Montana's constructive and professional engagement throughout the consent decree negotiation process. The State's participation has been instrumental in achieving a resolution that addresses the environmental conditions at the Ridgecrest and Gallatin facilities in a manner that is protective of human health, the environment, and