Contract analysis

I. Executive Summary The purpose of this memorandum is to evaluate Torchlight Mining Corp.'s existing anti-corruption compliance program against the framework set forth in the U.S. Department of Justice Criminal Division's Evaluation of Corporate Compliance Programs (most recently updated March 2023) (the "DOJ Guidance") and the U.S. Securities and Exchange Commission's enforcement guidance, in order to identify gaps

II. Analytical Framework — DOJ/SEC Evaluation of Corporate Compliance Programs The DOJ Criminal Division's Evaluation of Corporate Compliance Programs provides the principal framework against which prosecutors and regulators assess the adequacy of a company's compliance program in FCPA and other corporate criminal matters. The most recent revision of this guidance, issued in March 2023, builds upon earlier iterations

1. Is the corporation's compliance program well designed? This inquiry examines whether the company has adopted policies, procedures, and structural safeguards that are reasonably tailored to the company's risk profile and that reflect an understanding of the specific corruption risks confronting the organization.

2. Is the program being applied earnestly and in good faith — that is, is it effectively implemented? This inquiry goes beyond paper policies to examine whether the compliance program is resourced, supported by management, and operationalized across the organization, including in high-risk subsidiaries and business units.

3. Does the compliance program work in practice? This inquiry focuses on outcomes — whether the program has mechanisms for detecting and remediating misconduct, whether it evolves in response to lessons learned and changes in risk, and whether the company has a track record of identifying issues and taking appropriate corrective action. Under each of these overarching questions, the DOJ Guidance identifies specific t

III. Commitment by Senior and Middle Management

III.A. Tone at the Top Torchlight's Board of Directors adopted the Company's Global Anti-Corruption Policy in November 2018, approximately five months after Gerald R. Vandermeer was appointed Chief Executive Officer on June 22, 2018. The adoption of the policy was accompanied by a communication from Mr. Vandermeer to global staff, distributed via internal email and posted on the corporate intranet, in which he stated

III.B. Middle Management Engagement The DOJ Guidance places significant emphasis on the role of middle management in implementing and reinforcing compliance expectations. In the extractive-industry context, middle management — particularly regional operational leaders with authority over interactions with government officials — plays a critical role in translating corporate compliance policies into day-to-day practic

IV.A. Global Anti-Corruption Policy Torchlight's Global Anti-Corruption Policy was initially adopted in November 2018 and was revised in September 2021 under Berenson's direction. The policy is a 22-page document that covers the following subject areas: (i) prohibition of bribery of foreign officials; (ii) prohibition of commercial bribery; (iii) guidance on gifts, hospitality, and entertainment; (iv) facilitation pa

IV.B. Code of Conduct Torchlight's Code of Conduct is a 34-page document available on the Company's corporate intranet. The Code is available in English and French, the two official languages of Canada. The Code includes a general anti-corruption section that prohibits bribery and corruption and directs employees to the Global Anti-Corruption Policy for detailed guidance. The Code also includes sections on conflicts

IV.C. Delegation of Authority Policy Torchlight maintains a Delegation of Authority Policy (the "DAP"), which establishes approval thresholds and authorization requirements for expenditures across the Company and its subsidiaries. The DAP is organized by expenditure type and specifies the level of management authorization required for various categories of payments. Of particular relevance to this investigation, the

IV.D. Facilitation Payment Policy Torchlight's Global Anti-Corruption Policy includes a section addressing facilitation payments. The policy prohibits facilitation payments "except where required to protect the health or safety of personnel," and provides that any such payment must be "reported to the compliance department within 48 hours and accurately recorded in the Company's books and records." Gap: The investiga

V.A. Enterprise Risk Assessment Torchlight conducted a global compliance risk assessment in 2021, shortly after Berenson's appointment as VP Compliance and Ethics. The risk assessment was conducted by Berenson's compliance team in consultation with Patricia Sung (General Counsel) and was presented to the Audit Committee as part of Berenson's initial compliance program review. The 2021 risk assessment identified the f

V.B. Third-Party Risk Assessment As a component of the 2021 enterprise risk assessment, Berenson's team acknowledged that the use of agents, consultants, and intermediaries in connection with government permits presents elevated corruption risk. However, no risk-based tiering of third parties was documented as a result of this assessment. Gap: Third-party risk tiering is a fundamental element of an effective anti-cor

VI. Third-Party Management — Due Diligence and Ongoing Monitoring Third-party management is the area of Torchlight's compliance program that exhibits the most significant and consequential deficiencies. As noted above, the DOJ and SEC have identified third-party intermediaries as the primary channel through which corrupt payments are made in the vast majority of FCPA enforcement actions. The DOJ Guidance devotes subs

VI.A. Third-Party Due Diligence Procedures Torchlight's Global Anti-Corruption Policy includes a section titled "Use of Agents, Intermediaries, and Consultants" that requires "appropriate due diligence" on third parties engaged to interact with government officials on behalf of the Company. The policy states that "prior to engaging any agent, intermediary, or consultant who will interact with government officials in

VI.B. Contractual Protections The Government Relations Advisory Agreement between TGH and Crestfield Advisory Partners Ltd., dated April 12, 2019, is a 14-page agreement that sets forth the terms of Crestfield's engagement. The agreement includes a general anti-corruption representation clause at Clause 9.2, in which Crestfield warranted that it "shall comply with all applicable anti-corruption laws" and that it "has

VI.C. Ongoing Monitoring of Third Parties Effective third-party management requires not only pre-engagement due diligence but also ongoing monitoring of the third-party relationship for the duration of the engagement. The DOJ Guidance specifically evaluates whether a company has mechanisms for monitoring third-party payment patterns, assessing ongoing compliance, and detecting red flags that may emerge after the enga

VII. Training and Communications

VII.A. Global Anti-Corruption Training Program Torchlight implemented an online anti-corruption training module in 2021, concurrent with Berenson's broader compliance program review. The training program is administered through the Company's learning management system (the "LMS"), which is hosted on Torchlight's corporate IT infrastructure and accessible to employees with Torchlight corporate email accounts and netwo

VII.B. Training Penetration in West African Operations Critical Gap: Review of training records reveals that anti-corruption training was not delivered to the majority of TGM personnel in Ganara during the period under investigation (2019–2024). The gap between the Toronto-based training program and the reality of training delivery at TGM is substantial and represents one of the most significant compliance program de

VII.C. Communications to Third Parties Crestfield Advisory Partners Ltd. received no anti-corruption training, compliance certification, or compliance communication from Torchlight at any time during the 5.5-year engagement. No onboarding compliance briefing was provided to Renard or to Crestfield at the commencement of the engagement. No annual compliance certification was required. No compliance-related corresponde

VIII. Confidential Reporting Structure and Investigation Resources

VIII.A. Ethics Hotline Torchlight operates a third-party ethics hotline managed by Sentinel Compliance Solutions Inc., a U.S.-based provider of ethics and compliance reporting services. The hotline accepts anonymous submissions through both an online reporting portal and a telephone hotline. The hotline is available 24 hours a day, seven days a week, and supports submissions in multiple languages, including English a

VIII.B. Investigation Resources Prior to the engagement of Calderwood & Harkness LLP (formally retained on March 5, 2025, pursuant to an engagement letter authorized by the Audit Committee), the preliminary internal review was conducted by Berenson's compliance team and General Counsel Patricia Sung. The preliminary review involved an initial assessment of the allegations, a high-level review of available financial r