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CALDERWOOD & HARKNESS LLP 555 California Street, 40th Floor San Francisco, California 94104 Telephone: (415) 772-8000 Facsimile: (415) 772-8001 www.calderwoodharkness.com
PRIVILEGED AND CONFIDENTIAL — ATTORNEY-CLIENT PRIVILEGE / ATTORNEY WORK PRODUCT This memorandum was prepared by Calderwood & Harkness LLP at the direction of counsel for the purpose of providing legal advice and contains attorney work product. It is protected from disclosure by the attorney-client privilege, the work-product doctrine, and all other applicable privileges and protections. Any disclosure, distribution, or copying of this memorandum or its contents to any person not authorized to receive it may constitute a waiver of applicable privileges.
MEMORANDUM
To: Priya Anand, General Counsel, Torchlight Mining Corp.
From: Elaine Forsythe, Calderwood & Harkness LLP Claudia Ferraro, Meridian Compliance Partners LLC
Date: August 25, 2023
Re: Enhanced Antitrust Compliance Program — Design Memorandum
C&H Matter No.: 1039-00001
cc: Søren Dalmqvist, CEO, Torchlight Mining Corp. Howard Bellamy, Calderwood & Harkness LLP Aaron Liu, Calderwood & Harkness LLP Monica Reyes, Calderwood & Harkness LLP
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I. EXECUTIVE SUMMARY
The purpose of this memorandum is to present to Torchlight Mining Corp. ("TMC" or the "Company") the proposed design of TMC's Enhanced Antitrust Compliance Program (the "Program"). The Program has been developed jointly by Calderwood & Harkness LLP ("C&H") and Meridian Compliance Partners LLC ("Meridian"), which was retained by TMC on August 1, 2023, with Claudia Ferraro serving as engagement lead. This memorandum sets forth the Program's architecture, governance framework, substantive policies, training protocols, monitoring mechanisms, and implementation timeline, and is intended to serve as the foundation for TMC's compliance-remediation proffer to the United States Department of Justice.
The Program has been designed in the context of the DOJ Antitrust Division's ongoing grand jury investigation (GJ-22-0194, N.D. Cal.) into suspected price-fixing, market allocation, and bid-rigging in the North American specialty-minerals sector, specifically involving high-purity feldspar, industrial talc, and rare-earth concentrates. TMC is a subject of that investigation. The investigation has been pending since approximately early 2022, and TMC has been cooperating with the DOJ pursuant to counsel's guidance since February 2023.
The Program is designed to address the significant deficiencies identified during C&H's internal investigation, the findings of which were presented to the TMC Board of Directors on January 20, 2023. As described in detail in Part II below, the internal investigation revealed that TMC's existing antitrust compliance framework — originally adopted in approximately 2014 and never meaningfully updated — was inadequate to detect or prevent the anticompetitive conduct at issue. The Program is further designed to satisfy the anticipated requirements of the DOJ in connection with a potential non-prosecution agreement ("NPA"), which TMC and C&H are actively negotiating with the Antitrust Division.
The Program is intended for submission to the DOJ as a component of TMC's cooperation and remediation proffer, with a target submission date of September 15, 2023. The submission is designed to demonstrate TMC's genuine commitment to meaningful compliance reform and to maximize cooperation and remediation credit under the DOJ's applicable guidelines.
The scope of the Program covers all TMC operations globally, encompassing the Company's 14 active mining operations across Canada, the United States, Brazil, and Australia, as well as its six downstream chemical-processing facilities. Particular emphasis is placed on the U.S. Specialty Minerals Division, which generated fiscal year 2021 revenue of approximately USD 687 million and which is at the center of the DOJ's investigation. The Program is intended to be scalable and adaptable to TMC's diverse operational footprint, while ensuring that the highest levels of scrutiny and control are applied to the business units and activities that present the greatest antitrust risk.
For context, TMC is a corporation organized under the Canada Business Corporations Act ("CBCA") and is listed on the Toronto Stock Exchange (ticker: TRCL) and the New York Stock Exchange (ticker: TMC). For fiscal year 2021, TMC reported consolidated revenue of approximately CAD 4.27 billion (approximately USD 3.38 billion at prevailing exchange rates). The Company operates across four countries and employs approximately 8,600 personnel worldwide.
The following sections of this memorandum detail the background giving rise to the need for the Program, the proposed governance and organizational structure, the risk-assessment methodology, the substantive compliance policies, the training program, reporting mechanisms and whistleblower protections, monitoring and auditing protocols, discipline and accountability measures, third-party compliance requirements, document-retention standards, the implementation timeline, budget and resource requirements, coordination with the DOJ submission, and our recommendations for next steps. Referenced appendices containing proposed organizational charts, draft policies, training outlines, and the risk-assessment framework are attached separately.
II. BACKGROUND AND NEED FOR ENHANCED COMPLIANCE PROGRAM
A. The Existing Compliance Framework and Its Deficiencies
TMC adopted its initial antitrust compliance policy in approximately 2014, shortly after the Company's listing on the NYSE. At the time of adoption, the policy consisted of a general statement of the Company's commitment to compliance with applicable competition laws, a brief summary of prohibited conduct, and a directive that employees contact the legal department with questions. The policy was distributed to employees at the time of its adoption, and a single round of live training was conducted for sales and commercial personnel in the first quarter of 2015.
The internal investigation conducted by C&H between March 2022 and January 2023 revealed that the 2014 policy had significant structural deficiencies and, critically, had not been maintained, updated, or enforced in any meaningful way in the years following its adoption. Specifically, the investigation identified the following deficiencies:
1. No Annual Antitrust Training Since 2018. The last antitrust compliance training conducted by TMC occurred in approximately the first quarter of 2018 — roughly five years before the commencement of the DOJ investigation. No training was conducted in 2019, 2020, 2021, or 2022. The 2018 training was a single one-hour webinar made available to commercial personnel in the U.S. Specialty Minerals Division; attendance was not mandatory, and no records were maintained of which employees completed the training.
2. No Monitoring Protocols for Trade-Association Interactions. Despite the fact that TMC personnel regularly attended quarterly conferences hosted by the North American Specialty Minerals Council ("NASMC"), headquartered in Arlington, Virginia, TMC had no policies, protocols, or monitoring mechanisms governing employee participation in trade-association events. There were no pre-event briefings, no limitations on the scope of permissible discussions, no prohibition on informal or private side meetings with competitor personnel, and no requirement that attendees report on their interactions at such events. This gap is particularly significant given that the internal investigation identified NASMC quarterly conferences as a primary venue for the anticompetitive communications at issue.
3. No Audit or Monitoring of Competitor Contacts. TMC had no system in place for tracking, logging, reviewing, or auditing contacts between TMC employees and personnel of competing companies. There was no requirement that employees report competitor contacts, no pre-approval mechanism for competitor interactions, and no centralized record of such interactions.
4. No Centralized Reporting or Tracking Mechanism. Relatedly, TMC lacked any centralized mechanism for the reporting or tracking of interactions between TMC commercial personnel and employees of competitor firms. Individual employees were left to exercise their own judgment as to the propriety of competitor interactions, without guidance, oversight, or documentation requirements.
5. No Designated Compliance Officer with Independent Reporting Authority. TMC did not have a dedicated compliance officer responsible for antitrust compliance. Responsibility for antitrust matters was nominally housed within the General Counsel's office, but no individual was specifically tasked with antitrust compliance oversight, monitoring, or enforcement. There was no individual with independent reporting authority to the Board or Audit Committee on compliance matters.
6. No Whistleblower Hotline Specific to Antitrust Concerns. While TMC maintained a general ethics hotline, there was no reporting mechanism specifically designed for antitrust compliance concerns. The general ethics hotline was not widely publicized, and no antitrust-specific guidance was provided to employees regarding when or how to report potential competition-law violations.
These deficiencies, taken together, left TMC without the institutional safeguards necessary to prevent, detect, or remediate anticompetitive conduct. The absence of meaningful training, monitoring, and reporting mechanisms created an environment in which the conduct described below was able to persist for an extended period without detection by TMC's management or legal department.
B. Conduct Identified in the Internal Investigation
C&H's internal investigation, conducted with the assistance of Redstone Digital Forensics (e-discovery vendor) and Hargrove Forensic Advisory LLC (economic consultants, led by Dr. Vanessa Tremblay), encompassed the review of approximately 555,000 documents — including emails, text messages, encrypted-messaging application records, calendars, travel records, expense reports, and pricing-related files — and interviews of 23 current and former TMC employees.
The investigation revealed the following principal findings:
Gavin Holt (Former Vice President, U.S. Specialty Minerals Sales, who departed TMC on September 30, 2021) exchanged pricing information with Carl Edgerton (Vice President of Sales, Ridgecrest Minerals Inc., Denver, Colorado) and Kevin Tsang (Former Senior Vice President, Commercial Operations, Pinnacle Earth Resources Ltd., with offices in Sudbury, Ontario and Salt Lake City, Utah) on at least 37 documented occasions between approximately March 2017 and July 2021. These communications involved the sharing of current and prospective pricing for high-purity feldspar, industrial talc, and rare-earth concentrates, as well as discussions concerning the allocation of customers and geographic territories among the three companies.
The investigation determined that these communications occurred through multiple channels, including: (i) the VaultChat encrypted messaging application, which features end-to-end encryption and auto-deleting messages, and which Holt installed on his personal mobile device for the apparent purpose of conducting these communications outside TMC's IT infrastructure; (ii) in-person meetings at NASMC quarterly conferences, held in Arlington, Virginia; Scottsdale, Arizona; and Orlando, Florida, among other locations; and (iii) occasional telephone calls from Holt's personal mobile phone.
Sandra Chu (Director, Pricing Analytics, currently employed) received instructions from Holt to adjust TMC's published price lists for specialty-mineral products on at least 12 documented occasions that were correlated with competitor price movements. The investigation found that Chu implemented Holt's pricing directives in the ordinary course of her responsibilities. Importantly, C&H's investigation did not identify direct evidence that Chu knew of the inter-competitor communications or understood that Holt's pricing instructions were the product of an agreement with competitors. Chu cooperated fully with the internal investigation and provided credible testimony that she understood Holt's instructions to be based on his assessment of market conditions.
Thomas Eriksen (Regional Sales Manager, Western Region, currently employed) attended four NASMC conferences during the alleged conspiracy period at which side meetings between Holt and competitor personnel allegedly occurred. Evidence of Eriksen's direct participation in the anticompetitive conduct is ambiguous. Eriksen was present at certain social events at which Holt and competitor representatives were also present, but no documentary evidence was identified establishing that Eriksen participated in substantive pricing or allocation discussions. Eriksen's status remains under review.
The investigation found no evidence that TMC's C-suite executives — including CEO Søren Dalmqvist and General Counsel Priya Anand — or any member of the TMC Board of Directors had knowledge of, authorized, or participated in the alleged anticompetitive conduct. The conduct appears to have been confined to Holt and, potentially, a limited number of subordinate personnel within the U.S. Specialty Minerals Division.
The alleged conspiracy period spans from approximately January 2017 through August 2021. Based on the DOJ's preliminary calculations, which have been shared with C&H during the course of cooperation discussions, the total volume of affected commerce across all three alleged co-conspirators is estimated at approximately USD 1.34 billion, of which TMC's share is estimated at approximately USD 478 million. These figures are subject to further refinement during the pendency of the investigation.
C. Regulatory Expectations
The design of the Program has been informed by the DOJ Antitrust Division's published guidance on the Evaluation of Corporate Compliance Programs, as updated, as well as by C&H's experience with comparable enforcement matters and by insights gained through TMC's ongoing cooperation discussions with the Antitrust Division. The DOJ's guidance makes clear that the existence and effectiveness of a company's compliance program is a significant factor in the Division's assessment of appropriate penalties, the availability of cooperation credit, and the scope and duration of any independent compliance monitor.
The DOJ has consistently emphasized that a compliance program must be more than a "paper program" — it must be adequately designed, effectively implemented, and sincerely enforced. The Division evaluates compliance programs based on three overarching questions: (1) Is the corporation's compliance program well designed? (2) Is the program being applied earnestly and in good faith, i.e., is the program adequately resourced and empowered to function effectively? (3) Does the corporation's compliance program work in practice?
Based on C&H's discussions with the Antitrust Division and our assessment of comparable recent enforcement actions, we anticipate that the terms of a potential NPA will likely require, at a minimum:
• Implementation and maintenance of an enhanced antitrust compliance program meeting or exceeding the standards set forth in the DOJ's published guidance;
• Appointment of an independent compliance monitor for a defined term (we anticipate two years, subject to negotiation), with authority to assess the Program's design, implementation, and effectiveness and to report findings to the DOJ;
• Annual certifications by the CEO and General Counsel attesting to TMC's maintenance of, funding for, and adherence to the Program during the preceding year; and
• Such other terms and conditions as the Division may require, including a monetary payment, which we anticipate will be negotiated in the range of USD 30–60 million.
The Program as proposed in this memorandum has been intentionally designed to exceed the minimum requirements that we anticipate the DOJ will impose. Our objective is to present a Program that demonstrates TMC's genuine commitment to cultural and structural reform and that maximizes the cooperation and remediation credit available to the Company. A robust Program may also serve to reduce the scope and intrusiveness of the independent monitor's mandate and to shorten the monitor's term.
III. PROGRAM GOVERNANCE AND ORGANIZATIONAL STRUCTURE
An effective antitrust compliance program requires a governance structure that ensures the Program has sufficient independence, authority, resources, and senior-level support to function effectively. The governance structure proposed below is designed to establish clear lines of accountability, to provide the Chief Compliance Officer with the independence and access necessary to carry out the Program, and to ensure Board-level oversight of the Program's design, implementation, and ongoing effectiveness.
A. Appointment of Independent Chief Compliance Officer (CCO)
TMC shall appoint a dedicated Chief Compliance Officer ("CCO") whose exclusive responsibility shall be the design, implementation, operation, and enforcement of the Enhanced Antitrust Compliance Program. The CCO position shall be a senior leadership role within TMC, carrying sufficient authority and stature to ensure that the compliance function is taken seriously throughout the organization and that the CCO has the ability to influence business conduct at all levels of the Company.
Reporting Structure. The CCO shall report directly to the TMC Board of Directors (currently chaired by Margaret Caldwell) and to the Audit Committee of the Board (currently chaired by Janet Moreau-Shaw), with a dotted-line reporting relationship to the General Counsel (Priya Anand). This dual-reporting structure is designed to ensure both the CCO's independence from the business units whose conduct the CCO is responsible for monitoring and the CCO's integration into TMC's legal and governance infrastructure. The CCO must have direct, unfettered access to the CEO (Søren Dalmqvist), all members of the Board, and all members of the Audit Committee at all times, without the need for intermediary approval.
Independence Requirements. The independence of the CCO is a cornerstone of the Program's governance design. To preserve this independence:
• The CCO shall not have any operational, commercial, or revenue-generating responsibilities that could create real or perceived conflicts of interest with the compliance function.
• The CCO shall not report to, and shall not be subject to the direction or control of, any business-unit leader or commercial manager.
• The CCO may not be removed, demoted, reassigned, or have their compensation reduced without the express approval of the Board of Directors, upon recommendation of the Audit Committee.
• The CCO shall have sole authority over the staffing, budget allocation, and operational priorities of the compliance function, subject to overall budget approval by the Board.
Recommended Qualifications. We recommend that the CCO be a senior attorney or compliance professional with significant experience in antitrust enforcement and compliance. Ideally, the candidate should have a minimum of 15 years of relevant experience, including experience with DOJ or FTC antitrust enforcement matters, corporate compliance program design and implementation, and the mining, minerals, or natural-resources industry. Prior experience serving as a compliance monitor, compliance officer, or senior enforcement official at a federal antitrust agency would be particularly valuable. C&H and Meridian are prepared to assist TMC in conducting a confidential executive search for qualified candidates.
B. Board and Audit Committee Oversight
Effective compliance governance requires meaningful engagement by the Board of Directors and its relevant committees. The Program establishes the following oversight mechanisms:
Quarterly Compliance Reports to the Audit Committee. The CCO shall prepare and deliver quarterly reports to the Audit Committee summarizing the status and activities of the Program, including: training completion rates; competitor-contact log activity and any concerns arising from the logs; trade-association participation and post-event reports; whistleblower hotline activity and investigation outcomes; results of ongoing monitoring and spot audits; any identified compliance incidents or potential violations; and any recommendations for Program enhancements. The quarterly reporting protocol shall be modeled on the structured briefing format used during the October 18, 2022 Audit Committee briefing, which was conducted during the pendency of the internal investigation and which was well-received by the Committee.
Annual Compliance Program Effectiveness Assessment to the Board. The CCO shall prepare and present to the full Board, on an annual basis, a comprehensive assessment of the Program's effectiveness. This assessment shall address the adequacy of the Program's design, the quality of its implementation, areas of concern or weakness, resource needs, and recommended modifications. The annual assessment shall be informed by the results of the annual compliance audit described in Part VIII below.
Board-Level Accountability. The Board of Directors shall bear ultimate accountability for the adequacy and resourcing of the Program. The Board's approval of the Program framework, its annual review of the Program's effectiveness, and its oversight of the CCO's independence and authority are integral components of the governance structure. Board members should understand that the DOJ will evaluate the sincerity and effectiveness of Board engagement as part of its assessment of the Program.
C. Compliance Program Staffing
The CCO shall be supported by a dedicated compliance team housed within the CCO's office. The size and composition of the team shall be determined by the CCO in consultation with the General Counsel and subject to budget approval by the Board, but we recommend at a minimum:
• A Deputy CCO or Senior Compliance Manager to serve as the CCO's principal deputy and to manage day-to-day program operations;
• A Compliance Analyst responsible for monitoring, data analysis, and pricing-pattern review;
• An Administrative Coordinator responsible for training logistics, record-keeping, and competitor-contact log management; and
• Regional compliance liaisons in each major operating jurisdiction — the United States, Canada, Brazil, and Australia — to serve as local points of contact, to facilitate the delivery of training, and to assist with the implementation of policies and monitoring protocols at the regional and site level.
Given the U.S. Specialty Minerals Division's role as the center of the investigated conduct and its classification as a "high-risk" business unit, the U.S. regional compliance liaison should be a senior individual with substantial antitrust compliance experience and should be physically located within or in close proximity to the Division's principal offices.
Budget Allocation. We recommend a minimum annual compliance budget of USD 2–3 million, exclusive of the costs of any independent compliance monitor. This budget should cover CCO and compliance-team compensation, training development and delivery, hotline vendor fees, IT monitoring tools, travel for regional liaisons and audits, and external consulting support as needed. This budget recommendation is discussed further in Part XIII below.
D. CEO and General Counsel Annual Certifications
As noted in Part II.C above, we anticipate that the terms of the NPA will require annual written certifications by the CEO and General Counsel. Even in the absence of such a specific NPA requirement, we recommend that TMC adopt the practice of annual certifications as a matter of corporate governance best practice.
The certifications shall be submitted to the DOJ (if required under the NPA terms), to the Board, and to the Audit Committee. Each certification shall attest that:
(a) TMC has maintained the Enhanced Antitrust Compliance Program during the preceding year in accordance with its terms;
(b) TMC has provided adequate funding, staffing, and resources to the Program;
(c) TMC has adhered to the policies and procedures established by the Program;
(d) The certifying officer is not aware of any material deficiency in the Program's design or implementation that has not been disclosed to the Board and, if required, to the DOJ and the independent compliance monitor; and
(e) The certifying officer has taken reasonable steps to inform himself or herself of the Program's status and effectiveness, including review of the CCO's quarterly and annual reports.
The form and content of the certification template will be developed by C&H following execution of the NPA, to ensure alignment with any specific requirements imposed by the DOJ.
IV. RISK ASSESSMENT
A rigorous, data-driven antitrust risk assessment is the foundation upon which the Program's policies, training, and monitoring activities are built. The risk assessment must identify the specific antitrust risks facing TMC, prioritize those risks based on likelihood and potential impact, and inform the allocation of compliance resources to the areas of greatest vulnerability.
A. Methodology
A comprehensive antitrust risk assessment shall be conducted within 90 days of the Program's launch date and shall be updated on an annual basis thereafter. The initial risk assessment shall be led by Meridian Compliance Partners, with input from TMC business units, the legal department, and the CCO (once appointed). Subsequent annual risk assessments shall be led by the CCO with Meridian's support (or that of a successor compliance consultant).
The risk assessment shall cover all TMC product lines and geographies but shall devote particular focus to the following areas, which have been identified as presenting the highest levels of antitrust risk based on the findings of the internal investigation and the characteristics of the relevant markets:
• High-purity feldspar sales in the U.S. and North American markets, the primary product at issue in the DOJ investigation;
• Industrial talc sales, also identified in the investigation as a product subject to inter-competitor pricing discussions;
• Rare-earth concentrates sales, the third product category implicated in the investigation; and
• Any other products sold in concentrated markets with few competitors, where the structural conditions conducive to anticompetitive coordination may exist.
The methodology shall include document review, data analysis, interviews with business-unit leaders and commercial personnel, analysis of market structure and competitive dynamics, and benchmarking against industry and regulatory best practices.
B. Risk Factors to Be Assessed
The risk assessment shall evaluate, at a minimum, the following factors for each relevant business unit, product line, and geography:
Market Concentration and Number of Competitors. The North American specialty-minerals sector is characterized by a relatively limited number of major producers. TMC, Ridgecrest Minerals Inc. (headquartered in Denver, Colorado), and Pinnacle Earth Resources Ltd. (with offices in Sudbury, Ontario and Salt Lake City, Utah) collectively account for a substantial share of the North American market for the relevant products. High market concentration is a well-recognized structural risk factor for collusive conduct, as it facilitates monitoring of competitor behavior and reduces the number of participants needed to sustain an agreement. The risk assessment shall identify and quantify market concentration levels for each relevant product and geography using standard measures (e.g., Herfindahl-Hirschman Index).
Frequency and Nature of Competitor Interactions. The assessment shall catalog and evaluate the frequency, nature, and context of interactions between TMC personnel and employees of competing firms. This includes both formal and informal contacts, at trade-association events and otherwise.
Trade-Association Participation and Conference Attendance. TMC's participation in trade associations, and particularly in NASMC, is a significant risk factor given the role that NASMC quarterly conferences played in facilitating the conduct at issue. The assessment shall evaluate the risks associated with each trade-association membership and the adequacy of existing and proposed safeguards.
Pricing Practices and Mechanisms. The assessment shall examine TMC's pricing practices across relevant product lines, including the use of published price lists, customer-specific pricing, bid processes, and any other pricing mechanisms. Particular attention shall be given to the degree of pricing discretion afforded to individual employees, the robustness of pricing-approval processes, and the extent to which pricing decisions are documented and subject to review.
Geographic Market Allocation Risks. The assessment shall evaluate the risk of geographic market allocation, considering the geographic distribution of TMC's and its competitors' operations, customer bases, and sales territories.
Customer Allocation Risks. Similarly, the assessment shall evaluate the risk of customer allocation, considering the extent to which TMC and its competitors serve overlapping customer bases and the degree to which customer assignments are formalized or subject to negotiation.
Information-Exchange Risks. The assessment shall specifically evaluate the risk of improper information exchange, with particular attention to the use of encrypted or ephemeral messaging platforms. The investigation revealed that the VaultChat application was used specifically to evade detection; the assessment shall evaluate the risk that similar tools are in use elsewhere within the organization and shall inform the communications-monitoring protocols described in Part V.D below.
Historical Conduct Patterns. The assessment shall take into account the patterns of conduct identified in the internal investigation, recognizing that the existence of prior anticompetitive behavior within a business unit is a significant risk factor for recurrence, particularly if the underlying structural conditions have not changed.
C. Risk Scoring and Mitigation Prioritization
Based on the factors assessed above, each business unit and product line shall receive a risk score on a three-tier scale: high, medium, or low. The scoring methodology shall be transparent and documented, and shall be reviewed annually.
The U.S. Specialty Minerals Division shall be classified as "high risk" for the foreseeable future, given its central role in the investigated conduct, the structural characteristics of the North American specialty-minerals market, and the ongoing sensitivity of the DOJ investigation. Other business units and product lines shall be scored based on the assessment factors described above.
Mitigation measures — including the intensity of training, the frequency of monitoring and audits, the restrictiveness of competitor-contact and pricing-authority controls, and the allocation of compliance personnel — shall be calibrated to the risk level assigned to each business unit and product line. High-risk units shall be subject to the most intensive compliance controls; medium- and low-risk units shall be subject to appropriately scaled measures. The risk-scoring methodology is set forth in detail in Appendix 5.
V. ANTITRUST COMPLIANCE POLICIES
The Program establishes a comprehensive suite of antitrust compliance policies designed to address the specific vulnerabilities and risks identified in the internal investigation and the risk assessment. These policies replace TMC's 2014 antitrust compliance policy in its entirety and shall be binding on all TMC employees, officers, directors, and, where applicable, contractors and agents.
A. Core Antitrust Compliance Policy
TMC shall adopt a comprehensive restatement of its antitrust compliance policy, superseding and replacing the 2014 policy. The new Core Antitrust Compliance Policy shall set forth in clear, unambiguous terms TMC's commitment to full compliance with all applicable competition and antitrust laws, including the Sherman Act (15 U.S.C. §§ 1–7), the Clayton Act (15 U.S.C. §§ 12–27), the Federal Trade Commission Act (15 U.S.C. §§ 41–58), the Canadian Competition Act (R.S.C. 1985, c. C-34), and the equivalent competition laws of Brazil, Australia, and any other jurisdiction in which TMC operates.
The policy shall contain clear and specific prohibitions on the following categories of conduct:
• Price-fixing, including any agreement, understanding, or coordinated action with competitors to fix, stabilize, maintain, raise, or lower prices, and including the exchange of current, recent, or prospective pricing information with competitors;
• Market allocation, including any agreement, understanding, or coordinated action with competitors to divide or allocate geographic territories, markets, or customers;
• Customer allocation, including any agreement, understanding, or coordinated action with competitors to assign, divide, or refrain from competing for specific customers or categories of customers;
• Bid-rigging, including any agreement, understanding, or coordinated action with competitors to coordinate, suppress, rotate, or otherwise manipulate bids submitted in competitive procurement processes; and
• Any other agreement or understanding with competitors that has the purpose or effect of restraining competition, whether express or implied, written or oral, formal or informal.
The policy shall specifically and emphatically prohibit the use of encrypted or ephemeral messaging applications — such as VaultChat, Signal (when used for business communications with competitors), Kestrel Data Systems, Pemberton Health IT, Confide, or any similar platform — for any business communications with competitors or any communications that involve competitively sensitive topics. The investigation established that VaultChat was specifically selected and used by Gavin Holt for its encryption and auto-delete features, which were employed to evade TMC's document-retention systems and to avoid detection. The policy shall make clear that the use of such platforms for business communications with competitors or concerning competitively sensitive subjects will be treated as a serious compliance violation warranting disciplinary action up to and including termination, irrespective of whether the content of the communication was itself improper.
The policy shall require that all business communications be conducted through TMC-approved channels that are subject to the Company's document-retention and monitoring policies. Approved channels shall include TMC company email, TMC-approved video and audio conferencing tools, and such other platforms as may be specifically designated by the CCO.
The policy shall be distributed to all TMC employees, officers, and directors, and each individual shall be required to acknowledge in writing that they have received, read, and understood the policy. Annual re-acknowledgment shall be required.
B. Competitor-Contact Policy
The internal investigation revealed that the anticompetitive communications at the center of the DOJ investigation were able to persist in part because TMC had no policy governing or monitoring contacts between its employees and competitor personnel. The Competitor-Contact Policy is designed to close this gap by establishing a rigorous framework of pre-approval, documentation, and review for all competitor interactions.
Pre-Approval Requirement. All contacts with competitors — whether in person, by telephone, by email, by video conference, or by any other means — must be pre-approved by the CCO or a designee appointed by the CCO. The pre-approval request must specify the proposed contact's purpose, the identity of the competitor and the competitor personnel involved, the topics to be discussed, and the anticipated date and location of the interaction. The CCO or designee shall evaluate the request and may approve, deny, or impose conditions on the proposed contact.
Broad Definition of "Competitor." For purposes of this policy, "competitor" shall be defined broadly to include any entity engaged in the production, processing, distribution, or sale of specialty minerals, including but not limited to Ridgecrest Minerals Inc., Pinnacle Earth Resources Ltd., and Cascade Chemical Supply Co., as well as any subsidiary, affiliate, joint-venture partner, or agent of any such entity. The CCO shall maintain a current list of identified competitors, which shall be updated at least quarterly and made available to all TMC personnel.
Documentation Requirements. Following any approved contact with a competitor, the TMC employee involved must prepare a written summary documenting:
(a) The date, time, and location of the contact;
(b) The identity and title of the competitor personnel involved;
(c) The purpose of the contact;
(d) The specific topics discussed; and
(e) A statement confirming that no competitively sensitive information was exchanged.
This written summary must be submitted to the CCO's office within 48 hours of the contact.
Prohibited Topics. The policy shall enumerate the following categories of topics that are strictly prohibited in any communication with competitor personnel:
• Pricing, price levels, price changes, price lists, or pricing strategies;
• Costs, cost structures, margins, or profitability;
• Bids, bid terms, bid strategies, or bidding intentions;
• Customer terms, customer-specific pricing, or customer relationships;
• Production volumes, production plans, or production capacity;
• Inventory levels or supply-chain information;
• Any other competitively sensitive information, as defined in the policy.
Quarterly Review. The CCO shall conduct a quarterly review of all competitor-contact logs to identify any patterns of concern, to verify compliance with the documentation requirements, and to assess whether the pre-approval process is functioning effectively.
The full text of the draft Competitor-Contact Policy is attached as Appendix 2.
C. Trade-Association Interaction Guidelines
TMC's participation in trade associations, and particularly in the North American Specialty Minerals Council ("NASMC"), headquartered at 2300 Wilson Boulevard, Suite 400, Arlington, Virginia 22201, presents a significant antitrust risk. NASMC's quarterly conferences were identified in the internal investigation as a primary venue for the in-person meetings between Gavin Holt and his counterparts at Ridgecrest and Pinnacle during which anticompetitive discussions took place. The Trade-Association Interaction Guidelines are designed to mitigate this risk while permitting TMC to participate in legitimate trade-association activities.
Pre-Approval for Conference Attendance. Attendance at any trade-association conference, meeting, seminar, working-group session, or social event must be pre-approved by the CCO or a designee. The pre-approval request must include the name and date of the event, the sponsoring organization, the agenda (if available), and a list of known competitor representatives expected to attend.
Pre-Event Antitrust Briefing. All TMC personnel approved to attend a trade-association event must receive a pre-event antitrust compliance briefing from the compliance team, which shall review the applicable rules and guidelines, reinforce the prohibited topics, and address any event-specific risks. For major recurring events — such as NASMC quarterly conferences — the compliance team shall prepare event-specific guidance materials tailored to the agenda and known participants.
Written Conduct Guidelines. The policy shall establish the following conduct guidelines for all industry events:
• TMC personnel shall not participate in private, informal, or unscheduled side meetings with competitor personnel, whether in meeting rooms, hallways, hotel lobbies, restaurants, bars, golf courses, or any other setting, unless such meetings have been pre-approved by the CCO and are documented in accordance with the Competitor-Contact Policy.
• TMC personnel shall not discuss pricing, customers, bids, capacity, production plans, costs, margins, or any other competitively sensitive topic with competitor personnel at any time during the event, including during social functions, meals, receptions, and informal gatherings.
• If a TMC employee finds himself or herself in a meeting or conversation in which competitively sensitive topics are raised — whether by a competitor representative, a trade-association official, or any other person — the employee must immediately depart the meeting or conversation, state clearly that the discussion is inappropriate, and promptly report the incident to the CCO.
Post-Event Reporting. Each TMC employee who attends a trade-association event must submit a written report to the CCO's office within five business days of the event's conclusion. The report shall summarize all interactions with competitor personnel, including the names and affiliations of individuals encountered, the topics discussed, and any concerns or observations regarding potential antitrust-risk situations.
Annual Review of Trade-Association Memberships. The CCO shall conduct an annual review of TMC's trade-association memberships to assess the ongoing risks and benefits of each membership. Where the risks of a particular membership outweigh its legitimate business benefits, the CCO shall recommend to the General Counsel that TMC withdraw from the association or modify the terms of its participation.
The full text of the draft Trade-Association Interaction Guidelines is attached as Appendix 3.
D. Communications and Messaging Policy
The use of the VaultChat encrypted messaging application by Gavin Holt to conduct anticompetitive communications outside of TMC's IT systems was a central feature of the investigated conduct. The Communications and Messaging Policy is designed to ensure that all business communications are conducted on approved, monitorable, and retainable platforms.
Approved Platforms Only. All business-related communications — including communications with customers, competitors, suppliers, trade-association representatives, government officials, and other external parties — must be conducted exclusively on TMC-approved platforms. Approved platforms shall include TMC company email (currently hosted on Ashgrove Software), TMC-approved video and audio conferencing tools (currently Northgate Data Systems and Calderon Software for Business), and such other platforms as may be specifically approved by the CCO in consultation with the Chief Information Officer.
Absolute Prohibition on Ephemeral and Encrypted Messaging for Business Purposes. The policy shall impose an absolute prohibition on the use of ephemeral, encrypted, or auto-deleting messaging applications for any business purpose. This prohibition specifically encompasses, but is not limited to, the following platforms: VaultChat, Signal, Kestrel Data Systems, Meridian Services Inc. (to the extent used for business communications), Pemberton Health IT, Confide, Dust, and any successor or similar applications. The policy shall be clear that the prohibition extends to the use of personal devices and personal accounts for business communications, regardless of the platform used.
IT Monitoring and Auditing. TMC's IT department, in coordination with the CCO's office, shall implement monitoring tools capable of detecting the installation or use of prohibited messaging applications on TMC-issued devices. Periodic audits of communication platforms shall be conducted to verify compliance. The CCO shall have the authority to direct IT to conduct targeted reviews of specific individuals' or business units' communication records where warranted by the circumstances.
Document Retention. All business communications conducted on approved platforms shall be retained in accordance with TMC's updated document-retention policy (discussed in Part XI below). Employees shall be instructed that the deliberate destruction, deletion, or concealment of business communications is a serious compliance violation and may also constitute obstruction of justice.
E. Pricing Authority and Controls
The internal investigation revealed a critical weakness in TMC's pricing governance: Gavin Holt, as Vice President of U.S. Specialty Minerals Sales, exercised effectively unilateral authority to direct pricing changes, instructing Sandra Chu (Director, Pricing Analytics) to adjust published price lists without meaningful oversight, secondary approval, or documentation of business justification. This concentration of pricing authority in a single individual, without checks, balances, or monitoring, was a key enabler of the anticompetitive conduct. The Pricing Authority and Controls framework is designed to eliminate this vulnerability.
Pricing Authority Matrix. TMC shall establish a clearly defined pricing authority matrix for the U.S. Specialty Minerals Division and other high-risk business units. The matrix shall specify the levels of approval required for different categories of pricing decisions, including:
• Adjustments to published price lists;
• Customer-specific pricing;
• Bid pricing;
• discounts, rebates, and promotional pricing;
• Pricing for new products or new markets; and
• Any pricing change that deviates from established parameters by more than a defined threshold.
Separation of Duties. No single individual may both set and approve a pricing change. The individual who initiates or recommends a pricing change must be different from the individual who approves it, and the approver must be at a higher level of authority than the initiator. This separation-of-duties requirement directly addresses the vulnerability exploited during the conspiracy period, in which Holt was able to direct pricing changes without any second-level review.
Documentation and Business Justification. All pricing changes must be documented with a written business justification at the time of approval. The justification must articulate the market conditions, customer requirements, cost considerations, or other legitimate business reasons supporting the change. The CCO's office shall have access to all pricing-change documentation and shall review it for anomalous patterns, including patterns suggestive of coordination with competitor pricing movements.
Quarterly Pricing-Pattern Analysis. The compliance team shall conduct a quarterly analysis of pricing data to identify statistically significant correlations between TMC pricing changes and competitor pricing movements. This analysis, described further in Part VIII.C below, shall serve as a continuous monitoring tool to detect potential anticompetitive pricing behavior.
VI. TRAINING PROGRAM
Training is a critical component of any effective compliance program. The DOJ evaluates the quality, frequency, and reach of compliance training in assessing a program's effectiveness. TMC's failure to conduct any antitrust training since 2018 was one of the most significant deficiencies identified in the internal investigation, and the Program's training component is designed to be comprehensive, rigorous, and sustained.
A. Mandatory Annual Training
All TMC employees, officers, and directors shall receive mandatory annual antitrust compliance training. The first round of training shall be conducted within 60 days of the Program's launch date, and training shall be repeated on an annual basis thereafter.
Training content shall be developed by Meridian Compliance Partners in consultation with Calderwood & Harkness. The training shall be tailored to TMC's specific business, industry, and risk profile, and shall be updated annually to reflect changes in law, enforcement trends, and lessons learned from TMC's own compliance monitoring activities.
At a minimum, the annual training shall address the following topics:
• Overview of Applicable Antitrust Laws. A clear and accessible explanation of Sherman Act Section 1 (15 U.S.C. § 1), including the elements of per se offenses (price-fixing, market allocation, bid-rigging), as well as Canadian Competition Act equivalents (Part VI, Criminal Matters) and the competition laws of other jurisdictions in which TMC operates.
• Per Se Violations vs. Rule-of-Reason Analysis. An explanation of the distinction between per se illegal conduct (agreements among competitors to fix prices, allocate markets, or rig bids) and conduct subject to rule-of-reason analysis, with emphasis on the absolute prohibition on per se violations.
• Criminal Penalties. A clear statement of the criminal penalties for antitrust violations, including fines of up to USD 100 million for corporations and USD 1 million for individuals under the Sherman Act, as well as imprisonment of up to 10 years for individuals. The training shall also address the potential for civil damages (treble damages under Section 4 of the Clayton Act), debarment, and reputational harm.
• Real-World Scenarios from the TMC Investigation. To ensure that training is grounded in reality and resonates with participants, the training shall incorporate scenarios drawn from the facts of TMC's own investigation, appropriately anonymized to protect privilege and ongoing-investigation sensitivities. These scenarios shall illustrate how anticompetitive conduct can arise, the warning signs, and the steps employees should take to avoid and report such conduct.
• Proper Conduct at Trade-Association Events. A detailed review of the Trade-Association Interaction Guidelines, with practical guidance on how to navigate industry events in compliance with the law and TMC's policies.
• Competitor-Contact Protocols. A thorough explanation of the Competitor-Contact Policy, including the pre-approval requirement, documentation obligations, and prohibited topics.
• Reporting Obligations and Whistleblower Protections. Clear instruction on employees' obligation to report known or suspected antitrust violations, the available reporting channels (hotline, web portal, CCO, General Counsel, compliance team), and the anti-retaliation protections available to reporters.
Training shall be delivered through a combination of live presentations (in-person and virtual), interactive e-learning modules, and written materials. The training format shall be engaging and interactive, incorporating quizzes, case studies, and role-playing exercises to maximize comprehension and retention.
B. Enhanced Training for High-Risk Personnel
Individuals in sales, pricing, commercial, and business-development roles within the U.S. Specialty Minerals Division and other business units classified as "high risk" under the risk assessment shall receive additional specialized training on a semi-annual basis — that is, twice per year, in addition to the annual training required of all TMC personnel.
The enhanced training shall include:
• Role-specific scenarios tailored to the daily activities and risk exposures of sales and pricing personnel, including scenarios involving customer negotiations, bid processes, trade-show interactions, and informal encounters with competitor personnel;
• Tabletop exercises simulating realistic situations in which participants must identify antitrust red flags and make real-time compliance decisions; and
• Case studies drawn from recent antitrust enforcement actions in the mining, minerals, and related industries, as well as from the facts of TMC's own investigation.
New hires in high-risk roles shall receive antitrust compliance training within 30 days of their start date, prior to engaging in any customer-facing or pricing-related activities.
C. Executive and Board Training
The CEO (Søren Dalmqvist), General Counsel (Priya Anand), CFO (Richard Fong), and other C-suite executives shall receive an annual antitrust compliance briefing conducted by the CCO and, as appropriate, outside counsel. This briefing shall address the current state of the Program, key risk areas, enforcement trends, and the executives' personal responsibilities and potential liability under applicable antitrust laws.
The TMC Board of Directors, including all Audit Committee members, shall receive an annual training session on antitrust compliance. Board training shall focus on directors' oversight responsibilities, red-flag recognition, and the Board's role in ensuring that the compliance program is adequately designed, resourced, and enforced. This training recognizes that the DOJ evaluates the quality and sincerity of Board-level engagement with compliance as a key indicator of corporate culture and commitment.
D. Training Certification and Records
All training attendees must sign a certification of completion at the conclusion of each training session, acknowledging that they attended the training, understood its content, and commit to complying with TMC's antitrust compliance policies. Certifications shall be maintained in electronic and, where applicable, physical form.
Training records — including attendance records, certifications, training materials, and evaluation results — shall be maintained by the CCO's office for a minimum of seven years. Training completion rates shall be tracked on a per-business-unit and per-individual basis and reported to the Audit Committee on a quarterly basis as part of the CCO's quarterly compliance report.
Non-completion of mandatory training shall be treated as a compliance deficiency. Employees who fail to complete training within the prescribed timeframe shall be identified and escalated to the relevant business-unit head. If the deficiency is not remediated promptly, the matter shall be escalated to the CEO. Persistent non-completion may result in disciplinary action, including withholding of bonuses, suspension, or termination.
The training curriculum outline is attached as Appendix 4.
VII. REPORTING MECHANISMS AND WHISTLEBLOWER PROTECTIONS
The absence of effective reporting mechanisms was a significant factor in the failure to detect the anticompetitive conduct at issue. The Program establishes multiple reporting channels designed to encourage and facilitate the prompt reporting of potential antitrust violations, and provides robust protections against retaliation for reporters.
A. Antitrust-Specific Reporting Hotline