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CALDERWOOD & HARKNESS LLP

PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGE / WORK PRODUCT DOCTRINE

INTERNAL MEMORANDUM — NOT FOR DISTRIBUTION OUTSIDE CALDERWOOD & HARKNESS LLP

Date: June 1, 2022

Matter No.: 1039-00001

To: File (Torchlight Mining Corp. Defense — DOJ Grand Jury Investigation GJ-22-0194, N.D. Cal.)

From: Elaine Forsythe, Responsible Partner, Antitrust & Competition Practice Group Aaron Liu, Lead Associate, Antitrust & Competition Practice Group

Re: Defense Strategy — Torchlight Mining Corp. — DOJ Antitrust Division Grand Jury Investigation into Price-Fixing, Market Allocation, and Bid-Rigging in the North American Specialty Minerals Sector

CONFIDENTIALITY LEGEND: This memorandum constitutes privileged and confidential attorney work product prepared in anticipation of litigation and for the purpose of providing legal advice to Torchlight Mining Corp. It is protected from disclosure by the attorney-client privilege and the work-product doctrine. The opinions, assessments, and recommendations contained herein reflect the professional judgment of Calderwood & Harkness LLP based on information available as of the date of this memorandum. Do not copy or distribute without express authorization of the Responsible Partner. Any unauthorized disclosure may result in waiver of applicable privileges.

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I. EXECUTIVE SUMMARY

The purpose of this memorandum is to set forth Calderwood & Harkness LLP's recommended defense strategy for Torchlight Mining Corp. ("TMC" or "Torchlight" or the "Company") in connection with the United States Department of Justice, Antitrust Division, grand jury investigation, Grand Jury No. GJ-22-0194, currently pending before the United States District Court for the Northern District of California, San Francisco Division. This memorandum is intended to serve as the foundational strategic roadmap for the defense team and to memorialize our analysis and recommendations for the file.

The investigation was opened on February 10, 2022. TMC received a grand jury subpoena duces tecum (Subpoena No. GJ-22-0194-SD-003) on February 14, 2022, and subsequently received a DOJ target letter on May 20, 2022, elevating its status from subject to target. The investigation concerns suspected price-fixing, market allocation, and bid-rigging in the North American specialty-minerals sector, principally with respect to three product categories: high-purity feldspar, industrial talc, and rare-earth concentrates. The suspected conspiracy period runs from approximately January 2017 through August 2021.

After conducting an extensive preliminary review of the documentary evidence, completing a substantial number of internal investigation witness interviews, and assessing the overall evidentiary landscape, it is our firm recommendation that TMC should pursue a cooperation strategy aimed at securing a non-prosecution agreement ("NPA") rather than contest the investigation adversarially. This recommendation is grounded in the following considerations:

First, the evidentiary exposure facing TMC is substantial. Our review has identified at least 37 documented communications between TMC's former Vice President of U.S. Specialty Minerals Sales, Gavin Holt, and his counterparts at competitor firms — Carl Edgerton of Ridgecrest Minerals Inc. and Kevin Tsang of Pinnacle Earth Resources Ltd. — conducted via the encrypted messaging platform VaultChat and in person at conferences of the North American Specialty Minerals Council ("NASMC"). These communications contain explicit pricing information exchanges, customer-allocation discussions, and coordination on bid submissions for government and private-sector contracts.

Second, TMC was not the first-in cooperator under the DOJ Antitrust Division's Leniency Program. Cascade Chemical Supply Co. ("Cascade") entered into a cooperation agreement with the Antitrust Division on approximately September 15, 2021, well before the grand jury was convened, and effectively holds the leniency position. TMC is therefore ineligible for conditional amnesty and must pursue an alternative resolution pathway.

Third, the reputational, financial, and operational consequences of indictment — let alone conviction — far outweigh the costs associated with cooperation and remediation. TMC is a publicly listed company on both the Toronto Stock Exchange (TSX: TRCL) and the New York Stock Exchange (NYSE: TMC), with consolidated annual revenue exceeding CAD 4.27 billion. A federal criminal indictment would trigger catastrophic collateral consequences, including potential debarment from government contracts, a securities-market reaction adversely affecting shareholder value, cross-border regulatory cascading effects in Canada, Australia, and Brazil, and exposure to follow-on private antitrust litigation and securities class actions.

In addition to the primary cooperation recommendation, we advise the following secondary measures: (a) retention of a forensic economics expert, specifically Hargrove Forensic Advisory LLC, to prepare an independent affected-commerce analysis and pricing-pattern assessment; (b) proactive remediation of TMC's antitrust compliance program, which will be essential to securing favorable NPA terms; and (c) careful management of the individual exposure of Gavin Holt, who has retained separate counsel and has asserted his Fifth Amendment privilege before the grand jury, to preserve TMC's ability to demonstrate its own full cooperation with the Antitrust Division.

II. BACKGROUND AND PROCEDURAL STATUS

A. The Investigation

On February 10, 2022, the Antitrust Division of the United States Department of Justice, acting through its San Francisco Field Office, opened a federal grand jury investigation into suspected violations of Section 1 of the Sherman Antitrust Act, 15 U.S.C. § 1, in the North American specialty-minerals sector. The grand jury was seated in the Northern District of California, San Francisco Division, and has been assigned Grand Jury No. GJ-22-0194.

The lead prosecutors assigned to the investigation are Trial Attorney Denise Kowalski and Senior Trial Attorney Marcus Reeves, both of the San Francisco Field Office. The matter is supervised by Deputy Assistant Attorney General Julia Stafford-Hayes, who is based in the Antitrust Division's headquarters in Washington, D.C. Based on our interactions with the prosecution team to date, Kowalski has been the primary point of contact for subpoena compliance and document production, while Reeves has taken the lead on witness-related matters and proffer negotiations with cooperating entities.

The investigation was triggered by a cooperation agreement between the Antitrust Division and Cascade Chemical Supply Co. ("Cascade"), a Washington state corporation headquartered in Spokane, Washington. Cascade is led by its president, Leonard Massey. Cascade entered into its cooperation agreement with DOJ on approximately September 15, 2021 — notably, several months before the grand jury was formally convened. As part of that cooperation agreement, Cascade has provided the Antitrust Division with documents and testimony relating to pricing practices, customer-allocation discussions, and bid-coordination activities in the specialty-minerals sector. The scope and detail of Cascade's cooperation, based on what we have been able to glean from the grand jury subpoena specifications and from publicly available information, appears to be extensive. Cascade's role as a downstream distributor of specialty minerals gave it a unique vantage point from which to observe pricing patterns and coordination among the major producers.

Cascade is represented by Whitfield, Strauss & Tully LLP, a Seattle-based firm, with lead partner Rebecca Ostrander handling the matter. We have had limited contact with Ostrander's team, and given TMC's cooperation posture, we do not anticipate significant coordination with Cascade's counsel.

B. Co-Subjects / Co-Targets

In addition to TMC, the investigation involves at least two other major participants in the North American specialty-minerals market, both of which have been identified as co-targets by the Antitrust Division:

Ridgecrest Minerals Inc. Ridgecrest is a Delaware corporation headquartered in Denver, Colorado. Its fiscal year 2021 revenue was approximately USD 1.92 billion, making it the second-largest North American producer of high-purity feldspar and industrial talc. Ridgecrest is a portfolio company of Marlowe Asset Management Peak Capital Partners LP, a Denver-based private equity fund. Its Chief Executive Officer is Brian Novotny. Of particular significance to this investigation, Ridgecrest's Vice President of Sales, Carl Edgerton, has been identified by DOJ as a key individual participant in the alleged conspiracy. Edgerton is a direct counterpart to TMC's Gavin Holt and appears to have been Holt's primary contact in the VaultChat communications described below. Ridgecrest received a DOJ target letter on January 12, 2022 — approximately four months before TMC received its own target letter, suggesting that Ridgecrest may have been a primary focus of the investigation from an early stage. Ridgecrest is represented separately by Davenport, Kline & Archer LLP (Denver), with lead partner Helen Marchetti.

Pinnacle Earth Resources Ltd. Pinnacle is an Ontario corporation headquartered in Sudbury, Ontario, with U.S. operations based in Salt Lake City, Utah. Its fiscal year 2021 revenue was approximately CAD 1.45 billion (approximately USD 1.15 billion at prevailing exchange rates). Pinnacle is a top-five North American producer of rare-earth concentrates and specialty minerals. Its Chief Executive Officer is Douglas Harlowe. Former Senior Vice President of Commercial Operations Kevin Tsang has been identified by DOJ as a key individual participant. Like TMC's Gavin Holt, Tsang appears to have been a regular participant in the VaultChat communications and NASMC conference side meetings at the center of the alleged conspiracy. Pinnacle is represented separately by Ashford Whitmore LLP (Toronto and New York), with lead partner George Nakamura.

We note that the private-equity ownership of Ridgecrest introduces additional dynamics into the investigation. Marlowe Asset Management Peak Capital Partners may face its own liability exposure depending on its involvement in Ridgecrest's operational decision-making and its knowledge of the conduct at issue. This may influence Ridgecrest's litigation strategy and its willingness to cooperate.

C. TMC's Status and Profile

Corporate organization. Torchlight Mining Corp. is a corporation organized under the Canada Business Corporations Act ("CBCA"), bearing CBCA Corporation No. 7841526-1. Its registered office is located at 200 Bay Street, Suite 3400, Toronto, Ontario M5J 2J2, Canada. TMC's shares are listed on the Toronto Stock Exchange under the ticker symbol TRCL and on the New York Stock Exchange under the ticker symbol TMC.

Financial profile. For fiscal year 2021, TMC reported consolidated revenue of CAD 4.27 billion (approximately USD 3.38 billion at an average exchange rate of approximately 0.792 USD/CAD) and consolidated EBITDA of CAD 812 million.

Operations. TMC operates 14 mines across four countries — Canada, the United States, Brazil, and Australia — together with six downstream chemical-processing facilities. The Company's operations span the full value chain of specialty-minerals production, from extraction through processing and distribution to end-use industrial customers.

U.S. Specialty Minerals Division. The division at the center of the DOJ investigation is TMC's U.S. Specialty Minerals Division, which generated USD 687 million in revenue during fiscal year 2021, representing approximately 20.3% of TMC's consolidated revenue. This division is responsible for the marketing and sale of high-purity feldspar, industrial talc, and rare-earth concentrates to U.S. industrial and chemical-manufacturing customers. The division operated under the commercial leadership of Gavin Holt (VP, U.S. Specialty Minerals Sales) from 2016 until Holt's departure in September 2021.

U.S. subsidiary. TMC conducts its U.S. operations through its wholly owned subsidiary, Torchlight Mining (U.S.) Inc., a Nevada corporation (Entity No. NV20160438721), with its principal office at 8750 West Sahara Avenue, Suite 210, Reno, Nevada 89117. The subsidiary's Federal Employer Identification Number is 83-2947106. Torchlight Mining (U.S.) Inc. is the entity that directly employed Gavin Holt and the other U.S.-based individuals of interest, and it is the entity through which the relevant sales transactions were booked.

Key personnel. The following TMC officers and directors are relevant to the defense strategy:

• Margaret Caldwell — Board Chair

• Søren Dalmqvist — Chief Executive Officer

• Priya Anand — General Counsel

• Richard Fong — Chief Financial Officer

• Janet Moreau-Shaw — Audit Committee Chair

D. Procedural Milestones to Date

The following timeline summarizes the key procedural events in the investigation to date:

February 14, 2022: TMC receives grand jury subpoena duces tecum, Subpoena No. GJ-22-0194-SD-003, issued by the grand jury sitting in the Northern District of California, San Francisco Division. The subpoena requests the production of a broad range of documents relating to TMC's pricing, sales, customer-allocation, and competitive-intelligence practices in the U.S. specialty-minerals market, covering the period January 1, 2015, through the date of the subpoena. The subpoena specifications are extensive, comprising 47 numbered categories.

February 18, 2022: TMC retains Calderwood & Harkness LLP as outside counsel for the investigation. Engagement letter executed by TMC General Counsel Priya Anand and Responsible Partner Elaine Forsythe. Initial engagement budget of USD 12 million.

February 22, 2022: Calderwood & Harkness acknowledges receipt of the grand jury subpoena on behalf of TMC and submits a request to the Antitrust Division for a 60-day extension of the subpoena return date. The extension request is granted on March 2, 2022, establishing a new initial return date of April 25, 2022, with a rolling production schedule.

March 1, 2022: Calderwood & Harkness issues a comprehensive litigation hold memorandum to all TMC personnel, directing the preservation of all documents and communications potentially responsive to the grand jury subpoena. The hold covers all electronic and hard-copy records, including email, instant messages, text messages, documents stored on network drives and personal devices, and physical files. The hold is distributed to approximately 340 TMC employees identified as potentially possessing relevant materials.

March 4, 2022: TMC tenders notice of the investigation to its directors' and officers' liability insurance carrier, Northland Mutual Insurance Co., under Policy No. NMI-DO-2021-5547. The policy provides coverage for defense costs and certain specified losses arising from governmental investigations and enforcement proceedings. Coverage analysis is ongoing; initial indications are that the policy will respond to defense-cost claims, subject to the policy's cooperation and reporting requirements and applicable exclusions.

March 5, 2022: Calderwood & Harkness establishes the internal investigation plan. The plan contemplates the identification and preservation of relevant documents, the collection and forensic imaging of electronic data from custodian devices, an employee interview program, and engagement of forensic and economic experts as needed.

March 15, 2022: TMC retains Redstone Digital Forensics Inc. ("Redstone") for data collection, forensic imaging, and e-discovery support. Redstone's Project Director, Neil Ashworth, is the primary point of contact. Redstone has been tasked with collecting data from 28 identified custodians, processing and hosting the collected data in a review platform, and supporting the document review and production workflow.

March 28, 2022: TMC publicly discloses the DOJ investigation in its fiscal year 2021 annual report, filed on SEDAR+ (Canadian securities filing system) and with the U.S. Securities and Exchange Commission on Form 40-F. The disclosure notes the receipt of the grand jury subpoena, the engagement of outside counsel, and the Company's intention to cooperate with the investigation. In conjunction with this filing, TMC, on the advice of its auditors and outside counsel, establishes an initial litigation reserve of USD 30 million to reflect the Company's preliminary estimate of potential exposure. The reserve is subject to revision as the investigation progresses.

April 4, 2022: TMC completes its first rolling production of documents to the Antitrust Division, comprising approximately 42,000 documents. This initial production includes corporate pricing records, internal communications among identified custodians, sales data, and other materials responsive to the subpoena specifications. Additional rolling productions are ongoing, with a cumulative document volume projected to reach several hundred thousand documents and millions of pages.

May 20, 2022: TMC receives a DOJ target letter from Trial Attorney Kowalski, formally advising that TMC's status in the investigation has been escalated from subject to target. The target letter identifies TMC as a potential defendant in connection with alleged violations of Section 1 of the Sherman Antitrust Act, 15 U.S.C. § 1, relating to price-fixing, market allocation, and bid-rigging in the North American specialty-minerals market. Receipt of the target letter represents a material escalation of TMC's exposure and necessitates a comprehensive reassessment of defense strategy, which is the primary purpose of this memorandum.

E. Key TMC Individuals of Interest

Our internal investigation has identified the following TMC current and former employees as individuals of particular interest to the DOJ investigation:

Gavin Holt — Former Vice President, U.S. Specialty Minerals Sales. Holt is the TMC individual most directly implicated in the alleged conspiracy. He served as VP, U.S. Specialty Minerals Sales from 2016 through his resignation effective September 30, 2021. In that role, he led TMC's commercial pricing function for the U.S. Specialty Minerals Division, with direct authority over pricing decisions, customer negotiations, and bid submissions. Our review of the documentary record indicates that Holt was the primary — and possibly the sole — TMC participant in the inter-competitor communications at the center of the investigation. The 37+ documented VaultChat exchanges between Holt and his counterparts at Ridgecrest (Edgerton) and Pinnacle (Tsang) were conducted using Holt's personal device, which was not captured in TMC's original data-collection process and was identified only through Cascade's production to DOJ.

Holt retained personal counsel, Briarcliff Law Group PLLC, located at 50 California Street, Suite 2800, San Francisco, California 94111. The lead attorney handling Holt's representation is Patrick Dunleavy. Holt retained Briarcliff on approximately June 10, 2022. On June 14, 2022, Holt appeared before the grand jury pursuant to a subpoena and asserted his Fifth Amendment privilege against self-incrimination, declining to testify. Holt has also, on the advice of Dunleavy, declined Calderwood & Harkness's request for an interview as part of TMC's internal investigation. These developments are discussed further in Section VII below.

Sandra Chu — Director, Pricing Analytics, U.S. Specialty Minerals Division. Chu reported directly to Gavin Holt during the relevant period. Our investigation has revealed that Chu received pricing-adjustment instructions from Holt on at least 12 occasions that correlate with competitor price movements during the alleged conspiracy period. Chu's role was to implement pricing changes in TMC's systems based on instructions from her superiors. Critically, there is no direct evidence that Chu was aware of the inter-competitor communications underlying Holt's instructions. She has stated in her preliminary interview with Calderwood & Harkness that she understood the pricing adjustments to be based on Holt's assessment of market conditions and competitive dynamics, and that she had no knowledge of direct communications between Holt and personnel at Ridgecrest or Pinnacle. Chu remains employed by TMC.

Thomas Eriksen — Regional Sales Manager (Western Region), U.S. Specialty Minerals Division. Eriksen attended four NASMC quarterly conferences during the conspiracy period at which side meetings among Holt, Edgerton, and Tsang allegedly occurred. The evidence regarding Eriksen's direct participation in those side meetings is ambiguous. While conference attendance records and travel records confirm his presence at the relevant conferences (held in Arlington, Virginia; Scottsdale, Arizona; and Orlando, Florida), we have not identified documentary evidence establishing that Eriksen was present during any substantive discussions of pricing, customer allocation, or bid coordination. Eriksen has denied, in his preliminary interview with Calderwood & Harkness, any knowledge of or participation in anti-competitive communications with competitor personnel. His denial is facially credible given his role as a regional sales manager rather than a pricing decision-maker, but we cannot rule out the possibility that DOJ will seek to challenge his account. Eriksen remains employed by TMC.

Priya Anand — General Counsel. Anand oversaw the initial document-preservation and litigation-hold process following receipt of the grand jury subpoena. There is no evidence that Anand had prior knowledge of the alleged anti-competitive conduct. She has been closely involved in coordinating TMC's response to the investigation and has served as the primary in-house liaison with Calderwood & Harkness.

Søren Dalmqvist — Chief Executive Officer. Dalmqvist has no personal involvement in the alleged conduct. As CEO, he is the ultimate decision-maker on questions of cooperation strategy, settlement authority, and organizational remediation. He has been briefed on the investigation and has expressed his commitment to full cooperation with the Antitrust Division.

III. LEGAL FRAMEWORK

A. Substantive Law — Section 1 of the Sherman Antitrust Act (15 U.S.C. § 1)

The DOJ investigation targets alleged violations of Section 1 of the Sherman Antitrust Act, 15 U.S.C. § 1, which prohibits "[e]very contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations." The three categories of conduct under investigation — price-fixing, market allocation, and bid-rigging — are each treated as per se violations of Section 1. This is a critically important doctrinal point because it means that no rule-of-reason defense is available. If the government can prove the existence of an agreement among competitors to fix prices, allocate markets, or rig bids, the violation is established without any need for the government to demonstrate anticompetitive effects, market power, or the absence of procompetitive justifications. Conversely, TMC cannot defend on the grounds that the agreed-upon prices were reasonable, that the market allocations were efficient, or that the conduct produced any procompetitive benefits.

The per se rule is well established and has been applied to horizontal price-fixing and market-allocation agreements for nearly a century. See United States v. Socony-Vacuum Oil Co., 310 U.S. 150 (1940); United States v. Topco Associates, Inc., 405 U.S. 596 (1972). Bid-rigging — the practice of coordinating competitive bids to ensure a predetermined winner — is treated as a form of per se illegal price-fixing. See United States v. Heffernan, 43 F.3d 1144 (7th Cir. 1994).

Criminal penalties for corporations. Under Section 1 as amended, a corporation convicted of a Sherman Act violation may be fined up to USD 100 million per count. However, under the Alternative Fines Act, 18 U.S.C. § 3571(d), the court may impose a fine of up to twice the gross pecuniary gain derived by the defendant from the offense, or twice the gross pecuniary loss caused to victims of the offense, if either amount exceeds the statutory maximum. Given the scale of the affected commerce in this investigation (estimated at USD 1.34 billion total, with TMC's share at approximately USD 478 million), the Alternative Fines Act could expose TMC to fines substantially exceeding the USD 100 million statutory cap.

Criminal penalties for individuals. An individual convicted of a Section 1 violation faces fines of up to USD 1 million and imprisonment of up to 10 years per count. These penalties are directly relevant to the individual exposure of Gavin Holt and potentially other TMC personnel.

Products at issue. The products at the center of the investigation are high-purity feldspar, industrial talc, and rare-earth concentrates sold to U.S. industrial and chemical-manufacturing customers. These are commodity-grade inputs used in a wide range of downstream applications, including ceramics, glass manufacturing, paint and coatings, plastics, metallurgy, and advanced electronics. The specialty-minerals sector is characterized by a relatively concentrated producer landscape, with a small number of major firms — including TMC, Ridgecrest, Pinnacle, and Cascade — accounting for a substantial share of North American production and distribution.

B. DOJ Antitrust Division Leniency Program

The Antitrust Division's Leniency Program is the cornerstone of the Division's cartel-enforcement strategy. Under the program, the first corporation to report a criminal antitrust violation and cooperate fully with the Division's investigation is eligible for conditional amnesty — meaning that the corporation and its cooperating employees avoid criminal prosecution entirely. The program operates on a strict "first-in-the-door" principle: only one corporation may receive leniency for any given conspiracy.

There are two types of corporate leniency. Type A leniency is available when a corporation reports before the Division has received information about the illegal activity from any other source; Type B leniency is available when a corporation reports after the Division has already begun an investigation, provided that the corporation meets certain additional conditions (including that the Division does not yet have evidence likely to result in a sustainable conviction against the corporation at the time of its application).

In this case, Cascade Chemical Supply Co. entered into its cooperation agreement with the Antitrust Division on approximately September 15, 2021 — prior to the opening of the grand jury investigation on February 10, 2022. Cascade therefore effectively holds the leniency position and is the sole beneficiary of conditional amnesty. TMC is ineligible for either Type A or Type B leniency.

Implication: Because TMC cannot obtain leniency, it must seek an alternative resolution. The available alternatives are (a) a non-prosecution agreement, (b) a deferred prosecution agreement, or (c) a guilty plea with cooperation credit. Each of these is discussed in Section III.D below.

C. DOJ Cooperation Credit Policies

The Antitrust Division has publicly articulated its policies regarding cooperation credit for companies that are not eligible for leniency but that nonetheless cooperate with the Division's investigation. These policies reflect the Division's recognition that cooperation from multiple participants in a cartel — not just the leniency applicant — significantly enhances the Division's ability to prosecute the conspiracy and hold individual participants accountable.

The factors that the Division considers in evaluating the nature, extent, and value of a company's cooperation include the following:

• Timeliness of cooperation: Whether the company began cooperating promptly after becoming aware of the investigation, or whether it delayed cooperation until the evidentiary case against it was already largely assembled.

• Scope and quality of cooperation: The completeness of the company's document production, the quality of its factual proffers, and the availability of its current employees for interviews and testimony.

• Nature and extent of remediation: Whether the company has taken meaningful steps to remediate the conduct, including terminating or disciplining responsible employees, enhancing compliance programs, and addressing systemic deficiencies.

• Voluntary disclosure of wrongdoing: Whether the company voluntarily reported the conduct to DOJ or cooperated only after being identified through an independent investigation.

• Identification and termination of culpable employees: Whether the company has identified all employees involved in the misconduct and taken appropriate personnel actions.

Cooperation credit can result in a substantial reduction in the fine that would otherwise be calculated under the United States Sentencing Guidelines. Based on public statements by Division officials and the outcomes of prior cases, full cooperation credit can reduce the otherwise applicable fine by approximately 40% to 50% or more, depending on the quality and timeliness of the cooperation. This represents a significant financial incentive for cooperation and is one of the primary drivers of our recommendation that TMC pursue a cooperation-based resolution strategy.

D. Non-Prosecution Agreements vs. Deferred Prosecution Agreements vs. Guilty Pleas

The three principal resolution vehicles available to TMC — non-prosecution agreements, deferred prosecution agreements, and guilty pleas — differ materially in their legal structure, procedural requirements, and collateral consequences. Each is summarized below.

Non-Prosecution Agreement ("NPA"). Under an NPA, the government agrees not to file criminal charges against the company, provided that the company complies with the terms of the agreement. An NPA is a contractual arrangement between the government and the company; it is not filed with the court and does not require judicial approval or oversight. The company avoids a formal criminal charge and conviction, and the associated collateral consequences are minimized. The NPA will typically impose cooperation obligations (including the requirement to continue assisting the government's investigation and prosecution of other parties), compliance-program enhancements, and a monetary payment. If the company materially breaches the NPA, the government retains the right to prosecute on the basis of an agreed statement of facts that is negotiated as part of the NPA.

The key advantage of an NPA for TMC is the avoidance of formal criminal charges and conviction, which would otherwise trigger a cascade of collateral consequences, including potential debarment from government contracts, securities-law disclosure obligations and market impacts, cross-border regulatory effects (the Canadian Competition Bureau, the Australian Competition and Consumer Commission, and Brazil's Administrative Council for Economic Defense could each open parallel investigations upon learning of a U.S. criminal conviction), and exposure to follow-on private antitrust treble-damages litigation.

Deferred Prosecution Agreement ("DPA"). Under a DPA, the government files a criminal information or charge against the company but agrees to defer prosecution for a specified period (typically two to three years). The DPA is filed with the court under the Speedy Trial Act, 18 U.S.C. § 3161(h)(2), and the court may exercise a degree of oversight during the deferral period. If the company complies with all terms of the DPA, the charges are dismissed at the end of the deferral period. If the company breaches the DPA, the government may proceed with prosecution on the basis of the agreed facts. A DPA is more public than an NPA (because charges are filed), involves court supervision, and may trigger some of the collateral consequences associated with formal criminal proceedings, even though no conviction results if the company complies.

Guilty Plea. A guilty plea results in a criminal conviction with maximum collateral consequences. The company pleads guilty to one or more counts of the indictment (or to a separate criminal information), and the court imposes a sentence that typically includes a substantial fine, a period of probation with compliance-program conditions, and potentially a requirement for restitution. A conviction triggers the full range of collateral consequences: debarment, securities-law impacts, cross-border regulatory cascading, and enhanced exposure to private treble-damages litigation.

Recommendation. It is our recommendation that the NPA is the optimal resolution vehicle for TMC. This recommendation is based on the following factors:

(a) TMC as a corporate entity did not authorize, sanction, or direct the conduct at issue. The alleged conspiracy was orchestrated and executed by a single now-departed employee, Gavin Holt, acting without the knowledge or approval of TMC's senior management or Board of Directors.

(b) TMC maintained an antitrust compliance policy that, while inadequate in certain respects (as discussed below), demonstrates some institutional commitment to lawful competitive behavior.

(c) TMC has the ability to demonstrate significant cooperation and remediation, including comprehensive document production, availability of witnesses, internal investigation, and proactive compliance-program enhancements.

(d) As a publicly listed, dual-exchange company (TSX and NYSE) with consolidated revenue exceeding CAD 4.27 billion, a criminal conviction or even the filing of formal criminal charges would trigger severe collateral consequences that are disproportionate to TMC's level of institutional culpability.

(e) The NPA framework allows TMC to resolve its exposure without admitting guilt in a formal judicial proceeding, while still satisfying the Antitrust Division's enforcement objectives through cooperation, financial penalties, and compliance reform.

IV. EVIDENCE ASSESSMENT

A. Evidence Against TMC — Strengths of DOJ's Case

Based on our review of the available evidence and our understanding of the Antitrust Division's investigative file (as inferred from the grand jury subpoena specifications, the target letter, and information obtained through the internal investigation), the government's case against TMC rests on the following principal evidentiary pillars:

Cascade's cooperation. The DOJ has the substantial benefit of documents and testimony from Cascade Chemical Supply Co., the cooperating witness entity. Cascade, as a downstream distributor of specialty minerals, maintained independent commercial relationships with TMC, Ridgecrest, and Pinnacle. Its records include purchase orders, invoices, pricing correspondence, and communications with sales personnel at each of the producer firms. Cascade's cooperation provides the government with an external perspective on pricing patterns and coordination among the producers. While Cascade's evidence is largely circumstantial with respect to the existence of direct inter-competitor communications — Cascade was not a participant in the VaultChat exchanges — its pricing data and commercial records corroborate the government's theory that coordinated pricing behavior occurred during the alleged conspiracy period. Moreover, Cascade president Leonard Massey is available as a cooperating witness to testify to his personal observations of pricing anomalies and suspicious commercial interactions among the producer firms.

VaultChat messages. The evidentiary centerpiece of the government's case is a trove of at least 37 documented exchanges between Gavin Holt and his counterparts at Ridgecrest (Carl Edgerton) and Pinnacle (Kevin Tsang), conducted through the VaultChat encrypted messaging platform. The earliest documented VaultChat exchange between Holt and Edgerton is dated approximately March 14, 2017; the communications continue through approximately July 2021. These messages are highly incriminating. Based on our review of the messages that have been produced to us through the government's reciprocal discovery obligations and our own internal investigation, the VaultChat exchanges contain:

• Direct sharing of current and planned pricing information for high-purity feldspar, industrial talc, and rare-earth concentrates;

• Discussions of customer allocation, including agreements to refrain from competing for specific accounts or in specific geographic territories;

• Coordination on bid submissions for government procurement contracts and large-volume private-sector purchase orders, including specific discussions of bid amounts and the pre-designation of bid "winners";

• Post-implementation communications confirming adherence to agreed pricing levels and market-allocation understandings.

The VaultChat platform was selected by the participants precisely because of its encryption and auto-deletion features. However, the messages were captured and preserved through forensic recovery from devices belonging to participants at Cascade and Ridgecrest, whose cooperation or seizure processes yielded the message content despite the platform's built-in deletion protocols.

NASMC conference meetings. The documentary and testimonial evidence further establishes that in-person meetings occurred among Holt, Edgerton, and Tsang at NASMC quarterly conferences during the conspiracy period. These conferences were held at various locations, including Arlington, Virginia; Scottsdale, Arizona; and Orlando, Florida. Conference attendance records, hotel-booking confirmations, and airline travel records corroborate the timing and location of contacts among the three individuals. Contemporaneous communications recovered from Holt's TMC email account (prior to his departure) include references to scheduled "catch-up" meetings with Edgerton and Tsang during upcoming conferences, which, in light of the VaultChat evidence, appear to have been occasions for substantive competitive discussions.

The significance of the conference-meeting evidence is twofold. First, it provides additional occasions of contact beyond the VaultChat exchanges, suggesting a broader and more regular pattern of coordination than the electronic messages alone might indicate. Second, it establishes that the conspiracy involved face-to-face interactions, which enhances the government's narrative of a deliberate, personal, and ongoing scheme.

Pricing correlation. TMC's price movements during the alleged conspiracy period show statistically significant correlation with the price movements of Ridgecrest and Pinnacle. Our preliminary economic analysis, conducted by the Calderwood & Harkness litigation analytics team (pending review by an independent forensic economics expert), indicates that the degree of pricing correlation during the alleged conspiracy period (January 2017 – August 2021) significantly exceeds the level of correlation that would be expected in a competitive market, even after controlling for common input costs, demand fluctuations, and other exogenous factors. Specifically, the timing, magnitude, and direction of TMC's pricing changes in all three product categories closely tracked corresponding changes by Ridgecrest and Pinnacle, often within days of one another.

This pricing correlation is further corroborated internally by Sandra Chu's testimony. Chu has confirmed in her preliminary interview that Gavin Holt directed her to implement at least 12 pricing adjustments during the relevant period that she found notable because of their timing and apparent disconnect from TMC's internal cost models and demand forecasts. While Chu states she did not know the basis for Holt's instructions, the correlation between these directed adjustments and competitor price movements provides powerful internal corroboration for the government's theory.

Holt's central role. The evidence consistently points to Gavin Holt as the primary — and quite possibly the sole — TMC participant in the inter-competitor coordination. His role as VP of U.S. Specialty Minerals Sales gave him unilateral authority over pricing decisions, customer negotiations, and bid submissions within TMC's U.S. Specialty Minerals Division. Holt's departure from TMC prior to the investigation (his resignation was effective September 30, 2021) and his subsequent assertion of the Fifth Amendment privilege before the grand jury on June 14, 2022, while legally permissible, may carry adverse inferential weight in the minds of the grand jurors and DOJ prosecutors. The pattern of conduct — secretive communications on an encrypted platform, combined with his post-departure refusal to cooperate — paints an unfavorable picture that the government will exploit.

Affected commerce volume. The Antitrust Division estimates the total volume of affected commerce — i.e., the aggregate value of sales of the affected products in the affected geographic market during the conspiracy period — at approximately USD 1.34 billion. TMC's share of this affected commerce is estimated at approximately USD 478 million, or roughly 35.7% of the total. This is a substantial figure and establishes significant market impact, which will factor into the government's calculation of the appropriate penalty under the Sentencing Guidelines and the Alternative Fines Act.

B. Potential Defense Theories and Mitigating Factors

While the evidentiary posture is challenging, several defense theories and mitigating factors can be advanced in connection with TMC's cooperation submissions and NPA negotiations:

Rogue-employee theory. The conduct at issue was driven by a single individual — Gavin Holt — acting without authorization from TMC's senior management or Board of Directors. The documentary record shows no evidence that any member of TMC's C-suite (CEO Dalmqvist, General Counsel Anand, CFO Fong) or Board of Directors (Chair Caldwell, Audit Committee Chair Moreau-Shaw) had knowledge of Holt's communications with competitor personnel or his coordination of pricing and market-allocation activities with Ridgecrest and Pinnacle. This is a meaningful mitigating factor because it demonstrates that the conduct was not institutionally sanctioned or directed. TMC should emphasize that the conspiracy originated with and was confined to a single employee who exploited his autonomous pricing authority to engage in unauthorized competitive contacts.

Prompt remediation upon discovery. TMC has cooperated with the investigation from the outset. Upon engaging counsel, TMC immediately issued a litigation hold, commenced an internal investigation, retained forensic and e-discovery vendors, and began making rolling document productions to the Antitrust Division. These steps demonstrate a corporate commitment to transparency and cooperation that is inconsistent with institutional complicity in the underlying conduct.

Holt's departure. Gavin Holt resigned from TMC effective September 30, 2021 — months before the grand jury was convened. His departure removed the primary bad actor from the organization and effectively terminated the conduct (the last documented VaultChat exchange is from approximately July 2021). TMC can argue that the conspiracy ended naturally with Holt's departure, and that TMC's current management and workforce are untainted by the misconduct.

Existing (if inadequate) compliance program. TMC adopted an antitrust compliance policy in approximately 2014. While we acknowledge significant deficiencies in the program — no annual compliance training was conducted after 2018, there was no monitoring of trade-association interactions or competitor contacts, and the compliance policy was not updated to reflect developments in digital communications and encrypted messaging platforms — the existence of a compliance program demonstrates some baseline institutional commitment to lawful competitive behavior. TMC can point to the compliance policy as evidence that the Company took antitrust obligations seriously as a general matter, even though the specific controls in place proved insufficient to detect and prevent Holt's conduct.

No C-suite involvement. This factor is closely related to the rogue-employee theory but merits separate emphasis. In many antitrust cases, the government's theory of corporate liability is strengthened by evidence that senior officers or directors participated in, directed, or ratified the anti-competitive conduct. Here, there is no such evidence. The absence of C-suite involvement distinguishes TMC's case from the more aggravated scenarios that have led to criminal convictions and maximum penalties in prior Antitrust Division prosecutions.

Chu's limited knowledge. Sandra Chu received pricing instructions from Holt and implemented them without knowledge of the underlying inter-competitor communications. Her testimony supports the characterization of the conduct as confined to Holt's individual actions, rather than reflecting a broader institutional scheme. If Chu had been aware of the conspiracy and participated knowingly, it would significantly undermine the rogue-employee narrative; but the evidence indicates she did not.

Eriksen's ambiguous role. Thomas Eriksen attended four NASMC conferences during the conspiracy period, but the evidence of his direct participation in the alleged side meetings is equivocal. His denial of knowledge is facially credible, and we have not identified documentary evidence that contradicts his account. If DOJ cannot establish Eriksen's participation beyond a reasonable doubt, his conference attendance remains circumstantially ambiguous rather than incriminating for TMC's institutional posture.

C. Weaknesses in Potential Defense Theories

We must also candidly assess the limitations of the defense theories outlined above.

Rogue-employee theory limitation. The DOJ is likely to argue that TMC's inadequate compliance controls — specifically, the absence of antitrust compliance training after 2018, the failure to monitor trade-association interactions, and the absence of protocols governing competitor contacts — created an environment that enabled and facilitated Holt's conduct. Under the doctrine of respondeat superior, a corporation is criminally liable for the acts of its employees committed within the scope of their employment and for the benefit of the corporation, regardless of whether the conduct was authorized by senior management. See New York Central & Hudson River Railroad Co. v. United States, 212 U.S. 481 (1909); United States v. Harborline Enterprises Hotels Corp., 467 F.2d 1000 (9th Cir. 1972). The government need not prove that TMC's Board or C-suite authorized or ratified Holt's conduct; it need only prove that Holt engaged in the conduct within the scope of his employment and for at least the partial benefit of TMC. On the available facts, both of these elements are easily established: Holt was acting in his capacity as VP of U.S. Specialty Minerals Sales, and the pricing coordination benefited TMC's revenue and margins.

Duration and scope. The alleged conspiracy lasted approximately four years and eight months (January 2017 – August 2021), spanning three distinct product lines and involving at least 37 documented communications, multiple in-person meetings, and coordination with counterparts at two separate competitor firms. This is a sustained, multi-year scheme — not a single isolated incident — which undermines any characterization of the conduct as inadvertent, aberrational, or de minimis. The government will argue that the extended duration and multi-product scope of the conspiracy reflect a deliberate and systematic effort to suppress competition.

Per se violation. As noted in Section III.A, price-fixing, market allocation, and bid-rigging are per se violations of Section 1 of the Sherman Act. This eliminates any substantive defense on the merits. TMC cannot argue that the pricing arrangements were reasonable, that the market-allocation agreements were efficient, or that the conduct produced procompetitive benefits. The only questions in a criminal prosecution would be (a) whether an agreement existed and (b) whether TMC (through its employees) participated in that agreement. The documentary evidence strongly supports affirmative answers to both questions.

Holt's refusal to cooperate. Holt's assertion of the Fifth Amendment privilege and his refusal to participate in TMC's internal investigation, on the advice of his personal counsel Patrick Dunleavy of Briarcliff Law Group PLLC, creates a significant practical obstacle. First, it limits TMC's ability to present a complete narrative to the Antitrust Division — we cannot provide the government with Holt's account of events, his motivations, or his version of the communications identified in the VaultChat records. Second, it may frustrate DOJ's expectations regarding TMC's cooperation, as the government will look to TMC to facilitate access to all individuals who participated in the conduct, and Holt's non-cooperation leaves a conspicuous gap. We address this issue in greater detail in Section VII below.

V. RECOMMENDED STRATEGY: COOPERATION AND NPA

A. Strategic Recommendation

Based on the analysis set forth in the preceding sections of this memorandum, it is our recommendation that TMC pursue a strategy of full cooperation with the DOJ Antitrust Division, aimed at obtaining a non-prosecution agreement as the ultimate resolution of the investigation.

The rationale for this recommendation rests on a convergence of factors that, taken together, make the cooperation path clearly superior to the adversarial alternative:

Evidentiary exposure. The evidentiary record — 37+ documented VaultChat communications, Cascade's cooperation and testimony, pricing-correlation data, NASMC conference records, and Sandra Chu's corroborating testimony — makes a trial defense extremely risky. Under the per se doctrine, the government need only prove the existence of an agreement; it need not prove anticompetitive effects, market power, or the absence of procompetitive justification. The VaultChat messages, if admitted at trial, would be devastating evidence of an explicit agreement to fix prices, allocate customers, and rig bids. A trial defense would require TMC to challenge the authenticity, interpretation, or applicability of these communications — arguments that, on the current record, appear unlikely to succeed.

Catastrophic collateral consequences of indictment and conviction. As a publicly traded, dual-exchange company, TMC would face collateral consequences of extraordinary magnitude in the event of indictment. These include but are not limited to:

• Government-contract debarment. A criminal conviction for bid-rigging or price-fixing may result in mandatory or discretionary debarment from federal government contracts in both the United States and Canada, which could affect TMC's downstream business relationships and revenue streams.

• Securities-market reaction. The announcement of a federal criminal indictment would likely trigger an immediate and significant decline in TMC's share price on both the TSX and NYSE, causing substantial harm to shareholders and potentially triggering margin calls and other financial disruptions.

• Cross-border regulatory cascading. A U.S. criminal conviction or indictment would put Canadian competition authorities (the Competition Bureau of Canada), the Australian Competition and Consumer Commission ("ACCC"), and Brazil's Administrative Council for Economic Defense ("CADE") on notice of the conduct, potentially triggering parallel investigations and enforcement actions in each of those jurisdictions, where TMC also operates.

• Investor litigation exposure. Indictment and conviction would almost certainly generate securities class-action litigation alleging that TMC's public disclosures during the conspiracy period were materially misleading, as well as shareholder derivative suits alleging breach of fiduciary duty by TMC's officers and directors.

• Reputational harm. The reputational impact of a criminal conviction on a publicly traded company with over CAD 4 billion in annual revenue and 14 mining operations across four countries cannot be overstated. TMC's relationships with customers, suppliers, lenders, regulators, and business partners would all be adversely affected.

NPA as the optimal vehicle. An NPA avoids formal criminal charges and conviction, minimizes collateral consequences, and allows TMC to continue operating without the stigma of a criminal record. While an NPA still involves a significant monetary payment and compliance obligations, the overall cost-benefit analysis strongly favors this resolution pathway over the alternatives.

TMC's cooperation posture. TMC has cooperated since engaging counsel. The Company has produced approximately 42,000 documents in its first rolling production, issued a comprehensive litigation hold, commenced an internal investigation, and is positioned to make additional witnesses available for DOJ proffer sessions. TMC is also prepared to undertake proactive compliance-program remediation. This cooperation posture positions TMC well for significant cooperation credit and enhances the likelihood of a favorable NPA outcome.

B. Cooperation Framework — Specific Steps

To execute the cooperation strategy effectively, we recommend the following specific steps:

1. Continue and accelerate document production. Rolling document productions to the Antitrust Division are ongoing. The first production of approximately 42,000 documents was completed on April 4, 2022, and additional productions are in progress toward a cumulative target that we anticipate will reach several hundred thousand documents encompassing millions of pages. Redstone Digital Forensics, Inc., under the direction of Project Director Neil Ashworth, is managing the collection, processing, and production workflow. We will continue to coordinate with Trial Attorney Kowalski and Senior Trial Attorney Reeves on production schedules and prioritization of document categories. Timely and complete document production is the foundation of credible cooperation, and any delay or deficiency in production could undermine TMC's cooperation credit.

2. Complete internal investigation. Calderwood & Harkness will complete interviews of all 23 identified current and former TMC employees who may possess relevant information regarding the conduct at issue. Priority interviews of Sandra Chu and Thomas Eriksen are already scheduled. Other key interview subjects include General Counsel Priya Anand, CFO Richard Fong, and additional members of the U.S. Specialty Minerals Division sales and pricing teams. Upon completion of the interview program and review of all collected documents, we will prepare a comprehensive internal investigation report for presentation to the TMC Board of Directors.

3. Retain forensic economics expert. We recommend that TMC retain a qualified forensic accounting and economics firm to conduct an independent analysis of pricing patterns and affected-commerce calculations. Our recommendation is to engage Hargrove Forensic Advisory LLC, led by Dr. Vanessa Tremblay, an economist based in Chicago with substantial experience in antitrust damages analysis. The engagement should be structured under Kovel-letter protections — i.e., Hargrove should be retained by and report to Calderwood & Harkness as the client's counsel, such that Hargrove's work product and communications are protected by the attorney-client privilege and work-product doctrine. See United States v. Kovel, 296 F.2d 918 (2d Cir. 1961). Dr. Tremblay's analysis will serve two purposes: first, to provide an independent assessment of the affected-commerce volume and the economic impact of the alleged conduct, which will inform our NPA negotiations with DOJ; and second, to identify any methodological weaknesses in DOJ's own affected-commerce calculations that could be used to negotiate a lower monetary payment.

4. Make witnesses available for DOJ proffer sessions. We recommend that TMC offer to make Sandra Chu and Thomas Eriksen available for voluntary proffer sessions with the Antitrust Division. These sessions should be conducted under queen-for-a-day (use immunity) protections, pursuant to which the government agrees that statements made during the proffer session will not be used directly against the witness in any subsequent prosecution, subject to standard exceptions for false statements and perjury. We will negotiate proffer terms with DOJ in advance, and we will thoroughly prepare each witness before the session. Making witnesses available for proffers is a powerful demonstration of cooperation and is typically expected by the Antitrust Division as a condition of meaningful cooperation credit.

5. Submit cooperation proffer to DOJ. After the internal investigation findings are finalized and the forensic economic analysis is complete, we will prepare a comprehensive written proffer to the Antitrust Division. This proffer will summarize TMC's cooperation to date, present our internal investigation findings in a structured format, describe the remediation measures TMC has undertaken and plans to undertake, and present the mitigating factors supporting NPA treatment. The cooperation proffer is the vehicle through which we will make our affirmative case for a non-prosecution resolution.

6. Proactively remediate compliance program. We recommend that TMC engage a qualified antitrust compliance consultant to design and implement an enhanced antitrust compliance program. Proactive remediation — i.e., implementing reforms before the Antitrust Division requires them as a condition of resolution — is a powerful demonstration of good faith and will enhance TMC's cooperation credit. The enhanced compliance program should include the following elements at a minimum:

• Mandatory annual antitrust compliance training for all sales, pricing, and business-development personnel, as well as all officers and directors;

• Appointment of a Chief Compliance Officer with direct reporting authority to the Board of Directors (or a designated Board committee);

• Written protocols governing contacts with competitors, including prohibitions on unauthorized pricing, market-allocation, and bid-coordination discussions;

• Policies governing participation in trade-association events, including mandatory pre-clearance and post-event reporting for all interactions with competitor personnel;

• A monitoring and audit mechanism, including periodic review of communications and transactions for potential antitrust red flags;

• An anonymous reporting hotline for employees to report suspected antitrust violations;

• Certification requirements for all relevant personnel, including annual written certifications of compliance with the antitrust compliance policy.

7. Engage DOJ on NPA discussions. After TMC has demonstrated substantial cooperation through its document productions, witness proffers, and cooperation proffer, we will formally propose an NPA resolution to the Antitrust Division. Based on typical timelines in comparable investigations, we anticipate that the cooperation proffer could be submitted in early 2023, with NPA negotiations beginning in mid-to-late 2023. We will manage the engagement with DOJ throughout this process, maintaining regular contact with Kowalski, Reeves, and DAAG Stafford-Hayes.

C. Anticipated NPA Terms

Based on our experience with prior Antitrust Division NPAs and our assessment of TMC's specific circumstances, we anticipate that an NPA resolution would include the following principal terms:

Monetary payment. The Antitrust Divis

CALDERWOOD & HARKNESS LLP
PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGE / WORK PRODUCT DOCTRINE
INTERNAL MEMORANDUM — NOT FOR DISTRIBUTION OUTSIDE CALDERWOOD & HARKNESS LLP
Date: June 1, 2022
Matter No.: 1039-00001
To: File (Torchlight Mining Corp. Defense — DOJ Grand Jury Investigation GJ-22-0194, N.D. Cal.)
From: Elaine Forsythe, Responsible Partner, Antitrust & Competition Practice Group Aaron Liu, Lead Associate, Antitrust & Competition Practice Group
Re: Defense Strategy — Torchlight Mining Corp. — DOJ Antitrust Division Grand Jury Investigation into Price-Fixing, Market Allocation, and Bid-Rigging in the North American Specialty Minerals Sector
CONFIDENTIALITY LEGEND: This memorandum constitutes privileged and confidential attorney work product prepared in anticipation of litigation and for the purpose of providing legal advice to Torchlight Mining Corp. It is protected from disclosure by the attorney-client privilege and the work-product doctrine. The opinions, assessments, and recommendations contained herein reflect the professional judgment of Calderwood & Harkness LLP based on information available as of the date of this memorandum. Do not copy or distribute without express authorization of the Responsible Partner. Any unauthorized disclosure may result in waiver of applicable privileges.
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I. EXECUTIVE SUMMARY
The purpose of this memorandum is to set forth Calderwood & Harkness LLP's recommended defense strategy for Torchlight Mining Corp. ("TMC" or "Torchlight" or the "Company") in connection with the United States Department of Justice, Antitrust Division, grand jury investigation, Grand Jury No. GJ-22-0194, currently pending before the United States District Court for the Northern District of California, San Francisco Division. This memorandum is intended to serve as the foundational strategic roadmap for the defense team and to memorialize our analysis and recommendations for the file.
The investigation was opened on February 10, 2022. TMC received a grand jury subpoena duces tecum (Subpoena No. GJ-22-0194-SD-003) on February 14, 2022, and subsequently received a DOJ target letter on May 20, 2022, elevating its status from subject to target. The investigation concerns suspected price-fixing, market allocation, and bid-rigging in the North American specialty-minerals sector, principally with respect to three product categories: high-purity feldspar, industrial talc, and rare-earth concentrates. The suspected conspiracy period runs from approximately January 2017 through August 2021.
After conducting an extensive preliminary review of the documentary evidence, completing a substantial number of internal investigation witness interviews, and assessing the overall evidentiary landscape, it is our firm recommendation that TMC should pursue a cooperation strategy aimed at securing a non-prosecution agreement ("NPA") rather than contest the investigation adversarially. This recommendation is grounded in the following considerations:
First, the evidentiary exposure facing TMC is substantial. Our review has identified at least 37 documented communications between TMC's former Vice President of U.S. Specialty Minerals Sales, Gavin Holt, and his counterparts at competitor firms — Carl Edgerton of Ridgecrest Minerals Inc. and Kevin Tsang of Pinnacle Earth Resources Ltd. — conducted via the encrypted messaging platform VaultChat and in person at conferences of the North American Specialty Minerals Council ("NASMC"). These communications contain explicit pricing information exchanges, customer-allocation discussions, and coordination on bid submissions for government and private-sector contracts.
Second, TMC was not the first-in cooperator under the DOJ Antitrust Division's Leniency Program. Cascade Chemical Supply Co. ("Cascade") entered into a cooperation agreement with the Antitrust Division on approximately September 15, 2021, well before the grand jury was convened, and effectively holds the leniency position. TMC is therefore ineligible for conditional amnesty and must pursue an alternative resolution pathway.
Third, the reputational, financial, and operational consequences of indictment — let alone conviction — far outweigh the costs associated with cooperation and remediation. TMC is a publicly listed company on both the Toronto Stock Exchange (TSX: TRCL) and the New York Stock Exchange (NYSE: TMC), with consolidated annual revenue exceeding CAD 4.27 billion. A federal criminal indictment would trigger catastrophic collateral consequences, including potential debarment from government contracts, a securities-market reaction adversely affecting shareholder value, cross-border regulatory cascading effects in Canada, Australia, and Brazil, and exposure to follow-on private antitrust litigation and securities class actions.
In addition to the primary cooperation recommendation, we advise the following secondary measures: (a) retention of a forensic economics expert, specifically Hargrove Forensic Advisory LLC, to prepare an independent affected-commerce analysis and pricing-pattern assessment; (b) proactive remediation of TMC's antitrust compliance program, which will be essential to securing favorable NPA terms; and (c) careful management of the individual exposure of Gavin Holt, who has retained separate counsel and has asserted his Fifth Amendment privilege before the grand jury, to preserve TMC's ability to demonstrate its own full cooperation with the Antitrust Division.
II. BACKGROUND AND PROCEDURAL STATUS
A. The Investigation
On February 10, 2022, the Antitrust Division of the United States Department of Justice, acting through its San Francisco Field Office, opened a federal grand jury investigation into suspected violations of Section 1 of the Sherman Antitrust Act, 15 U.S.C. § 1, in the North American specialty-minerals sector. The grand jury was seated in the Northern District of California, San Francisco Division, and has been assigned Grand Jury No. GJ-22-0194.
The lead prosecutors assigned to the investigation are Trial Attorney Denise Kowalski and Senior Trial Attorney Marcus Reeves, both of the San Francisco Field Office. The matter is supervised by Deputy Assistant Attorney General Julia Stafford-Hayes, who is based in the Antitrust Division's headquarters in Washington, D.C. Based on our interactions with the prosecution team to date, Kowalski has been the primary point of contact for subpoena compliance and document production, while Reeves has taken the lead on witness-related matters and proffer negotiations with cooperating entities.
The investigation was triggered by a cooperation agreement between the Antitrust Division and Cascade Chemical Supply Co. ("Cascade"), a Washington state corporation headquartered in Spokane, Washington. Cascade is led by its president, Leonard Massey. Cascade entered into its cooperation agreement with DOJ on approximately September 15, 2021 — notably, several months before the grand jury was formally convened. As part of that cooperation agreement, Cascade has provided the Antitrust Division with documents and testimony relating to pricing practices, customer-allocation discussions, and bid-coordination activities in the specialty-minerals sector. The scope and detail of Cascade's cooperation, based on what we have been able to glean from the grand jury subpoena specifications and from publicly available information, appears to be extensive. Cascade's role as a downstream distributor of specialty minerals gave it a unique vantage point from which to observe pricing patterns and coordination among the major producers.
Cascade is represented by Whitfield, Strauss & Tully LLP, a Seattle-based firm, with lead partner Rebecca Ostrander handling the matter. We have had limited contact with Ostrander's team, and given TMC's cooperation posture, we do not anticipate significant coordination with Cascade's counsel.
B. Co-Subjects / Co-Targets
In addition to TMC, the investigation involves at least two other major participants in the North American specialty-minerals market, both of which have been identified as co-targets by the Antitrust Division:
Ridgecrest Minerals Inc. Ridgecrest is a Delaware corporation headquartered in Denver, Colorado. Its fiscal year 2021 revenue was approximately USD 1.92 billion, making it the second-largest North American producer of high-purity feldspar and industrial talc. Ridgecrest is a portfolio company of Marlowe Asset Management Peak Capital Partners LP, a Denver-based private equity fund. Its Chief Executive Officer is Brian Novotny. Of particular significance to this investigation, Ridgecrest's Vice President of Sales, Carl Edgerton, has been identified by DOJ as a key individual participant in the alleged conspiracy. Edgerton is a direct counterpart to TMC's Gavin Holt and appears to have been Holt's primary contact in the VaultChat communications described below. Ridgecrest received a DOJ target letter on January 12, 2022 — approximately four months before TMC received its own target letter, suggesting that Ridgecrest may have been a primary focus of the investigation from an early stage. Ridgecrest is represented separately by Davenport, Kline & Archer LLP (Denver), with lead partner Helen Marchetti.
Pinnacle Earth Resources Ltd. Pinnacle is an Ontario corporation headquartered in Sudbury, Ontario, with U.S. operations based in Salt Lake City, Utah. Its fiscal year 2021 revenue was approximately CAD 1.45 billion (approximately USD 1.15 billion at prevailing exchange rates). Pinnacle is a top-five North American producer of rare-earth concentrates and specialty minerals. Its Chief Executive Officer is Douglas Harlowe. Former Senior Vice President of Commercial Operations Kevin Tsang has been identified by DOJ as a key individual participant. Like TMC's Gavin Holt, Tsang appears to have been a regular participant in the VaultChat communications and NASMC conference side meetings at the center of the alleged conspiracy. Pinnacle is represented separately by Ashford Whitmore LLP (Toronto and New York), with lead partner George Nakamura.
We note that the private-equity ownership of Ridgecrest introduces additional dynamics into the investigation. Marlowe Asset Management Peak Capital Partners may face its own liability exposure depending on its involvement in Ridgecrest's operational decision-making and its knowledge of the conduct at issue. This may influence Ridgecrest's litigation strategy and its willingness to cooperate.
C. TMC's Status and Profile
Corporate organization. Torchlight Mining Corp. is a corporation organized under the Canada Business Corporations Act ("CBCA"), bearing CBCA Corporation No. 7841526-1. Its registered office is located at 200 Bay Street, Suite 3400, Toronto, Ontario M5J 2J2, Canada. TMC's shares are listed on the Toronto Stock Exchange under the ticker symbol TRCL and on the New York Stock Exchange under the ticker symbol TMC.
Financial profile. For fiscal year 2021, TMC reported consolidated revenue of CAD 4.27 billion (approximately USD 3.38 billion at an average exchange rate of approximately 0.792 USD/CAD) and consolidated EBITDA of CAD 812 million.
Operations. TMC operates 14 mines across four countries — Canada, the United States, Brazil, and Australia — together with six downstream chemical-processing facilities. The Company's operations span the full value chain of specialty-minerals production, from extraction through processing and distribution to end-use industrial customers.
U.S. Specialty Minerals Division. The division at the center of the DOJ investigation is TMC's U.S. Specialty Minerals Division, which generated USD 687 million in revenue during fiscal year 2021, representing approximately 20.3% of TMC's consolidated revenue. This division is responsible for the marketing and sale of high-purity feldspar, industrial talc, and rare-earth concentrates to U.S. industrial and chemical-manufacturing customers. The division operated under the commercial leadership of Gavin Holt (VP, U.S. Specialty Minerals Sales) from 2016 until Holt's departure in September 2021.
U.S. subsidiary. TMC conducts its U.S. operations through its wholly owned subsidiary, Torchlight Mining (U.S.) Inc., a Nevada corporation (Entity No. NV20160438721), with its principal office at 8750 West Sahara Avenue, Suite 210, Reno, Nevada 89117. The subsidiary's Federal Employer Identification Number is 83-2947106. Torchlight Mining (U.S.) Inc. is the entity that directly employed Gavin Holt and the other U.S.-based individuals of interest, and it is the entity through which the relevant sales transactions were booked.
Key personnel. The following TMC officers and directors are relevant to the defense strategy:
•  Margaret Caldwell — Board Chair
•  Søren Dalmqvist — Chief Executive Officer
•  Priya Anand — General Counsel
•  Richard Fong — Chief Financial Officer
•  Janet Moreau-Shaw — Audit Committee Chair
D. Procedural Milestones to Date
The following timeline summarizes the key procedural events in the investigation to date:
February 14, 2022: TMC receives grand jury subpoena duces tecum, Subpoena No. GJ-22-0194-SD-003, issued by the grand jury sitting in the Northern District of California, San Francisco Division. The subpoena requests the production of a broad range of documents relating to TMC's pricing, sales, customer-allocation, and competitive-intelligence practices in the U.S. specialty-minerals market, covering the period January 1, 2015, through the date of the subpoena. The subpoena specifications are extensive, comprising 47 numbered categories.
February 18, 2022: TMC retains Calderwood & Harkness LLP as outside counsel for the investigation. Engagement letter executed by TMC General Counsel Priya Anand and Responsible Partner Elaine Forsythe. Initial engagement budget of USD 12 million.
February 22, 2022: Calderwood & Harkness acknowledges receipt of the grand jury subpoena on behalf of TMC and submits a request to the Antitrust Division for a 60-day extension of the subpoena return date. The extension request is granted on March 2, 2022, establishing a new initial return date of April 25, 2022, with a rolling production schedule.
March 1, 2022: Calderwood & Harkness issues a comprehensive litigation hold memorandum to all TMC personnel, directing the preservation of all documents and communications potentially responsive to the grand jury subpoena. The hold covers all electronic and hard-copy records, including email, instant messages, text messages, documents stored on network drives and personal devices, and physical files. The hold is distributed to approximately 340 TMC employees identified as potentially possessing relevant materials.
March 4, 2022: TMC tenders notice of the investigation to its directors' and officers' liability insurance carrier, Northland Mutual Insurance Co., under Policy No. NMI-DO-2021-5547. The policy provides coverage for defense costs and certain specified losses arising from governmental investigations and enforcement proceedings. Coverage analysis is ongoing; initial indications are that the policy will respond to defense-cost claims, subject to the policy's cooperation and reporting requirements and applicable exclusions.
March 5, 2022: Calderwood & Harkness establishes the internal investigation plan. The plan contemplates the identification and preservation of relevant documents, the collection and forensic imaging of electronic data from custodian devices, an employee interview program, and engagement of forensic and economic experts as needed.
March 15, 2022: TMC retains Redstone Digital Forensics Inc. ("Redstone") for data collection, forensic imaging, and e-discovery support. Redstone's Project Director, Neil Ashworth, is the primary point of contact. Redstone has been tasked with collecting data from 28 identified custodians, processing and hosting the collected data in a review platform, and supporting the document review and production workflow.
March 28, 2022: TMC publicly discloses the DOJ investigation in its fiscal year 2021 annual report, filed on SEDAR+ (Canadian securities filing system) and with the U.S. Securities and Exchange Commission on Form 40-F. The disclosure notes the receipt of the grand jury subpoena, the engagement of outside counsel, and the Company's intention to cooperate with the investigation. In conjunction with this filing, TMC, on the advice of its auditors and outside counsel, establishes an initial litigation reserve of USD 30 million to reflect the Company's preliminary estimate of potential exposure. The reserve is subject to revision as the investigation progresses.
April 4, 2022: TMC completes its first rolling production of documents to the Antitrust Division, comprising approximately 42,000 documents. This initial production includes corporate pricing records, internal communications among identified custodians, sales data, and other materials responsive to the subpoena specifications. Additional rolling productions are ongoing, with a cumulative document volume projected to reach several hundred thousand documents and millions of pages.
May 20, 2022: TMC receives a DOJ target letter from Trial Attorney Kowalski, formally advising that TMC's status in the investigation has been escalated from subject to target. The target letter identifies TMC as a potential defendant in connection with alleged violations of Section 1 of the Sherman Antitrust Act, 15 U.S.C. § 1, relating to price-fixing, market allocation, and bid-rigging in the North American specialty-minerals market. Receipt of the target letter represents a material escalation of TMC's exposure and necessitates a comprehensive reassessment of defense strategy, which is the primary purpose of this memorandum.
E. Key TMC Individuals of Interest
Our internal investigation has identified the following TMC current and former employees as individuals of particular interest to the DOJ investigation:
Gavin Holt — Former Vice President, U.S. Specialty Minerals Sales. Holt is the TMC individual most directly implicated in the alleged conspiracy. He served as VP, U.S. Specialty Minerals Sales from 2016 through his resignation effective September 30, 2021. In that role, he led TMC's commercial pricing function for the U.S. Specialty Minerals Division, with direct authority over pricing decisions, customer negotiations, and bid submissions. Our review of the documentary record indicates that Holt was the primary — and possibly the sole — TMC participant in the inter-competitor communications at the center of the investigation. The 37+ documented VaultChat exchanges between Holt and his counterparts at Ridgecrest (Edgerton) and Pinnacle (Tsang) were conducted using Holt's personal device, which was not captured in TMC's original data-collection process and was identified only through Cascade's production to DOJ.
Holt retained personal counsel, Briarcliff Law Group PLLC, located at 50 California Street, Suite 2800, San Francisco, California 94111. The lead attorney handling Holt's representation is Patrick Dunleavy. Holt retained Briarcliff on approximately June 10, 2022. On June 14, 2022, Holt appeared before the grand jury pursuant to a subpoena and asserted his Fifth Amendment privilege against self-incrimination, declining to testify. Holt has also, on the advice of Dunleavy, declined Calderwood & Harkness's request for an interview as part of TMC's internal investigation. These developments are discussed further in Section VII below.
Sandra Chu — Director, Pricing Analytics, U.S. Specialty Minerals Division. Chu reported directly to Gavin Holt during the relevant period. Our investigation has revealed that Chu received pricing-adjustment instructions from Holt on at least 12 occasions that correlate with competitor price movements during the alleged conspiracy period. Chu's role was to implement pricing changes in TMC's systems based on instructions from her superiors. Critically, there is no direct evidence that Chu was aware of the inter-competitor communications underlying Holt's instructions. She has stated in her preliminary interview with Calderwood & Harkness that she understood the pricing adjustments to be based on Holt's assessment of market conditions and competitive dynamics, and that she had no knowledge of direct communications between Holt and personnel at Ridgecrest or Pinnacle. Chu remains employed by TMC.
Thomas Eriksen — Regional Sales Manager (Western Region), U.S. Specialty Minerals Division. Eriksen attended four NASMC quarterly conferences during the conspiracy period at which side meetings among Holt, Edgerton, and Tsang allegedly occurred. The evidence regarding Eriksen's direct participation in those side meetings is ambiguous. While conference attendance records and travel records confirm his presence at the relevant conferences (held in Arlington, Virginia; Scottsdale, Arizona; and Orlando, Florida), we have not identified documentary evidence establishing that Eriksen was present during any substantive discussions of pricing, customer allocation, or bid coordination. Eriksen has denied, in his preliminary interview with Calderwood & Harkness, any knowledge of or participation in anti-competitive communications with competitor personnel. His denial is facially credible given his role as a regional sales manager rather than a pricing decision-maker, but we cannot rule out the possibility that DOJ will seek to challenge his account. Eriksen remains employed by TMC.
Priya Anand — General Counsel. Anand oversaw the initial document-preservation and litigation-hold process following receipt of the grand jury subpoena. There is no evidence that Anand had prior knowledge of the alleged anti-competitive conduct. She has been closely involved in coordinating TMC's response to the investigation and has served as the primary in-house liaison with Calderwood & Harkness.
Søren Dalmqvist — Chief Executive Officer. Dalmqvist has no personal involvement in the alleged conduct. As CEO, he is the ultimate decision-maker on questions of cooperation strategy, settlement authority, and organizational remediation. He has been briefed on the investigation and has expressed his commitment to full cooperation with the Antitrust Division.
III. LEGAL FRAMEWORK
A. Substantive Law — Section 1 of the Sherman Antitrust Act (15 U.S.C. § 1)
The DOJ investigation targets alleged violations of Section 1 of the Sherman Antitrust Act, 15 U.S.C. § 1, which prohibits "[e]very contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations." The three categories of conduct under investigation — price-fixing, market allocation, and bid-rigging — are each treated as per se violations of Section 1. This is a critically important doctrinal point because it means that no rule-of-reason defense is available. If the government can prove the existence of an agreement among competitors to fix prices, allocate markets, or rig bids, the violation is established without any need for the government to demonstrate anticompetitive effects, market power, or the absence of procompetitive justifications. Conversely, TMC cannot defend on the grounds that the agreed-upon prices were reasonable, that the market allocations were efficient, or that the conduct produced any procompetitive benefits.
The per se rule is well established and has been applied to horizontal price-fixing and market-allocation agreements for nearly a century. See United States v. Socony-Vacuum Oil Co., 310 U.S. 150 (1940); United States v. Topco Associates, Inc., 405 U.S. 596 (1972). Bid-rigging — the practice of coordinating competitive bids to ensure a predetermined winner — is treated as a form of per se illegal price-fixing. See United States v. Heffernan, 43 F.3d 1144 (7th Cir. 1994).
Criminal penalties for corporations. Under Section 1 as amended, a corporation convicted of a Sherman Act violation may be fined up to USD 100 million per count. However, under the Alternative Fines Act, 18 U.S.C. § 3571(d), the court may impose a fine of up to twice the gross pecuniary gain derived by the defendant from the offense, or twice the gross pecuniary loss caused to victims of the offense, if either amount exceeds the statutory maximum. Given the scale of the affected commerce in this investigation (estimated at USD 1.34 billion total, with TMC's share at approximately USD 478 million), the Alternative Fines Act could expose TMC to fines substantially exceeding the USD 100 million statutory cap.
Criminal penalties for individuals. An individual convicted of a Section 1 violation faces fines of up to USD 1 million and imprisonment of up to 10 years per count. These penalties are directly relevant to the individual exposure of Gavin Holt and potentially other TMC personnel.
Products at issue. The products at the center of the investigation are high-purity feldspar, industrial talc, and rare-earth concentrates sold to U.S. industrial and chemical-manufacturing customers. These are commodity-grade inputs used in a wide range of downstream applications, including ceramics, glass manufacturing, paint and coatings, plastics, metallurgy, and advanced electronics. The specialty-minerals sector is characterized by a relatively concentrated producer landscape, with a small number of major firms — including TMC, Ridgecrest, Pinnacle, and Cascade — accounting for a substantial share of North American production and distribution.
B. DOJ Antitrust Division Leniency Program
The Antitrust Division's Leniency Program is the cornerstone of the Division's cartel-enforcement strategy. Under the program, the first corporation to report a criminal antitrust violation and cooperate fully with the Division's investigation is eligible for conditional amnesty — meaning that the corporation and its cooperating employees avoid criminal prosecution entirely. The program operates on a strict "first-in-the-door" principle: only one corporation may receive leniency for any given conspiracy.
There are two types of corporate leniency. Type A leniency is available when a corporation reports before the Division has received information about the illegal activity from any other source; Type B leniency is available when a corporation reports after the Division has already begun an investigation, provided that the corporation meets certain additional conditions (including that the Division does not yet have evidence likely to result in a sustainable conviction against the corporation at the time of its application).
In this case, Cascade Chemical Supply Co. entered into its cooperation agreement with the Antitrust Division on approximately September 15, 2021 — prior to the opening of the grand jury investigation on February 10, 2022. Cascade therefore effectively holds the leniency position and is the sole beneficiary of conditional amnesty. TMC is ineligible for either Type A or Type B leniency.
Implication: Because TMC cannot obtain leniency, it must seek an alternative resolution. The available alternatives are (a) a non-prosecution agreement, (b) a deferred prosecution agreement, or (c) a guilty plea with cooperation credit. Each of these is discussed in Section III.D below.
C. DOJ Cooperation Credit Policies
The Antitrust Division has publicly articulated its policies regarding cooperation credit for companies that are not eligible for leniency but that nonetheless cooperate with the Division's investigation. These policies reflect the Division's recognition that cooperation from multiple participants in a cartel — not just the leniency applicant — significantly enhances the Division's ability to prosecute the conspiracy and hold individual participants accountable.
The factors that the Division considers in evaluating the nature, extent, and value of a company's cooperation include the following:
•  Timeliness of cooperation: Whether the company began cooperating promptly after becoming aware of the investigation, or whether it delayed cooperation until the evidentiary case against it was already largely assembled.
•  Scope and quality of cooperation: The completeness of the company's document production, the quality of its factual proffers, and the availability of its current employees for interviews and testimony.
•  Nature and extent of remediation: Whether the company has taken meaningful steps to remediate the conduct, including terminating or disciplining responsible employees, enhancing compliance programs, and addressing systemic deficiencies.
•  Voluntary disclosure of wrongdoing: Whether the company voluntarily reported the conduct to DOJ or cooperated only after being identified through an independent investigation.
•  Identification and termination of culpable employees: Whether the company has identified all employees involved in the misconduct and taken appropriate personnel actions.
Cooperation credit can result in a substantial reduction in the fine that would otherwise be calculated under the United States Sentencing Guidelines. Based on public statements by Division officials and the outcomes of prior cases, full cooperation credit can reduce the otherwise applicable fine by approximately 40% to 50% or more, depending on the quality and timeliness of the cooperation. This represents a significant financial incentive for cooperation and is one of the primary drivers of our recommendation that TMC pursue a cooperation-based resolution strategy.
D. Non-Prosecution Agreements vs. Deferred Prosecution Agreements vs. Guilty Pleas
The three principal resolution vehicles available to TMC — non-prosecution agreements, deferred prosecution agreements, and guilty pleas — differ materially in their legal structure, procedural requirements, and collateral consequences. Each is summarized below.
Non-Prosecution Agreement ("NPA"). Under an NPA, the government agrees not to file criminal charges against the company, provided that the company complies with the terms of the agreement. An NPA is a contractual arrangement between the government and the company; it is not filed with the court and does not require judicial approval or oversight. The company avoids a formal criminal charge and conviction, and the associated collateral consequences are minimized. The NPA will typically impose cooperation obligations (including the requirement to continue assisting the government's investigation and prosecution of other parties), compliance-program enhancements, and a monetary payment. If the company materially breaches the NPA, the government retains the right to prosecute on the basis of an agreed statement of facts that is negotiated as part of the NPA.
The key advantage of an NPA for TMC is the avoidance of formal criminal charges and conviction, which would otherwise trigger a cascade of collateral consequences, including potential debarment from government contracts, securities-law disclosure obligations and market impacts, cross-border regulatory effects (the Canadian Competition Bureau, the Australian Competition and Consumer Commission, and Brazil's Administrative Council for Economic Defense could each open parallel investigations upon learning of a U.S. criminal conviction), and exposure to follow-on private antitrust treble-damages litigation.
Deferred Prosecution Agreement ("DPA"). Under a DPA, the government files a criminal information or charge against the company but agrees to defer prosecution for a specified period (typically two to three years). The DPA is filed with the court under the Speedy Trial Act, 18 U.S.C. § 3161(h)(2), and the court may exercise a degree of oversight during the deferral period. If the company complies with all terms of the DPA, the charges are dismissed at the end of the deferral period. If the company breaches the DPA, the government may proceed with prosecution on the basis of the agreed facts. A DPA is more public than an NPA (because charges are filed), involves court supervision, and may trigger some of the collateral consequences associated with formal criminal proceedings, even though no conviction results if the company complies.
Guilty Plea. A guilty plea results in a criminal conviction with maximum collateral consequences. The company pleads guilty to one or more counts of the indictment (or to a separate criminal information), and the court imposes a sentence that typically includes a substantial fine, a period of probation with compliance-program conditions, and potentially a requirement for restitution. A conviction triggers the full range of collateral consequences: debarment, securities-law impacts, cross-border regulatory cascading, and enhanced exposure to private treble-damages litigation.
Recommendation. It is our recommendation that the NPA is the optimal resolution vehicle for TMC. This recommendation is based on the following factors:
(a) TMC as a corporate entity did not authorize, sanction, or direct the conduct at issue. The alleged conspiracy was orchestrated and executed by a single now-departed employee, Gavin Holt, acting without the knowledge or approval of TMC's senior management or Board of Directors.
(b) TMC maintained an antitrust compliance policy that, while inadequate in certain respects (as discussed below), demonstrates some institutional commitment to lawful competitive behavior.
(c) TMC has the ability to demonstrate significant cooperation and remediation, including comprehensive document production, availability of witnesses, internal investigation, and proactive compliance-program enhancements.
(d) As a publicly listed, dual-exchange company (TSX and NYSE) with consolidated revenue exceeding CAD 4.27 billion, a criminal conviction or even the filing of formal criminal charges would trigger severe collateral consequences that are disproportionate to TMC's level of institutional culpability.
(e) The NPA framework allows TMC to resolve its exposure without admitting guilt in a formal judicial proceeding, while still satisfying the Antitrust Division's enforcement objectives through cooperation, financial penalties, and compliance reform.
IV. EVIDENCE ASSESSMENT
A. Evidence Against TMC — Strengths of DOJ's Case
Based on our review of the available evidence and our understanding of the Antitrust Division's investigative file (as inferred from the grand jury subpoena specifications, the target letter, and information obtained through the internal investigation), the government's case against TMC rests on the following principal evidentiary pillars:
Cascade's cooperation. The DOJ has the substantial benefit of documents and testimony from Cascade Chemical Supply Co., the cooperating witness entity. Cascade, as a downstream distributor of specialty minerals, maintained independent commercial relationships with TMC, Ridgecrest, and Pinnacle. Its records include purchase orders, invoices, pricing correspondence, and communications with sales personnel at each of the producer firms. Cascade's cooperation provides the government with an external perspective on pricing patterns and coordination among the producers. While Cascade's evidence is largely circumstantial with respect to the existence of direct inter-competitor communications — Cascade was not a participant in the VaultChat exchanges — its pricing data and commercial records corroborate the government's theory that coordinated pricing behavior occurred during the alleged conspiracy period. Moreover, Cascade president Leonard Massey is available as a cooperating witness to testify to his personal observations of pricing anomalies and suspicious commercial interactions among the producer firms.
VaultChat messages. The evidentiary centerpiece of the government's case is a trove of at least 37 documented exchanges between Gavin Holt and his counterparts at Ridgecrest (Carl Edgerton) and Pinnacle (Kevin Tsang), conducted through the VaultChat encrypted messaging platform. The earliest documented VaultChat exchange between Holt and Edgerton is dated approximately March 14, 2017; the communications continue through approximately July 2021. These messages are highly incriminating. Based on our review of the messages that have been produced to us through the government's reciprocal discovery obligations and our own internal investigation, the VaultChat exchanges contain:
•  Direct sharing of current and planned pricing information for high-purity feldspar, industrial talc, and rare-earth concentrates;
•  Discussions of customer allocation, including agreements to refrain from competing for specific accounts or in specific geographic territories;
•  Coordination on bid submissions for government procurement contracts and large-volume private-sector purchase orders, including specific discussions of bid amounts and the pre-designation of bid "winners";
•  Post-implementation communications confirming adherence to agreed pricing levels and market-allocation understandings.
The VaultChat platform was selected by the participants precisely because of its encryption and auto-deletion features. However, the messages were captured and preserved through forensic recovery from devices belonging to participants at Cascade and Ridgecrest, whose cooperation or seizure processes yielded the message content despite the platform's built-in deletion protocols.
NASMC conference meetings. The documentary and testimonial evidence further establishes that in-person meetings occurred among Holt, Edgerton, and Tsang at NASMC quarterly conferences during the conspiracy period. These conferences were held at various locations, including Arlington, Virginia; Scottsdale, Arizona; and Orlando, Florida. Conference attendance records, hotel-booking confirmations, and airline travel records corroborate the timing and location of contacts among the three individuals. Contemporaneous communications recovered from Holt's TMC email account (prior to his departure) include references to scheduled "catch-up" meetings with Edgerton and Tsang during upcoming conferences, which, in light of the VaultChat evidence, appear to have been occasions for substantive competitive discussions.
The significance of the conference-meeting evidence is twofold. First, it provides additional occasions of contact beyond the VaultChat exchanges, suggesting a broader and more regular pattern of coordination than the electronic messages alone might indicate. Second, it establishes that the conspiracy involved face-to-face interactions, which enhances the government's narrative of a deliberate, personal, and ongoing scheme.
Pricing correlation. TMC's price movements during the alleged conspiracy period show statistically significant correlation with the price movements of Ridgecrest and Pinnacle. Our preliminary economic analysis, conducted by the Calderwood & Harkness litigation analytics team (pending review by an independent forensic economics expert), indicates that the degree of pricing correlation during the alleged conspiracy period (January 2017 – August 2021) significantly exceeds the level of correlation that would be expected in a competitive market, even after controlling for common input costs, demand fluctuations, and other exogenous factors. Specifically, the timing, magnitude, and direction of TMC's pricing changes in all three product categories closely tracked corresponding changes by Ridgecrest and Pinnacle, often within days of one another.
This pricing correlation is further corroborated internally by Sandra Chu's testimony. Chu has confirmed in her preliminary interview that Gavin Holt directed her to implement at least 12 pricing adjustments during the relevant period that she found notable because of their timing and apparent disconnect from TMC's internal cost models and demand forecasts. While Chu states she did not know the basis for Holt's instructions, the correlation between these directed adjustments and competitor price movements provides powerful internal corroboration for the government's theory.
Holt's central role. The evidence consistently points to Gavin Holt as the primary — and quite possibly the sole — TMC participant in the inter-competitor coordination. His role as VP of U.S. Specialty Minerals Sales gave him unilateral authority over pricing decisions, customer negotiations, and bid submissions within TMC's U.S. Specialty Minerals Division. Holt's departure from TMC prior to the investigation (his resignation was effective September 30, 2021) and his subsequent assertion of the Fifth Amendment privilege before the grand jury on June 14, 2022, while legally permissible, may carry adverse inferential weight in the minds of the grand jurors and DOJ prosecutors. The pattern of conduct — secretive communications on an encrypted platform, combined with his post-departure refusal to cooperate — paints an unfavorable picture that the government will exploit.
Affected commerce volume. The Antitrust Division estimates the total volume of affected commerce — i.e., the aggregate value of sales of the affected products in the affected geographic market during the conspiracy period — at approximately USD 1.34 billion. TMC's share of this affected commerce is estimated at approximately USD 478 million, or roughly 35.7% of the total. This is a substantial figure and establishes significant market impact, which will factor into the government's calculation of the appropriate penalty under the Sentencing Guidelines and the Alternative Fines Act.
B. Potential Defense Theories and Mitigating Factors
While the evidentiary posture is challenging, several defense theories and mitigating factors can be advanced in connection with TMC's cooperation submissions and NPA negotiations:
Rogue-employee theory. The conduct at issue was driven by a single individual — Gavin Holt — acting without authorization from TMC's senior management or Board of Directors. The documentary record shows no evidence that any member of TMC's C-suite (CEO Dalmqvist, General Counsel Anand, CFO Fong) or Board of Directors (Chair Caldwell, Audit Committee Chair Moreau-Shaw) had knowledge of Holt's communications with competitor personnel or his coordination of pricing and market-allocation activities with Ridgecrest and Pinnacle. This is a meaningful mitigating factor because it demonstrates that the conduct was not institutionally sanctioned or directed. TMC should emphasize that the conspiracy originated with and was confined to a single employee who exploited his autonomous pricing authority to engage in unauthorized competitive contacts.
Prompt remediation upon discovery. TMC has cooperated with the investigation from the outset. Upon engaging counsel, TMC immediately issued a litigation hold, commenced an internal investigation, retained forensic and e-discovery vendors, and began making rolling document productions to the Antitrust Division. These steps demonstrate a corporate commitment to transparency and cooperation that is inconsistent with institutional complicity in the underlying conduct.
Holt's departure. Gavin Holt resigned from TMC effective September 30, 2021 — months before the grand jury was convened. His departure removed the primary bad actor from the organization and effectively terminated the conduct (the last documented VaultChat exchange is from approximately July 2021). TMC can argue that the conspiracy ended naturally with Holt's departure, and that TMC's current management and workforce are untainted by the misconduct.
Existing (if inadequate) compliance program. TMC adopted an antitrust compliance policy in approximately 2014. While we acknowledge significant deficiencies in the program — no annual compliance training was conducted after 2018, there was no monitoring of trade-association interactions or competitor contacts, and the compliance policy was not updated to reflect developments in digital communications and encrypted messaging platforms — the existence of a compliance program demonstrates some baseline institutional commitment to lawful competitive behavior. TMC can point to the compliance policy as evidence that the Company took antitrust obligations seriously as a general matter, even though the specific controls in place proved insufficient to detect and prevent Holt's conduct.
No C-suite involvement. This factor is closely related to the rogue-employee theory but merits separate emphasis. In many antitrust cases, the government's theory of corporate liability is strengthened by evidence that senior officers or directors participated in, directed, or ratified the anti-competitive conduct. Here, there is no such evidence. The absence of C-suite involvement distinguishes TMC's case from the more aggravated scenarios that have led to criminal convictions and maximum penalties in prior Antitrust Division prosecutions.
Chu's limited knowledge. Sandra Chu received pricing instructions from Holt and implemented them without knowledge of the underlying inter-competitor communications. Her testimony supports the characterization of the conduct as confined to Holt's individual actions, rather than reflecting a broader institutional scheme. If Chu had been aware of the conspiracy and participated knowingly, it would significantly undermine the rogue-employee narrative; but the evidence indicates she did not.
Eriksen's ambiguous role. Thomas Eriksen attended four NASMC conferences during the conspiracy period, but the evidence of his direct participation in the alleged side meetings is equivocal. His denial of knowledge is facially credible, and we have not identified documentary evidence that contradicts his account. If DOJ cannot establish Eriksen's participation beyond a reasonable doubt, his conference attendance remains circumstantially ambiguous rather than incriminating for TMC's institutional posture.
C. Weaknesses in Potential Defense Theories
We must also candidly assess the limitations of the defense theories outlined above.
Rogue-employee theory limitation. The DOJ is likely to argue that TMC's inadequate compliance controls — specifically, the absence of antitrust compliance training after 2018, the failure to monitor trade-association interactions, and the absence of protocols governing competitor contacts — created an environment that enabled and facilitated Holt's conduct. Under the doctrine of respondeat superior, a corporation is criminally liable for the acts of its employees committed within the scope of their employment and for the benefit of the corporation, regardless of whether the conduct was authorized by senior management. See New York Central & Hudson River Railroad Co. v. United States, 212 U.S. 481 (1909); United States v. Harborline Enterprises Hotels Corp., 467 F.2d 1000 (9th Cir. 1972). The government need not prove that TMC's Board or C-suite authorized or ratified Holt's conduct; it need only prove that Holt engaged in the conduct within the scope of his employment and for at least the partial benefit of TMC. On the available facts, both of these elements are easily established: Holt was acting in his capacity as VP of U.S. Specialty Minerals Sales, and the pricing coordination benefited TMC's revenue and margins.
Duration and scope. The alleged conspiracy lasted approximately four years and eight months (January 2017 – August 2021), spanning three distinct product lines and involving at least 37 documented communications, multiple in-person meetings, and coordination with counterparts at two separate competitor firms. This is a sustained, multi-year scheme — not a single isolated incident — which undermines any characterization of the conduct as inadvertent, aberrational, or de minimis. The government will argue that the extended duration and multi-product scope of the conspiracy reflect a deliberate and systematic effort to suppress competition.
Per se violation. As noted in Section III.A, price-fixing, market allocation, and bid-rigging are per se violations of Section 1 of the Sherman Act. This eliminates any substantive defense on the merits. TMC cannot argue that the pricing arrangements were reasonable, that the market-allocation agreements were efficient, or that the conduct produced procompetitive benefits. The only questions in a criminal prosecution would be (a) whether an agreement existed and (b) whether TMC (through its employees) participated in that agreement. The documentary evidence strongly supports affirmative answers to both questions.
Holt's refusal to cooperate. Holt's assertion of the Fifth Amendment privilege and his refusal to participate in TMC's internal investigation, on the advice of his personal counsel Patrick Dunleavy of Briarcliff Law Group PLLC, creates a significant practical obstacle. First, it limits TMC's ability to present a complete narrative to the Antitrust Division — we cannot provide the government with Holt's account of events, his motivations, or his version of the communications identified in the VaultChat records. Second, it may frustrate DOJ's expectations regarding TMC's cooperation, as the government will look to TMC to facilitate access to all individuals who participated in the conduct, and Holt's non-cooperation leaves a conspicuous gap. We address this issue in greater detail in Section VII below.
V. RECOMMENDED STRATEGY: COOPERATION AND NPA
A. Strategic Recommendation
Based on the analysis set forth in the preceding sections of this memorandum, it is our recommendation that TMC pursue a strategy of full cooperation with the DOJ Antitrust Division, aimed at obtaining a non-prosecution agreement as the ultimate resolution of the investigation.
The rationale for this recommendation rests on a convergence of factors that, taken together, make the cooperation path clearly superior to the adversarial alternative:
Evidentiary exposure. The evidentiary record — 37+ documented VaultChat communications, Cascade's cooperation and testimony, pricing-correlation data, NASMC conference records, and Sandra Chu's corroborating testimony — makes a trial defense extremely risky. Under the per se doctrine, the government need only prove the existence of an agreement; it need not prove anticompetitive effects, market power, or the absence of procompetitive justification. The VaultChat messages, if admitted at trial, would be devastating evidence of an explicit agreement to fix prices, allocate customers, and rig bids. A trial defense would require TMC to challenge the authenticity, interpretation, or applicability of these communications — arguments that, on the current record, appear unlikely to succeed.
Catastrophic collateral consequences of indictment and conviction. As a publicly traded, dual-exchange company, TMC would face collateral consequences of extraordinary magnitude in the event of indictment. These include but are not limited to:
•  Government-contract debarment. A criminal conviction for bid-rigging or price-fixing may result in mandatory or discretionary debarment from federal government contracts in both the United States and Canada, which could affect TMC's downstream business relationships and revenue streams.
•  Securities-market reaction. The announcement of a federal criminal indictment would likely trigger an immediate and significant decline in TMC's share price on both the TSX and NYSE, causing substantial harm to shareholders and potentially triggering margin calls and other financial disruptions.
•  Cross-border regulatory cascading. A U.S. criminal conviction or indictment would put Canadian competition authorities (the Competition Bureau of Canada), the Australian Competition and Consumer Commission ("ACCC"), and Brazil's Administrative Council for Economic Defense ("CADE") on notice of the conduct, potentially triggering parallel investigations and enforcement actions in each of those jurisdictions, where TMC also operates.
•  Investor litigation exposure. Indictment and conviction would almost certainly generate securities class-action litigation alleging that TMC's public disclosures during the conspiracy period were materially misleading, as well as shareholder derivative suits alleging breach of fiduciary duty by TMC's officers and directors.
•  Reputational harm. The reputational impact of a criminal conviction on a publicly traded company with over CAD 4 billion in annual revenue and 14 mining operations across four countries cannot be overstated. TMC's relationships with customers, suppliers, lenders, regulators, and business partners would all be adversely affected.
NPA as the optimal vehicle. An NPA avoids formal criminal charges and conviction, minimizes collateral consequences, and allows TMC to continue operating without the stigma of a criminal record. While an NPA still involves a significant monetary payment and compliance obligations, the overall cost-benefit analysis strongly favors this resolution pathway over the alternatives.
TMC's cooperation posture. TMC has cooperated since engaging counsel. The Company has produced approximately 42,000 documents in its first rolling production, issued a comprehensive litigation hold, commenced an internal investigation, and is positioned to make additional witnesses available for DOJ proffer sessions. TMC is also prepared to undertake proactive compliance-program remediation. This cooperation posture positions TMC well for significant cooperation credit and enhances the likelihood of a favorable NPA outcome.
B. Cooperation Framework — Specific Steps
To execute the cooperation strategy effectively, we recommend the following specific steps:
1. Continue and accelerate document production. Rolling document productions to the Antitrust Division are ongoing. The first production of approximately 42,000 documents was completed on April 4, 2022, and additional productions are in progress toward a cumulative target that we anticipate will reach several hundred thousand documents encompassing millions of pages. Redstone Digital Forensics, Inc., under the direction of Project Director Neil Ashworth, is managing the collection, processing, and production workflow. We will continue to coordinate with Trial Attorney Kowalski and Senior Trial Attorney Reeves on production schedules and prioritization of document categories. Timely and complete document production is the foundation of credible cooperation, and any delay or deficiency in production could undermine TMC's cooperation credit.
2. Complete internal investigation. Calderwood & Harkness will complete interviews of all 23 identified current and former TMC employees who may possess relevant information regarding the conduct at issue. Priority interviews of Sandra Chu and Thomas Eriksen are already scheduled. Other key interview subjects include General Counsel Priya Anand, CFO Richard Fong, and additional members of the U.S. Specialty Minerals Division sales and pricing teams. Upon completion of the interview program and review of all collected documents, we will prepare a comprehensive internal investigation report for presentation to the TMC Board of Directors.
3. Retain forensic economics expert. We recommend that TMC retain a qualified forensic accounting and economics firm to conduct an independent analysis of pricing patterns and affected-commerce calculations. Our recommendation is to engage Hargrove Forensic Advisory LLC, led by Dr. Vanessa Tremblay, an economist based in Chicago with substantial experience in antitrust damages analysis. The engagement should be structured under Kovel-letter protections — i.e., Hargrove should be retained by and report to Calderwood & Harkness as the client's counsel, such that Hargrove's work product and communications are protected by the attorney-client privilege and work-product doctrine. See United States v. Kovel, 296 F.2d 918 (2d Cir. 1961). Dr. Tremblay's analysis will serve two purposes: first, to provide an independent assessment of the affected-commerce volume and the economic impact of the alleged conduct, which will inform our NPA negotiations with DOJ; and second, to identify any methodological weaknesses in DOJ's own affected-commerce calculations that could be used to negotiate a lower monetary payment.
4. Make witnesses available for DOJ proffer sessions. We recommend that TMC offer to make Sandra Chu and Thomas Eriksen available for voluntary proffer sessions with the Antitrust Division. These sessions should be conducted under queen-for-a-day (use immunity) protections, pursuant to which the government agrees that statements made during the proffer session will not be used directly against the witness in any subsequent prosecution, subject to standard exceptions for false statements and perjury. We will negotiate proffer terms with DOJ in advance, and we will thoroughly prepare each witness before the session. Making witnesses available for proffers is a powerful demonstration of cooperation and is typically expected by the Antitrust Division as a condition of meaningful cooperation credit.
5. Submit cooperation proffer to DOJ. After the internal investigation findings are finalized and the forensic economic analysis is complete, we will prepare a comprehensive written proffer to the Antitrust Division. This proffer will summarize TMC's cooperation to date, present our internal investigation findings in a structured format, describe the remediation measures TMC has undertaken and plans to undertake, and present the mitigating factors supporting NPA treatment. The cooperation proffer is the vehicle through which we will make our affirmative case for a non-prosecution resolution.
6. Proactively remediate compliance program. We recommend that TMC engage a qualified antitrust compliance consultant to design and implement an enhanced antitrust compliance program. Proactive remediation — i.e., implementing reforms before the Antitrust Division requires them as a condition of resolution — is a powerful demonstration of good faith and will enhance TMC's cooperation credit. The enhanced compliance program should include the following elements at a minimum:
•  Mandatory annual antitrust compliance training for all sales, pricing, and business-development personnel, as well as all officers and directors;
•  Appointment of a Chief Compliance Officer with direct reporting authority to the Board of Directors (or a designated Board committee);
•  Written protocols governing contacts with competitors, including prohibitions on unauthorized pricing, market-allocation, and bid-coordination discussions;
•  Policies governing participation in trade-association events, including mandatory pre-clearance and post-event reporting for all interactions with competitor personnel;
•  A monitoring and audit mechanism, including periodic review of communications and transactions for potential antitrust red flags;
•  An anonymous reporting hotline for employees to report suspected antitrust violations;
•  Certification requirements for all relevant personnel, including annual written certifications of compliance with the antitrust compliance policy.
7. Engage DOJ on NPA discussions. After TMC has demonstrated substantial cooperation through its document productions, witness proffers, and cooperation proffer, we will formally propose an NPA resolution to the Antitrust Division. Based on typical timelines in comparable investigations, we anticipate that the cooperation proffer could be submitted in early 2023, with NPA negotiations beginning in mid-to-late 2023. We will manage the engagement with DOJ throughout this process, maintaining regular contact with Kowalski, Reeves, and DAAG Stafford-Hayes.
C. Anticipated NPA Terms
Based on our experience with prior Antitrust Division NPAs and our assessment of TMC's specific circumstances, we anticipate that an NPA resolution would include the following principal terms:
Monetary payment. The Antitrust Divis

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II. BACKGROUND AND PROCEDURAL STATUS

III. LEGAL FRAMEWORK

IV. EVIDENCE ASSESSMENT

V. RECOMMENDED STRATEGY: COOPERATION AND NPA

Record

Parties

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