1039-00001 · Torchlight Mining Corp · documents

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PRIVILEGED AND CONFIDENTIAL

CALDERWOOD & HARKNESS LLP Attorneys at Law

555 California Street, 40th Floor San Francisco, CA 94104, USA Telephone: (415) 772-5000 Facsimile: (415) 772-5001 www.calderwoodharkness.com

October 15, 2023

Matter Number: 1039-00001

VIA ELECTRONIC FILING AND OVERNIGHT COURIER

Denise Kowalski Trial Attorney Antitrust Division, San Francisco Field Office U.S. Department of Justice 450 Golden Gate Avenue, Room 10-0101 San Francisco, CA 94102

Marcus Reeves Senior Trial Attorney Antitrust Division, San Francisco Field Office U.S. Department of Justice 450 Golden Gate Avenue, Room 10-0101 San Francisco, CA 94102

Re: In the Matter of Grand Jury Investigation No. GJ-22-0194, U.S. District Court, Northern District of California, San Francisco Division — Torchlight Mining Corp.

Dear Ms. Kowalski and Mr. Reeves:

I. Introduction and Purpose

Calderwood & Harkness LLP writes on behalf of its client, Torchlight Mining Corp. ("TMC"), a corporation organized and existing under the Canada Business Corporations Act, R.S.C. 1985, c. C-44, with its registered office at 200 Bay Street, Suite 3400, Toronto, Ontario, M5J 2T3, Canada, and principal U.S. operations conducted through its wholly owned subsidiary, Torchlight Mining (U.S.) Inc., a Nevada corporation, with offices at 8750 West Sahara Avenue, Suite 210, Reno, Nevada 89117. TMC is publicly listed on the Toronto Stock Exchange under the ticker symbol "TRCL" and on the New York Stock Exchange under the ticker symbol "TMC." As a dual-listed issuer subject to both Canadian and U.S. securities regulation, TMC is acutely aware of its obligations to shareholders, regulators, and the public to resolve this matter responsibly and transparently.

The purpose of this letter is to set forth TMC's position regarding the appropriate monetary penalty calculation in any resolution of the above-referenced matter, and to demonstrate that TMC's extraordinary cooperation and proactive remediation efforts warrant the maximum available cooperation credit under the Antitrust Division's longstanding policies governing the treatment of cooperating parties in criminal antitrust investigations. As set forth in detail below, the nature, scope, and timeliness of TMC's cooperation—together with the comprehensive compliance remediation TMC has already undertaken and continues to implement—place TMC squarely within the category of respondents that the Division has historically recognized as meriting the most favorable cooperation treatment available.

This letter builds upon and supplements TMC's cooperation proffer submitted to the Division on February 15, 2023 (the "Cooperation Proffer"), which detailed the findings of TMC's internal investigation and provided the Division with a comprehensive account of the relevant conduct, the individuals involved, and the documentary evidence recovered. This letter also follows the Division's September 15, 2023 receipt of TMC's Enhanced Antitrust Compliance Program Proposal (the "Compliance Proposal"), prepared with the assistance of Meridian Compliance Partners LLC, which sets forth the structural and procedural reforms TMC has undertaken and proposes to formalize as part of any resolution. More broadly, this letter supplements and advances the ongoing dialogue between TMC and the Division regarding a potential non-prosecution resolution of this matter, and is submitted with the understanding that the Division is currently evaluating the appropriate terms of such a resolution, including the monetary component.

We respectfully request that the Division give this submission careful consideration as it determines the penalty framework applicable to TMC.

II. Summary of TMC's Position on Penalty Calculation

TMC acknowledges the Antitrust Division's well-established methodology for calculating monetary penalties in criminal antitrust matters. Under this methodology, the Division typically applies a base fine calculation equal to twenty percent (20%) of the volume of affected commerce attributable to the subject entity during the relevant conspiracy period. This framework, rooted in the United States Sentencing Guidelines and the Division's own practice, provides the starting point from which cooperation credits, aggravating factors, and other adjustments are considered.

TMC's share of affected commerce during the alleged conspiracy period—approximately January 2017 through August 2021, a period of approximately four years and eight months—has been calculated at approximately USD 478 million. This figure is derived from the draft expert report prepared by Hargrove Forensic Advisory LLC ("Hargrove"), under the direction of Dr. Vanessa Tremblay, Engagement Partner, dated August 15, 2023 (the "Hargrove Draft Report"). The Hargrove Draft Report was prepared based on a comprehensive analysis of TMC's transactional data, publicly available market data, and information obtained through the internal investigation. TMC provided the Hargrove Draft Report to the Division on August 22, 2023, and Hargrove remains available to discuss the methodology and conclusions with Division economists at the Division's convenience.

For context, the total volume of affected commerce across all participants in the alleged conspiracy—TMC, Ridgecrest Minerals Inc. ("Ridgecrest"), and Pinnacle Earth Resources Ltd. ("Pinnacle")—is estimated at approximately USD 1.34 billion during the relevant period. TMC's share of approximately USD 478 million represents approximately 35.7% of the total affected commerce. TMC notes that its share is the smallest among the three alleged participants, reflecting TMC's position as the third-largest participant by revenue in the relevant specialty-minerals product market during the alleged conspiracy period.

Applying the Division's standard 20% methodology to TMC's affected commerce yields a base penalty of approximately USD 95.6 million (USD 478 million × 20% = USD 95.6 million). TMC does not contest the application of this methodology as a starting point for purposes of this submission, though TMC reserves all rights to challenge the affected-commerce calculation, the conspiracy period, and the scope of the alleged conduct in any proceeding.

However, TMC respectfully submits that the totality of its cooperation and remediation efforts—described in detail in Sections III and IV below—warrants a cooperation credit of not less than approximately 49% of the base penalty. Application of this credit would result in a monetary payment in the range of USD 48.5 million, which TMC submits represents the appropriate outcome in light of the Division's policies and the specific facts of this case.

TMC further submits that this proposed resolution is consistent with, and in fact more conservative than, the cooperation credits the Division has awarded in comparable Antitrust Division resolutions involving respondents that have demonstrated a similar breadth and depth of cooperation. As discussed in Section V below, the Division has recognized cooperation credits in the range of 40% to 50% in analogous matters, and TMC's cooperation places it at the high end of that range by any reasonable measure.

III. TMC's Extraordinary Cooperation

From the outset of this investigation, TMC has pursued a strategy of full, voluntary, and proactive cooperation with the Division. TMC's cooperation has been comprehensive in scope, prompt in execution, and transparent in substance. Each component of TMC's cooperation is described in detail below.

A. Prompt and Comprehensive Document Production

TMC received Grand Jury Subpoena No. GJ-22-0194-SD-003 on February 14, 2022, just four days after the formal opening of the grand jury investigation on February 10, 2022. Upon receipt of the subpoena, TMC's in-house legal team immediately notified senior management and commenced a preliminary assessment of the scope and implications of the investigation.

TMC promptly retained Calderwood & Harkness LLP on February 18, 2022—four days after receiving the subpoena—and immediately commenced preservation and collection efforts in coordination with TMC's in-house legal and information-technology teams. The speed of TMC's engagement of outside counsel reflects its recognition of the seriousness of the investigation and its commitment to responding promptly and completely.

A comprehensive litigation hold was issued to all TMC personnel potentially possessing relevant information on March 1, 2022—within eleven (11) days of retaining outside counsel. The litigation hold was drafted in consultation with TMC's IT department and was distributed to all employees in the U.S. Specialty Minerals Division, as well as to relevant corporate personnel in Toronto. The hold covered all categories of documents and electronically stored information ("ESI") potentially responsive to the subpoena, including email, electronic files, instant messages, personal devices used for business purposes, and cloud-based storage platforms.

On March 15, 2022, TMC retained Redstone Digital Forensics Inc. ("Redstone"), under the direction of Neil Ashworth, Project Director, to conduct forensic data collection, processing, hosting, and production of ESI responsive to the subpoena. Redstone is a nationally recognized digital forensics firm with extensive experience in government investigations, and its retention reflected TMC's commitment to ensuring that its document collection and production efforts met the highest standards of forensic integrity.

TMC identified thirty-four (34) custodians whose files and communications were potentially responsive to the subpoena. The data sources collected from these custodians included, but were not limited to:

• Corporate email systems (Strathmore Data Systems / Outlook);

• Shared network drives and departmental file repositories;

• VaultChat encrypted messaging archives;

• Personal mobile devices used for business communications;

• Cloud-based storage platforms (including Cobalt Ridge Systems and Aldermere Systems); and

• Physical documents obtained from TMC's Reno and Toronto offices.

TMC delivered its first rolling production to the Division on April 4, 2022, comprising approximately 42,000 documents. This production was delivered within approximately seven (7) weeks of TMC's receipt of the subpoena—a timeline that reflects an aggressive and resource-intensive collection, review, and production effort. TMC prioritized the production of documents most likely to be relevant to the Division's investigation, including communications involving the key custodians and pricing-related materials.

TMC continued rolling productions throughout the balance of 2022. Between August 1 and December 15, 2022, TMC produced additional tranches of responsive documents at regular intervals, bringing the cumulative production to approximately 487,000 documents. Each rolling production was accompanied by a cover letter identifying the custodians and data sources represented, as well as any applicable privilege designations.

On May 15, 2023, the Division issued a second subpoena, Grand Jury Subpoena No. GJ-22-0194-SD-007, seeking additional categories of documents and data. TMC promptly complied with this subpoena, producing an additional approximately 68,000 documents by June 30, 2023—well within the subpoena's return date.

In total, TMC's document production in this matter comprises approximately 555,000 documents totaling more than 3.2 million pages. This production reflects a massive investment of time and resources by TMC, Calderwood & Harkness, and Redstone, including the application of technology-assisted review tools, manual review by teams of attorneys and contract reviewers, and quality-control sampling to ensure accuracy and completeness.

Importantly, at no point during this investigation has TMC sought to quash, limit, modify, or otherwise resist any subpoena or other compulsory process issued by the Division. TMC has not asserted any blanket privilege claims over categories of documents, nor has TMC delayed or obstructed the production process. To the contrary, TMC has consistently produced documents on a rolling basis in advance of applicable deadlines, and has worked cooperatively with the Division to prioritize the production of materials most relevant to the investigation.

B. Voluntary Witness Cooperation

In addition to its comprehensive document production, TMC has made current employees available for voluntary proffer sessions with the Division, going beyond the requirements of compulsory process and demonstrating TMC's commitment to facilitating the Division's investigative efforts through live testimony.

Sandra Chu, Director of Pricing Analytics, U.S. Specialty Minerals Division, participated in a voluntary proffer session with the Division on March 10, 2023. During this proffer, Ms. Chu provided detailed testimony regarding TMC's internal pricing processes, including the manner in which pricing recommendations were developed, approved, and communicated to the sales organization. Ms. Chu also testified regarding her interactions with Gavin Holt, TMC's former Vice President of U.S. Specialty Minerals Sales, including the occasions on which she received pricing-adjustment instructions from Holt that she subsequently implemented. Ms. Chu's proffer was candid and forthcoming, and she answered all questions posed by Division attorneys without limitation or reservation.

Thomas Eriksen, Regional Sales Manager (Western Region), U.S. Specialty Minerals Division, participated in a voluntary proffer session with the Division on April 22, 2023. Mr. Eriksen provided testimony regarding his attendance at four North American Specialty Minerals Council ("NASMC") quarterly conferences during the alleged conspiracy period, including his observations of interactions among industry participants at those events. Mr. Eriksen described his understanding of the purpose and content of those conferences and responded fully to Division attorneys' questions regarding the activities he observed.

Both proffer sessions were conducted with full cooperation on the part of TMC and the individual witnesses. TMC did not seek to limit the scope of questioning by Division attorneys, nor did TMC impose any conditions on the proffers beyond the standard protections afforded under the Division's proffer letter agreements. TMC facilitated the scheduling and preparation of these witnesses and ensured that they were available for follow-up inquiries.

TMC has confirmed to the Division, and reaffirms in this letter, that it will continue to make current and former employees available for interviews, proffer sessions, and testimony as requested by the Division in connection with this investigation or any related proceedings, including any individual prosecutions.

C. Thorough Internal Investigation

Concurrent with its response to the Division's compulsory process, TMC authorized and funded a comprehensive internal investigation conducted by Calderwood & Harkness. This internal investigation was designed to identify the nature and scope of any anticompetitive conduct involving TMC personnel, to assess TMC's institutional knowledge and culpability, and to enable TMC to provide the Division with a complete and accurate account of the relevant facts.

The internal investigation encompassed a review of approximately 555,000 documents collected in connection with the grand jury subpoena responses, as well as interviews of twenty-three (23) current and former TMC employees across multiple levels of the organization, including personnel in the U.S. Specialty Minerals Division, corporate headquarters in Toronto, and other functional areas with potential knowledge of relevant events.

In addition, TMC engaged Hargrove Forensic Advisory LLC, under the direction of Dr. Vanessa Tremblay, Engagement Partner, on July 1, 2022, to conduct an independent economic analysis of pricing patterns in the specialty-minerals market during the alleged conspiracy period. Dr. Tremblay's analysis examined TMC's pricing data, publicly available competitor pricing information, and market-level indicators to assess whether TMC's pricing behavior was consistent with competitive conduct or, alternatively, exhibited patterns suggestive of coordination. The results of this analysis were shared with the Division as part of TMC's cooperation.

The internal investigation identified and analyzed at least thirty-seven (37) documented communications between TMC's former Vice President of U.S. Specialty Minerals Sales, Gavin Holt, and his counterparts at the other alleged co-conspirators—specifically, Carl Edgerton, Vice President of Sales at Ridgecrest Minerals Inc., and Kevin Tsang, former Senior Vice President of Commercial Operations at Pinnacle Earth Resources Ltd. These communications spanned the period from approximately March 2017 through July 2021 and included both written electronic communications and references to in-person conversations.

The investigation further identified that these communications occurred through multiple channels, including:

• VaultChat encrypted messaging: Holt, Edgerton, and Tsang maintained a VaultChat group thread through which they exchanged messages regarding pricing intentions, upcoming price adjustments, and customer-specific competitive intelligence. Recovery of these encrypted messages required specialized forensic efforts by Redstone Digital Forensics, as discussed further in Section III.D below.

• In-person conversations at NASMC quarterly conferences: The investigation identified that Holt, Edgerton, and Tsang regularly attended NASMC quarterly conferences and had in-person interactions at those events. Relevant conferences took place in Arlington, Virginia; Scottsdale, Arizona; and Orlando, Florida, among other locations. NASMC conference attendance records, hotel records, and expense reports corroborated that the three individuals were present at the same conferences on numerous occasions during the alleged conspiracy period.

The investigation also examined the role of other TMC personnel who may have had knowledge of or involvement in the alleged conduct. Specifically:

• Sandra Chu (Director of Pricing Analytics) received pricing-adjustment instructions from Holt on at least twelve (12) occasions that correlated temporally with competitor price movements identified in the Hargrove pricing analysis. However, the internal investigation did not uncover direct evidence that Ms. Chu was aware of the inter-competitor communications underlying those instructions. Ms. Chu has consistently stated that she understood Holt's pricing instructions to reflect competitive market intelligence gathered through legitimate means.

• Thomas Eriksen (Regional Sales Manager, Western Region) attended NASMC conferences during the alleged conspiracy period and was present at events where Holt interacted with Edgerton and Tsang. However, the investigation found that Eriksen's direct participation in the alleged conduct is ambiguous at best. Mr. Eriksen denied knowledge of any pricing agreements or inter-competitor coordination, and no documentary evidence was identified that directly contradicts his account.

Critically, the internal investigation confirmed that no evidence implicates TMC's C-suite leadership or Board of Directors in the alleged conduct. Specifically, TMC's Chief Executive Officer, Søren Dalmqvist; its General Counsel, Priya Anand; and the Chair of TMC's Board of Directors, Margaret Caldwell, were not aware of, did not authorize, and did not participate in the alleged coordination. The investigation found no evidence that any information about inter-competitor pricing communications was reported to or shared with any member of TMC's senior executive team or Board.

TMC voluntarily disclosed the results of the internal investigation to the Division through the February 15, 2023 Cooperation Proffer, which provided a detailed narrative account of the investigation's findings, supported by key documentary exhibits and a timeline of relevant events. TMC subsequently provided supplemental submissions updating and refining the Cooperation Proffer as additional information became available through the ongoing investigation and document review.

TMC's candor in these disclosures extended to providing information that was adverse to TMC's own interests. TMC did not seek to minimize or sanitize the findings of the internal investigation, but instead provided the Division with a complete and unvarnished account of the evidence, including the thirty-seven documented communications, the pricing-correlation analysis, and the assessment of individual employees' roles. This transparency demonstrates the bona fides of TMC's cooperation and its genuine commitment to assisting the Division in understanding the relevant conduct.

D. Voluntary Disclosures Beyond Compulsory Requirements

TMC's cooperation has not been limited to responding to the Division's compulsory process. Throughout the investigation, TMC has proactively identified and disclosed relevant evidence and facts to the Division that were not specifically requested in the grand jury subpoenas or otherwise demanded by the Division.

Most notably, TMC identified the existence and content of VaultChat communications among Holt, Edgerton, and Tsang. VaultChat is an encrypted messaging platform that does not retain messages on a central server; rather, messages are stored locally on user devices and are subject to automatic deletion protocols. Recovery of these communications required specialized forensic techniques applied by Redstone Digital Forensics to Holt's former corporate mobile device and laptop. TMC proactively disclosed the existence of these communications to the Division and produced the recovered messages, which constitute some of the most significant evidence in the investigation. TMC was under no obligation to undertake these specialized recovery efforts, as the subpoenas did not specifically identify VaultChat as a data source, and the existence of the VaultChat communications was not known to the Division at the time of TMC's initial disclosure.

TMC also provided the Division with the results of its pricing-data analysis, conducted by Hargrove Forensic Advisory, which demonstrated statistically significant correlations between TMC price movements and competitor price movements during the alleged conspiracy period. This economic evidence, which TMC disclosed voluntarily and in advance of any Division request, provides important context for understanding the scope and impact of the alleged conduct.

Additionally, TMC identified and disclosed the relevant NASMC conference attendance records and correlated those records with the alleged coordination events identified through the document review and witness interviews. TMC obtained these records through its own efforts, including by requesting them directly from NASMC, and provided them to the Division with explanatory annotations.

Each of these voluntary disclosures reflects TMC's commitment to going beyond the minimum requirements of cooperation and to affirmatively assisting the Division in building a complete evidentiary record.

IV. TMC's Proactive Compliance Remediation

In addition to its cooperation with the Division's investigation, TMC has undertaken comprehensive, proactive remediation of the compliance deficiencies that enabled the alleged conduct. TMC's remediation efforts are described below.

A. Deficiencies in TMC's Prior Compliance Program

TMC acknowledges that its antitrust compliance program, as it existed at the time of the alleged conduct, was inadequate to prevent or detect the conduct at issue. TMC initially adopted an antitrust compliance policy in approximately 2014, in connection with its expansion into the U.S. specialty-minerals market. However, the 2014 policy was modest in scope and was not supported by robust implementation, training, or monitoring mechanisms.

Specifically, at the time of the alleged conduct:

• No annual antitrust training had been conducted for TMC personnel since 2018. While a single training session was held in 2018 in connection with the onboarding of new sales personnel, there was no systematic program of recurring antitrust education for commercial employees, managers, or senior leadership.

• No monitoring of trade-association interactions was in place. TMC personnel, including Holt, attended NASMC conferences and other industry events without any requirement to report on their interactions with competitors or to obtain advance approval for attendance.

• No systematic audit of competitor contacts existed. TMC did not have protocols requiring employees to document contacts with competitor personnel, nor did TMC conduct periodic audits to identify potentially problematic interactions.

TMC takes full responsibility for these institutional shortcomings. TMC recognizes that a more robust compliance program might have detected or deterred the alleged conduct at an earlier stage, and TMC is committed to ensuring that these deficiencies are fully remediated.

B. Enhanced Antitrust Compliance Program

To address the compliance deficiencies described above, TMC retained Meridian Compliance Partners LLC ("Meridian"), under the direction of Claudia Ferraro, Engagement Lead, on August 1, 2023, to design and implement a comprehensive enhanced antitrust compliance program (the "Enhanced Program"). Meridian is a nationally recognized compliance consulting firm with deep expertise in antitrust compliance program design, implementation, and assessment.

TMC submitted the Enhanced Antitrust Compliance Program Proposal to the Division on September 15, 2023, well in advance of any resolution requirement and prior to any directive from the Division that TMC undertake specific compliance reforms. This proactive submission reflects TMC's genuine commitment to institutional reform, rather than a reactive response to a negotiated resolution term.

The Enhanced Program encompasses the following key elements:

• Mandatory Annual Antitrust Training: All commercial personnel, including sales, pricing, marketing, and business-development employees, as well as all members of senior management and the Board of Directors, will participate in mandatory annual antitrust compliance training. Training will be developed and delivered by qualified antitrust counsel and will cover, at a minimum, the prohibitions of Section 1 of the Sherman Act, the per se illegality of price fixing and market allocation, the risks associated with competitor contacts, and TMC's specific compliance policies and procedures. Training participation will be tracked, and completion will be a condition of continued employment in commercial roles.

• Appointment of an Independent Chief Compliance Officer: TMC will appoint an independent Chief Compliance Officer ("CCO") with direct reporting responsibility to the Board of Directors, including the authority to report directly to the Audit Committee without prior review or approval by management. The CCO will have primary responsibility for overseeing the implementation, administration, and enforcement of the Enhanced Program, and will have the resources, authority, and access necessary to carry out those responsibilities effectively.

• Annual Compliance Certifications: TMC's Chief Executive Officer and General Counsel will each execute annual certifications attesting to their knowledge that the Enhanced Program is being implemented and that they are not aware of any violations of TMC's antitrust compliance policies. These certifications will be filed with the CCO and the Audit Committee.

• Competitor-Contact Protocols: TMC will implement mandatory protocols requiring all employees to obtain advance written approval from the CCO or designated compliance counsel before engaging in any direct or indirect communication with competitor personnel regarding pricing, costs, customers, territories, or other competitively sensitive subjects. All approved competitor contacts must be contemporaneously documented and reported to the CCO within forty-eight (48) hours.

• Trade-Association Interaction Guidelines: TMC will adopt comprehensive guidelines governing employee participation in trade-association meetings, conferences, and events. These guidelines will require mandatory pre-approval of attendance, adherence to prepared agendas, prohibition on participation in discussions of competitively sensitive topics, and post-event reporting of all interactions with competitor personnel.

• Confidential Reporting Hotline: TMC will establish a confidential reporting hotline, administered by an independent third-party provider, through which employees may report suspected antitrust violations or compliance concerns without fear of retaliation. TMC will publicize the hotline through training, internal communications, and postings in all TMC offices.

• Periodic Compliance Auditing and Monitoring: TMC will conduct periodic audits of compliance with the Enhanced Program, including reviews of competitor-contact logs, trade-association reporting records, training completion rates, and other compliance metrics. These audits will be conducted at least annually and the results will be reported to the CCO and the Audit Committee.

TMC has already begun implementing elements of the Enhanced Program, including the commencement of antitrust training sessions for U.S. Specialty Minerals Division personnel, the engagement of a third-party hotline provider, and the development of competitor-contact protocols. TMC's decision to begin implementation prior to any resolution of this matter demonstrates its genuine commitment to remediation and institutional reform, independent of any obligation imposed as part of a plea or non-prosecution agreement.

Additionally, TMC has expressed its willingness to accept the appointment of an independent compliance monitor for a defined term as part of any resolution agreement. TMC has cooperated in the monitor-selection process initiated by the Division and remains prepared to support the monitor's activities with full access to TMC personnel, documents, and facilities.

C. Personnel Actions

Gavin Holt, the individual most directly implicated in the alleged conduct, resigned from TMC effective September 30, 2021—prior to the commencement of the grand jury investigation in February 2022. While TMC did not terminate Holt's employment in connection with the investigation (as his departure preceded TMC's awareness of the investigation), TMC has not re-employed Holt in any capacity and has cooperated fully with the Division regarding Holt's activities during his tenure.

Following Holt's departure and the commencement of the investigation, TMC has restructured the reporting lines within the U.S. Specialty Minerals Division to enhance oversight and accountability. Pricing decisions are no longer made unilaterally by a single individual but are instead subject to a multi-level approval process involving the CCO and divisional management. The structural changes are designed to prevent any single individual from exercising the degree of unmonitored authority that Holt held during the alleged conspiracy period.

TMC understands and accepts that the Division reserves the right to pursue criminal charges against Holt individually. TMC's cooperation extends fully to any potential individual prosecution of Holt, including the production of documents and testimony relevant to such proceedings. TMC will not impede, obstruct, or discourage any individual from cooperating with the Division.

V. Applicable Precedent and Cooperation-Credit Framework

The Antitrust Division has consistently recognized that meaningful cooperation by subjects and targets of criminal antitrust investigations is deserving of significant credit in the determination of monetary penalties. The Division's policy statements on cooperation credit, including the principles articulated in the Division's publicly available guidance on the evaluation of corporate compliance programs and cooperation in criminal antitrust matters, establish that the Division will consider the following factors in assessing the nature and value of a respondent's cooperation:

(i) the timeliness and completeness of the respondent's disclosure and document production;

(ii) the extent to which the respondent voluntarily disclosed facts and evidence beyond what was required by compulsory process;

(iii) the quality and thoroughness of any internal investigation conducted by the respondent;

(iv) the respondent's willingness to make witnesses available for interviews and testimony;

(v) the respondent's remedial efforts, including the adoption and implementation of an effective compliance program; and

(vi) the respondent's overall commitment to cooperation throughout the investigation.

TMC respectfully submits that its cooperation satisfies each of these criteria at the highest level. The nature and extent of TMC's cooperation—prompt and comprehensive document production of over 555,000 documents totaling more than 3.2 million pages; voluntary witness proffers by key employees; a thorough internal investigation with voluntary disclosure of findings adverse to TMC's own interests; proactive identification and disclosure of encrypted communications and economic evidence not requested by the Division; and comprehensive, self-initiated compliance remediation—collectively place TMC at the forefront of cooperating respondents in the Division's experience.

The Division has awarded cooperation credits in the range of 40% to 50% of the base penalty in comparable criminal antitrust cases where the respondent has demonstrated a similar breadth and depth of cooperation. TMC is aware of publicly reported resolutions in which respondents received credits at or near the top of this range based on combinations of prompt document production, voluntary witness cooperation, internal investigation disclosures, and compliance remediation. TMC submits that its case warrants credit at the high end of this range—approximately 49%—based on the following specific considerations:

(i) Speed and completeness of document production: TMC's first rolling production of approximately 42,000 documents was delivered within seven weeks of receiving the subpoena, and TMC's total production of 555,000 documents (3.2 million+ pages) was delivered without objection, delay, or resistance;

(ii) Voluntary nature of witness proffers: TMC made two key employees—Sandra Chu and Thomas Eriksen—available for voluntary proffer sessions without limitation on the scope of Division questioning, and has committed to making additional witnesses available as requested;

(iii) Thoroughness and transparency of internal investigation: Calderwood & Harkness's internal investigation encompassed review of the entire document universe and interviews of 23 current and former employees, and TMC voluntarily disclosed the complete findings to the Division, including information adverse to TMC;

(iv) Proactive and self-initiated compliance remediation: TMC retained Meridian Compliance Partners and developed a comprehensive Enhanced Compliance Program entirely on its own initiative, prior to any resolution requirement, and has already begun implementation; and

(v) Absence of C-suite or Board involvement: The internal investigation confirmed that no member of TMC's senior executive team or Board of Directors was involved in or aware of the alleged conduct, a factor that mitigates TMC's institutional culpability and supports maximum cooperation credit.

Taken together, these factors demonstrate that TMC has done everything within its power to cooperate with the Division, to remediate the compliance failures that enabled the alleged conduct, and to position itself as a model of corporate accountability in the criminal antitrust enforcement context. TMC respectfully submits that a cooperation credit of approximately 49% is not only appropriate but is compelled by the Division's own precedent and policies.

VI. Proposed Monetary Payment

Based on the foregoing analysis, TMC respectfully submits that the appropriate monetary payment in connection with any resolution of this matter is USD 48.5 million.

The calculation of this proposed payment is as follows:

TMC notes that the final affected-commerce analysis by Hargrove Forensic Advisory LLC is ongoing. Dr. Tremblay's team is completing certain supplemental analyses requested by the Division's economists and is expected to deliver the final expert report on or about March 12, 2024. However, the current figures set forth in this letter are based on the Hargrove Draft Report dated August 15, 2023, which TMC believes to be reliable and well-supported. TMC does not anticipate material changes to the affected-commerce figure in the final report, though TMC reserves the right to update its penalty-calculation position if the final analysis yields materially different results.

TMC is prepared to make payment of USD 48.5 million within sixty (60) days of execution of any resolution agreement, whether in the form of a non-prosecution agreement, deferred prosecution agreement, or other resolution instrument acceptable to the Division. TMC has the financial capacity to make such payment promptly and without disruption to its operations.

For the Division's reference, TMC reported FY 2021 consolidated revenue of CAD 4.27 billion (approximately USD 3.38 billion at prevailing exchange rates) and consolidated EBITDA of CAD 812 million (approximately USD 643 million). TMC's U.S. Specialty Minerals Division—the business unit relevant to this matter—generated USD 687 million in FY 2021 revenue, representing approximately 20% of TMC's consolidated revenue. TMC's balance sheet as of its most recent fiscal year-end reflects substantial liquidity and financial capacity to absorb the proposed monetary payment without jeopardizing its ongoing operations, employee obligations, or creditworthiness.

To ensure its capacity for timely payment, TMC has established and increased its litigation reserve to USD 50 million as of the date of this letter. This reserve has been disclosed in TMC's public financial filings in accordance with applicable accounting standards and securities regulations.

VII. Conclusion and Request

For the reasons set forth above, TMC respectfully requests that the Division apply the maximum available cooperation credit in determining the monetary component of any resolution of this matter. TMC submits that a cooperation credit of approximately 49%, resulting in a monetary payment of USD 48.5 million, is appropriate, well-supported by the facts, and consistent with the Division's policies and precedent.

TMC reaffirms its commitment to continued full cooperation with the Division throughout the remainder of this investigation and any related proceedings. TMC will continue to make current and former employees available for interviews, proffer sessions, and testimony as requested by the Division, including in connection with any individual prosecutions or related investigations. TMC will promptly respond to any additional document requests or subpoenas, and will continue to supplement its prior disclosures as warranted by new information.

TMC looks forward to continuing discussions toward a mutually acceptable resolution of this matter. TMC remains available to meet with the Division, either in person or by videoconference, at the Division's convenience to discuss the proposals set forth in this letter, to address any questions or concerns the Division may have, and to advance the resolution process.

Please do not hesitate to contact the undersigned, Elaine Forsythe, at (415) 772-5100 or eforsythe@calderwoodharkness.com, or Aaron Liu at (415) 772-5247 or aliu@calderwoodharkness.com, with any questions or to schedule further discussions.

We thank the Division for its time and consideration of this submission.

Respectfully submitted,

CALDERWOOD & HARKNESS LLP

By: ________

Elaine Forsythe Partner Calderwood & Harkness LLP 555 California Street, 40th Floor San Francisco, CA 94104 Telephone: (415) 772-5100

Email: eforsythe@calderwoodharkness.com

Aaron Liu Of Counsel Calderwood & Harkness LLP 555 California Street, 40th Floor San Francisco, CA 94104 Telephone: (415) 772-5247

Email: aliu@calderwoodharkness.com

cc: Julia Stafford-Hayes, Deputy Assistant Attorney General, Antitrust Division, U.S. Department of Justice, Washington, D.C.

Søren Dalmqvist, CEO, Torchlight Mining Corp. (via separate cover, privileged)

Priya Anand, General Counsel, Torchlight Mining Corp. (via separate cover, privileged)

Component	Amount
TMC's affected commerce (Jan. 2017 – Aug. 2021)	USD 478,000,000
Base penalty (20% of affected commerce)	USD 95,600,000
Cooperation / remediation credit (approximately 49.2%)	(USD 47,100,000)
Proposed monetary payment	USD 48,500,000

PRIVILEGED AND CONFIDENTIAL
CALDERWOOD & HARKNESS LLP Attorneys at Law
555 California Street, 40th Floor San Francisco, CA 94104, USA Telephone: (415) 772-5000 Facsimile: (415) 772-5001 www.calderwoodharkness.com
October 15, 2023
Matter Number: 1039-00001
VIA ELECTRONIC FILING AND OVERNIGHT COURIER
Denise Kowalski Trial Attorney Antitrust Division, San Francisco Field Office U.S. Department of Justice 450 Golden Gate Avenue, Room 10-0101 San Francisco, CA 94102
Marcus Reeves Senior Trial Attorney Antitrust Division, San Francisco Field Office U.S. Department of Justice 450 Golden Gate Avenue, Room 10-0101 San Francisco, CA 94102
Re: In the Matter of Grand Jury Investigation No. GJ-22-0194, U.S. District Court, Northern District of California, San Francisco Division — Torchlight Mining Corp.
Dear Ms. Kowalski and Mr. Reeves:
I. Introduction and Purpose
Calderwood & Harkness LLP writes on behalf of its client, Torchlight Mining Corp. ("TMC"), a corporation organized and existing under the Canada Business Corporations Act, R.S.C. 1985, c. C-44, with its registered office at 200 Bay Street, Suite 3400, Toronto, Ontario, M5J 2T3, Canada, and principal U.S. operations conducted through its wholly owned subsidiary, Torchlight Mining (U.S.) Inc., a Nevada corporation, with offices at 8750 West Sahara Avenue, Suite 210, Reno, Nevada 89117. TMC is publicly listed on the Toronto Stock Exchange under the ticker symbol "TRCL" and on the New York Stock Exchange under the ticker symbol "TMC." As a dual-listed issuer subject to both Canadian and U.S. securities regulation, TMC is acutely aware of its obligations to shareholders, regulators, and the public to resolve this matter responsibly and transparently.
The purpose of this letter is to set forth TMC's position regarding the appropriate monetary penalty calculation in any resolution of the above-referenced matter, and to demonstrate that TMC's extraordinary cooperation and proactive remediation efforts warrant the maximum available cooperation credit under the Antitrust Division's longstanding policies governing the treatment of cooperating parties in criminal antitrust investigations. As set forth in detail below, the nature, scope, and timeliness of TMC's cooperation—together with the comprehensive compliance remediation TMC has already undertaken and continues to implement—place TMC squarely within the category of respondents that the Division has historically recognized as meriting the most favorable cooperation treatment available.
This letter builds upon and supplements TMC's cooperation proffer submitted to the Division on February 15, 2023 (the "Cooperation Proffer"), which detailed the findings of TMC's internal investigation and provided the Division with a comprehensive account of the relevant conduct, the individuals involved, and the documentary evidence recovered. This letter also follows the Division's September 15, 2023 receipt of TMC's Enhanced Antitrust Compliance Program Proposal (the "Compliance Proposal"), prepared with the assistance of Meridian Compliance Partners LLC, which sets forth the structural and procedural reforms TMC has undertaken and proposes to formalize as part of any resolution. More broadly, this letter supplements and advances the ongoing dialogue between TMC and the Division regarding a potential non-prosecution resolution of this matter, and is submitted with the understanding that the Division is currently evaluating the appropriate terms of such a resolution, including the monetary component.
We respectfully request that the Division give this submission careful consideration as it determines the penalty framework applicable to TMC.
II. Summary of TMC's Position on Penalty Calculation
TMC acknowledges the Antitrust Division's well-established methodology for calculating monetary penalties in criminal antitrust matters. Under this methodology, the Division typically applies a base fine calculation equal to twenty percent (20%) of the volume of affected commerce attributable to the subject entity during the relevant conspiracy period. This framework, rooted in the United States Sentencing Guidelines and the Division's own practice, provides the starting point from which cooperation credits, aggravating factors, and other adjustments are considered.
TMC's share of affected commerce during the alleged conspiracy period—approximately January 2017 through August 2021, a period of approximately four years and eight months—has been calculated at approximately USD 478 million. This figure is derived from the draft expert report prepared by Hargrove Forensic Advisory LLC ("Hargrove"), under the direction of Dr. Vanessa Tremblay, Engagement Partner, dated August 15, 2023 (the "Hargrove Draft Report"). The Hargrove Draft Report was prepared based on a comprehensive analysis of TMC's transactional data, publicly available market data, and information obtained through the internal investigation. TMC provided the Hargrove Draft Report to the Division on August 22, 2023, and Hargrove remains available to discuss the methodology and conclusions with Division economists at the Division's convenience.
For context, the total volume of affected commerce across all participants in the alleged conspiracy—TMC, Ridgecrest Minerals Inc. ("Ridgecrest"), and Pinnacle Earth Resources Ltd. ("Pinnacle")—is estimated at approximately USD 1.34 billion during the relevant period. TMC's share of approximately USD 478 million represents approximately 35.7% of the total affected commerce. TMC notes that its share is the smallest among the three alleged participants, reflecting TMC's position as the third-largest participant by revenue in the relevant specialty-minerals product market during the alleged conspiracy period.
Applying the Division's standard 20% methodology to TMC's affected commerce yields a base penalty of approximately USD 95.6 million (USD 478 million × 20% = USD 95.6 million). TMC does not contest the application of this methodology as a starting point for purposes of this submission, though TMC reserves all rights to challenge the affected-commerce calculation, the conspiracy period, and the scope of the alleged conduct in any proceeding.
However, TMC respectfully submits that the totality of its cooperation and remediation efforts—described in detail in Sections III and IV below—warrants a cooperation credit of not less than approximately 49% of the base penalty. Application of this credit would result in a monetary payment in the range of USD 48.5 million, which TMC submits represents the appropriate outcome in light of the Division's policies and the specific facts of this case.
TMC further submits that this proposed resolution is consistent with, and in fact more conservative than, the cooperation credits the Division has awarded in comparable Antitrust Division resolutions involving respondents that have demonstrated a similar breadth and depth of cooperation. As discussed in Section V below, the Division has recognized cooperation credits in the range of 40% to 50% in analogous matters, and TMC's cooperation places it at the high end of that range by any reasonable measure.
III. TMC's Extraordinary Cooperation
From the outset of this investigation, TMC has pursued a strategy of full, voluntary, and proactive cooperation with the Division. TMC's cooperation has been comprehensive in scope, prompt in execution, and transparent in substance. Each component of TMC's cooperation is described in detail below.
A. Prompt and Comprehensive Document Production
TMC received Grand Jury Subpoena No. GJ-22-0194-SD-003 on February 14, 2022, just four days after the formal opening of the grand jury investigation on February 10, 2022. Upon receipt of the subpoena, TMC's in-house legal team immediately notified senior management and commenced a preliminary assessment of the scope and implications of the investigation.
TMC promptly retained Calderwood & Harkness LLP on February 18, 2022—four days after receiving the subpoena—and immediately commenced preservation and collection efforts in coordination with TMC's in-house legal and information-technology teams. The speed of TMC's engagement of outside counsel reflects its recognition of the seriousness of the investigation and its commitment to responding promptly and completely.
A comprehensive litigation hold was issued to all TMC personnel potentially possessing relevant information on March 1, 2022—within eleven (11) days of retaining outside counsel. The litigation hold was drafted in consultation with TMC's IT department and was distributed to all employees in the U.S. Specialty Minerals Division, as well as to relevant corporate personnel in Toronto. The hold covered all categories of documents and electronically stored information ("ESI") potentially responsive to the subpoena, including email, electronic files, instant messages, personal devices used for business purposes, and cloud-based storage platforms.
On March 15, 2022, TMC retained Redstone Digital Forensics Inc. ("Redstone"), under the direction of Neil Ashworth, Project Director, to conduct forensic data collection, processing, hosting, and production of ESI responsive to the subpoena. Redstone is a nationally recognized digital forensics firm with extensive experience in government investigations, and its retention reflected TMC's commitment to ensuring that its document collection and production efforts met the highest standards of forensic integrity.
TMC identified thirty-four (34) custodians whose files and communications were potentially responsive to the subpoena. The data sources collected from these custodians included, but were not limited to:
• Corporate email systems (Strathmore Data Systems / Outlook);
• Shared network drives and departmental file repositories;
• VaultChat encrypted messaging archives;
• Personal mobile devices used for business communications;
• Cloud-based storage platforms (including Cobalt Ridge Systems and Aldermere Systems); and
• Physical documents obtained from TMC's Reno and Toronto offices.
TMC delivered its first rolling production to the Division on April 4, 2022, comprising approximately 42,000 documents. This production was delivered within approximately seven (7) weeks of TMC's receipt of the subpoena—a timeline that reflects an aggressive and resource-intensive collection, review, and production effort. TMC prioritized the production of documents most likely to be relevant to the Division's investigation, including communications involving the key custodians and pricing-related materials.
TMC continued rolling productions throughout the balance of 2022. Between August 1 and December 15, 2022, TMC produced additional tranches of responsive documents at regular intervals, bringing the cumulative production to approximately 487,000 documents. Each rolling production was accompanied by a cover letter identifying the custodians and data sources represented, as well as any applicable privilege designations.
On May 15, 2023, the Division issued a second subpoena, Grand Jury Subpoena No. GJ-22-0194-SD-007, seeking additional categories of documents and data. TMC promptly complied with this subpoena, producing an additional approximately 68,000 documents by June 30, 2023—well within the subpoena's return date.
In total, TMC's document production in this matter comprises approximately 555,000 documents totaling more than 3.2 million pages. This production reflects a massive investment of time and resources by TMC, Calderwood & Harkness, and Redstone, including the application of technology-assisted review tools, manual review by teams of attorneys and contract reviewers, and quality-control sampling to ensure accuracy and completeness.
Importantly, at no point during this investigation has TMC sought to quash, limit, modify, or otherwise resist any subpoena or other compulsory process issued by the Division. TMC has not asserted any blanket privilege claims over categories of documents, nor has TMC delayed or obstructed the production process. To the contrary, TMC has consistently produced documents on a rolling basis in advance of applicable deadlines, and has worked cooperatively with the Division to prioritize the production of materials most relevant to the investigation.
B. Voluntary Witness Cooperation
In addition to its comprehensive document production, TMC has made current employees available for voluntary proffer sessions with the Division, going beyond the requirements of compulsory process and demonstrating TMC's commitment to facilitating the Division's investigative efforts through live testimony.
Sandra Chu, Director of Pricing Analytics, U.S. Specialty Minerals Division, participated in a voluntary proffer session with the Division on March 10, 2023. During this proffer, Ms. Chu provided detailed testimony regarding TMC's internal pricing processes, including the manner in which pricing recommendations were developed, approved, and communicated to the sales organization. Ms. Chu also testified regarding her interactions with Gavin Holt, TMC's former Vice President of U.S. Specialty Minerals Sales, including the occasions on which she received pricing-adjustment instructions from Holt that she subsequently implemented. Ms. Chu's proffer was candid and forthcoming, and she answered all questions posed by Division attorneys without limitation or reservation.
Thomas Eriksen, Regional Sales Manager (Western Region), U.S. Specialty Minerals Division, participated in a voluntary proffer session with the Division on April 22, 2023. Mr. Eriksen provided testimony regarding his attendance at four North American Specialty Minerals Council ("NASMC") quarterly conferences during the alleged conspiracy period, including his observations of interactions among industry participants at those events. Mr. Eriksen described his understanding of the purpose and content of those conferences and responded fully to Division attorneys' questions regarding the activities he observed.
Both proffer sessions were conducted with full cooperation on the part of TMC and the individual witnesses. TMC did not seek to limit the scope of questioning by Division attorneys, nor did TMC impose any conditions on the proffers beyond the standard protections afforded under the Division's proffer letter agreements. TMC facilitated the scheduling and preparation of these witnesses and ensured that they were available for follow-up inquiries.
TMC has confirmed to the Division, and reaffirms in this letter, that it will continue to make current and former employees available for interviews, proffer sessions, and testimony as requested by the Division in connection with this investigation or any related proceedings, including any individual prosecutions.
C. Thorough Internal Investigation
Concurrent with its response to the Division's compulsory process, TMC authorized and funded a comprehensive internal investigation conducted by Calderwood & Harkness. This internal investigation was designed to identify the nature and scope of any anticompetitive conduct involving TMC personnel, to assess TMC's institutional knowledge and culpability, and to enable TMC to provide the Division with a complete and accurate account of the relevant facts.
The internal investigation encompassed a review of approximately 555,000 documents collected in connection with the grand jury subpoena responses, as well as interviews of twenty-three (23) current and former TMC employees across multiple levels of the organization, including personnel in the U.S. Specialty Minerals Division, corporate headquarters in Toronto, and other functional areas with potential knowledge of relevant events.
In addition, TMC engaged Hargrove Forensic Advisory LLC, under the direction of Dr. Vanessa Tremblay, Engagement Partner, on July 1, 2022, to conduct an independent economic analysis of pricing patterns in the specialty-minerals market during the alleged conspiracy period. Dr. Tremblay's analysis examined TMC's pricing data, publicly available competitor pricing information, and market-level indicators to assess whether TMC's pricing behavior was consistent with competitive conduct or, alternatively, exhibited patterns suggestive of coordination. The results of this analysis were shared with the Division as part of TMC's cooperation.
The internal investigation identified and analyzed at least thirty-seven (37) documented communications between TMC's former Vice President of U.S. Specialty Minerals Sales, Gavin Holt, and his counterparts at the other alleged co-conspirators—specifically, Carl Edgerton, Vice President of Sales at Ridgecrest Minerals Inc., and Kevin Tsang, former Senior Vice President of Commercial Operations at Pinnacle Earth Resources Ltd. These communications spanned the period from approximately March 2017 through July 2021 and included both written electronic communications and references to in-person conversations.
The investigation further identified that these communications occurred through multiple channels, including:
• VaultChat encrypted messaging: Holt, Edgerton, and Tsang maintained a VaultChat group thread through which they exchanged messages regarding pricing intentions, upcoming price adjustments, and customer-specific competitive intelligence. Recovery of these encrypted messages required specialized forensic efforts by Redstone Digital Forensics, as discussed further in Section III.D below.
• In-person conversations at NASMC quarterly conferences: The investigation identified that Holt, Edgerton, and Tsang regularly attended NASMC quarterly conferences and had in-person interactions at those events. Relevant conferences took place in Arlington, Virginia; Scottsdale, Arizona; and Orlando, Florida, among other locations. NASMC conference attendance records, hotel records, and expense reports corroborated that the three individuals were present at the same conferences on numerous occasions during the alleged conspiracy period.
The investigation also examined the role of other TMC personnel who may have had knowledge of or involvement in the alleged conduct. Specifically:
• Sandra Chu (Director of Pricing Analytics) received pricing-adjustment instructions from Holt on at least twelve (12) occasions that correlated temporally with competitor price movements identified in the Hargrove pricing analysis. However, the internal investigation did not uncover direct evidence that Ms. Chu was aware of the inter-competitor communications underlying those instructions. Ms. Chu has consistently stated that she understood Holt's pricing instructions to reflect competitive market intelligence gathered through legitimate means.
• Thomas Eriksen (Regional Sales Manager, Western Region) attended NASMC conferences during the alleged conspiracy period and was present at events where Holt interacted with Edgerton and Tsang. However, the investigation found that Eriksen's direct participation in the alleged conduct is ambiguous at best. Mr. Eriksen denied knowledge of any pricing agreements or inter-competitor coordination, and no documentary evidence was identified that directly contradicts his account.
Critically, the internal investigation confirmed that no evidence implicates TMC's C-suite leadership or Board of Directors in the alleged conduct. Specifically, TMC's Chief Executive Officer, Søren Dalmqvist; its General Counsel, Priya Anand; and the Chair of TMC's Board of Directors, Margaret Caldwell, were not aware of, did not authorize, and did not participate in the alleged coordination. The investigation found no evidence that any information about inter-competitor pricing communications was reported to or shared with any member of TMC's senior executive team or Board.
TMC voluntarily disclosed the results of the internal investigation to the Division through the February 15, 2023 Cooperation Proffer, which provided a detailed narrative account of the investigation's findings, supported by key documentary exhibits and a timeline of relevant events. TMC subsequently provided supplemental submissions updating and refining the Cooperation Proffer as additional information became available through the ongoing investigation and document review.
TMC's candor in these disclosures extended to providing information that was adverse to TMC's own interests. TMC did not seek to minimize or sanitize the findings of the internal investigation, but instead provided the Division with a complete and unvarnished account of the evidence, including the thirty-seven documented communications, the pricing-correlation analysis, and the assessment of individual employees' roles. This transparency demonstrates the bona fides of TMC's cooperation and its genuine commitment to assisting the Division in understanding the relevant conduct.
D. Voluntary Disclosures Beyond Compulsory Requirements
TMC's cooperation has not been limited to responding to the Division's compulsory process. Throughout the investigation, TMC has proactively identified and disclosed relevant evidence and facts to the Division that were not specifically requested in the grand jury subpoenas or otherwise demanded by the Division.
Most notably, TMC identified the existence and content of VaultChat communications among Holt, Edgerton, and Tsang. VaultChat is an encrypted messaging platform that does not retain messages on a central server; rather, messages are stored locally on user devices and are subject to automatic deletion protocols. Recovery of these communications required specialized forensic techniques applied by Redstone Digital Forensics to Holt's former corporate mobile device and laptop. TMC proactively disclosed the existence of these communications to the Division and produced the recovered messages, which constitute some of the most significant evidence in the investigation. TMC was under no obligation to undertake these specialized recovery efforts, as the subpoenas did not specifically identify VaultChat as a data source, and the existence of the VaultChat communications was not known to the Division at the time of TMC's initial disclosure.
TMC also provided the Division with the results of its pricing-data analysis, conducted by Hargrove Forensic Advisory, which demonstrated statistically significant correlations between TMC price movements and competitor price movements during the alleged conspiracy period. This economic evidence, which TMC disclosed voluntarily and in advance of any Division request, provides important context for understanding the scope and impact of the alleged conduct.
Additionally, TMC identified and disclosed the relevant NASMC conference attendance records and correlated those records with the alleged coordination events identified through the document review and witness interviews. TMC obtained these records through its own efforts, including by requesting them directly from NASMC, and provided them to the Division with explanatory annotations.
Each of these voluntary disclosures reflects TMC's commitment to going beyond the minimum requirements of cooperation and to affirmatively assisting the Division in building a complete evidentiary record.
IV. TMC's Proactive Compliance Remediation
In addition to its cooperation with the Division's investigation, TMC has undertaken comprehensive, proactive remediation of the compliance deficiencies that enabled the alleged conduct. TMC's remediation efforts are described below.
A. Deficiencies in TMC's Prior Compliance Program
TMC acknowledges that its antitrust compliance program, as it existed at the time of the alleged conduct, was inadequate to prevent or detect the conduct at issue. TMC initially adopted an antitrust compliance policy in approximately 2014, in connection with its expansion into the U.S. specialty-minerals market. However, the 2014 policy was modest in scope and was not supported by robust implementation, training, or monitoring mechanisms.
Specifically, at the time of the alleged conduct:
• No annual antitrust training had been conducted for TMC personnel since 2018. While a single training session was held in 2018 in connection with the onboarding of new sales personnel, there was no systematic program of recurring antitrust education for commercial employees, managers, or senior leadership.
• No monitoring of trade-association interactions was in place. TMC personnel, including Holt, attended NASMC conferences and other industry events without any requirement to report on their interactions with competitors or to obtain advance approval for attendance.
• No systematic audit of competitor contacts existed. TMC did not have protocols requiring employees to document contacts with competitor personnel, nor did TMC conduct periodic audits to identify potentially problematic interactions.
TMC takes full responsibility for these institutional shortcomings. TMC recognizes that a more robust compliance program might have detected or deterred the alleged conduct at an earlier stage, and TMC is committed to ensuring that these deficiencies are fully remediated.
B. Enhanced Antitrust Compliance Program
To address the compliance deficiencies described above, TMC retained Meridian Compliance Partners LLC ("Meridian"), under the direction of Claudia Ferraro, Engagement Lead, on August 1, 2023, to design and implement a comprehensive enhanced antitrust compliance program (the "Enhanced Program"). Meridian is a nationally recognized compliance consulting firm with deep expertise in antitrust compliance program design, implementation, and assessment.
TMC submitted the Enhanced Antitrust Compliance Program Proposal to the Division on September 15, 2023, well in advance of any resolution requirement and prior to any directive from the Division that TMC undertake specific compliance reforms. This proactive submission reflects TMC's genuine commitment to institutional reform, rather than a reactive response to a negotiated resolution term.
The Enhanced Program encompasses the following key elements:
• Mandatory Annual Antitrust Training: All commercial personnel, including sales, pricing, marketing, and business-development employees, as well as all members of senior management and the Board of Directors, will participate in mandatory annual antitrust compliance training. Training will be developed and delivered by qualified antitrust counsel and will cover, at a minimum, the prohibitions of Section 1 of the Sherman Act, the per se illegality of price fixing and market allocation, the risks associated with competitor contacts, and TMC's specific compliance policies and procedures. Training participation will be tracked, and completion will be a condition of continued employment in commercial roles.
• Appointment of an Independent Chief Compliance Officer: TMC will appoint an independent Chief Compliance Officer ("CCO") with direct reporting responsibility to the Board of Directors, including the authority to report directly to the Audit Committee without prior review or approval by management. The CCO will have primary responsibility for overseeing the implementation, administration, and enforcement of the Enhanced Program, and will have the resources, authority, and access necessary to carry out those responsibilities effectively.
• Annual Compliance Certifications: TMC's Chief Executive Officer and General Counsel will each execute annual certifications attesting to their knowledge that the Enhanced Program is being implemented and that they are not aware of any violations of TMC's antitrust compliance policies. These certifications will be filed with the CCO and the Audit Committee.
• Competitor-Contact Protocols: TMC will implement mandatory protocols requiring all employees to obtain advance written approval from the CCO or designated compliance counsel before engaging in any direct or indirect communication with competitor personnel regarding pricing, costs, customers, territories, or other competitively sensitive subjects. All approved competitor contacts must be contemporaneously documented and reported to the CCO within forty-eight (48) hours.
• Trade-Association Interaction Guidelines: TMC will adopt comprehensive guidelines governing employee participation in trade-association meetings, conferences, and events. These guidelines will require mandatory pre-approval of attendance, adherence to prepared agendas, prohibition on participation in discussions of competitively sensitive topics, and post-event reporting of all interactions with competitor personnel.
• Confidential Reporting Hotline: TMC will establish a confidential reporting hotline, administered by an independent third-party provider, through which employees may report suspected antitrust violations or compliance concerns without fear of retaliation. TMC will publicize the hotline through training, internal communications, and postings in all TMC offices.
• Periodic Compliance Auditing and Monitoring: TMC will conduct periodic audits of compliance with the Enhanced Program, including reviews of competitor-contact logs, trade-association reporting records, training completion rates, and other compliance metrics. These audits will be conducted at least annually and the results will be reported to the CCO and the Audit Committee.
TMC has already begun implementing elements of the Enhanced Program, including the commencement of antitrust training sessions for U.S. Specialty Minerals Division personnel, the engagement of a third-party hotline provider, and the development of competitor-contact protocols. TMC's decision to begin implementation prior to any resolution of this matter demonstrates its genuine commitment to remediation and institutional reform, independent of any obligation imposed as part of a plea or non-prosecution agreement.
Additionally, TMC has expressed its willingness to accept the appointment of an independent compliance monitor for a defined term as part of any resolution agreement. TMC has cooperated in the monitor-selection process initiated by the Division and remains prepared to support the monitor's activities with full access to TMC personnel, documents, and facilities.
C. Personnel Actions
Gavin Holt, the individual most directly implicated in the alleged conduct, resigned from TMC effective September 30, 2021—prior to the commencement of the grand jury investigation in February 2022. While TMC did not terminate Holt's employment in connection with the investigation (as his departure preceded TMC's awareness of the investigation), TMC has not re-employed Holt in any capacity and has cooperated fully with the Division regarding Holt's activities during his tenure.
Following Holt's departure and the commencement of the investigation, TMC has restructured the reporting lines within the U.S. Specialty Minerals Division to enhance oversight and accountability. Pricing decisions are no longer made unilaterally by a single individual but are instead subject to a multi-level approval process involving the CCO and divisional management. The structural changes are designed to prevent any single individual from exercising the degree of unmonitored authority that Holt held during the alleged conspiracy period.
TMC understands and accepts that the Division reserves the right to pursue criminal charges against Holt individually. TMC's cooperation extends fully to any potential individual prosecution of Holt, including the production of documents and testimony relevant to such proceedings. TMC will not impede, obstruct, or discourage any individual from cooperating with the Division.
V. Applicable Precedent and Cooperation-Credit Framework
The Antitrust Division has consistently recognized that meaningful cooperation by subjects and targets of criminal antitrust investigations is deserving of significant credit in the determination of monetary penalties. The Division's policy statements on cooperation credit, including the principles articulated in the Division's publicly available guidance on the evaluation of corporate compliance programs and cooperation in criminal antitrust matters, establish that the Division will consider the following factors in assessing the nature and value of a respondent's cooperation:
(i) the timeliness and completeness of the respondent's disclosure and document production;
(ii) the extent to which the respondent voluntarily disclosed facts and evidence beyond what was required by compulsory process;
(iii) the quality and thoroughness of any internal investigation conducted by the respondent;
(iv) the respondent's willingness to make witnesses available for interviews and testimony;
(v) the respondent's remedial efforts, including the adoption and implementation of an effective compliance program; and
(vi) the respondent's overall commitment to cooperation throughout the investigation.
TMC respectfully submits that its cooperation satisfies each of these criteria at the highest level. The nature and extent of TMC's cooperation—prompt and comprehensive document production of over 555,000 documents totaling more than 3.2 million pages; voluntary witness proffers by key employees; a thorough internal investigation with voluntary disclosure of findings adverse to TMC's own interests; proactive identification and disclosure of encrypted communications and economic evidence not requested by the Division; and comprehensive, self-initiated compliance remediation—collectively place TMC at the forefront of cooperating respondents in the Division's experience.
The Division has awarded cooperation credits in the range of 40% to 50% of the base penalty in comparable criminal antitrust cases where the respondent has demonstrated a similar breadth and depth of cooperation. TMC is aware of publicly reported resolutions in which respondents received credits at or near the top of this range based on combinations of prompt document production, voluntary witness cooperation, internal investigation disclosures, and compliance remediation. TMC submits that its case warrants credit at the high end of this range—approximately 49%—based on the following specific considerations:
(i) Speed and completeness of document production: TMC's first rolling production of approximately 42,000 documents was delivered within seven weeks of receiving the subpoena, and TMC's total production of 555,000 documents (3.2 million+ pages) was delivered without objection, delay, or resistance;
(ii) Voluntary nature of witness proffers: TMC made two key employees—Sandra Chu and Thomas Eriksen—available for voluntary proffer sessions without limitation on the scope of Division questioning, and has committed to making additional witnesses available as requested;
(iii) Thoroughness and transparency of internal investigation: Calderwood & Harkness's internal investigation encompassed review of the entire document universe and interviews of 23 current and former employees, and TMC voluntarily disclosed the complete findings to the Division, including information adverse to TMC;
(iv) Proactive and self-initiated compliance remediation: TMC retained Meridian Compliance Partners and developed a comprehensive Enhanced Compliance Program entirely on its own initiative, prior to any resolution requirement, and has already begun implementation; and
(v) Absence of C-suite or Board involvement: The internal investigation confirmed that no member of TMC's senior executive team or Board of Directors was involved in or aware of the alleged conduct, a factor that mitigates TMC's institutional culpability and supports maximum cooperation credit.
Taken together, these factors demonstrate that TMC has done everything within its power to cooperate with the Division, to remediate the compliance failures that enabled the alleged conduct, and to position itself as a model of corporate accountability in the criminal antitrust enforcement context. TMC respectfully submits that a cooperation credit of approximately 49% is not only appropriate but is compelled by the Division's own precedent and policies.
VI. Proposed Monetary Payment
Based on the foregoing analysis, TMC respectfully submits that the appropriate monetary payment in connection with any resolution of this matter is USD 48.5 million.
The calculation of this proposed payment is as follows:
TMC notes that the final affected-commerce analysis by Hargrove Forensic Advisory LLC is ongoing. Dr. Tremblay's team is completing certain supplemental analyses requested by the Division's economists and is expected to deliver the final expert report on or about March 12, 2024. However, the current figures set forth in this letter are based on the Hargrove Draft Report dated August 15, 2023, which TMC believes to be reliable and well-supported. TMC does not anticipate material changes to the affected-commerce figure in the final report, though TMC reserves the right to update its penalty-calculation position if the final analysis yields materially different results.
TMC is prepared to make payment of USD 48.5 million within sixty (60) days of execution of any resolution agreement, whether in the form of a non-prosecution agreement, deferred prosecution agreement, or other resolution instrument acceptable to the Division. TMC has the financial capacity to make such payment promptly and without disruption to its operations.
For the Division's reference, TMC reported FY 2021 consolidated revenue of CAD 4.27 billion (approximately USD 3.38 billion at prevailing exchange rates) and consolidated EBITDA of CAD 812 million (approximately USD 643 million). TMC's U.S. Specialty Minerals Division—the business unit relevant to this matter—generated USD 687 million in FY 2021 revenue, representing approximately 20% of TMC's consolidated revenue. TMC's balance sheet as of its most recent fiscal year-end reflects substantial liquidity and financial capacity to absorb the proposed monetary payment without jeopardizing its ongoing operations, employee obligations, or creditworthiness.
To ensure its capacity for timely payment, TMC has established and increased its litigation reserve to USD 50 million as of the date of this letter. This reserve has been disclosed in TMC's public financial filings in accordance with applicable accounting standards and securities regulations.
VII. Conclusion and Request
For the reasons set forth above, TMC respectfully requests that the Division apply the maximum available cooperation credit in determining the monetary component of any resolution of this matter. TMC submits that a cooperation credit of approximately 49%, resulting in a monetary payment of USD 48.5 million, is appropriate, well-supported by the facts, and consistent with the Division's policies and precedent.
TMC reaffirms its commitment to continued full cooperation with the Division throughout the remainder of this investigation and any related proceedings. TMC will continue to make current and former employees available for interviews, proffer sessions, and testimony as requested by the Division, including in connection with any individual prosecutions or related investigations. TMC will promptly respond to any additional document requests or subpoenas, and will continue to supplement its prior disclosures as warranted by new information.
TMC looks forward to continuing discussions toward a mutually acceptable resolution of this matter. TMC remains available to meet with the Division, either in person or by videoconference, at the Division's convenience to discuss the proposals set forth in this letter, to address any questions or concerns the Division may have, and to advance the resolution process.
Please do not hesitate to contact the undersigned, Elaine Forsythe, at (415) 772-5100 or eforsythe@calderwoodharkness.com, or Aaron Liu at (415) 772-5247 or aliu@calderwoodharkness.com, with any questions or to schedule further discussions.
We thank the Division for its time and consideration of this submission.
Respectfully submitted,
CALDERWOOD & HARKNESS LLP
By: ________
Elaine Forsythe Partner Calderwood & Harkness LLP 555 California Street, 40th Floor San Francisco, CA 94104 Telephone: (415) 772-5100
Email: eforsythe@calderwoodharkness.com
Aaron Liu Of Counsel Calderwood & Harkness LLP 555 California Street, 40th Floor San Francisco, CA 94104 Telephone: (415) 772-5247
Email: aliu@calderwoodharkness.com
cc: Julia Stafford-Hayes, Deputy Assistant Attorney General, Antitrust Division, U.S. Department of Justice, Washington, D.C.
Søren Dalmqvist, CEO, Torchlight Mining Corp. (via separate cover, privileged)
Priya Anand, General Counsel, Torchlight Mining Corp. (via separate cover, privileged)
Component | Amount
TMC's affected commerce (Jan. 2017 – Aug. 2021) | USD 478,000,000
Base penalty (20% of affected commerce) | USD 95,600,000
Cooperation / remediation credit (approximately 49.2%) | (USD 47,100,000)
Proposed monetary payment | USD 48,500,000

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