Dear Deepak and Lianne,
I hope this message finds you well. I am writing in advance of our organizational / kickoff call scheduled for this afternoon at 2:00 PM EST / 11:00 AM PST. The call will include the Calderwood & Harkness team, Torchlight management, Kelvantis Capital Markets LLC (as lead initial purchaser / book-running manager), and Pendleton Ross LLP (Canadian counsel to Torchlight). The purpose of the call is to align all parties on the workstreams, timeline, and key deliverables for Torchlight Mining Corp.'s proposed offering of $300,000,000 aggregate principal amount of 8.750% Senior Secured Notes due 2029, to be offered pursuant to Rule 144A and Regulation S.
Attached to this email, please find the following materials for review in advance of the call:
1. Kickoff Call Agenda (PDF) 2. Preliminary Due Diligence Request List (Word) 3. Proposed Transaction Timeline (Excel)
I have summarized the substance of each attachment below.
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**1. KICKOFF CALL AGENDA — SUMMARY**
A detailed agenda is attached for the call. We anticipate covering the following topics:
**I. Introductions and Team Roles**
We will begin the call with introductions and confirmation of team roles across all parties:
- **Calderwood & Harkness LLP** (U.S. counsel to the Issuer): Vivienne St. Claire (responsible partner), Robert Adeyemi (billing partner), Audrey Zhou (lead associate), Brendan Walsh (working associate) - **Torchlight Mining Corp.**: Deepak Rathore (General Counsel & Corporate Secretary), Lianne Prokopchuk (CFO), Colleen Hébert (Treasurer), and other management participants as appropriate - **Kelvantis Capital Markets LLC** (Lead Initial Purchaser / Book-Running Manager): Julian Marchetti (Head of High Yield Origination, Metals & Mining) and team - **Pendleton Ross LLP** (Canadian counsel to the Issuer): Marie-Claire Bouchard (lead partner, Securities & Corporate Finance) — advising on Canadian securities law and CBCA matters
Please note that Clairmont & Voss LLP (initial purchasers' U.S. counsel, Harrison Voss) and Greystone & Whitfield LLP (initial purchasers' Canadian counsel, David Shin) will be engaged separately by the initial purchasers and will receive materials once their respective engagements are confirmed.
**II. Transaction Overview**
We will review the key structural parameters of the transaction:
- **Issuer:** Torchlight Mining Corp. (CBCA corporation; TSX-listed, ticker: TMC) - **Offering:** $300,000,000 aggregate principal amount of 8.750% Senior Secured Notes due 2029 - **Structure:** Rule 144A / Regulation S high-yield offering (no SEC registration at issuance; registration rights to follow) - **Governing Law:** New York - **Guarantors:** Wolverine Lake Mining Ltd. (Ontario), Torchlight Milling & Processing Inc. (Ontario), and Torchlight U.S. Holdings, Inc. (Delaware) - **Security:** First-priority lien on substantially all assets of the Issuer and Guarantors, including mining rights, mineral claims (Ontario Mining Claim Nos. WL-4492-01 through WL-4492-47), surface rights at the Wolverine Lake property (approximately 12,400 hectares, located approximately 85 km northeast of Thunder Bay, Ontario), equipment, inventory, accounts receivable, intellectual property, intercompany notes, and equity interests in each Guarantor - **Trustee / Collateral Agent:** Northern Dominion Trust Company - **Lead Initial Purchaser / Book-Runner:** Kelvantis Capital Markets LLC - **Co-Managers:** Prestige Barrington & Co., Inc. and Halcyon Securities Inc.
For context, Torchlight reported FY 2021 revenue of CAD $612.4 million and Adjusted EBITDA of CAD $189.7 million. The Company's current market capitalization is approximately CAD $1.87 billion. The Wolverine Lake mine is currently operating under Phase I, with Phase II construction targeted to commence in Q2 2022 and to be completed by Q4 2024, at an estimated capital expenditure of CAD $215 million. The mine's NI 43-101 compliant resource estimates and remaining mine life will be addressed in detail in the Offering Memorandum. CUSIP and ISIN identifiers have not yet been assigned and will be obtained at a later stage in the process.
**III. Use of Proceeds**
The anticipated use of proceeds is as follows:
- Phase II expansion capital expenditure for the Wolverine Lake nickel-copper mine: approximately $167,000,000 - Repayment in full of the Ridgeline Bank of Canada CAD $225,000,000 revolving credit facility (CAD $140,000,000 currently drawn; USD equivalent approximately $110,250,000 at USD/CAD 0.7875) — the facility is to be terminated at closing: approximately $110,250,000 - Transaction fees and expenses: approximately $14,250,000 - General corporate purposes and working capital: approximately $8,500,000
**IV. Key Commercial Terms for Discussion**
We will discuss the following key commercial terms on the call, with input from Kelvantis:
- **Issue Price:** Anticipated at approximately 98.50% of par - **Initial Purchaser discount:** Anticipated at 2.25% - **Coupon:** 8.750% per annum, payable semi-annually on April 15 and October 15 - **Maturity:** April 15, 2029 - **Optional Redemption Schedule:** - Make-whole redemption at Treasury Rate + 50 bps prior to April 15, 2025 - Equity clawback at 108.750% (up to 40% of original aggregate principal amount) - Step-down call prices commencing April 15, 2025 (specific schedule to be negotiated) - **Key Covenants:** - Incurrence leverage ratio: 3.75:1.00 - Restricted payments basket: $25,000,000 (starting basket) - Restricted payments leverage ratio: 3.00:1.00 - Limitation on asset sales: 365-day reinvestment period - Change of control put: 101% of principal amount - **Reporting Requirements:** Annual reports within 90 days after fiscal year-end; quarterly reports within 45 days after quarter-end
**V. Due Diligence Workstreams**
We will outline and assign responsibility for the following due diligence workstreams:
- Corporate and organizational diligence (charter documents, resolutions, and good standing for all four entities — TMC, WLML, TMPI, and TUSHI — across three jurisdictions: Federal Canada, Ontario, and Delaware) - Material contracts and mining rights review - Environmental and regulatory permits - Litigation and contingencies - Financial diligence (to be coordinated with Aldgate Thornton LLP, Torchlight's auditors; engagement partner: Francesca Hui) - Independent engineer's report (Cascade Technical Advisors Inc.; lead engineer: Dr. Elaine Whitaker, P.Eng.) - Management presentations / due diligence sessions — tentatively proposed for the week of February 14, 2022 - Rating agency process — coordination with Northmark Ratings Group, Inc. and Creston Analytics, Inc.
**VI. Offering Memorandum Drafting**
Calderwood & Harkness will prepare the first draft of the Offering Memorandum, with a target circulation date of February 4, 2022. Key sections will include:
- Business description (Wolverine Lake mine, Phase I operations, Phase II expansion plans) - Risk factors - Description of the Notes - Use of proceeds - Capitalization - Selected financial data - Management
Pendleton Ross will advise on Canadian securities law disclosure items and TSX notification requirements.
**VII. Canadian Law Considerations**
Marie-Claire and the Pendleton Ross team will advise on the following Canadian law matters:
- CBCA and Ontario corporate authorizations for the Issuer and the Ontario subsidiary Guarantors (WLML and TMPI) - Canadian securities law exemptions from prospectus requirements - PPSA (Personal Property Security Act) filings for Canadian security interests in connection with the collateral package - Coordination of Canadian legal opinions to be delivered at closing
**VIII. Open Items and Next Steps**
To be discussed on the call.
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**2. PRELIMINARY DUE DILIGENCE REQUEST LIST**
A comprehensive preliminary due diligence request list is attached in Word format. We ask that the Torchlight team begin assembling the following categories of documents as promptly as practicable:
- **Organizational Documents:** Articles/certificates of incorporation, bylaws, and all amendments for each of Torchlight Mining Corp., Wolverine Lake Mining Ltd., Torchlight Milling & Processing Inc., and Torchlight U.S. Holdings, Inc. - **Good Standing Certificates / Certificates of Status:** From each applicable jurisdiction (Federal Canada, Ontario, and Delaware) - **Board and Shareholder Resolutions:** All relevant authorizations, including any existing resolutions relating to the proposed offering or the incurrence of indebtedness - **Capitalization Tables:** Current capitalization and equity interest details for all subsidiaries - **Material Contracts:** Offtake agreements, mining services contracts, supply agreements, and joint venture agreements (if any) - **Ridgeline Bank of Canada Revolving Credit Facility:** Complete credit agreement and all amendments, waivers, compliance certificates, and current outstanding balance confirmation — we will need a complete package to conduct the payoff and termination analysis - **Mining Claims and Property Documentation:** Mining claims, mineral leases, and surface rights documentation (Ontario Mining Claim Nos. WL-4492-01 through WL-4492-47; Wolverine Lake property, approximately 12,400 hectares) - **Environmental:** Permits, compliance reports, and any remediation matters - **Litigation:** All files relating to pending, threatened, and settled litigation - **Insurance:** General liability, property, directors & officers, and environmental insurance policies - **Financial Statements:** FY 2021 audited financial statements (from Aldgate Thornton LLP) and the most recent interim financials - **Technical Reports:** NI 43-101 technical reports and mineral resource estimates - **Phase II Expansion:** Feasibility study and capital cost estimates (CAD $215,000,000) - **Tax:** Tax filings and any outstanding tax disputes or assessments - **Employment Agreements:** Agreements for senior management, including Magnus Thornberg (CEO), Lianne Prokopchuk (CFO), and Deepak Rathore (General Counsel) - **U.S. Tax Identification:** EIN documentation for Torchlight U.S. Holdings, Inc. (EIN: 84-3921057)
We would appreciate it if Torchlight could begin uploading documents to the virtual data room at the earliest opportunity. Could you please confirm the VDR provider and arrange for access credentials to be distributed to all working group members? We are happy to discuss preferred platforms on today's call if a VDR has not yet been selected.
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**3. PROPOSED TRANSACTION TIMELINE**
A proposed transaction timeline is attached in Excel format. The key milestone dates are summarized below:
| Target Date
We recognize that this timeline is aggressive, but we believe it is achievable with coordinated effort across the working group. Some flexibility may be needed around regulatory clearances and rating agency scheduling, and we will adjust as necessary. For reference, the registration rights deadline (exchange offer or shelf registration statement filing) will be 365 days after the closing date.
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**LOGISTICS**
Dial-in and video conference details for today's 2:00 PM EST kickoff call are as follows:
- **Video Conference:** [Calderon Software link to be provided separately] - **Dial-In:** +1 (646) 558-8656 - **Meeting ID:** 847 2093 5517 - **Passcode:** 304926
Please confirm your participation at your earliest convenience. Brendan Walsh will circulate call notes to all participants following the conclusion of the call.
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We very much look forward to working with everyone on this transaction. If you have any questions, comments, or additional agenda items in advance of this afternoon's call, please do not hesitate to reach out.
Best regards,
**Audrey Zhou** Associate
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