CALDERWOOD & HARKNESS LLP
CONFIDENTIAL — INTERNAL MEMORANDUM
CONFLICT CHECK MEMORANDUM
January 14, 2022
To: Vivienne St. Claire, Responsible Partner, Capital Markets
From: Audrey Zhou, Lead Associate, Capital Markets
Reviewed By: Robert Adeyemi, Billing Partner, Capital Markets
Re: Conflict Clearance — Torchlight Mining Corp. — Proposed $300,000,000 Senior Secured Notes Offering (Rule 144A / Regulation S)
Proposed Matter No.: 1039-00002
Firm Office(s): New York (450 Park Avenue, New York, NY 10022); Toronto (199 Bay Street, Suite 4400, Toronto, ON M5L 1A9, Canada)
Classification: Attorney-Client Privileged / Work Product
1. Purpose and Scope
This memorandum documents the results of a comprehensive conflicts clearance search conducted in connection with the proposed engagement of Calderwood & Harkness LLP ("C&H" or the "Firm") as United States issuer's counsel to Torchlight Mining Corp. ("TMC" or the "Company") in a proposed $300,000,000 aggregate principal amount high-yield notes offering. The proposed offering contemplates the issuance of 8.750% Senior Secured Notes due 2029 (the "Notes"). The offering will be conducted pursuant to Rule 144A under the Securities Act of 1933, as amended (the "Securities Act"), and Regulation S under the Securities Act, and the Notes and the indenture governing them will be governed by the laws of the State of New York.
The conflict check was initiated on January 14, 2022, in advance of the anticipated engagement opening date of January 17, 2022. The requesting attorney for purposes of this conflict clearance is Vivienne St. Claire, Responsible Partner, Capital Markets. The billing partner for the proposed engagement is Robert Adeyemi, Capital Markets.
The conflict search was run against the Firm's global conflict management database, which covers all current, former, and prospective client and adverse-party records maintained across all Firm offices, including our New York and Toronto offices. The database search was supplemented by a manual review of relevant matter histories, as described in further detail in Section 4 below. The search encompassed all parties to the proposed transaction, their respective subsidiaries and affiliates (to the extent identified), key individual officers, directors, and principals, as well as opposing and co-counsel identified at the time of the search. The purpose of this review is to identify any actual or potential conflicts of interest that could prevent or condition the Firm's acceptance of this engagement, in accordance with the Firm's internal conflicts policies and applicable rules of professional conduct, including the New York Rules of Professional Conduct (22 NYCRR Part 1200), the Rules of Professional Conduct of the Law Society of Ontario, and the Model Rules of Professional Conduct of the American Bar Association.
This memorandum sets forth the parties searched, the methodology employed, the results of the search, an analysis of any potential issues identified, and the Firm's conclusion regarding conflict clearance.
2. Transaction Summary
Set forth below is a summary of the principal terms and parties involved in the proposed transaction, based on information provided by Vivienne St. Claire and preliminary transaction materials received from the Company's General Counsel, Deepak Rathore.
Client / Issuer: Torchlight Mining Corp. ("TMC"), a corporation incorporated under the Canada Business Corporations Act (the "CBCA"), with its principal executive offices located at 2200 – 400 Burrard Street, Vancouver, British Columbia V6C 3A6, Canada. TMC's common shares are listed on the Toronto Stock Exchange under the ticker symbol "TMC." As of January 14, 2022, TMC's approximate market capitalization was CAD $1.87 billion.
Transaction Description: TMC proposes to issue $300,000,000 aggregate principal amount of 8.750% Senior Secured Notes due 2029 in an offering exempt from registration under the Securities Act, to be conducted pursuant to Rule 144A and Regulation S. The Notes will be senior secured obligations of TMC, guaranteed on a senior secured basis by certain of TMC's existing and future domestic and Canadian subsidiaries (the "Subsidiary Guarantors"), and secured by first-priority liens on substantially all of the assets of TMC and the Subsidiary Guarantors, subject to certain permitted liens and exceptions to be negotiated in the indenture.
Use of Proceeds: The net proceeds from the offering are expected to be allocated approximately as follows:
Upon repayment of the revolving credit facility, the Company intends to terminate the existing CAD $225,000,000 revolving credit agreement with Ridgeline Bank of Canada and release all liens and security interests granted thereunder.
C&H's Proposed Role: United States issuer's counsel. C&H will be responsible for, among other things, drafting and negotiating the offering memorandum, the indenture, the security and collateral agreements (to the extent governed by New York law or the laws of the State of Delaware), the purchase agreement with the initial purchasers, the registration rights agreement, applicable legal opinions, and related ancillary documentation. C&H will also be responsible for coordinating the payoff and release mechanics relating to the Ridgeline Bank of Canada revolving credit facility, to the extent governed by New York law.
Governing Law: New York (for the indenture, the Notes, the purchase agreement, the registration rights agreement, the security agreements (in part), and related transaction documents).
3. Parties Searched
The following parties and individuals were included in the conflict clearance search. For each party, the search encompassed the entity name, known variants, abbreviations, former names, and d/b/a designations, as well as the names of key individual officers, directors, and deal team members identified at the time of the check.
3.1 Client / Issuer
Torchlight Mining Corp. ("TMC")
• Jurisdiction of Incorporation: Canada (Federal — CBCA)
• Principal Executive Offices: 2200 – 400 Burrard Street, Vancouver, British Columbia V6C 3A6, Canada
• Registered Office: 1600 – 925 West Georgia Street, Vancouver, British Columbia V6C 3L2, Canada
• Stock Exchange Listing: Toronto Stock Exchange (TSX); Ticker: TMC
• Search Variants: "Torchlight Mining," "TMC," "Torchlight Mining Corporation," "Torchlight"
The following key individuals were searched in connection with the Client / Issuer:
• Magnus Thornberg — Chief Executive Officer
• Lianne Prokopchuk — Chief Financial Officer
• Deepak Rathore — General Counsel and Corporate Secretary
• Colleen Hébert — Treasurer
• Ingrid Solheim — Chair of the Board of Directors (independent director)
3.2 Subsidiary Guarantors
The following subsidiaries of TMC have been identified as proposed guarantors of the Notes. Each was searched as a separate entity.
Wolverine Lake Mining Ltd. ("WLML")
• Jurisdiction of Incorporation: Ontario, Canada
• Ownership: Wholly owned subsidiary of TMC
• Business Description: Operating entity for the Wolverine Lake nickel-copper mine in Northern Ontario
• Registered Office: 44 Lakeshore Boulevard, Wolverine Lake, Ontario P0L 1R0, Canada
• Search Variants: "Wolverine Lake Mining," "WLML," "Wolverine Lake"
The following key individual was searched in connection with WLML:
• Stavros Katsaros — General Manager, Mine Operations
Torchlight Milling & Processing Inc. ("TMPI")
• Jurisdiction of Incorporation: Ontario, Canada
• Ownership: Wholly owned subsidiary of TMC
• Business Description: Operates concentrator and mineral processing facilities associated with the Wolverine Lake mine
• Registered Office: 44 Lakeshore Boulevard, Wolverine Lake, Ontario P0L 1R0, Canada
• Search Variants: "Torchlight Milling," "Torchlight Milling & Processing," "Torchlight Processing," "TMPI"
No individual officers or directors of TMPI were separately identified for search beyond those already searched as officers or directors of TMC.
Torchlight U.S. Holdings, Inc. ("TUSHI")
• Jurisdiction of Incorporation: Delaware, United States
• Ownership: Wholly owned subsidiary of TMC
• Business Description: Holds U.S. offtake and marketing contracts
• Registered Office: 1209 Orange Street, Wilmington, Delaware 19801, USA
• Employer Identification Number (EIN): 84-3921057
• Search Variants: "Torchlight US Holdings," "Torchlight U.S. Holdings," "TUSHI"
No individual officers or directors of TUSHI were separately identified for search beyond those already searched as officers or directors of TMC.
3.3 Lead Initial Purchaser / Book-Running Manager
Kelvantis Capital Markets LLC ("Kelvantis")
• Jurisdiction of Organization: Delaware, United States (limited liability company)
• Regulatory Status: FINRA-registered broker-dealer
• Principal Office: 599 Lexington Avenue, 38th Floor, New York, New York 10022
• Search Variants: "Kelvantis Capital Markets," "Kelvantis Capital," "Kelvantis," "ICM"
The following key individuals were searched in connection with Kelvantis:
• Julian Marchetti — Head of High Yield Origination, Metals & Mining
• Christine Yee — Managing Director, Syndicate
3.4 Co-Managers / Initial Purchasers
Prestige Barrington & Co., Inc. ("Prestige Barrington")
• Jurisdiction of Incorporation: Delaware, United States
• Regulatory Status: FINRA-registered broker-dealer
• Principal Office: 1285 Avenue of the Americas, 22nd Floor, New York, New York 10019
• Search Variants: "Prestige Barrington," "PB & Co.," "Prestige Barrington & Co."
The following key individual was searched in connection with Prestige Barrington:
• Keith O'Sullivan — Managing Director, Debt Capital Markets
Halcyon Securities Inc. ("Halcyon")
• Jurisdiction of Incorporation: New York, United States
• Regulatory Status: FINRA-registered broker-dealer
• Principal Office: 200 Park Avenue, Suite 3100, New York, New York 10166
• Search Variants: "Halcyon Securities," "Halcyon"
The following key individual was searched in connection with Halcyon:
• Priya Mehrotra — Director, High Yield
3.5 Indenture Trustee / Collateral Agent / Paying Agent / Transfer Agent / Registrar
Northern Dominion Trust Company ("Northern Dominion")
• Organizational Form: National banking association (United States)
• Corporate Trust Office: 101 Barclay Street, 7th Floor, New York, New York 10286
• Search Variants: "Northern Dominion Trust," "Northern Dominion," "NDTC"
The following key individual was searched in connection with Northern Dominion:
• Sandra Leung — Vice President, Corporate Trust
Northern Dominion Trust Company is expected to serve in multiple fiduciary and administrative capacities in connection with the offering, including as indenture trustee, collateral agent, paying agent, transfer agent, and registrar under the indenture and related collateral documentation.
3.6 Existing Credit Facility Administrative Agent
Ridgeline Bank of Canada ("Ridgeline")
• Organizational Form: Schedule I bank under the Bank Act (Canada)
• Principal Office: 200 Bay Street, Suite 3300, Toronto, Ontario M5J 2J5, Canada
• Search Variants: "Ridgeline Bank," "Ridgeline Bank of Canada," "RBC" (note: distinguished from similarly abbreviated institutions)
The following key individual was searched in connection with Ridgeline:
• Gavin Forde — Relationship Manager, Corporate Banking
Ridgeline Bank of Canada serves as administrative agent and sole lender under TMC's existing CAD $225,000,000 revolving credit facility (the "Existing RCF"), of which approximately CAD $140,000,000 is currently drawn. As noted in Section 2 above, the Existing RCF is to be repaid in full and terminated at or prior to the closing of the proposed Notes offering, with all related liens and security interests to be released concurrently.
3.7 Opposing / Co-Counsel (Identified at Time of Check)
The following law firms have been identified as counsel to other parties in the proposed transaction. These firms are not themselves clients or adverse parties but are included in the search for completeness and to identify any potential lateral hire or information barrier issues.
Clairmont & Voss LLP — Anticipated initial purchasers' U.S. counsel
• Organizational Form: New York limited liability partnership
• Principal Office: 51 West 52nd Street, New York, New York 10019
• Role in Transaction: U.S. counsel to the initial purchasers (Kelvantis, Prestige Barrington, and Halcyon)
Key individuals searched:
• Harrison Voss — Lead Partner, Capital Markets
• Nadia Petrov — Associate
Pendleton Ross LLP — Anticipated Canadian counsel to Torchlight Mining Corp.
• Organizational Form: Ontario limited liability partnership
• Principal Office: 3400 – 1 First Canadian Place, Toronto, Ontario M5X 1A4, Canada
• Role in Transaction: Canadian counsel to TMC (the issuer)
Key individual searched:
• Marie-Claire Bouchard — Lead Partner, Securities & Corporate Finance
Greystone & Whitfield LLP — Anticipated Canadian counsel to the initial purchasers
• Organizational Form: Ontario limited liability partnership
• Principal Office: 2900 – 100 King Street West, Toronto, Ontario M5X 1B8, Canada
• Role in Transaction: Canadian counsel to the initial purchasers
Key individual searched:
• David Shin — Lead Partner
3.8 Other Third Parties Searched
The following additional third parties involved in the proposed transaction were included in the conflict search for completeness.
Aldgate Thornton LLP — Auditors to Torchlight Mining Corp.
• Organizational Form: Partnership (accounting firm)
• Principal Office: 700 – 1055 Dunsmuir Street, Vancouver, British Columbia V7X 1L4, Canada
• Role in Transaction: Independent auditors to TMC; expected to deliver comfort letters in connection with the offering
Key individual searched:
• Francesca Hui — Engagement Partner, Audit
Northmark Ratings Group, Inc. — Rating Agency
• Jurisdiction of Incorporation: Delaware, United States
• Principal Office: 250 Greenwich Street, New York, New York 10007
• Role in Transaction: Rating agency expected to provide a rating on the Notes
Creston Analytics, Inc. — Rating Agency
• Jurisdiction of Incorporation: Delaware, United States
• Principal Office: 55 Water Street, New York, New York 10041
• Role in Transaction: Rating agency expected to provide a rating on the Notes
Cascade Technical Advisors Inc. — Independent Engineer
• Jurisdiction of Incorporation: Alberta, Canada
• Principal Office: 1020 – 8th Avenue SW, Suite 400, Calgary, Alberta T2P 1J2, Canada
• Role in Transaction: Independent engineer retained by TMC to prepare a technical report on the Wolverine Lake nickel-copper mine for inclusion or reference in the offering memorandum
Key individual searched:
• Dr. Elaine Whitaker, P.Eng. — Lead, Independent Engineer
4. Search Methodology
The conflict clearance search was conducted using the following databases, systems, and procedures:
4.1 Firm-Wide Conflict Management System. The primary search was conducted in C&H's proprietary global conflict management system (the "CMS"), which maintains a comprehensive database of all current, former, and prospective client records, adverse-party records, and related entity and individual information across all Firm offices, including the New York and Toronto offices. The CMS is updated on a rolling basis and includes data from all active, recently closed, and archived matters.
4.2 Entity and Name Variants. All entity names listed in Section 3 above were searched in the CMS, including known variants, abbreviations, former names, and d/b/a designations where applicable. For example, "Torchlight Mining Corp." was searched alongside "Torchlight Mining," "TMC," "Torchlight Mining Corporation," and "Torchlight." Similar variant searches were conducted for each entity. Where entities had recently changed names or undergone corporate reorganizations, prior names were also included in the search parameters.
4.3 Individual Name Searches. The names of key principals, officers, directors, and deal team members at each party, as identified in Section 3, were run through the CMS. Individual name searches were designed to identify any instances in which the Firm may have represented or been adverse to such individuals in their personal or professional capacities.
4.4 Manual Review of Active Matter Listings. In addition to the automated CMS search, a manual review was conducted of the active matter listings for the following Firm practice groups, which are most likely to have touchpoints with the parties and subject matter of the proposed transaction:
• Capital Markets
• Mining & Natural Resources
• Banking & Finance
• Mergers & Acquisitions (limited review — mining sector matters only)
• Litigation (limited review — mining, natural resources, and financial institution matters only)
The manual review was conducted by the undersigned (Audrey Zhou) with the assistance of the Firm's Conflicts Department.
4.5 Restricted List and Ethical Wall Register. The party names and individual names were cross-checked against the Firm's restricted list (which identifies entities and individuals as to which the Firm has standing restrictions on trading or engagement) and the Firm's ethical wall register (which identifies matters as to which information barriers have been erected). No hits were identified on either the restricted list or the ethical wall register in connection with any party to the proposed transaction.
4.6 Date of Search. The search described herein was conducted on January 14, 2022.
4.7 Search Conducted By. The search was conducted by Audrey Zhou, Lead Associate, Capital Markets, with the assistance of the Firm's Conflicts Department, under the supervision of Robert Adeyemi, Billing Partner, Capital Markets.
5. Search Results
Set forth below are the results of the conflict clearance search for each party or category of parties identified in Section 3.
5.1 Torchlight Mining Corp. and Subsidiaries
The CMS search returned no results for Torchlight Mining Corp. or any of its subsidiaries — Wolverine Lake Mining Ltd., Torchlight Milling & Processing Inc., or Torchlight U.S. Holdings, Inc. — in any capacity, whether as a current or former client, a prospective client, or an adverse party. The Firm has not previously represented TMC or any of its subsidiaries, and no Firm matter has involved TMC or any of its subsidiaries as an opposing, co-party, or third-party entity.
The individual name searches for Magnus Thornberg (CEO), Lianne Prokopchuk (CFO), Deepak Rathore (General Counsel & Corporate Secretary), Colleen Hébert (Treasurer), Ingrid Solheim (Board Chair), and Stavros Katsaros (General Manager, Mine Operations — WLML) returned no hits in any capacity — neither as current or former clients in personal matters nor as officers, directors, or principals of other entities represented by or adverse to the Firm.
The manual review of active matter listings in the Capital Markets, Mining & Natural Resources, and Banking & Finance practice groups similarly revealed no representations involving TMC or any of its subsidiaries, affiliates, officers, or directors.
Conclusion: Clear — no conflict identified.
5.2 Kelvantis Capital Markets LLC
The CMS search returned the following results for Kelvantis Capital Markets LLC:
(a) Matter No. 1039-00002 — C&H served as issuer's U.S. counsel to Meridian Copper Holdings Ltd. in connection with a $200,000,000 Rule 144A / Regulation S senior unsecured notes offering in September 2019. Kelvantis Capital Markets LLC served as one of the co-managers in that offering. C&H's role in that transaction was adverse to no party; rather, C&H acted on behalf of the issuer and Kelvantis was on the same side of the transaction (as an initial purchaser). The matter was closed in October 2019. No confidential information relating to Kelvantis was received or generated by C&H in connection with that engagement.
(b) Matter No. 1039-00002 — C&H served as issuer's U.S. counsel to Arcadia Resources Corp. in connection with a $175,000,000 Rule 144A high-yield notes offering in March 2020. Kelvantis Capital Markets LLC served as the book-running manager. Again, Kelvantis was not an adverse party; it was on the same side of the transaction as C&H's client. The matter was closed in April 2020. No confidential information relating to Kelvantis was received or generated by C&H in that engagement.
No representations of Kelvantis Capital Markets LLC as a direct client of the Firm were identified. No current or prior adverse representation against Kelvantis was identified. In the proposed transaction, Kelvantis is the lead initial purchaser and book-running manager and is not adverse to the Firm's proposed client, TMC; Kelvantis's interests in the offering are aligned with those of TMC to the extent that both seek the successful execution of the Notes offering.
The individual name searches for Julian Marchetti (Head of HY Origination, Metals & Mining) and Christine Yee (MD, Syndicate) returned no hits in any capacity.
Conclusion: No disqualifying conflict. The two prior matters identified (1039-00002 and 1039-00002) involved Kelvantis on the same side of the transaction as C&H's client and are non-adverse in nature. No further action is required.
5.3 Prestige Barrington & Co., Inc.
The CMS search returned no results for Prestige Barrington & Co., Inc. in any capacity — neither as a current or former client, a prospective client, nor an adverse party. No Firm matter has involved Prestige Barrington as an opposing, co-party, or third-party entity.
The individual name search for Keith O'Sullivan (MD, Debt Capital Markets) returned no hits.
Conclusion: Clear — no conflict identified.
5.4 Halcyon Securities Inc.
The CMS search returned no results for Halcyon Securities Inc. in any capacity — neither as a current or former client, a prospective client, nor an adverse party. No Firm matter has involved Halcyon as an opposing, co-party, or third-party entity.
The individual name search for Priya Mehrotra (Director, High Yield) returned no hits.
Conclusion: Clear — no conflict identified.
5.5 Northern Dominion Trust Company
The CMS search returned the following results for Northern Dominion Trust Company:
(a) Matter No. 1039-00002 — C&H served as issuer's U.S. counsel to Marlowe Asset Management Metals Inc. in connection with a $250,000,000 senior secured notes offering in June 2017. Northern Dominion Trust Company served as indenture trustee, collateral agent, and paying agent in that transaction. C&H did not represent Northern Dominion in that matter; Northern Dominion appeared solely in its fiduciary and administrative capacity as trustee and agent. The matter was closed in July 2017.
(b) Matter No. 1039-00002 — C&H served as lender's counsel to a syndicate of financial institutions in connection with a $500,000,000 term loan facility to Pacific Infrastructure Holdings LLC. Northern Dominion Trust Company served as administrative agent and collateral agent for the lending syndicate. C&H's representation was of the lender syndicate, not Northern Dominion in its individual capacity, although Northern Dominion was a member of the syndicate and the administrative agent. The matter was closed in February 2019.
(c) Matter No. 1039-00002 — C&H served as issuer's U.S. counsel to Brightstone Energy Corp. in connection with a $400,000,000 senior unsecured notes offering in August 2021. Northern Dominion Trust Company served as indenture trustee and paying agent. C&H did not represent Northern Dominion in that matter; Northern Dominion appeared solely in its fiduciary and administrative capacity. This matter remains open (post-closing compliance and registration rights matters pending).
In none of these matters did C&H represent Northern Dominion Trust Company as a direct client. In all instances, Northern Dominion appeared in a fiduciary or administrative capacity as indenture trustee, collateral agent, paying agent, or administrative agent. There is no current or prior adverse representation against Northern Dominion Trust Company in any litigation or other matter. Northern Dominion is not an opposing party in the proposed transaction; it will serve in its customary fiduciary and administrative capacities under the indenture.
The individual name search for Sandra Leung (VP, Corporate Trust) returned no hits.
Conclusion: No disqualifying conflict. The prior matters identified involve Northern Dominion in its standard institutional trustee/agent role and do not create an attorney-client relationship between C&H and Northern Dominion, nor do they give rise to any adversity.
5.6 Ridgeline Bank of Canada
The CMS search returned the following results for Ridgeline Bank of Canada:
(a) Matter No. 1039-00002 — C&H's Toronto office served as borrower's counsel to Kensington Forest Products Inc. in connection with a CAD $80,000,000 revolving credit facility in which Ridgeline Bank of Canada was the sole lender and administrative agent. The matter was closed in March 2016 and has been fully archived. The representation was on behalf of the borrower, not Ridgeline; Ridgeline was on the opposite side of the negotiating table but the engagement was a standard bilateral lending transaction. No adversity arose in that matter, which was completed on a fully consensual basis.
(b) Matter No. 1039-00002 — C&H's New York office served as lead lender's counsel to a syndicate of financial institutions in connection with a $325,000,000 senior secured credit facility to Nexus Industrial Corp. Ridgeline Bank of Canada was one of approximately twelve syndicate members (with a commitment of approximately $25,000,000). C&H's representation was of the lead arranging banks, and Ridgeline was a participating lender in the syndicate. The matter was closed in June 2020. No adversity with Ridgeline arose in that matter; Ridgeline's interests were aligned with those of the other syndicate members.
No current representation of Ridgeline Bank of Canada as a direct client was identified. No current or prior adverse litigation, arbitration, or regulatory matter against Ridgeline was identified.
In the proposed transaction, Ridgeline's existing revolving credit facility with TMC is to be repaid in full and terminated at or prior to the closing of the Notes offering. Proceeds from the offering will be used, in part, to repay the approximately CAD $140,000,000 drawn under the Existing RCF and to terminate the facility. C&H's role in this regard will be limited to coordinating the preparation or review of the payoff letter, lien release documentation, and related discharge mechanics — all of which are consensual and administrative in nature. The repayment and termination of the Existing RCF is not adverse to Ridgeline; Ridgeline will receive full repayment of all amounts outstanding under the facility, together with any accrued interest and breakage costs, and will deliver customary lien releases. This is a standard feature of refinancing transactions and does not create adversity between C&H's client (TMC) and Ridgeline.
The individual name search for Gavin Forde (Relationship Manager, Corporate Banking) returned no hits.
Conclusion: No disqualifying conflict. The prior matters involving Ridgeline are either fully closed and non-adverse or involved Ridgeline as a co-lender on the same side as C&H's client. The payoff and termination of the Existing RCF in the proposed transaction is consensual and does not give rise to adversity. No further action is required.