CALDERWOOD & HARKNESS LLP Attorneys at Law
450 Park Avenue, New York, NY 10022 199 Bay Street, Suite 4400, Toronto, Ontario M5L 1A9 One Embarcadero Center, Suite 2600, San Francisco, CA 94111
Telephone: (212) 555-7000
NEW MATTER MEMORANDUM
CONFIDENTIAL — INTERNAL ADMINISTRATION
Firm Standard New Matter Opening Form
Date: January 17, 2022
Prepared by: Vivienne St. Claire, Partner, Capital Markets Group
Submitted to: Office of the General Counsel; Conflicts & New Business Committee; Finance Department
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SECTION 1: MATTER INFORMATION
1.1 Matter Number
The above matter number has been provisionally assigned by the Finance Department pending final approval by the Conflicts & New Business Committee. All time entries, disbursements, and correspondence relating to this engagement should reference Matter No. 1039-00002 effective as of the date of this memorandum. Upon full committee approval, the matter number will be confirmed as permanent in the firm's billing and matter management systems.
1.2 Matter Description
Short Description: Torchlight Mining Corp. — $300,000,000 Senior Secured Notes Offering (Rule 144A / Regulation S)
Full Description:
Representation of Torchlight Mining Corp. ("TMC" or the "Company"), a Canadian publicly traded mining company listed on the Toronto Stock Exchange (TSX: TMC), as issuer's U.S. counsel in connection with the offering of $300,000,000 aggregate principal amount of 8.750% Senior Secured Notes due 2029 (the "Notes") pursuant to Rule 144A under the Securities Act of 1933, as amended (the "Securities Act"), and Regulation S thereunder (the "Offering"). The Notes will be issued pursuant to an indenture governed by the laws of the State of New York between TMC, as issuer, certain subsidiary guarantors, and Northern Dominion Trust Company, as indenture trustee and collateral agent.
The net proceeds of the Offering will be used to (i) fund the Phase II expansion of the Wolverine Lake nickel-copper mine located in Northern Ontario, Canada (the "Wolverine Lake Mine"), which is wholly owned by TMC through its subsidiary Wolverine Lake Mining Ltd., and (ii) repay and terminate the existing CAD $225,000,000 revolving credit facility (of which approximately CAD $140,000,000 is currently drawn) with Ridgeline Bank of Canada, as administrative agent and sole lender. The Notes will be senior secured obligations of TMC, secured by a first-priority lien on substantially all assets of the Company and the subsidiary guarantors, including mining rights, mineral claims, equipment, inventory, receivables, and other personal and real property interests in both Canada and the United States.
This engagement encompasses the full spectrum of transactional work customarily associated with a high-yield notes offering of this size and complexity, including the preparation of offering documents, transaction agreements, security documentation, due diligence review, legal opinions, and closing mechanics, as more fully described in Section 4 of this memorandum.
1.3 Matter Type and Industry Classification
For purposes of the firm's internal industry classification and marketing databases, this matter should be coded under both "Capital Markets — High-Yield" and "Natural Resources — Mining" practice categories. The transaction involves a Canadian issuer accessing the U.S. 144A/Regulation S market, which also implicates the firm's cross-border and international capital markets competencies.
SECTION 2: CLIENT INFORMATION
2.1 Client Identity
Torchlight Mining Corp. is a mid-cap mining company principally engaged in the exploration, development, and production of nickel and copper deposits in Canada. The Company's primary producing asset is the Wolverine Lake Nickel-Copper Mine in Northern Ontario, which commenced commercial production in 2015 and is currently in the process of a significant Phase II expansion. TMC was incorporated under the CBCA and has been listed on the Toronto Stock Exchange since 2012. The Company does not maintain a listing on any U.S. securities exchange and has no reporting obligations under the Securities Exchange Act of 1934, as amended. TMC qualifies as a "foreign private issuer" as defined in Rule 405 under the Securities Act.
2.2 Key Client Contacts
Primary Contact:
Deepak Rathore General Counsel & Corporate Secretary Torchlight Mining Corp. 2200 – 400 Burrard Street Vancouver, British Columbia V6C 3A6, Canada Telephone: (604) 555-2200
Email: drathore@torchlightmining.com
Called to the Ontario Bar: 1998
Mr. Rathore will serve as the primary day-to-day contact for all legal and transactional matters arising in connection with this engagement. All substantive correspondence, draft documents, and legal memoranda should be directed to Mr. Rathore in the first instance, with copies to the additional contacts listed below as appropriate.
Additional Contacts:
Magnus Thornberg Chief Executive Officer Torchlight Mining Corp. Telephone: (604) 555-2201
Email: mthornberg@torchlightmining.com
Lianne Prokopchuk, CPA, CFA Chief Financial Officer Torchlight Mining Corp. Telephone: (604) 555-2205
Email: lprokopchuk@torchlightmining.com
Colleen Hébert, CPA Treasurer Torchlight Mining Corp. Telephone: (604) 555-2210
Email: chebert@torchlightmining.com
Mr. Thornberg, as CEO, will be involved in management presentations to prospective investors and will participate in key decision-making calls with respect to deal terms and pricing. Ms. Prokopchuk will be the principal contact for financial due diligence, the preparation of the financial information sections of the Offering Memorandum, and coordination with the Company's auditors. Ms. Hébert will be responsible for funds flow mechanics, payoff coordination with Ridgeline Bank of Canada, and treasury-related closing deliverables.
Board Chair:
Ingrid Solheim (independent director) Chair of the Board of Directors Torchlight Mining Corp.
Ms. Solheim, as Chair of the Board, may be involved in board authorization and approval processes related to the Offering. Any direct communications with Ms. Solheim should be coordinated through Mr. Rathore.
2.3 Client Financial Profile (for Engagement Risk Assessment)
The following financial information has been compiled for purposes of the firm's standard engagement risk assessment. Financial data is derived from TMC's publicly available filings on SEDAR and has been supplemented by information provided by the Company's management.
Based on the financial profile summarized above, the engagement risk assessment indicates that TMC is a substantial operating company with a market capitalization approaching CAD $2 billion and meaningful cash flow generation from its mining operations. The Company's FY 2021 Adjusted EBITDA of approximately CAD $189,700,000 represents an EBITDA margin of approximately 31%, which is consistent with industry benchmarks for mid-cap base metals producers. The proposed Offering represents a leverage ratio of approximately 1.6x Adjusted EBITDA (on a pro forma basis after giving effect to the refinancing of the Ridgeline revolving facility), which is within the range typically associated with single-B rated high-yield mining credits.
The Company's ability to service the fees associated with this engagement is not a concern based on the foregoing financial profile. Moreover, the engagement letter provides for monthly invoicing with standard 30-day payment terms, and the completion fee component aligns our compensation with the successful closing of the transaction.
2.4 Existing Client Relationship
Torchlight Mining Corp. is a new client of Calderwood & Harkness LLP. The firm has not previously represented TMC or any of its subsidiaries in any capacity. The Company was referred to the firm by Julian Marchetti of Kelvantis Capital Markets LLC, the lead initial purchaser for the Offering, based on our recognized expertise in high-yield mining and natural resources transactions.
A comprehensive conflict check was initiated on January 12, 2022, and a Conflict Check Memorandum was prepared and finalized on January 14, 2022 (a copy of which is filed separately as Attachment B to this memorandum). The conflict check was conducted using the firm's standard protocols, including searches of the firm's conflicts database for the Company, all identified subsidiaries, directors, officers, and other transaction participants identified at the time of the check. The results of the conflict check have been reviewed by the undersigned and by the Office of the General Counsel.
Conflict Clearance Confirmation: No disqualifying conflicts have been identified. The conflict check memorandum notes certain prior and current representations of transaction participants (including limited prior work for Ridgeline Bank of Canada on unrelated lending matters in the firm's Toronto office), but in each case the nature of the prior or current representation has been analyzed and determined not to give rise to a disqualifying conflict of interest under the applicable rules of professional conduct. Appropriate ethical screens have been recommended and implemented as set forth in the Conflict Check Memorandum.
SECTION 3: ENGAGEMENT TEAM
3.1 Responsible Partner
Ms. St. Claire will serve as the responsible partner for this engagement, with overall supervisory responsibility for the quality and timeliness of all work product, client relationship management, and coordination among the various members of the engagement team and external counsel. Ms. St. Claire has over 20 years of experience in high-yield debt offerings, with particular expertise in the mining, energy, and natural resources sectors. She has served as lead partner on over 40 high-yield transactions aggregating in excess of $25 billion in principal amount.
3.2 Billing Partner
Mr. Adeyemi will serve as the billing partner for this engagement. In addition to his billing responsibilities, Mr. Adeyemi will provide substantive support on the Indenture drafting and covenant analysis, an area in which he has particular depth of experience. Mr. Adeyemi has extensive familiarity with incurrence-based covenant packages for below-investment-grade mining credits and has been involved in the negotiation of high-yield indentures in numerous comparable transactions.
3.3 Associates
Lead Associate:
Audrey Zhou Capital Markets Group 450 Park Avenue, New York, NY 10022 Telephone: (212) 555-7244
Email: azhou@calderwoodharkness.com
Ms. Zhou, a sixth-year associate in the Capital Markets Group, will serve as the lead associate on this engagement. She will be primarily responsible for day-to-day management of the transaction process, including coordination of drafting sessions, management of the due diligence review process, preparation of closing checklists and mechanics, and acting as the principal point of contact for opposing counsel on routine matters. Ms. Zhou has worked on numerous 144A/Regulation S offerings and is familiar with cross-border transaction structures involving Canadian issuers.
Working Associate:
Brendan Walsh Capital Markets Group 450 Park Avenue, New York, NY 10022 Telephone: (212) 555-7261
Email: bwalsh@calderwoodharkness.com
Mr. Walsh, a third-year associate in the Capital Markets Group, will provide additional associate support on this engagement, with a particular focus on due diligence review (including corporate, material contracts, and environmental/regulatory diligence), preparation of officers' and secretary's certificates, and research on specific legal issues that may arise during the course of the transaction.
3.4 Other Anticipated Firm Resources
In light of the cross-border nature of this transaction and the need for coordination on certain Canadian law matters, including mine site due diligence, the engagement team anticipates seeking support from Calderwood & Harkness LLP's Toronto office, located at 199 Bay Street, Suite 4400, Toronto, Ontario M5L 1A9, Canada. The Toronto office may be asked to assist with:
(a) coordination with Pendleton Ross LLP (issuer's Canadian counsel) on matters relating to CBCA corporate governance, Ontario corporate law, and Canadian securities regulatory requirements;
(b) logistical and substantive support for the planned due diligence visit to the Wolverine Lake mine site in Northern Ontario, including review of provincial mining permits, environmental compliance documentation, and surface and mineral rights instruments held at the Thunder Bay Land Registry Office;
(c) review of Canadian General Security Agreement collateral descriptions and Canadian PPSA filing requirements; and
(d) assistance with any other Canadian law or practice matters that may arise in the course of the engagement, subject to the understanding that Pendleton Ross LLP will serve as lead Canadian counsel and will provide all Canadian law opinions.
The involvement of the Toronto office will be coordinated through the responsible partner and billed under the same matter number. Any partners or associates from the Toronto office who will perform substantive work on this matter will be identified in a supplemental staffing memorandum and will be subject to the standard conflict clearance procedures applicable to this engagement.
SECTION 4: SCOPE OF REPRESENTATION
4.1 Role
Calderwood & Harkness LLP has been retained to act as issuer's U.S. counsel to Torchlight Mining Corp. in connection with the Rule 144A / Regulation S offering of the $300,000,000 aggregate principal amount of 8.750% Senior Secured Notes due 2029 (the "Offering"). In this capacity, the firm will serve as lead transactional counsel for the Company on all aspects of the Offering governed by, or touching upon, U.S. federal securities law, the laws of the State of New York, and the laws of the State of Delaware (with respect to the Delaware-incorporated subsidiary guarantor).
4.2 Principal Work Streams
The scope of representation encompasses the following principal work streams:
1. Offering Memorandum. Drafting and negotiation of the Preliminary Offering Memorandum and the Final Offering Memorandum (collectively, the "Offering Memorandum" or "OM"), including all sections customary for a high-yield Rule 144A/Regulation S offering by a Canadian mining issuer, such as: summary, risk factors, use of proceeds, capitalization, selected financial data, management's discussion and analysis of financial condition and results of operations, business and properties (including mine plan and reserve/resource summary), management and governance, description of the Notes, description of collateral, description of other indebtedness, certain relationships and related party transactions, taxation (U.S. and Canadian), plan of distribution, transfer restrictions, and legal matters. The firm will coordinate with the Company's management, auditors, and independent engineer to ensure that the factual and financial disclosures contained in the Offering Memorandum are accurate and complete in all material respects.
2. Purchase Agreement. Drafting and negotiation of the Purchase Agreement (the "Purchase Agreement") among the Company, the subsidiary guarantors, and the initial purchasers (Kelvantis Capital Markets LLC, as lead initial purchaser and book-running manager, Prestige Barrington & Co., Inc., and Halcyon Securities Inc.), setting forth the terms and conditions upon which the initial purchasers will purchase the Notes from the Company, including representations and warranties, covenants, conditions to closing, and indemnification provisions.
3. Indenture. Drafting and negotiation of the Indenture (the "Indenture") among the Company, as issuer, the subsidiary guarantors, and Northern Dominion Trust Company, as indenture trustee and collateral agent, including customary provisions relating to the terms of the Notes, restrictive covenants (including incurrence-based debt covenants, restricted payments covenants, asset sale covenants, and affiliate transaction covenants), optional and mandatory redemption provisions, events of default and remedies, and supplemental indenture mechanics.
4. Subsidiary Guarantees. Drafting of guarantee provisions (either as part of the Indenture or as supplemental instruments) for each of the following subsidiary guarantors:
(a) Wolverine Lake Mining Ltd. (corporation incorporated under the laws of the Province of Ontario, Canada);
(b) Torchlight Milling & Processing Inc. (corporation incorporated under the laws of the Province of Ontario, Canada); and
(c) Torchlight U.S. Holdings, Inc. (corporation incorporated under the laws of the State of Delaware, USA).
The guarantees will be full, unconditional, and joint and several guarantees of the Company's obligations under the Notes and the Indenture, subject to customary limitations, including fraudulent conveyance savings provisions.
5. Security Documents and Collateral Agency Agreement. Drafting and negotiation of the security documents establishing a first-priority lien on substantially all assets of the Company and the subsidiary guarantors, including:
(a) a U.S. Security Agreement granting a security interest in personal property of Torchlight U.S. Holdings, Inc. located in the United States, with related UCC-1 financing statements to be filed in the State of Delaware;
(b) a Canadian General Security Agreement granting a security interest in personal property of the Company and the Canadian subsidiary guarantors, with related PPSA registrations to be filed in the applicable Canadian provinces (principally Ontario and British Columbia);
(c) a Collateral Agency Agreement among the Company, the subsidiary guarantors, Northern Dominion Trust Company (as collateral agent), and the indenture trustee, governing the administration, enforcement, and distribution of proceeds of the collateral; and
(d) any supplemental security instruments required to perfect the security interests in specific categories of collateral, including mining rights, mineral claims, and real property interests, in coordination with Canadian counsel.
6. Registration Rights Agreement. Drafting and negotiation of the Registration Rights Agreement (the "Registration Rights Agreement") providing for the Company's obligation to either (i) file a registration statement with the U.S. Securities and Exchange Commission (the "SEC") relating to an exchange offer for the Notes, or (ii) in the alternative, file a shelf registration statement with the SEC for the resale of the Notes, in each case within the time periods specified therein. The Registration Rights Agreement will include customary provisions regarding additional interest in the event of a registration default.
7. Due Diligence. Coordination and conduct of due diligence in connection with the Offering, including:
(a) corporate due diligence (organizational documents, board and shareholder resolutions, good standing certificates, officers' and directors' questionnaires);
(b) material contracts review (mining licenses, royalty agreements, offtake agreements, supply agreements, joint venture agreements, if any, and other material contracts);
(c) mining rights due diligence (Ontario mining claims, mineral leases, surface rights, Crown land permits, and related instruments);
(d) environmental and regulatory due diligence (environmental permits, compliance history, closure plans, reclamation obligations, and regulatory correspondence);
(e) litigation due diligence (pending and threatened litigation, regulatory proceedings, and environmental claims); and
(f) management interviews and due diligence sessions.
8. Legal Opinions. Preparation and delivery of U.S. legal opinions in connection with the closing of the Offering, including:
(a) a New York law opinion addressing the due authorization, execution, delivery, and enforceability of the Notes, the Indenture, and the other transaction documents governed by New York law;
(b) a Delaware law opinion addressing the due organization and good standing of Torchlight U.S. Holdings, Inc. and the due authorization, execution, and delivery of the transaction documents by such entity; and
(c) such other customary opinions as may be required by the initial purchasers and their counsel.
9. Coordination with Canadian Counsel. Coordination with Pendleton Ross LLP (issuer's Canadian counsel, lead partner Marie-Claire Bouchard) on all matters relating to Canadian corporate law (including CBCA corporate governance, board and shareholder approval requirements, and subsidiary guarantee authority), Canadian securities law compliance (including TSX notification requirements and any applicable exemptive relief), and the Canadian components of the security package.
10. Closing Mechanics. Management of the closing process, including the preparation and delivery of:
(a) officer's certificates and secretary's certificates on behalf of the Company and each subsidiary guarantor;
(b) bring-down certificates (compliance and good standing);
(c) funds flow memorandum detailing the application of the net proceeds of the Offering;
(d) payoff letter coordination with Ridgeline Bank of Canada for the repayment and termination of the existing revolving credit facility;
(e) DTC letter of representations in connection with the book-entry settlement of the Notes through The Depository Trust Company; and
(f) all other customary closing deliverables.
11. 10b-5 / Negative Assurance Analysis. The firm will conduct a customary 10b-5 analysis in connection with the Offering and will provide a negative assurance letter (commonly referred to as a "10b-5 letter" or "negative assurance letter") to the initial purchasers, confirming that, based on the firm's participation in the preparation of the Offering Memorandum and the due diligence process, nothing has come to the attention of the lawyers at the firm who participated in the preparation of the Offering Memorandum that causes them to believe that the Offering Memorandum, as of its date and as of the date of such letter, contained or contains an untrue statement of a material fact or omitted or omits to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.
4.3 Matters Outside Scope
The following matters are expressly outside the scope of Calderwood & Harkness LLP's engagement and will be handled by other advisors retained by the Company or the initial purchasers, as applicable:
Canadian Securities Law Opinions. All opinions relating to Canadian corporate law, Canadian securities law, and Ontario corporate law will be provided by Pendleton Ross LLP, issuer's Canadian counsel, under the direction of lead partner Marie-Claire Bouchard. Calderwood & Harkness LLP will coordinate with Pendleton Ross LLP on cross-border matters but will not render any opinions on matters of Canadian law.
Auditor Comfort Letters. The auditor comfort letters (both "circle-up" and "bring-down" letters) required by the initial purchasers will be prepared and delivered by Aldgate Thornton LLP, the Company's independent auditors, under the direction of engagement partner Francesca Hui, CPA, CA. Calderwood & Harkness LLP will review the comfort letters for form and completeness but will not be responsible for the preparation or content thereof.
Independent Engineer's Report. The independent technical report relating to the Wolverine Lake Mine (including mineral reserve and mineral resource estimates, mine plan review, and capital cost analysis for the Phase II expansion) will be prepared and delivered by Cascade Technical Advisors Inc., under the direction of lead engineer Dr. Elaine Whitaker, P.Eng. This report will be included or summarized in the Offering Memorandum. While Calderwood & Harkness LLP will review the report for purposes of the Offering Memorandum disclosure and the due diligence process, the firm will not be responsible for the technical accuracy of the mining, geological, or engineering information contained therein.
Rating Agency Process. The rating agency process, including the preparation of rating agency presentations, the conduct of rating agency meetings, and the negotiation of rating agency terms, will be managed by the Company and the initial purchasers in their direct engagement with Northmark Ratings Group, Inc. and Creston Analytics, Inc. Calderwood & Harkness LLP may provide input on legal and structural matters relevant to the rating analysis but will not manage or direct the rating agency process.
SECTION 5: COUNTERPARTIES AND OTHER TRANSACTION PARTICIPANTS
5.1 Initial Purchasers
The Notes will be sold by the Company to a group of initial purchasers in a firm commitment underwriting pursuant to the Purchase Agreement, for resale to qualified institutional buyers pursuant to Rule 144A and to non-U.S. persons in offshore transactions pursuant to Regulation S.
Lead Initial Purchaser / Book-Running Manager:
Kelvantis Capital Markets LLC Delaware limited liability company; FINRA-registered broker-dealer 599 Lexington Avenue, 38th Floor New York, NY 10022
Head of High Yield Origination, Metals & Mining: Julian Marchetti Managing Director, Syndicate: Christine Yee
Kelvantis Capital Markets LLC will serve as the lead initial purchaser and sole book-running manager for the Offering. Kelvantis will be responsible for the structuring, marketing, and pricing of the Notes, and will coordinate the activities of the co-managers. Mr. Marchetti will serve as the primary business contact at Kelvantis for deal team coordination, while Ms. Yee will lead the syndicate and allocation process.
Co-Manager:
Prestige Barrington & Co., Inc. Delaware corporation; FINRA-registered broker-dealer 1285 Avenue of the Americas, 22nd Floor New York, NY 10019
Managing Director, Debt Capital Markets: Keith O'Sullivan
Co-Manager:
Halcyon Securities Inc. New York corporation; FINRA-registered broker-dealer 200 Park Avenue, Suite 3100 New York, NY 10166
Director, High Yield: Priya Mehrotra
5.2 Indenture Trustee / Collateral Agent
Northern Dominion Trust Company National banking association (USA) 101 Barclay Street, 7th Floor New York, NY 10286
Vice President, Corporate Trust: Sandra Leung
Northern Dominion Trust Company will act as indenture trustee under the Indenture and as collateral agent under the Collateral Agency Agreement and the related security documents. All communications with Northern Dominion should be directed through Sandra Leung in the Corporate Trust department.
5.3 Existing Lender
Ridgeline Bank of Canada Schedule I bank under the Bank Act (Canada) 200 Bay Street, Suite 3300 Toronto, Ontario M5J 2J5, Canada
Relationship Manager: Gavin Forde
Ridgeline Bank of Canada is the administrative agent and sole lender under the Company's existing CAD $225,000,000 revolving credit facility, of which approximately CAD $140,000,000 is currently drawn. The revolving credit facility will be repaid in full and terminated at the closing of the Offering. Calderwood & Harkness LLP will coordinate with Ridgeline (and its counsel, if any) on the preparation and delivery of a payoff letter and the release of any existing liens in connection with the termination of the revolving facility.
5.4 Subsidiary Guarantors
The Notes will be guaranteed on a senior secured basis by each of the following subsidiaries of the Company:
Wolverine Lake Mining Ltd.
Corporation incorporated under the laws of the Province of Ontario, Canada 44 Lakeshore Boulevard Wolverine Lake, Ontario P0L 1R0, Canada General Manager, Mine Operations: Stavros Katsaros
Wolverine Lake Mining Ltd. ("WLML") is the direct, wholly-owned subsidiary of TMC that holds all mining rights, mineral claims, surface rights, and operating permits relating to the Wolverine Lake Nickel-Copper Mine. WLML is the principal operating subsidiary and the holder of the Company's most significant assets.
Torchlight Milling & Processing Inc.
Corporation incorporated under the laws of the Province of Ontario, Canada 44 Lakeshore Boulevard Wolverine Lake, Ontario P0L 1R0, Canada
Torchlight Milling & Processing Inc. ("TMPI") is a wholly-owned subsidiary of TMC that owns and operates the milling and processing facilities located at the Wolverine Lake mine site. TMPI processes all ore extracted by WLML and produces nickel and copper concentrates for sale to third-party smelters and refiners.
Torchlight U.S. Holdings, Inc.
Corporation incorporated under the laws of the State of Delaware, USA 1209 Orange Street Wilmington, Delaware 19801, USA Employer Identification Number (EIN): 84-3921057
Torchlight U.S. Holdings, Inc. ("TUSHI") is a wholly-owned subsidiary of TMC organized under Delaware law. TUSHI serves as the Company's U.S. holding vehicle and is used for, among other things, the management of U.S. dollar-denominated treasury activities and the engagement of U.S. service providers. TUSHI does not currently conduct significant independent operations but will be a guarantor of the Notes.
5.5 Opposing / Other Counsel
Initial Purchasers' U.S. Counsel:
Clairmont & Voss LLP 51 West 52nd Street New York, NY 10019
Lead Partner: Harrison Voss Associate: Nadia Petrov Matter Reference: 1039-00002
Clairmont & Voss LLP has been retained by the initial purchasers to act as their U.S. counsel in connection with the Offering. We expect to work closely with Mr. Voss and Ms. Petrov on the negotiation of the Purchase Agreement, the Indenture, and other transaction documents, as well as on due diligence matters. Mr. Voss is a well-known practitioner in the high-yield space and the firm has worked with him on numerous prior transactions.
Initial Purchasers' Canadian Counsel:
Greystone & Whitfield LLP 2900 – 100 King Street West Toronto, Ontario M5X 1B8, Canada
Lead Partner: David Shin
Greystone & Whitfield LLP has been retained by the initial purchasers to provide Canadian legal advice in connection with the Offering. Their scope of work is expected to include Canadian securities law due diligence, review of the Canadian security documents, and delivery of a Canadian law opinion addressed to the initial purchasers.
Issuer's Canadian Counsel:
Pendleton Ross LLP 3400 – 1 First Canadian Place Toronto, Ontario M5X 1A4, Canada
Lead Partner: Marie-Claire Bouchard
Pendleton Ross LLP has been retained by the Company to act as its Canadian counsel in connection with the Offering. Pendleton Ross will be responsible for all Canadian corporate law matters, Canadian securities law compliance, the Canadian components of the security package, and the delivery of Canadian law opinions. Calderwood & Harkness LLP will coordinate closely with Ms. Bouchard and her team throughout the transaction.
5.6 Other Advisors
Auditors:
Aldgate Thornton LLP 700 – 1055 Dunsmuir Street Vancouver, British Columbia V7X 1L4, Canada
Engagement Partner: Francesca Hui, CPA, CA
Aldgate Thornton LLP serves as the Company's independent auditor and will be responsible for delivering the auditor comfort letters required by the initial purchasers in connection with the Offering.
Independent Engineer:
Cascade Technical Advisors Inc. 1020 – 8th Avenue SW, Suite 400 Calgary, Alberta T2P 1J2, Canada
Lead: Dr. Elaine Whitaker, P.Eng.
Cascade Technical Advisors Inc. has been retained by the Company to prepare an independent technical report on the Wolverine Lake Mine, including mineral reserve and resource estimates, mine plan review, and capital cost estimates for the Phase II expansion. The technical report will be prepared in accordance with the standards of National Instrument 43-101 and will be included or summarized in the Offering Memorandum.
Rating Agencies:
Northmark Ratings Group, Inc. 250 Greenwich Street New York, NY 10007
Creston Analytics, Inc. 55 Water Street New York, NY 10041
The Company has engaged both Northmark Ratings Group, Inc. and Creston Analytics, Inc. to provide credit ratings for the Notes. Based on preliminary discussions between the Company, the initial purchasers, and the rating agencies, the expected ratings are B1 (Northmark) and B+ (Creston).
SECTION 6: FEE ARRANGEMENT AND BUDGET
6.1 Fee Structure
The fee arrangement for this engagement has been negotiated with the Company's General Counsel, Deepak Rathore, and is reflected in the engagement letter dated January 17, 2022 (filed separately as Attachment A). The structure consists of blended hourly rates with a success-based completion fee, as described below.
The foregoing rates represent a blended rate structure applicable to all partners and associates who work on this matter, irrespective of seniority, and reflect a negotiated discount from the firm's standard hourly rates in recognition of the anticipated size and scope of the engagement and the potential for an ongoing client relationship with Torchlight Mining Corp.
6.2 Fee Estimate
Based on our experience with comparable high-yield transactions in the mining and natural resources sector, and taking into account the anticipated complexity of this Offering (including the cross-border nature of the transaction, the multi-jurisdictional collateral package, and the number of subsidiary guarantors), the estimated legal fees for Calderwood & Harkness LLP's engagement are:
Estimated Legal Fees: $1,200,000 – $1,450,000
This estimate includes all partner and associate time for the principal work streams described in Section 4.2 above but excludes the completion fee described in Section 6.3 below and disbursements described in Section 6.4 below. The estimate assumes a transaction timeline broadly consistent with the milestones set forth in Section 7 and does not account for material delays, restructuring of the transaction terms, or other extraordinary circumstances that may cause actual fees to exceed the estimated range. In the event that actual fees are expected to materially exceed the high end of the estimated range, the responsible partner will promptly notify the client and seek authorization prior to incurring additional fees.
6.3 Completion Fee
In addition to the hourly fees described above, the Company has agreed to pay a success-based completion fee in the amount of:
Completion Fee: $150,000
The completion fee is payable upon the closing of the Offering and the issuance of the Notes. In the event that the Offering is not consummated for any reason, the completion fee will not be payable, but the Company will remain responsible for all hourly fees and disbursements incurred through the date of termination or abandonment of the engagement.
6.4 Expense Cap
Disbursements and out-of-pocket expenses incurred by the firm in connection with this engagement (including, without limitation, filing fees, printing costs, document reproduction, database research charges, courier and overnight delivery charges, and local travel) are subject to a cap of:
Expense Cap: $75,000
The expense cap expressly excludes travel costs associated with the anticipated due diligence visit to the Wolverine Lake mine site in Northern Ontario, including airfare, ground transportation (Thunder Bay, Ontario and vicinity), lodging, and meals. Such travel expenses will be billed at cost and are subject to the Company's reasonable prior approval.
6.5 Billing Arrangements
The firm will render invoices on a monthly basis. All invoices will be directed to:
Deepak Rathore General Counsel & Corporate Secretary Torchlight Mining Corp. 2200 – 400 Burrard Street Vancouver, British Columbia V6C 3A6, Canada
Email: drathore@torchlightmining.com
Payment terms are net 30 days from the date of invoice, as set forth in the engagement letter dated January 17, 2022. The engagement letter contains the full terms and conditions governing the fee arrangement, including provisions relating to scope limitations, termination, dispute resolution, and interest on overdue amounts. A copy of the fully executed engagement letter is filed separately as Attachment A to this memorandum.
SECTION 7: ANTICIPATED TIMELINE
7.1 Key Milestones
The following table sets forth the anticipated timeline for the Offering, based on preliminary discussions with the Company's management and the initial purchasers. All dates are subject to change based on market conditions, regulatory developments, and the progress of the due diligence and documentation process. The engagement team will maintain an updated transaction timetable and circulate revised versions to all working group participants on a regular basis.
The foregoing timeline reflects an approximately 12-week execution period from engagement opening to closing, which is consistent with the customary timeline for a high-yield notes offering of this size and complexity. The timeline assumes no material delays resulting from regulatory issues, adverse market conditions, or changes to the transaction structure.
7.2 Post-Closing Obligations
The engagement team should be aware of the following post-closing obligations that will arise under the transaction documents, certain of which may require ongoing legal support from the firm: