1039-00003 · Torchlight Mining Corp · Credit Facility & Financial Impact

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COVENANT COMPLIANCE CERTIFICATE — ENVIRONMENTAL LIABILITIES

Delivered pursuant to Section 7.02(d) of the Credit Agreement dated as of March 15, 2022, as amended by the First Amendment dated September 22, 2023, and as further amended by the Second Amendment dated June 14, 2024 (as so amended, the "Credit Agreement"),

among

TORCHLIGHT MINING CORP., as Borrower,

THE LENDERS PARTY THERETO,

and

HARBORSTONE NATIONAL BANK, N.A., as Administrative Agent

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Section 1: Recitals and Introductory Statements

The undersigned, Carolyn Bracebridge, in her capacity as Chief Financial Officer of Torchlight Mining Corp. ("TMC" or the "Borrower"), hereby delivers this Covenant Compliance Certificate (this "Certificate") to Harborstone National Bank, N.A., in its capacity as Administrative Agent (the "Administrative Agent"), pursuant to Section 7.02(d) of that certain Credit Agreement dated as of March 15, 2022, as amended by the First Amendment dated September 22, 2023, and as further amended by the Second Amendment dated June 14, 2024 (as so amended, the "Credit Agreement"), among the Borrower, the Lenders party thereto, and the Administrative Agent.

This Certificate is being delivered in connection with the Borrower's environmental liability covenant set forth in Section 8.14 of the Credit Agreement (the "Environmental Liability Covenant"). The Environmental Liability Covenant requires that the Borrower's aggregate disclosed and undisclosed environmental liabilities, as determined in accordance with the methodology set forth in Schedule 8.14 to the Credit Agreement, shall not at any time exceed twenty-five percent (25%) of the Borrower's Consolidated Net Tangible Assets ("CNTA") as most recently reported in the Borrower's quarterly or annual financial statements delivered to the Administrative Agent pursuant to Section 7.01 of the Credit Agreement.

Capitalized terms used but not otherwise defined herein shall have the respective meanings ascribed to such terms in the Credit Agreement. In the event of any conflict between the definitions set forth herein and those set forth in the Credit Agreement, the definitions in the Credit Agreement shall govern.

The reporting period to which this Certificate relates is the fiscal quarter ended September 30, 2024, which corresponds to the Borrower's most recently filed quarterly report on Form 10-Q with the U.S. Securities and Exchange Commission and the corresponding continuous disclosure filings with the Canadian securities regulatory authorities. The financial data and reserve balances set forth herein are derived from such quarterly report, as updated to reflect the consent decree obligations finalized as of February 3, 2025, and the subsequent lodging of the consent decree with the United States District Court for the District of Montana on February 19, 2025, as more fully described in Section 2 below.

The Borrower is delivering this Certificate on an expedited basis in light of the significance of the consent decree obligations and their potential impact on the Borrower's environmental liability profile under the Credit Agreement. The Borrower will continue to provide updated certificates in accordance with the delivery schedule set forth in Section 7.02(d) of the Credit Agreement, including in connection with the filing of the Borrower's annual financial statements for the fiscal year ended December 31, 2024.

Section 2: Background — Consent Decree and Related Obligations

2.1 Litigation Background

On January 22, 2024, the United States of America, acting through the United States Department of Justice on behalf of the United States Environmental Protection Agency ("EPA"), and the State of Montana, acting through the Montana Department of Environmental Quality, filed a complaint in the United States District Court for the District of Montana, Missoula Division, styled United States of America and State of Montana v. Torchlight Mining Corp. et al., Civil Action No. 9:24-cv-00087-DWM (the "Action"). The Action was assigned to the Honorable Donald W. Molloy, Senior United States District Judge. The complaint alleged violations of the Clean Water Act (33 U.S.C. §§ 1251 et seq.), the Resource Conservation and Recovery Act ("RCRA") (42 U.S.C. §§ 6901 et seq.), and the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA") (42 U.S.C. §§ 9601 et seq.) at four facilities operated or formerly operated by the Borrower and certain of its subsidiaries and affiliates.

2.2 The Consent Decree

Following extensive negotiations among the parties, which included multiple rounds of mediation before the Honorable Jeremiah C. Lynch, United States Magistrate Judge, the parties reached a comprehensive settlement. The resulting consent decree (the "Consent Decree") was executed by all parties as of February 3, 2025. The Consent Decree was lodged with the Court on February 19, 2025, and is currently subject to a thirty (30)-day public comment period pursuant to 28 C.F.R. § 50.7 and Section 7003(d) of RCRA, during which time the United States Department of Justice will receive and consider public comments before requesting entry of the Consent Decree by the Court.

Assuming no material objections are raised during the public comment period and the Court enters the Consent Decree without modification, the Consent Decree is expected to become a final, enforceable order of the Court on or about June 14, 2025. The Borrower's counsel, Calderwood & Harkness LLP, has advised that while the Court retains discretion to modify or reject the Consent Decree, the likelihood of entry without material modification is high based on precedent and the absence of any known opposition.

2.3 Affected Facilities

The Consent Decree resolves the alleged violations at the following four facilities (each, an "Affected Facility" and collectively, the "Affected Facilities"):

(a) Ridgecrest Copper-Molybdenum Mine — 14200 Ridgecrest Mine Road, Drummond, Granite County, Montana 59832. An active open-pit copper-molybdenum mining operation with associated concentrator, tailings storage facility, and water treatment infrastructure. The Ridgecrest facility has been in continuous operation since 1978 and is currently one of the Borrower's largest producing assets. The alleged violations at Ridgecrest principally relate to unpermitted discharges of process water containing elevated levels of copper, arsenic, and selenium into Flint Creek and its tributaries, as well as RCRA-related claims concerning the management and closure of certain waste rock storage areas.

(b) Gallatin Chemical Works — 8800 Industrial Park Lane, Belgrade, Gallatin County, Montana 59714. A specialty chemical manufacturing facility operated by Torchlight Specialty Chemicals, Inc., a wholly owned subsidiary of the Borrower. The alleged violations at Gallatin relate to the unpermitted release of volatile organic compounds and heavy metals into groundwater underlying the facility, as well as violations of RCRA permit conditions governing the storage and treatment of hazardous wastes generated during chemical production processes.

(c) Bonanza Creek Gold Mine — County Road 447, Mile Marker 12, Lander County, Nevada 89820. A former open-pit and underground gold mining operation that ceased active mining in 2016 but remains in an active reclamation phase. The alleged violations at Bonanza Creek relate primarily to acid mine drainage from historical waste rock dumps and inadequate closure of heap leach pads, resulting in alleged contamination of surface water and groundwater in the Bonanza Creek drainage basin.

(d) Kanawha Bend Chemical Plant — 2200 Chemical Valley Road, Institute, Kanawha County, West Virginia 25112. A former chemical manufacturing facility that was acquired by the Borrower through its 2015 acquisition of Appalachian Chemical Holdings, Inc. The facility ceased active operations in 2018 and is currently undergoing decommissioning. The alleged violations at Kanawha Bend include CERCLA response cost liability arising from an EPA emergency response action conducted in June 2020, as well as RCRA corrective action obligations related to contaminated soils and groundwater at the facility.

2.4 Defendant Entities

The Consent Decree names the following entities as defendants (collectively, the "Settling Defendants"):

(a) Torchlight Mining Corp. (the Borrower);

(b) Torchlight Mining (U.S.) Inc., a Delaware corporation (EIN: 83-2047156), which serves as the Borrower's principal U.S. operating subsidiary;

(c) Torchlight Specialty Chemicals, Inc., a Delaware corporation (EIN: 47-3819204), which operates the Gallatin Chemical Works facility;

(d) Ridgecrest Mine Holdings, LLC, a Montana limited liability company (Montana Secretary of State ID: E1042738), which holds the mining claims and related property interests at the Ridgecrest facility; and

(e) Bonanza Creek Mining, LLC, a Nevada limited liability company (Nevada Secretary of State Entity No.: E0518294731), which holds the mining claims and related property interests at the Bonanza Creek facility.

Each of the foregoing entities is a direct or indirect wholly owned subsidiary of the Borrower and is a Guarantor under the Credit Agreement. The Consent Decree imposes joint and several liability on all Settling Defendants for the obligations set forth therein, subject to certain allocation provisions among the Settling Defendants for internal cost-sharing purposes.

Section 3: Schedule of Environmental Liabilities

Set forth below is a detailed schedule of the environmental liabilities arising under or in connection with the Consent Decree and related proceedings. All dollar amounts are expressed in United States dollars unless otherwise indicated. The liabilities are categorized in accordance with the structure of the Consent Decree and the requirements of Schedule 8.14 to the Credit Agreement.

3(a): Remediation Obligations Under Consent Decree

The Consent Decree requires the Settling Defendants to perform comprehensive remediation activities at each of the four Affected Facilities. The scope and estimated cost of remediation at each site were the subject of extensive negotiation between the parties and their respective technical consultants. The following table summarizes the remediation obligations on both a nominal (undiscounted) and net present value ("NPV") basis:

The following notes provide additional context for the remediation cost estimates set forth above:

(i) Ridgecrest Negotiated Cost. The nominal remediation cost of $198.6 million for the Ridgecrest Copper-Molybdenum Mine represents a negotiated amount reflecting a compromise between the Borrower's estimate of $187.5 million and the EPA's estimate of $224.0 million. The Borrower's estimate was based on a detailed remedial design and cost analysis prepared by Pinnacle Creek Environmental, LLC, the Borrower's environmental remediation consultant (principal: Dr. Astrid Bergmann, P.E., Montana Professional Engineer License No. PE-12847). The EPA's estimate was based on an independent cost analysis prepared by Cascade Geosciences, Inc., the EPA's independent technical expert (principal: Dr. Patricia Voss, Ph.D., Environmental Engineering). The negotiated figure of $198.6 million was arrived at through a structured mediation process and reflects adjustments to certain cost assumptions, including assumptions regarding the duration and intensity of water treatment operations, the volume of contaminated waste rock requiring consolidation and capping, and the scope of ecological restoration activities in the Flint Creek watershed.

(ii) Remediation Duration. The remediation durations set forth above reflect the performance periods established in the Consent Decree for each Affected Facility. These durations include active remediation, monitoring, and institutional controls. The Consent Decree provides for periodic five-year reviews at each facility, and the remediation durations may be extended if the performance standards established in the Consent Decree are not achieved within the prescribed timeframes.

(iii) discount Rate. The NPV calculations set forth above use a discount rate of three percent (3%) per annum, consistent with the methodology specified in Schedule 8.14 to the Credit Agreement and the U.S. Office of Management and Budget Circular A-94 discount rate guidance for long-duration environmental remediation obligations.

(iv) Validation of Estimates. All remediation cost estimates prepared by Pinnacle Creek Environmental, LLC have been validated against the independent estimates of Cascade Geosciences, Inc., as required under the Consent Decree's cost estimation protocol. The validated estimates reflect assumptions regarding current labor and material costs, regulatory requirements, available remediation technologies, and site-specific conditions. The estimates are subject to revision as remediation activities proceed and as additional site characterization data become available.

3(b): Civil Penalties

The Consent Decree requires the Settling Defendants to pay aggregate civil penalties of $31.5 million in resolution of the alleged statutory violations at the Affected Facilities. The penalties are allocated among the Affected Facilities as follows:

The civil penalties are payable in four equal quarterly installments of $7.875 million each, in accordance with the following schedule:

(i) First installment of $7.875 million (25% of total penalties): due within thirty (30) days of the date of entry of the Consent Decree by the Court (estimated entry date: June 14, 2025; estimated first payment date: July 14, 2025);

(ii) Second installment of $7.875 million (25% of total penalties): due twelve (12) months after the date of entry of the Consent Decree (estimated payment date: June 14, 2026);

(iii) Third installment of $7.875 million (25% of total penalties): due twenty-four (24) months after the date of entry of the Consent Decree (estimated payment date: June 14, 2027); and

(iv) Fourth installment of $7.875 million (25% of total penalties): due thirty-six (36) months after the date of entry of the Consent Decree (estimated payment date: June 14, 2028).

Interest on unpaid installments shall accrue at the rate specified in 28 U.S.C. § 1961 from the date each installment becomes due until paid. Late payments are subject to stipulated penalties under Section XIV of the Consent Decree.

3(c): EPA Past-Costs Reimbursement (CERCLA § 107)

The Consent Decree requires the Settling Defendants to reimburse the EPA for response costs previously incurred by the EPA at the Ridgecrest and Kanawha Bend facilities pursuant to Section 107(a) of CERCLA, 42 U.S.C. § 9607(a). The past-costs reimbursement obligations are as follows:

The Ridgecrest past-costs reimbursement of $14.3 million reflects costs incurred by the EPA in connection with an emergency removal action conducted at the Ridgecrest facility between March 2021 and November 2023 to address imminent and substantial endangerment arising from the failure of a diversion channel that resulted in the release of acid mine drainage into Flint Creek. The Kanawha Bend past-costs reimbursement of $3.8 million reflects costs incurred by the EPA in connection with an emergency response action conducted in June 2020 to address a release of hazardous substances from a corroded underground storage tank at the Kanawha Bend facility.

The full amount of the past-costs reimbursement ($18.1 million) is due within sixty (60) days of the date of entry of the Consent Decree by the Court.

3(d): Supplemental Environmental Projects (SEPs)

In addition to the remediation obligations, civil penalties, and past-costs reimbursement described above, the Consent Decree requires the Settling Defendants to fund and implement three Supplemental Environmental Projects ("SEPs") designed to secure environmental or public health benefits in the communities affected by the alleged violations. The SEPs are as follows:

(i) The Flint Creek Watershed Restoration Project involves the restoration of approximately twelve miles of riparian habitat along Flint Creek and its tributaries in Granite County, Montana, including streambank stabilization, revegetation with native species, and the removal of legacy mining sediments. The project is expected to be completed within five years of the date of entry of the Consent Decree.

(ii) The Battle Mountain Community Drinking Water Improvement Project involves the upgrade and expansion of the public water supply system serving the community of Battle Mountain, Lander County, Nevada, including the installation of advanced water treatment capacity and the replacement of aging distribution infrastructure. The project is expected to be completed within three years of the date of entry of the Consent Decree.

(iii) The Institute Community Air Quality Monitoring Network involves the installation and operation of a network of continuous ambient air quality monitoring stations in the Institute area of Kanawha County, West Virginia, to monitor for volatile organic compounds, particulate matter, and other pollutants of concern. The monitoring network is expected to operate for a minimum of ten years following installation.

3(e): Independent Environmental Monitor Costs

The Consent Decree provides for the appointment of an independent environmental monitor to oversee the Settling Defendants' compliance with the terms of the Consent Decree. The Court has designated Verdant Analytics, Inc. (Dr. Kamal Osei, Senior Managing Director) as the independent environmental monitor (the "Monitor"). The costs of the Monitor are to be borne by the Settling Defendants.

The estimated cost of the Monitor over the initial five-year monitoring period is $4.8 million, or approximately $960,000 per year. The Monitor's fees and expenses are subject to review and approval by the Court. The Consent Decree provides for the potential extension of the monitoring period beyond five years if the Court determines that continued monitoring is warranted based on the Settling Defendants' compliance record and the progress of remediation activities.

3(f): Aggregate Environmental Liabilities — Summary

The following table summarizes the aggregate environmental liabilities arising under or in connection with the Consent Decree:

For purposes of reference, the NPV / cash-equivalent grand total of the foregoing environmental liabilities is approximately $311.5 million, calculated as follows: $245.1 million (NPV of remediation obligations at a 3% discount rate) + $31.5 million (civil penalties, undiscounted) + $18.1 million (past-costs reimbursement, undiscounted) + $12.0 million (SEPs, undiscounted) + $4.8 million (Monitor costs, undiscounted) = $311.5 million. Civil penalties, past-costs reimbursement, SEP obligations, and Monitor costs have not been discounted due to their relatively near-term payment schedules and the conservatism appropriate to a covenant compliance analysis.

3(g): Other Known Environmental Liabilities

The Borrower is not aware of any material environmental liabilities beyond those described in this Certificate and as otherwise previously disclosed to the Administrative Agent in connection with the Credit Agreement and the Borrower's ongoing disclosure obligations under Section 7.02 thereof.

For reference, the Borrower's environmental remediation reserve as disclosed in its Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2024 (the "Q3 2024 10-Q"), filed with the U.S. Securities and Exchange Commission on November 8, 2024, was C$340.0 million (approximately US$251.4 million at the exchange rate of C$1 = US$0.7394, which was the rate used in the Borrower's Q3 2024 financial reporting). This reserve was established to reflect the Borrower's best estimate of its environmental remediation obligations at all sites, including but not limited to the Affected Facilities, as of September 30, 2024.

The shortfall between the existing environmental remediation reserve and the nominal grand total of the Consent Decree obligations is calculated as follows:

• Nominal grand total of Consent Decree obligations: US$409.9 million

• Existing environmental remediation reserve (as of September 30, 2024): approximately US$251.4 million

• Shortfall: approximately US$158.5 million

The Borrower intends to increase its environmental remediation reserve in the next reporting period (i.e., in connection with its annual financial statements for the fiscal year ended December 31, 2024) to reflect the full scope of the Consent Decree obligations. The Borrower's management and its external auditors, Ridgeline Accounting Partners LLP, are currently evaluating the appropriate reserve adjustment in accordance with ASC 450 (Contingencies) and IAS 37 (Provisions, Contingent Liabilities and Contingent Assets). The Borrower will notify the Administrative Agent of any material changes to the reserve upon the filing of its annual financial statements.

Section 4: Financial Assurance Obligations

4.1 Financial Assurance Package

The Consent Decree requires the Settling Defendants to establish and maintain financial assurance in an aggregate amount of $245.0 million to guarantee the performance of the remediation obligations described in Section 3(a) above. The financial assurance package consists of the following components:

(a) Surety Bond. A performance surety bond in the face amount of $165.0 million, issued by Ironbark Surety of America, Inc. (Bond No. ISA-ENV-2025-08934). The surety bond guarantees the Settling Defendants' performance of remediation obligations at the Ridgecrest, Bonanza Creek, and Kanawha Bend facilities. The annual premium payable on the surety bond is 1.85% of the face value, which equals $3,052,500 per year. The surety bond remains in effect until the Settling Defendants have completed all remediation obligations at the covered facilities and the Court has issued an order certifying such completion, or until the bond is replaced or released in accordance with the terms of the Consent Decree. The bond is supported by an indemnity agreement executed by the Borrower and Torchlight Mining (U.S.) Inc. in favor of Ironbark Surety of America, Inc.

(b) Remediation Trust Fund. A dedicated remediation trust fund in the initial amount of $80.0 million, to be established with Larchfield Trust Company, N.A. (Trust Agreement No. LTC-REM-2025-1177; Trust Officer: David Henshaw). The trust fund is designated to support remediation activities at the Gallatin Chemical Works facility and to serve as a supplemental funding mechanism for remediation activities at the other Affected Facilities if the surety bond proves insufficient. The trust fund is to be funded with an initial deposit of $80.0 million, which the Settling Defendants are required to deposit within the time period specified below. The trust fund will be administered by Larchfield Trust Company, N.A., as trustee, in accordance with the terms of the trust agreement, and disbursements from the trust fund require the prior approval of the EPA or, in the event of a dispute, the Court.

(c) Total Financial Assurance. The aggregate amount of financial assurance required under the Consent Decree is $165.0 million (surety bond) + $80.0 million (remediation trust fund) = $245.0 million.

4.2 Deadline for Financial Assurance

The Settling Defendants are required to establish the remediation trust fund and post all required financial assurance instruments no later than September 12, 2025, which is ninety (90) days after the anticipated date of entry of the Consent Decree by the Court. Failure to timely establish the financial assurance is subject to stipulated penalties under Section XIV of the Consent Decree.

4.3 Interaction with Credit Agreement Covenants

The Borrower notes that the surety bond and the related indemnity agreement executed in connection therewith may be subject to analysis under the Credit Agreement's negative covenants regarding liens (Section 8.01), permitted indebtedness (Section 8.03), and contingent obligations (Section 8.05). Specifically, the indemnity agreement in favor of Ironbark Surety of America, Inc. may constitute a contingent obligation or guarantee that requires classification as a "Permitted Obligation" under Section 8.05 of the Credit Agreement, and the trust fund deposit may implicate the restrictions on investments and restricted payments set forth in Sections 8.06 and 8.07 of the Credit Agreement.

The Borrower's counsel, Calderwood & Harkness LLP, is preparing a separate memorandum, anticipated to be delivered to the Administrative Agent on or about March 5, 2025, addressing the potential need for an amendment or waiver of the Credit Agreement to accommodate the financial assurance obligations under the Consent Decree. The Borrower reserves all rights with respect to such matters and will work cooperatively with the Administrative Agent and the Lenders to address any required modifications to the Credit Agreement in a timely manner.

Section 5: Insurance Coverage — Potential Offsets

5.1 Pollution Legal Liability Policy

The Borrower maintains a Pollution Legal Liability insurance policy issued by Meridian Environmental Insurance Company (Policy No. MEI-ENV-2021-04738) (the "PLL Policy"). The key terms of the PLL Policy are as follows:

• Policy Period: July 1, 2021 through July 1, 2024

• Per-Occurrence Limit: $50.0 million

• Aggregate Limit: $75.0 million

• Self-Insured Retention ("SIR"): $5.0 million per occurrence

• Named Insureds: Torchlight Mining Corp., Torchlight Mining (U.S.) Inc., Torchlight Specialty Chemicals, Inc., and their respective subsidiaries and affiliates

• Covered Locations: All owned, operated, or formerly operated facilities of the Named Insureds within the United States, subject to the terms, conditions, and exclusions of the PLL Policy

5.2 Coverage Dispute

The Borrower tendered claims under the PLL Policy in connection with the environmental liabilities at each of the four Affected Facilities. Meridian Environmental Insurance Company ("Meridian") has responded to the tenders as follows:

(a) Ridgecrest Copper-Molybdenum Mine: Meridian has denied coverage based on the PLL Policy's pollution/known-conditions exclusion, asserting that the contamination at the Ridgecrest facility was a known condition at the time the PLL Policy was bound and therefore falls outside the scope of covered "pollution events" as defined in the PLL Policy. The Borrower disputes Meridian's characterization and has reserved all rights to pursue coverage under the PLL Policy, including through litigation if necessary.

(b) Kanawha Bend Chemical Plant: Meridian has denied coverage based on a late notice defense, asserting that the Borrower failed to provide timely notice of the pollution event at the Kanawha Bend facility within the notice period required by the PLL Policy. The Borrower disputes Meridian's late notice defense, contending that notice was provided within a reasonable time after the Borrower became aware of the claims and that Meridian has not been prejudiced by any delay. The Borrower has reserved all rights to pursue coverage under the PLL Policy.

(c) Gallatin Chemical Works: Meridian has acknowledged coverage for the environmental liabilities at the Gallatin facility, subject to the $5.0 million per-occurrence SIR. Meridian has reserved its rights with respect to certain coverage issues, including the allocation of defense costs and the application of the aggregate limit.

(d) Bonanza Creek Gold Mine: Meridian has acknowledged coverage for the environmental liabilities at the Bonanza Creek facility, subject to the $5.0 million per-occurrence SIR. As with Gallatin, Meridian has reserved its rights with respect to certain coverage issues.

5.3 Estimated Insurance Recovery

Northspire Capital Markets, Inc. (the Borrower's financial advisor; engagement lead: Vivian Okafor, Managing Director, Liability & Risk Advisory) has provided an estimated range of insurance recovery under the PLL Policy of $45.0 million to $55.0 million. The maximum theoretical recovery under the PLL Policy is $75.0 million (the aggregate limit), subject to the coverage disputes described above, the application of the per-occurrence SIR, and the allocation of covered and non-covered costs.

The estimated recovery range of $45.0 million to $55.0 million reflects Northspire's assessment of the probability-weighted outcomes of the coverage disputes with Meridian, the likely allocation of covered costs across the acknowledged and disputed claims, and the application of the SIR. The Borrower cautions that the ultimate insurance recovery may be higher or lower than the estimated range depending on the resolution of the coverage disputes and the outcome of any related litigation or arbitration proceedings.

5.4 Treatment of Insurance Recoveries for Covenant Compliance Purposes

Consistent with the requirements of ASC 450 (Contingencies) and IAS 37 (Provisions, Contingent Liabilities and Contingent Assets), potential insurance recoveries have NOT been netted against the environmental liabilities reported in Section 3 above. Under both ASC 450 and IAS 37, insurance recoveries may be recognized as an asset only when realization is virtually certain (IAS 37) or probable (ASC 450-20-25), and the Borrower's management has determined that the conditions for recognition have not yet been met given the pending coverage disputes with Meridian. Accordingly, the environmental liabilities set forth in this Certificate are presented on a gross basis, without offset for potential insurance recoveries, which represents the conservative approach appropriate for covenant compliance purposes.

Section 6: Covenant Compliance Calculation

6(a): Consolidated Net Tangible Assets (CNTA)

For purposes of the Environmental Liability Covenant calculation set forth below, the Borrower's Consolidated Net Tangible Assets ("CNTA") have been determined as of September 30, 2024, based on the financial data reported in the Borrower's Q3 2024 10-Q, which was audited (on a review engagement basis for quarterly reporting) by Ridgeline Accounting Partners LLP (engagement partner: Frances Whitmore, CPA, CA).

CNTA as of September 30, 2024: C$3.92 billion

CNTA is calculated in accordance with the definition set forth in Section 1.01 of the Credit Agreement, which defines Consolidated Net Tangible Assets as the total assets of the Borrower and its consolidated subsidiaries, less (i) all current liabilities (excluding the current portion of long-term indebtedness and the current portion of capital lease obligations), (ii) all goodwill and other intangible assets, and (iii) minority interests, in each case as determined on a consolidated basis in accordance with IFRS (as adopted for Canadian public company reporting purposes) or, to the extent applicable, U.S. GAAP.

6(b): Environmental Liability Covenant Threshold

The Environmental Liability Covenant set forth in Section 8.14 of the Credit Agreement provides that the Borrower's aggregate environmental liabilities shall not exceed twenty-five percent (25%) of CNTA at any time. Applying this threshold:

25% of CNTA = 25% × C$3.92 billion = C$980.0 million

6(c): Aggregate Environmental Liabilities (Converted to CAD)

The grand total of the Borrower's aggregate environmental liabilities, as set forth in Section 3(f) above, is US$409.9 million on a nominal basis. For purposes of the covenant compliance calculation, this amount must be converted to Canadian dollars using the applicable exchange rate.

• Grand total environmental liabilities (nominal, USD): US$409.9 million

• Exchange rate (as used in TMC's Q3 2024 reporting): C$1 = US$0.7394

• Conversion: US$409.9 million ÷ 0.7394 = approximately C$554.4 million

6(d): Compliance Determination

The following table sets forth the Environmental Liability Covenant compliance test:

Based on the foregoing calculation, the undersigned hereby certifies that, as of the date of this Certificate, the Borrower's aggregate environmental liabilities of approximately C$554.4 million are below the Environmental Liability Covenant threshold of C$980.0 million, resulting in covenant headroom of approximately C$425.6 million (representing approximately 43.4% of the covenant threshold).

The Borrower is therefore IN COMPLIANCE with the Environmental Liability Covenant set forth in Section 8.14 of the Credit Agreement.

6(e): Sensitivity Analysis and Supplementary Notes

The undersigned provides the following supplementary notes in connection with the covenant compliance calculation set forth above:

(i) Use of Nominal Figures. The nominal grand total of US$409.9 million (approximately C$554.4 million) has been used for covenant compliance purposes. This represents the conservative approach, as the nominal figure includes the full undiscounted remediation cost estimates over the entire remediation period (up to 30 years for the Ridgecrest facility). If the NPV / cash-equivalent grand total of US$311.5 million (approximately C$421.3 million, converted at C$1 = US$0.7394) were used instead, the covenant headroom would increase to approximately C$558.7 million. The Borrower has elected to use the nominal figure to provide the Administrative Agent and the Lenders with the most conservative assessment of covenant compliance.

(ii) CNTA Reporting Period. The CNTA figure of C$3.92 billion is based on the Borrower's Q3 2024 financial statements (as of September 30, 2024). The next updated CNTA figure will be available upon the filing of the Borrower's annual financial statements for the fiscal year ended December 31, 2024, which are expected to be filed on or about March 31, 2025. The Borrower notes that the CNTA figure may change in the annual financial statements due to, among other factors, asset impairments, acquisitions, dispositions, and changes in working capital.

(iii) Foreign Exchange Risk. The covenant compliance calculation is sensitive to fluctuations in the exchange rate between the Canadian dollar and the U.S. dollar. The exchange rate used in this Certificate (C$1 = US$0.7394) is the rate used in the Borrower's Q3 2024 financial reporting. A material depreciation of the Canadian dollar relative to the U.S. dollar would increase the Canadian dollar equivalent of the Borrower's U.S. dollar-denominated environmental liabilities, thereby reducing covenant headroom. Conversely, a material appreciation of the Canadian dollar would decrease the Canadian dollar equivalent of such liabilities and increase covenant headroom. The Borrower does not currently hedge its exposure to foreign exchange fluctuations with respect to environmental liabilities.

(iv) Potential Changes to Environmental Liabilities. The environmental liabilities reported in this Certificate are based on the Consent Decree as executed on February 3, 2025, and lodged with the Court on February 19, 2025. The liabilities are subject to change based on, among other factors: (A) modifications to the Consent Decree during the public comment period or by the Court; (B) changes in remediation scope, design, or cost estimates as remediation activities proceed; (C) the resolution of the insurance coverage dispute with Meridian Environmental Insurance Company; (D) the identification of additional environmental liabilities at the Affected Facilities or at other properties owned or operated by the Borrower; and (E) changes in applicable environmental laws and regulations.

Section 7: Additional Certifications

In addition to the covenant compliance certification set forth in Section 6 above, the undersigned, in her capacity as Chief Financial Officer of the Borrower, hereby further certifies as follows:

(a) No Default or Event of Default. No Default or Event of Default (as each such term is defined in the Credit Agreement) has occurred and is continuing as of the date hereof as a result of the environmental matters described in this Certificate, including without limitation the Consent Decree, the remediation obligations, the civil penalties, the past-costs reimbursement obligations, the SEP obligations, the Monitor costs, and the financial assurance obligations described herein.

(b) Disclosure to Administrative Agent. The Borrower has disclosed or is in the process of disclosing the Consent Decree and the related financial obligations described in this Certificate to the Administrative Agent. Without limiting the foregoing, the Borrower cross-references its letter to Harborstone National Bank, N.A. dated March 1, 2025, which provides additional detail regarding the Consent Decree, the Borrower's financial condition, and the anticipated impact of the Consent Decree obligations on the Borrower's liquidity, capital resources, and compliance with the Credit Agreement.

(c) Accuracy of Information. The information contained in this Certificate is true, correct, and complete in all material respects as of the date hereof. The undersigned has reviewed the information set forth herein and, to the best of her knowledge and belief after due inquiry, no material information has been omitted that would be necessary to make the statements contained herein not misleading.

(d) Borrower Financial Profile. For purposes of context, the undersigned provides the following summary of the Borrower's financial profile based on the most recently available financial data:

• Revenue (FY2023): C$4.82 billion (approximately US$3.56 billion)

• EBITDA (FY2023): C$1.14 billion (approximately US$843 million)

• Market Capitalization: Approximately C$7.6 billion (as of October 2024)

• Employees: Approximately 11,400 worldwide (approximately 4,200 in the United States)

The foregoing financial data is provided for informational purposes only and is not a guarantee of future financial performance.

Section 8: Attachments and Schedules Referenced

The following schedules and attachments are referenced in, and delivered with, this Certificate:

Schedule A: Summary of Consent Decree Financial Obligations — A summary of all financial obligations arising under the Consent Decree, as set forth in Section 3 of this Certificate, presented in tabular format for ease of reference.

Schedule B: Financial Assurance Instruments — Summaries of the surety bond (Bond No. ISA-ENV-2025-08934, Ironbark Surety of America, Inc.) and the remediation trust agreement (Trust Agreement No. LTC-REM-2025-1177, Larchfield Trust Company, N.A.), including principal terms, conditions, and key dates.

Schedule C: Environmental Remediation Reserve Reconciliation — A reconciliation of the Borrower's environmental remediation reserve as reported in the Q3 2024 10-Q (C$340.0 million / approximately US$251.4 million) against the updated obligations arising under the Consent Decree, including identification of the approximately US$158.5 million shortfall to be addressed in the Borrower's FY2024 annual financial statements.

Attachment 1: Copy of the Consent Decree — Execution Version dated February 19, 2025, in the matter of United States of America and State of Montana v. Torchlight Mining Corp. et al., Civil Action No. 9:24-cv-00087-DWM, United States District Court for the District of Montana, Missoula Division.

Attachment 2: Surety Bond (Bond No. ISA-ENV-2025-08934) — Issued by Ironbark Surety of America, Inc. in the face amount of $165.0 million.

Attachment 3: Remediation Trust Agreement (Trust Agreement No. LTC-REM-2025-1177) — Executed by and among the Settling Defendants, as grantors, and Larchfield Trust Company, N.A., as trustee, establishing the $80.0 million remediation trust fund.

Section 9: Execution

IN WITNESS WHEREOF, the undersigned has executed and delivered this Covenant Compliance Certificate as of the date first set forth above.

TORCHLIGHT MINING CORP.

By: ________

Name: Carolyn Bracebridge

Title: Chief Financial Officer

Date: February 25, 2025

Delivered to:

Harborstone National Bank, N.A. as Administrative Agent under the Credit Agreement 200 Harborstone Plaza Calgary, Alberta T2P 2M5, Canada

Attention: Syndicated Lending Division — Environmental Covenant Compliance

With a copy to:

Harborstone National Bank, N.A. 1185 Avenue of the Americas, 22nd Floor New York, New York 10036

Attention: Cross-Border Lending Group

Prepared with the assistance of:

Calderwood & Harkness LLP Barristers & Solicitors Bay Adelaide Centre, East Tower 22 Adelaide Street West, Suite 3400 Toronto, Ontario M5H 4E3, Canada Matter No.: 1039-00003 Responsible Partner: Harrison Wexford

Northspire Capital Markets, Inc. Liability & Risk Advisory 161 Bay Street, Suite 4500 Toronto, Ontario M5J 2S1, Canada Managing Director: Vivian Okafor

Section 10: Disclaimer and Qualification

DISCLAIMER AND QUALIFICATION

This Certificate is delivered solely for purposes of compliance with Section 7.02(d) and Section 8.14 of the Credit Agreement and does not constitute an admission of liability, fault, wrongdoing, or violation of law by the Borrower or any of its subsidiaries or affiliates. Nothing in this Certificate shall be construed as a waiver of any rights, claims, defenses, or counterclaims of the Borrower or any of its subsidiaries or affiliates in connection with the Consent Decree, the Action, the insurance coverage dispute with Meridian Environmental Insurance Company, or any other matter.

The estimates of remediation costs, civil penalties, past-costs reimbursement, SEP costs, independent monitor costs, insurance recoveries, and other financial figures set forth in this Certificate are forward-looking in nature and are based on currently available information, assumptions, and methodologies that are subject to significant uncertainty. Actual costs and recoveries may differ materially from the estimates set forth herein based on, among other factors: (i) ongoing remediation activities and the discovery of additional contamination or changed site conditions at the Affected Facilities; (ii) changes in applicable environmental laws, regulations, and regulatory guidance; (iii) judicial proceedings, including the Court's review of the Consent Decree during the public comment period and any subsequent modification or rejection of the Consent Decree; (iv) the resolution of the insurance coverage dispute with Meridian Environmental Insurance Company, which may result in insurance recoveries that are higher or lower than the estimated range set forth herein; (v) changes in commodity prices, labor costs, and the cost of remediation materials and equipment; (vi) changes in the applicable discount rate; and (vii) fluctuations in the exchange rate between the Canadian dollar and the U.S. dollar.

This Certificate has been prepared based on information available as of February 25, 2025. The Borrower undertakes to provide updated Covenant Compliance Certificates to the Administrative Agent as required under Section 7.02(d) of the Credit Agreement, and to provide prompt notice to the Administrative Agent of any material changes in the environmental liabilities described herein, in accordance with Section 7.02(f) of the Credit Agreement.

This Certificate does not constitute investment advice, legal advice, or a recommendation with respect to any securities of the Borrower. Investors and other market participants should refer to the Borrower's public filings with the U.S. Securities and Exchange Commission and the Canadian securities regulatory authorities for additional information regarding the Borrower's environmental liabilities and financial condition.

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Certificate Date:	February 25, 2025
Credit Facility:	C$750.0 Million Syndicated Revolving Credit Facility
Administrative Agent:	Harborstone National Bank, N.A.
RCF Maturity Date:	March 15, 2027
Borrower:	Torchlight Mining Corp. (a corporation incorporated under the Canada Business Corporations Act; TSX: TRC; NYSE: TRC)
Canadian Headquarters:	1800 Bayfield Tower, 401 Bay Street, Toronto, Ontario M5H 2Y4, Canada
U.S. Headquarters:	750 Copper Ridge Boulevard, Suite 200, Helena, Montana 59601
Site	Nominal Cost (US$M)	Duration (Years)	NPV at 3% discount Rate (US$M)
Ridgecrest Copper-Molybdenum Mine (negotiated)	$198.6	30	$134.9
Gallatin Chemical Works	$42.8	15	$34.1
Bonanza Creek Gold Mine	$63.2	20	$47.1
Kanawha Bend Chemical Plant	$38.9	20	$29.0
Total Remediation	$343.5	—	$245.1
Site	Penalty Amount (US$M)
Ridgecrest Copper-Molybdenum Mine	$14.2
Gallatin Chemical Works	$5.8
Bonanza Creek Gold Mine	$7.9
Kanawha Bend Chemical Plant	$3.6
Total Civil Penalties	$31.5
Site	Reimbursement Amount (US$M)
Ridgecrest Copper-Molybdenum Mine (EPA removal action, 2021–2023)	$14.3
Kanawha Bend Chemical Plant (EPA emergency response, June 2020)	$3.8
Total Past-Costs Reimbursement	$18.1
Supplemental Environmental Project	Amount (US$M)
Flint Creek Watershed Restoration Project (Granite County, Montana)	$5.5

Battle Mountain Community Drinking Water Improvement Project (Lander County, Nevada)	$3.5
Institute Community Air Quality Monitoring Network (Kanawha County, West Virginia)	$3.0
Total SEPs	$12.0
Category	Nominal Amount (US$M)
Total Remediation Obligations	$343.5
Total Civil Penalties	$31.5
EPA Past-Costs Reimbursement	$18.1
Supplemental Environmental Projects	$12.0
Independent Monitor Costs (5 years)	$4.8
Grand Total	$409.9
Metric	Amount (C$M)
Consolidated Net Tangible Assets (CNTA) — September 30, 2024	C$3,920.0
Environmental Liability Covenant Threshold (25% of CNTA)	C$980.0
Aggregate Environmental Liabilities (nominal, converted to CAD)	C$554.4
Covenant Headroom	C$425.6
Compliance Status	IN COMPLIANCE

COVENANT COMPLIANCE CERTIFICATE — ENVIRONMENTAL LIABILITIES
Delivered pursuant to Section 7.02(d) of the Credit Agreement dated as of March 15, 2022, as amended by the First Amendment dated September 22, 2023, and as further amended by the Second Amendment dated June 14, 2024 (as so amended, the "Credit Agreement"),
among
TORCHLIGHT MINING CORP., as Borrower,
THE LENDERS PARTY THERETO,
and
HARBORSTONE NATIONAL BANK, N.A., as Administrative Agent
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Section 1: Recitals and Introductory Statements
The undersigned, Carolyn Bracebridge, in her capacity as Chief Financial Officer of Torchlight Mining Corp. ("TMC" or the "Borrower"), hereby delivers this Covenant Compliance Certificate (this "Certificate") to Harborstone National Bank, N.A., in its capacity as Administrative Agent (the "Administrative Agent"), pursuant to Section 7.02(d) of that certain Credit Agreement dated as of March 15, 2022, as amended by the First Amendment dated September 22, 2023, and as further amended by the Second Amendment dated June 14, 2024 (as so amended, the "Credit Agreement"), among the Borrower, the Lenders party thereto, and the Administrative Agent.
This Certificate is being delivered in connection with the Borrower's environmental liability covenant set forth in Section 8.14 of the Credit Agreement (the "Environmental Liability Covenant"). The Environmental Liability Covenant requires that the Borrower's aggregate disclosed and undisclosed environmental liabilities, as determined in accordance with the methodology set forth in Schedule 8.14 to the Credit Agreement, shall not at any time exceed twenty-five percent (25%) of the Borrower's Consolidated Net Tangible Assets ("CNTA") as most recently reported in the Borrower's quarterly or annual financial statements delivered to the Administrative Agent pursuant to Section 7.01 of the Credit Agreement.
Capitalized terms used but not otherwise defined herein shall have the respective meanings ascribed to such terms in the Credit Agreement. In the event of any conflict between the definitions set forth herein and those set forth in the Credit Agreement, the definitions in the Credit Agreement shall govern.
The reporting period to which this Certificate relates is the fiscal quarter ended September 30, 2024, which corresponds to the Borrower's most recently filed quarterly report on Form 10-Q with the U.S. Securities and Exchange Commission and the corresponding continuous disclosure filings with the Canadian securities regulatory authorities. The financial data and reserve balances set forth herein are derived from such quarterly report, as updated to reflect the consent decree obligations finalized as of February 3, 2025, and the subsequent lodging of the consent decree with the United States District Court for the District of Montana on February 19, 2025, as more fully described in Section 2 below.
The Borrower is delivering this Certificate on an expedited basis in light of the significance of the consent decree obligations and their potential impact on the Borrower's environmental liability profile under the Credit Agreement. The Borrower will continue to provide updated certificates in accordance with the delivery schedule set forth in Section 7.02(d) of the Credit Agreement, including in connection with the filing of the Borrower's annual financial statements for the fiscal year ended December 31, 2024.
Section 2: Background — Consent Decree and Related Obligations
2.1 Litigation Background
On January 22, 2024, the United States of America, acting through the United States Department of Justice on behalf of the United States Environmental Protection Agency ("EPA"), and the State of Montana, acting through the Montana Department of Environmental Quality, filed a complaint in the United States District Court for the District of Montana, Missoula Division, styled United States of America and State of Montana v. Torchlight Mining Corp. et al., Civil Action No. 9:24-cv-00087-DWM (the "Action"). The Action was assigned to the Honorable Donald W. Molloy, Senior United States District Judge. The complaint alleged violations of the Clean Water Act (33 U.S.C. §§ 1251 et seq.), the Resource Conservation and Recovery Act ("RCRA") (42 U.S.C. §§ 6901 et seq.), and the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA") (42 U.S.C. §§ 9601 et seq.) at four facilities operated or formerly operated by the Borrower and certain of its subsidiaries and affiliates.
2.2 The Consent Decree
Following extensive negotiations among the parties, which included multiple rounds of mediation before the Honorable Jeremiah C. Lynch, United States Magistrate Judge, the parties reached a comprehensive settlement. The resulting consent decree (the "Consent Decree") was executed by all parties as of February 3, 2025. The Consent Decree was lodged with the Court on February 19, 2025, and is currently subject to a thirty (30)-day public comment period pursuant to 28 C.F.R. § 50.7 and Section 7003(d) of RCRA, during which time the United States Department of Justice will receive and consider public comments before requesting entry of the Consent Decree by the Court.
Assuming no material objections are raised during the public comment period and the Court enters the Consent Decree without modification, the Consent Decree is expected to become a final, enforceable order of the Court on or about June 14, 2025. The Borrower's counsel, Calderwood & Harkness LLP, has advised that while the Court retains discretion to modify or reject the Consent Decree, the likelihood of entry without material modification is high based on precedent and the absence of any known opposition.
2.3 Affected Facilities
The Consent Decree resolves the alleged violations at the following four facilities (each, an "Affected Facility" and collectively, the "Affected Facilities"):
(a) Ridgecrest Copper-Molybdenum Mine — 14200 Ridgecrest Mine Road, Drummond, Granite County, Montana 59832. An active open-pit copper-molybdenum mining operation with associated concentrator, tailings storage facility, and water treatment infrastructure. The Ridgecrest facility has been in continuous operation since 1978 and is currently one of the Borrower's largest producing assets. The alleged violations at Ridgecrest principally relate to unpermitted discharges of process water containing elevated levels of copper, arsenic, and selenium into Flint Creek and its tributaries, as well as RCRA-related claims concerning the management and closure of certain waste rock storage areas.
(b) Gallatin Chemical Works — 8800 Industrial Park Lane, Belgrade, Gallatin County, Montana 59714. A specialty chemical manufacturing facility operated by Torchlight Specialty Chemicals, Inc., a wholly owned subsidiary of the Borrower. The alleged violations at Gallatin relate to the unpermitted release of volatile organic compounds and heavy metals into groundwater underlying the facility, as well as violations of RCRA permit conditions governing the storage and treatment of hazardous wastes generated during chemical production processes.
(c) Bonanza Creek Gold Mine — County Road 447, Mile Marker 12, Lander County, Nevada 89820. A former open-pit and underground gold mining operation that ceased active mining in 2016 but remains in an active reclamation phase. The alleged violations at Bonanza Creek relate primarily to acid mine drainage from historical waste rock dumps and inadequate closure of heap leach pads, resulting in alleged contamination of surface water and groundwater in the Bonanza Creek drainage basin.
(d) Kanawha Bend Chemical Plant — 2200 Chemical Valley Road, Institute, Kanawha County, West Virginia 25112. A former chemical manufacturing facility that was acquired by the Borrower through its 2015 acquisition of Appalachian Chemical Holdings, Inc. The facility ceased active operations in 2018 and is currently undergoing decommissioning. The alleged violations at Kanawha Bend include CERCLA response cost liability arising from an EPA emergency response action conducted in June 2020, as well as RCRA corrective action obligations related to contaminated soils and groundwater at the facility.
2.4 Defendant Entities
The Consent Decree names the following entities as defendants (collectively, the "Settling Defendants"):
(a) Torchlight Mining Corp. (the Borrower);
(b) Torchlight Mining (U.S.) Inc., a Delaware corporation (EIN: 83-2047156), which serves as the Borrower's principal U.S. operating subsidiary;
(c) Torchlight Specialty Chemicals, Inc., a Delaware corporation (EIN: 47-3819204), which operates the Gallatin Chemical Works facility;
(d) Ridgecrest Mine Holdings, LLC, a Montana limited liability company (Montana Secretary of State ID: E1042738), which holds the mining claims and related property interests at the Ridgecrest facility; and
(e) Bonanza Creek Mining, LLC, a Nevada limited liability company (Nevada Secretary of State Entity No.: E0518294731), which holds the mining claims and related property interests at the Bonanza Creek facility.
Each of the foregoing entities is a direct or indirect wholly owned subsidiary of the Borrower and is a Guarantor under the Credit Agreement. The Consent Decree imposes joint and several liability on all Settling Defendants for the obligations set forth therein, subject to certain allocation provisions among the Settling Defendants for internal cost-sharing purposes.
Section 3: Schedule of Environmental Liabilities
Set forth below is a detailed schedule of the environmental liabilities arising under or in connection with the Consent Decree and related proceedings. All dollar amounts are expressed in United States dollars unless otherwise indicated. The liabilities are categorized in accordance with the structure of the Consent Decree and the requirements of Schedule 8.14 to the Credit Agreement.
3(a): Remediation Obligations Under Consent Decree
The Consent Decree requires the Settling Defendants to perform comprehensive remediation activities at each of the four Affected Facilities. The scope and estimated cost of remediation at each site were the subject of extensive negotiation between the parties and their respective technical consultants. The following table summarizes the remediation obligations on both a nominal (undiscounted) and net present value ("NPV") basis:
The following notes provide additional context for the remediation cost estimates set forth above:
(i) Ridgecrest Negotiated Cost. The nominal remediation cost of $198.6 million for the Ridgecrest Copper-Molybdenum Mine represents a negotiated amount reflecting a compromise between the Borrower's estimate of $187.5 million and the EPA's estimate of $224.0 million. The Borrower's estimate was based on a detailed remedial design and cost analysis prepared by Pinnacle Creek Environmental, LLC, the Borrower's environmental remediation consultant (principal: Dr. Astrid Bergmann, P.E., Montana Professional Engineer License No. PE-12847). The EPA's estimate was based on an independent cost analysis prepared by Cascade Geosciences, Inc., the EPA's independent technical expert (principal: Dr. Patricia Voss, Ph.D., Environmental Engineering). The negotiated figure of $198.6 million was arrived at through a structured mediation process and reflects adjustments to certain cost assumptions, including assumptions regarding the duration and intensity of water treatment operations, the volume of contaminated waste rock requiring consolidation and capping, and the scope of ecological restoration activities in the Flint Creek watershed.
(ii) Remediation Duration. The remediation durations set forth above reflect the performance periods established in the Consent Decree for each Affected Facility. These durations include active remediation, monitoring, and institutional controls. The Consent Decree provides for periodic five-year reviews at each facility, and the remediation durations may be extended if the performance standards established in the Consent Decree are not achieved within the prescribed timeframes.
(iii) discount Rate. The NPV calculations set forth above use a discount rate of three percent (3%) per annum, consistent with the methodology specified in Schedule 8.14 to the Credit Agreement and the U.S. Office of Management and Budget Circular A-94 discount rate guidance for long-duration environmental remediation obligations.
(iv) Validation of Estimates. All remediation cost estimates prepared by Pinnacle Creek Environmental, LLC have been validated against the independent estimates of Cascade Geosciences, Inc., as required under the Consent Decree's cost estimation protocol. The validated estimates reflect assumptions regarding current labor and material costs, regulatory requirements, available remediation technologies, and site-specific conditions. The estimates are subject to revision as remediation activities proceed and as additional site characterization data become available.
3(b): Civil Penalties
The Consent Decree requires the Settling Defendants to pay aggregate civil penalties of $31.5 million in resolution of the alleged statutory violations at the Affected Facilities. The penalties are allocated among the Affected Facilities as follows:
The civil penalties are payable in four equal quarterly installments of $7.875 million each, in accordance with the following schedule:
(i) First installment of $7.875 million (25% of total penalties): due within thirty (30) days of the date of entry of the Consent Decree by the Court (estimated entry date: June 14, 2025; estimated first payment date: July 14, 2025);
(ii) Second installment of $7.875 million (25% of total penalties): due twelve (12) months after the date of entry of the Consent Decree (estimated payment date: June 14, 2026);
(iii) Third installment of $7.875 million (25% of total penalties): due twenty-four (24) months after the date of entry of the Consent Decree (estimated payment date: June 14, 2027); and
(iv) Fourth installment of $7.875 million (25% of total penalties): due thirty-six (36) months after the date of entry of the Consent Decree (estimated payment date: June 14, 2028).
Interest on unpaid installments shall accrue at the rate specified in 28 U.S.C. § 1961 from the date each installment becomes due until paid. Late payments are subject to stipulated penalties under Section XIV of the Consent Decree.
3(c): EPA Past-Costs Reimbursement (CERCLA § 107)
The Consent Decree requires the Settling Defendants to reimburse the EPA for response costs previously incurred by the EPA at the Ridgecrest and Kanawha Bend facilities pursuant to Section 107(a) of CERCLA, 42 U.S.C. § 9607(a). The past-costs reimbursement obligations are as follows:
The Ridgecrest past-costs reimbursement of $14.3 million reflects costs incurred by the EPA in connection with an emergency removal action conducted at the Ridgecrest facility between March 2021 and November 2023 to address imminent and substantial endangerment arising from the failure of a diversion channel that resulted in the release of acid mine drainage into Flint Creek. The Kanawha Bend past-costs reimbursement of $3.8 million reflects costs incurred by the EPA in connection with an emergency response action conducted in June 2020 to address a release of hazardous substances from a corroded underground storage tank at the Kanawha Bend facility.
The full amount of the past-costs reimbursement ($18.1 million) is due within sixty (60) days of the date of entry of the Consent Decree by the Court.
3(d): Supplemental Environmental Projects (SEPs)
In addition to the remediation obligations, civil penalties, and past-costs reimbursement described above, the Consent Decree requires the Settling Defendants to fund and implement three Supplemental Environmental Projects ("SEPs") designed to secure environmental or public health benefits in the communities affected by the alleged violations. The SEPs are as follows:
(i) The Flint Creek Watershed Restoration Project involves the restoration of approximately twelve miles of riparian habitat along Flint Creek and its tributaries in Granite County, Montana, including streambank stabilization, revegetation with native species, and the removal of legacy mining sediments. The project is expected to be completed within five years of the date of entry of the Consent Decree.
(ii) The Battle Mountain Community Drinking Water Improvement Project involves the upgrade and expansion of the public water supply system serving the community of Battle Mountain, Lander County, Nevada, including the installation of advanced water treatment capacity and the replacement of aging distribution infrastructure. The project is expected to be completed within three years of the date of entry of the Consent Decree.
(iii) The Institute Community Air Quality Monitoring Network involves the installation and operation of a network of continuous ambient air quality monitoring stations in the Institute area of Kanawha County, West Virginia, to monitor for volatile organic compounds, particulate matter, and other pollutants of concern. The monitoring network is expected to operate for a minimum of ten years following installation.
3(e): Independent Environmental Monitor Costs
The Consent Decree provides for the appointment of an independent environmental monitor to oversee the Settling Defendants' compliance with the terms of the Consent Decree. The Court has designated Verdant Analytics, Inc. (Dr. Kamal Osei, Senior Managing Director) as the independent environmental monitor (the "Monitor"). The costs of the Monitor are to be borne by the Settling Defendants.
The estimated cost of the Monitor over the initial five-year monitoring period is $4.8 million, or approximately $960,000 per year. The Monitor's fees and expenses are subject to review and approval by the Court. The Consent Decree provides for the potential extension of the monitoring period beyond five years if the Court determines that continued monitoring is warranted based on the Settling Defendants' compliance record and the progress of remediation activities.
3(f): Aggregate Environmental Liabilities — Summary
The following table summarizes the aggregate environmental liabilities arising under or in connection with the Consent Decree:
For purposes of reference, the NPV / cash-equivalent grand total of the foregoing environmental liabilities is approximately $311.5 million, calculated as follows: $245.1 million (NPV of remediation obligations at a 3% discount rate) + $31.5 million (civil penalties, undiscounted) + $18.1 million (past-costs reimbursement, undiscounted) + $12.0 million (SEPs, undiscounted) + $4.8 million (Monitor costs, undiscounted) = $311.5 million. Civil penalties, past-costs reimbursement, SEP obligations, and Monitor costs have not been discounted due to their relatively near-term payment schedules and the conservatism appropriate to a covenant compliance analysis.
3(g): Other Known Environmental Liabilities
The Borrower is not aware of any material environmental liabilities beyond those described in this Certificate and as otherwise previously disclosed to the Administrative Agent in connection with the Credit Agreement and the Borrower's ongoing disclosure obligations under Section 7.02 thereof.
For reference, the Borrower's environmental remediation reserve as disclosed in its Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2024 (the "Q3 2024 10-Q"), filed with the U.S. Securities and Exchange Commission on November 8, 2024, was C$340.0 million (approximately US$251.4 million at the exchange rate of C$1 = US$0.7394, which was the rate used in the Borrower's Q3 2024 financial reporting). This reserve was established to reflect the Borrower's best estimate of its environmental remediation obligations at all sites, including but not limited to the Affected Facilities, as of September 30, 2024.
The shortfall between the existing environmental remediation reserve and the nominal grand total of the Consent Decree obligations is calculated as follows:
•  Nominal grand total of Consent Decree obligations: US$409.9 million
•  Existing environmental remediation reserve (as of September 30, 2024): approximately US$251.4 million
•  Shortfall: approximately US$158.5 million
The Borrower intends to increase its environmental remediation reserve in the next reporting period (i.e., in connection with its annual financial statements for the fiscal year ended December 31, 2024) to reflect the full scope of the Consent Decree obligations. The Borrower's management and its external auditors, Ridgeline Accounting Partners LLP, are currently evaluating the appropriate reserve adjustment in accordance with ASC 450 (Contingencies) and IAS 37 (Provisions, Contingent Liabilities and Contingent Assets). The Borrower will notify the Administrative Agent of any material changes to the reserve upon the filing of its annual financial statements.
Section 4: Financial Assurance Obligations
4.1 Financial Assurance Package
The Consent Decree requires the Settling Defendants to establish and maintain financial assurance in an aggregate amount of $245.0 million to guarantee the performance of the remediation obligations described in Section 3(a) above. The financial assurance package consists of the following components:
(a) Surety Bond. A performance surety bond in the face amount of $165.0 million, issued by Ironbark Surety of America, Inc. (Bond No. ISA-ENV-2025-08934). The surety bond guarantees the Settling Defendants' performance of remediation obligations at the Ridgecrest, Bonanza Creek, and Kanawha Bend facilities. The annual premium payable on the surety bond is 1.85% of the face value, which equals $3,052,500 per year. The surety bond remains in effect until the Settling Defendants have completed all remediation obligations at the covered facilities and the Court has issued an order certifying such completion, or until the bond is replaced or released in accordance with the terms of the Consent Decree. The bond is supported by an indemnity agreement executed by the Borrower and Torchlight Mining (U.S.) Inc. in favor of Ironbark Surety of America, Inc.
(b) Remediation Trust Fund. A dedicated remediation trust fund in the initial amount of $80.0 million, to be established with Larchfield Trust Company, N.A. (Trust Agreement No. LTC-REM-2025-1177; Trust Officer: David Henshaw). The trust fund is designated to support remediation activities at the Gallatin Chemical Works facility and to serve as a supplemental funding mechanism for remediation activities at the other Affected Facilities if the surety bond proves insufficient. The trust fund is to be funded with an initial deposit of $80.0 million, which the Settling Defendants are required to deposit within the time period specified below. The trust fund will be administered by Larchfield Trust Company, N.A., as trustee, in accordance with the terms of the trust agreement, and disbursements from the trust fund require the prior approval of the EPA or, in the event of a dispute, the Court.
(c) Total Financial Assurance. The aggregate amount of financial assurance required under the Consent Decree is $165.0 million (surety bond) + $80.0 million (remediation trust fund) = $245.0 million.
4.2 Deadline for Financial Assurance
The Settling Defendants are required to establish the remediation trust fund and post all required financial assurance instruments no later than September 12, 2025, which is ninety (90) days after the anticipated date of entry of the Consent Decree by the Court. Failure to timely establish the financial assurance is subject to stipulated penalties under Section XIV of the Consent Decree.
4.3 Interaction with Credit Agreement Covenants
The Borrower notes that the surety bond and the related indemnity agreement executed in connection therewith may be subject to analysis under the Credit Agreement's negative covenants regarding liens (Section 8.01), permitted indebtedness (Section 8.03), and contingent obligations (Section 8.05). Specifically, the indemnity agreement in favor of Ironbark Surety of America, Inc. may constitute a contingent obligation or guarantee that requires classification as a "Permitted Obligation" under Section 8.05 of the Credit Agreement, and the trust fund deposit may implicate the restrictions on investments and restricted payments set forth in Sections 8.06 and 8.07 of the Credit Agreement.
The Borrower's counsel, Calderwood & Harkness LLP, is preparing a separate memorandum, anticipated to be delivered to the Administrative Agent on or about March 5, 2025, addressing the potential need for an amendment or waiver of the Credit Agreement to accommodate the financial assurance obligations under the Consent Decree. The Borrower reserves all rights with respect to such matters and will work cooperatively with the Administrative Agent and the Lenders to address any required modifications to the Credit Agreement in a timely manner.
Section 5: Insurance Coverage — Potential Offsets
5.1 Pollution Legal Liability Policy
The Borrower maintains a Pollution Legal Liability insurance policy issued by Meridian Environmental Insurance Company (Policy No. MEI-ENV-2021-04738) (the "PLL Policy"). The key terms of the PLL Policy are as follows:
•  Policy Period: July 1, 2021 through July 1, 2024
•  Per-Occurrence Limit: $50.0 million
•  Aggregate Limit: $75.0 million
•  Self-Insured Retention ("SIR"): $5.0 million per occurrence
•  Named Insureds: Torchlight Mining Corp., Torchlight Mining (U.S.) Inc., Torchlight Specialty Chemicals, Inc., and their respective subsidiaries and affiliates
•  Covered Locations: All owned, operated, or formerly operated facilities of the Named Insureds within the United States, subject to the terms, conditions, and exclusions of the PLL Policy
5.2 Coverage Dispute
The Borrower tendered claims under the PLL Policy in connection with the environmental liabilities at each of the four Affected Facilities. Meridian Environmental Insurance Company ("Meridian") has responded to the tenders as follows:
(a) Ridgecrest Copper-Molybdenum Mine: Meridian has denied coverage based on the PLL Policy's pollution/known-conditions exclusion, asserting that the contamination at the Ridgecrest facility was a known condition at the time the PLL Policy was bound and therefore falls outside the scope of covered "pollution events" as defined in the PLL Policy. The Borrower disputes Meridian's characterization and has reserved all rights to pursue coverage under the PLL Policy, including through litigation if necessary.
(b) Kanawha Bend Chemical Plant: Meridian has denied coverage based on a late notice defense, asserting that the Borrower failed to provide timely notice of the pollution event at the Kanawha Bend facility within the notice period required by the PLL Policy. The Borrower disputes Meridian's late notice defense, contending that notice was provided within a reasonable time after the Borrower became aware of the claims and that Meridian has not been prejudiced by any delay. The Borrower has reserved all rights to pursue coverage under the PLL Policy.
(c) Gallatin Chemical Works: Meridian has acknowledged coverage for the environmental liabilities at the Gallatin facility, subject to the $5.0 million per-occurrence SIR. Meridian has reserved its rights with respect to certain coverage issues, including the allocation of defense costs and the application of the aggregate limit.
(d) Bonanza Creek Gold Mine: Meridian has acknowledged coverage for the environmental liabilities at the Bonanza Creek facility, subject to the $5.0 million per-occurrence SIR. As with Gallatin, Meridian has reserved its rights with respect to certain coverage issues.
5.3 Estimated Insurance Recovery
Northspire Capital Markets, Inc. (the Borrower's financial advisor; engagement lead: Vivian Okafor, Managing Director, Liability & Risk Advisory) has provided an estimated range of insurance recovery under the PLL Policy of $45.0 million to $55.0 million. The maximum theoretical recovery under the PLL Policy is $75.0 million (the aggregate limit), subject to the coverage disputes described above, the application of the per-occurrence SIR, and the allocation of covered and non-covered costs.
The estimated recovery range of $45.0 million to $55.0 million reflects Northspire's assessment of the probability-weighted outcomes of the coverage disputes with Meridian, the likely allocation of covered costs across the acknowledged and disputed claims, and the application of the SIR. The Borrower cautions that the ultimate insurance recovery may be higher or lower than the estimated range depending on the resolution of the coverage disputes and the outcome of any related litigation or arbitration proceedings.
5.4 Treatment of Insurance Recoveries for Covenant Compliance Purposes
Consistent with the requirements of ASC 450 (Contingencies) and IAS 37 (Provisions, Contingent Liabilities and Contingent Assets), potential insurance recoveries have NOT been netted against the environmental liabilities reported in Section 3 above. Under both ASC 450 and IAS 37, insurance recoveries may be recognized as an asset only when realization is virtually certain (IAS 37) or probable (ASC 450-20-25), and the Borrower's management has determined that the conditions for recognition have not yet been met given the pending coverage disputes with Meridian. Accordingly, the environmental liabilities set forth in this Certificate are presented on a gross basis, without offset for potential insurance recoveries, which represents the conservative approach appropriate for covenant compliance purposes.
Section 6: Covenant Compliance Calculation
6(a): Consolidated Net Tangible Assets (CNTA)
For purposes of the Environmental Liability Covenant calculation set forth below, the Borrower's Consolidated Net Tangible Assets ("CNTA") have been determined as of September 30, 2024, based on the financial data reported in the Borrower's Q3 2024 10-Q, which was audited (on a review engagement basis for quarterly reporting) by Ridgeline Accounting Partners LLP (engagement partner: Frances Whitmore, CPA, CA).
CNTA as of September 30, 2024: C$3.92 billion
CNTA is calculated in accordance with the definition set forth in Section 1.01 of the Credit Agreement, which defines Consolidated Net Tangible Assets as the total assets of the Borrower and its consolidated subsidiaries, less (i) all current liabilities (excluding the current portion of long-term indebtedness and the current portion of capital lease obligations), (ii) all goodwill and other intangible assets, and (iii) minority interests, in each case as determined on a consolidated basis in accordance with IFRS (as adopted for Canadian public company reporting purposes) or, to the extent applicable, U.S. GAAP.
6(b): Environmental Liability Covenant Threshold
The Environmental Liability Covenant set forth in Section 8.14 of the Credit Agreement provides that the Borrower's aggregate environmental liabilities shall not exceed twenty-five percent (25%) of CNTA at any time. Applying this threshold:
25% of CNTA = 25% × C$3.92 billion = C$980.0 million
6(c): Aggregate Environmental Liabilities (Converted to CAD)
The grand total of the Borrower's aggregate environmental liabilities, as set forth in Section 3(f) above, is US$409.9 million on a nominal basis. For purposes of the covenant compliance calculation, this amount must be converted to Canadian dollars using the applicable exchange rate.
•  Grand total environmental liabilities (nominal, USD): US$409.9 million
•  Exchange rate (as used in TMC's Q3 2024 reporting): C$1 = US$0.7394
•  Conversion: US$409.9 million ÷ 0.7394 = approximately C$554.4 million
6(d): Compliance Determination
The following table sets forth the Environmental Liability Covenant compliance test:
Based on the foregoing calculation, the undersigned hereby certifies that, as of the date of this Certificate, the Borrower's aggregate environmental liabilities of approximately C$554.4 million are below the Environmental Liability Covenant threshold of C$980.0 million, resulting in covenant headroom of approximately C$425.6 million (representing approximately 43.4% of the covenant threshold).
The Borrower is therefore IN COMPLIANCE with the Environmental Liability Covenant set forth in Section 8.14 of the Credit Agreement.
6(e): Sensitivity Analysis and Supplementary Notes
The undersigned provides the following supplementary notes in connection with the covenant compliance calculation set forth above:
(i) Use of Nominal Figures. The nominal grand total of US$409.9 million (approximately C$554.4 million) has been used for covenant compliance purposes. This represents the conservative approach, as the nominal figure includes the full undiscounted remediation cost estimates over the entire remediation period (up to 30 years for the Ridgecrest facility). If the NPV / cash-equivalent grand total of US$311.5 million (approximately C$421.3 million, converted at C$1 = US$0.7394) were used instead, the covenant headroom would increase to approximately C$558.7 million. The Borrower has elected to use the nominal figure to provide the Administrative Agent and the Lenders with the most conservative assessment of covenant compliance.
(ii) CNTA Reporting Period. The CNTA figure of C$3.92 billion is based on the Borrower's Q3 2024 financial statements (as of September 30, 2024). The next updated CNTA figure will be available upon the filing of the Borrower's annual financial statements for the fiscal year ended December 31, 2024, which are expected to be filed on or about March 31, 2025. The Borrower notes that the CNTA figure may change in the annual financial statements due to, among other factors, asset impairments, acquisitions, dispositions, and changes in working capital.
(iii) Foreign Exchange Risk. The covenant compliance calculation is sensitive to fluctuations in the exchange rate between the Canadian dollar and the U.S. dollar. The exchange rate used in this Certificate (C$1 = US$0.7394) is the rate used in the Borrower's Q3 2024 financial reporting. A material depreciation of the Canadian dollar relative to the U.S. dollar would increase the Canadian dollar equivalent of the Borrower's U.S. dollar-denominated environmental liabilities, thereby reducing covenant headroom. Conversely, a material appreciation of the Canadian dollar would decrease the Canadian dollar equivalent of such liabilities and increase covenant headroom. The Borrower does not currently hedge its exposure to foreign exchange fluctuations with respect to environmental liabilities.
(iv) Potential Changes to Environmental Liabilities. The environmental liabilities reported in this Certificate are based on the Consent Decree as executed on February 3, 2025, and lodged with the Court on February 19, 2025. The liabilities are subject to change based on, among other factors: (A) modifications to the Consent Decree during the public comment period or by the Court; (B) changes in remediation scope, design, or cost estimates as remediation activities proceed; (C) the resolution of the insurance coverage dispute with Meridian Environmental Insurance Company; (D) the identification of additional environmental liabilities at the Affected Facilities or at other properties owned or operated by the Borrower; and (E) changes in applicable environmental laws and regulations.
Section 7: Additional Certifications
In addition to the covenant compliance certification set forth in Section 6 above, the undersigned, in her capacity as Chief Financial Officer of the Borrower, hereby further certifies as follows:
(a) No Default or Event of Default. No Default or Event of Default (as each such term is defined in the Credit Agreement) has occurred and is continuing as of the date hereof as a result of the environmental matters described in this Certificate, including without limitation the Consent Decree, the remediation obligations, the civil penalties, the past-costs reimbursement obligations, the SEP obligations, the Monitor costs, and the financial assurance obligations described herein.
(b) Disclosure to Administrative Agent. The Borrower has disclosed or is in the process of disclosing the Consent Decree and the related financial obligations described in this Certificate to the Administrative Agent. Without limiting the foregoing, the Borrower cross-references its letter to Harborstone National Bank, N.A. dated March 1, 2025, which provides additional detail regarding the Consent Decree, the Borrower's financial condition, and the anticipated impact of the Consent Decree obligations on the Borrower's liquidity, capital resources, and compliance with the Credit Agreement.
(c) Accuracy of Information. The information contained in this Certificate is true, correct, and complete in all material respects as of the date hereof. The undersigned has reviewed the information set forth herein and, to the best of her knowledge and belief after due inquiry, no material information has been omitted that would be necessary to make the statements contained herein not misleading.
(d) Borrower Financial Profile. For purposes of context, the undersigned provides the following summary of the Borrower's financial profile based on the most recently available financial data:
•  Revenue (FY2023): C$4.82 billion (approximately US$3.56 billion)
•  EBITDA (FY2023): C$1.14 billion (approximately US$843 million)
•  Market Capitalization: Approximately C$7.6 billion (as of October 2024)
•  Employees: Approximately 11,400 worldwide (approximately 4,200 in the United States)
The foregoing financial data is provided for informational purposes only and is not a guarantee of future financial performance.
Section 8: Attachments and Schedules Referenced
The following schedules and attachments are referenced in, and delivered with, this Certificate:
Schedule A: Summary of Consent Decree Financial Obligations — A summary of all financial obligations arising under the Consent Decree, as set forth in Section 3 of this Certificate, presented in tabular format for ease of reference.
Schedule B: Financial Assurance Instruments — Summaries of the surety bond (Bond No. ISA-ENV-2025-08934, Ironbark Surety of America, Inc.) and the remediation trust agreement (Trust Agreement No. LTC-REM-2025-1177, Larchfield Trust Company, N.A.), including principal terms, conditions, and key dates.
Schedule C: Environmental Remediation Reserve Reconciliation — A reconciliation of the Borrower's environmental remediation reserve as reported in the Q3 2024 10-Q (C$340.0 million / approximately US$251.4 million) against the updated obligations arising under the Consent Decree, including identification of the approximately US$158.5 million shortfall to be addressed in the Borrower's FY2024 annual financial statements.
Attachment 1: Copy of the Consent Decree — Execution Version dated February 19, 2025, in the matter of United States of America and State of Montana v. Torchlight Mining Corp. et al., Civil Action No. 9:24-cv-00087-DWM, United States District Court for the District of Montana, Missoula Division.
Attachment 2: Surety Bond (Bond No. ISA-ENV-2025-08934) — Issued by Ironbark Surety of America, Inc. in the face amount of $165.0 million.
Attachment 3: Remediation Trust Agreement (Trust Agreement No. LTC-REM-2025-1177) — Executed by and among the Settling Defendants, as grantors, and Larchfield Trust Company, N.A., as trustee, establishing the $80.0 million remediation trust fund.
Section 9: Execution
IN WITNESS WHEREOF, the undersigned has executed and delivered this Covenant Compliance Certificate as of the date first set forth above.
TORCHLIGHT MINING CORP.
By: ________
Name: Carolyn Bracebridge
Title: Chief Financial Officer
Date: February 25, 2025
Delivered to:
Harborstone National Bank, N.A. as Administrative Agent under the Credit Agreement 200 Harborstone Plaza Calgary, Alberta T2P 2M5, Canada
Attention: Syndicated Lending Division — Environmental Covenant Compliance
With a copy to:
Harborstone National Bank, N.A. 1185 Avenue of the Americas, 22nd Floor New York, New York 10036
Attention: Cross-Border Lending Group
Prepared with the assistance of:
Calderwood & Harkness LLP Barristers & Solicitors Bay Adelaide Centre, East Tower 22 Adelaide Street West, Suite 3400 Toronto, Ontario M5H 4E3, Canada Matter No.: 1039-00003 Responsible Partner: Harrison Wexford
Northspire Capital Markets, Inc. Liability & Risk Advisory 161 Bay Street, Suite 4500 Toronto, Ontario M5J 2S1, Canada Managing Director: Vivian Okafor
Section 10: Disclaimer and Qualification
DISCLAIMER AND QUALIFICATION
This Certificate is delivered solely for purposes of compliance with Section 7.02(d) and Section 8.14 of the Credit Agreement and does not constitute an admission of liability, fault, wrongdoing, or violation of law by the Borrower or any of its subsidiaries or affiliates. Nothing in this Certificate shall be construed as a waiver of any rights, claims, defenses, or counterclaims of the Borrower or any of its subsidiaries or affiliates in connection with the Consent Decree, the Action, the insurance coverage dispute with Meridian Environmental Insurance Company, or any other matter.
The estimates of remediation costs, civil penalties, past-costs reimbursement, SEP costs, independent monitor costs, insurance recoveries, and other financial figures set forth in this Certificate are forward-looking in nature and are based on currently available information, assumptions, and methodologies that are subject to significant uncertainty. Actual costs and recoveries may differ materially from the estimates set forth herein based on, among other factors: (i) ongoing remediation activities and the discovery of additional contamination or changed site conditions at the Affected Facilities; (ii) changes in applicable environmental laws, regulations, and regulatory guidance; (iii) judicial proceedings, including the Court's review of the Consent Decree during the public comment period and any subsequent modification or rejection of the Consent Decree; (iv) the resolution of the insurance coverage dispute with Meridian Environmental Insurance Company, which may result in insurance recoveries that are higher or lower than the estimated range set forth herein; (v) changes in commodity prices, labor costs, and the cost of remediation materials and equipment; (vi) changes in the applicable discount rate; and (vii) fluctuations in the exchange rate between the Canadian dollar and the U.S. dollar.
This Certificate has been prepared based on information available as of February 25, 2025. The Borrower undertakes to provide updated Covenant Compliance Certificates to the Administrative Agent as required under Section 7.02(d) of the Credit Agreement, and to provide prompt notice to the Administrative Agent of any material changes in the environmental liabilities described herein, in accordance with Section 7.02(f) of the Credit Agreement.
This Certificate does not constitute investment advice, legal advice, or a recommendation with respect to any securities of the Borrower. Investors and other market participants should refer to the Borrower's public filings with the U.S. Securities and Exchange Commission and the Canadian securities regulatory authorities for additional information regarding the Borrower's environmental liabilities and financial condition.
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Certificate Date: | February 25, 2025
Credit Facility: | C$750.0 Million Syndicated Revolving Credit Facility
Administrative Agent: | Harborstone National Bank, N.A.
RCF Maturity Date: | March 15, 2027
Borrower: | Torchlight Mining Corp. (a corporation incorporated under the Canada Business Corporations Act; TSX: TRC; NYSE: TRC)
Canadian Headquarters: | 1800 Bayfield Tower, 401 Bay Street, Toronto, Ontario M5H 2Y4, Canada
U.S. Headquarters: | 750 Copper Ridge Boulevard, Suite 200, Helena, Montana 59601
Site | Nominal Cost (US$M) | Duration (Years) | NPV at 3% discount Rate (US$M)
Ridgecrest Copper-Molybdenum Mine (negotiated) | $198.6 | 30 | $134.9
Gallatin Chemical Works | $42.8 | 15 | $34.1
Bonanza Creek Gold Mine | $63.2 | 20 | $47.1
Kanawha Bend Chemical Plant | $38.9 | 20 | $29.0
Total Remediation | $343.5 | — | $245.1
Site | Penalty Amount (US$M)
Ridgecrest Copper-Molybdenum Mine | $14.2
Gallatin Chemical Works | $5.8
Bonanza Creek Gold Mine | $7.9
Kanawha Bend Chemical Plant | $3.6
Total Civil Penalties | $31.5
Site | Reimbursement Amount (US$M)
Ridgecrest Copper-Molybdenum Mine (EPA removal action, 2021–2023) | $14.3
Kanawha Bend Chemical Plant (EPA emergency response, June 2020) | $3.8
Total Past-Costs Reimbursement | $18.1
Supplemental Environmental Project | Amount (US$M)
Flint Creek Watershed Restoration Project (Granite County, Montana) | $5.5
Battle Mountain Community Drinking Water Improvement Project (Lander County, Nevada) | $3.5
Institute Community Air Quality Monitoring Network (Kanawha County, West Virginia) | $3.0
Total SEPs | $12.0
Category | Nominal Amount (US$M)
Total Remediation Obligations | $343.5
Total Civil Penalties | $31.5
EPA Past-Costs Reimbursement | $18.1
Supplemental Environmental Projects | $12.0
Independent Monitor Costs (5 years) | $4.8
Grand Total | $409.9
Metric | Amount (C$M)
Consolidated Net Tangible Assets (CNTA) — September 30, 2024 | C$3,920.0
Environmental Liability Covenant Threshold (25% of CNTA) | C$980.0
Aggregate Environmental Liabilities (nominal, converted to CAD) | C$554.4
Covenant Headroom | C$425.6
Compliance Status | IN COMPLIANCE

COVENANT COMPLIANCE CERTIFICATE — ENVIRONMENTAL LIABILITIES

THE LENDERS PARTY THERETO,

TORCHLIGHT MINING CORP.

DISCLAIMER AND QUALIFICATION

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