DRAFT — SURETY BOND APPLICATION

DRAFT — SURETY BOND APPLICATION
ENVIRONMENTAL REMEDIATION BOND
Penal Sum: $165,000,000 (One Hundred Sixty-Five Million Dollars)
Prepared for Submission to:
Ironbark Surety of America, Inc. 599 Lexington Avenue, 26th Floor New York, New York 10022
Attention: Thomas Rennick, Account Executive
Prepared by:
Calderwood & Harkness LLP on behalf of Torchlight Mining Corp. and its U.S. Operating Subsidiaries
C&H Matter No.: 1039-00003
December 10, 2024
DRAFT — CONFIDENTIAL — SUBJECT TO REVISION. This document has been prepared by Calderwood & Harkness LLP on behalf of Torchlight Mining Corp. and its U.S. subsidiaries for submission to Ironbark Surety of America, Inc. in connection with a proposed environmental remediation surety bond. This document is a draft and is subject to revision, finalization of the consent decree currently under negotiation, and authorization by the Board of Directors of Torchlight Mining Corp. The information contained herein is confidential and proprietary and is intended solely for the use of the addressee. Any unauthorized distribution or use of this document is strictly prohibited.
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SECTION 1: APPLICATION SUMMARY AND BOND REQUEST
1.1 Nature of Request
Torchlight Mining Corp. ("TMC" or "Torchlight"), together with its U.S. operating subsidiaries identified in Section 2 below (collectively, the "Applicants" or "Principals"), hereby submits this application to Ironbark Surety of America, Inc. ("Ironbark" or the "Surety") for the issuance of an environmental remediation surety bond in the penal sum of $165,000,000 (One Hundred Sixty-Five Million Dollars) (the "Bond").
The Bond is being requested to secure the environmental remediation obligations of TMC and its U.S. operating subsidiaries arising under a consent decree currently being negotiated with the United States Environmental Protection Agency ("EPA") and the United States Department of Justice ("DOJ"), Environment and Natural Resources Division ("ENRD"), as well as the States of Montana, Nevada, and West Virginia (collectively, the "Government Parties"). The consent decree will resolve all outstanding federal and state environmental enforcement claims against TMC and its subsidiaries relating to four sites located in Montana, Nevada, and West Virginia, as more fully described in Sections 4 and 5 of this Application.
The Bond type requested is an environmental remediation performance bond, which must be acceptable under the Resource Conservation and Recovery Act ("RCRA") financial assurance regulations set forth at 40 C.F.R. Part 264, Subpart H, and the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA") cost-recovery assurance requirements. The Bond will be structured to satisfy the financial assurance requirements of the consent decree and must meet all regulatory standards applicable to surety instruments used for environmental remediation purposes.
The Obligee under the Bond will be the United States Environmental Protection Agency.
The underlying litigation to which the consent decree relates is captioned:
Civil Action No. 9:24-cv-00087-DWM
United States of America and State of Montana v. Torchlight Mining Corp. et al.
United States District Court for the District of Montana, Missoula Division
Before the Honorable Donald W. Molloy, Senior Judge
This Application is being submitted on a preliminary basis to allow Ironbark to begin its underwriting review and due diligence while consent decree negotiations continue. Certain information, including the substantially final agreed text of the consent decree, will be supplemented as it becomes available. TMC anticipates that all material terms of the consent decree will be finalized in early February 2025 and that all supplemental information necessary to complete Ironbark's underwriting review will be provided at that time.
1.2 Requested Bond Terms
The following summarizes the principal terms of the Bond requested by the Applicants:
Proposed Bond Number: ISA-ENV-2025-08934
Penal Sum: $165,000,000 (One Hundred Sixty-Five Million Dollars)
Annual Premium: 1.85% of face value, equal to $3,052,500 per year, payable in advance on the effective date and on each annual renewal date thereafter.
Effective Date: On or about February 15, 2025, or such other date as may be required for the execution and delivery of financial assurance instruments in advance of the lodging of the consent decree with the Court. TMC anticipates that the financial assurance instruments, including the Bond, will need to be in place prior to the lodging of the consent decree, which is currently targeted for mid-to-late February 2025.
Term: Continuous until released by EPA upon termination of all consent decree obligations at all four sites covered by the decree. The Bond will be subject to annual renewal by the Surety, with provisions for notice of non-renewal as described in Section 10.2 below. Given the remediation timelines applicable to the four sites (ranging from 15 to 30 years), the Applicants anticipate that the Bond will remain in effect for a substantial period.
Financial Assurance Package: The surety bond is one component of a total financial assurance package of $245,000,000 required under the consent decree. The remaining $80,000,000 of the total financial assurance requirement will be satisfied by a remediation trust fund to be established with Larchfield Trust Company, N.A. (Trust Agreement No. LTC-REM-2025-1177), as more fully described in Section 4.5 below. Together, the Bond and the remediation trust fund will constitute the complete financial assurance package required by the consent decree.
The premium rate of 1.85% reflects the environmental remediation nature of the Bond, the extended duration of the underlying obligations, the creditworthiness of the Applicants, and the additional security provided by the remediation trust fund and the General Agreement of Indemnity described in Section 9 below. TMC understands that the final premium rate will be subject to Ironbark's underwriting review and approval.
SECTION 2: APPLICANT / PRINCIPAL INFORMATION
2.1 Primary Applicant (Parent)
The primary applicant and parent entity of all co-applicant subsidiaries is:
Full Legal Name: Torchlight Mining Corp.
Short Name: TMC / Torchlight
Entity Type: Corporation incorporated under the Canada Business Corporations Act (CBCA)
Stock Exchange Listings: TMC is dual-listed on the Toronto Stock Exchange (TSX: TRC) and the New York Stock Exchange (NYSE: TRC). TMC's shares have been listed on the TSX since 1996 and on the NYSE since 2004.
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
U.S. Employer Identification Number (through U.S. subsidiary): 83-2047156
Senior Officers:
Employees: TMC employs approximately 11,400 persons worldwide, of whom approximately 4,200 are employed in the United States. U.S. employees are principally located at the Helena, Montana corporate office, at the Ridgecrest and Bonanza Creek mine sites, and at the Gallatin Chemical Works and Kanawha Bend Chemical Plant facilities.
Business Description: TMC is a diversified mining and specialty chemicals company engaged in the exploration, development, extraction, processing, and sale of copper, molybdenum, and gold, as well as the manufacture and distribution of specialty chemicals, including flotation reagents, sodium xanthate, dithiophosphate collectors, leaching agents, and related products used in mineral processing and hydrometallurgical operations. TMC currently operates 14 mines and 6 chemical processing facilities across North America, South America, and Australia. TMC's operations are organized into two principal business segments: (i) Mining Operations, which accounts for approximately 78% of consolidated revenue, and (ii) Specialty Chemicals, which accounts for approximately 22% of consolidated revenue.
2.2 Co-Applicants / U.S. Operating Subsidiaries (Joint Principals)
The following U.S. subsidiaries of TMC are co-applicants and will serve as joint principals under the Bond and the associated General Agreement of Indemnity:
Torchlight Mining (U.S.) Inc.
Entity Type: Corporation incorporated in the State of Delaware
Ownership: Wholly owned by Torchlight Mining Corp.
Role: Direct operator of TMC's U.S. mining operations, including the Ridgecrest Copper-Molybdenum Mine (Montana) and the Bonanza Creek Gold Mine (Nevada); intermediate holding company for all other U.S. subsidiaries
EIN: 83-2047156
Registered Agent: Ashgrove Services Inc., 1209 Orange Street, Wilmington, Delaware 19801
Torchlight Specialty Chemicals, Inc.
Entity Type: Corporation incorporated in the State of Delaware
Ownership: Wholly owned by TMC through Torchlight Mining (U.S.) Inc.
Role: Operator of the Gallatin Chemical Works (Belgrade, Montana) and the Kanawha Bend Chemical Plant (Institute, West Virginia)
EIN: 47-3819204
Registered Agent: Ashgrove Services Inc., 1209 Orange Street, Wilmington, Delaware 19801
Ridgecrest Mine Holdings, LLC
Entity Type: Limited liability company organized under the laws of the State of Montana
Ownership: Wholly owned by Torchlight Mining (U.S.) Inc.
Role: Holds real property and mineral rights at the Ridgecrest Copper-Molybdenum Mine, Granite County, Montana
Montana Secretary of State ID: E1042738
Registered Agent: Ashgrove Services Inc., 208 N. Montana Avenue, Suite 101, Helena, Montana 59601
Bonanza Creek Mining, LLC
Entity Type: Limited liability company organized under the laws of the State of Nevada
Ownership: Wholly owned by Torchlight Mining (U.S.) Inc.
Role: Holds real property, mineral rights, and water rights at the Bonanza Creek Gold Mine, Lander County, Nevada
Nevada Secretary of State Entity No.: E0518294731
Registered Agent: Ashgrove Services Inc., 701 South Carson Street, Suite 200, Carson City, Nevada 89701
2.3 Organizational Chart
TMC's corporate structure, as it relates to the co-applicant entities and the sites subject to the consent decree, is organized as follows:
Torchlight Mining Corp. (CBCA corporation; parent; dual-listed TSX/NYSE) is the ultimate parent entity and sole shareholder of Torchlight Mining (U.S.) Inc. (Delaware corporation), which serves as the intermediate holding company for all U.S. operations. Torchlight Mining (U.S.) Inc. in turn directly or indirectly holds one hundred percent (100%) of the equity interests in each of the following entities:
(a) Torchlight Specialty Chemicals, Inc. (Delaware corporation) — a wholly owned subsidiary of Torchlight Mining (U.S.) Inc. responsible for chemical manufacturing operations at the Gallatin Chemical Works (Belgrade, Montana) and the Kanawha Bend Chemical Plant (Institute, West Virginia);
(b) Ridgecrest Mine Holdings, LLC (Montana LLC) — a wholly owned subsidiary of Torchlight Mining (U.S.) Inc. that holds the real property interests and mineral rights associated with the Ridgecrest Copper-Molybdenum Mine in Granite County, Montana; and
(c) Bonanza Creek Mining, LLC (Nevada LLC) — a wholly owned subsidiary of Torchlight Mining (U.S.) Inc. that holds the real property interests, mineral rights, and water rights associated with the Bonanza Creek Gold Mine in Lander County, Nevada.
All U.S. subsidiaries are wholly owned, either directly or indirectly, by TMC. A detailed organizational chart reflecting the full corporate structure is included as Appendix F to this Application.
2.4 Key Officers and Authorized Signatories
The following individuals are the key officers of TMC with responsibility for the matters addressed in this Application and are expected to serve as authorized signatories on the Bond, the General Agreement of Indemnity, and related financial assurance instruments:
TMC's Board of Directors has been briefed on the consent decree negotiations and the requirement for the financial assurance instruments described in this Application. Formal Board authorization to execute the consent decree and all ancillary financial assurance instruments, including the Bond and the General Agreement of Indemnity, is anticipated by Board resolution to be adopted at a special meeting of the Board currently scheduled for February 2025. A certified copy of the Board resolution will be provided to Ironbark upon adoption.
SECTION 3: FINANCIAL INFORMATION
3.1 Summary Financial Data (FY2023)
TMC is a publicly traded company with a strong financial profile characterized by diversified revenue streams, stable cash flows from mining operations, and a conservative capital structure. The following table presents summary consolidated financial data for TMC for the fiscal year ended December 31, 2023, as reported in TMC's audited consolidated financial statements prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board:
Note: U.S. dollar equivalents are calculated using an exchange rate of C$1.00 = US$0.7394, which reflects the average exchange rate for the period ended September 30, 2024, as published by the Bank of Canada. Actual exchange rates may fluctuate.
TMC's market capitalization as of October 2024 was approximately C$7.6 billion, reflecting the market's assessment of the company's long-term value, including its portfolio of producing mines, mineral reserves, chemical manufacturing operations, and growth pipeline. TMC has maintained a stable investment-grade credit profile, and its shares are widely held by institutional investors in North America and Europe.
External Auditor:
Ridgeline Accounting Partners LLP (PCAOB-registered) 225 6th Avenue SW, Suite 3300 Calgary, Alberta T2P 1N2 Canada
Engagement Partner: Frances Whitmore, CPA, CA
Ridgeline Accounting Partners LLP has served as TMC's independent external auditor since 2017 and has issued unqualified audit opinions on TMC's consolidated financial statements for each of the fiscal years ended December 31, 2021, 2022, and 2023. Ridgeline is registered with the Public Company Accounting Oversight Board ("PCAOB") and is subject to PCAOB inspection. Copies of the audited financial statements for the three most recent fiscal years are included as Appendix A to this Application.
3.2 Environmental Remediation Reserve
As of the date of TMC's most recent quarterly report on Form 10-Q for the period ended September 30, 2024, TMC has recorded an environmental remediation reserve on its consolidated balance sheet in the amount of C$340.0 million (approximately US$251.4 million at the exchange rate of C$1.00 = US$0.7394).
This reserve reflects management's best estimate, as of September 30, 2024, of the probable environmental remediation obligations associated with TMC's operations, including (but not limited to) the four sites that are the subject of the consent decree. The reserve was established in accordance with IAS 37 (Provisions, Contingent Liabilities and Contingent Assets) and reflects the estimated costs of remediation activities that TMC considers probable and for which the amounts can be reasonably estimated. The reserve is subject to periodic review and adjustment as additional information becomes available, including the finalization of the consent decree and the detailed remediation plans being developed by TMC's environmental consultant, Pinnacle Creek Environmental, LLC.
TMC notes that the final remediation obligations under the consent decree, once entered, may require an adjustment to the environmental remediation reserve. TMC's finance team, working in consultation with Northspire Capital Markets, Inc. and Ridgeline Accounting Partners LLP, is conducting a comprehensive analysis of the anticipated adjustment and expects to record any necessary charges in connection with TMC's year-end financial statements for the fiscal year ended December 31, 2024.
3.3 Existing Credit Facilities
TMC's principal debt facility is a syndicated revolving credit facility (the "RCF") with the following key terms:
The RCF contains a number of financial maintenance covenants, including an environmental liability covenant that is directly relevant to this Application. Specifically, the RCF provides that TMC's aggregate disclosed and undisclosed environmental liabilities shall not exceed 25% of consolidated net tangible assets ("CNTA") at any time during the term of the facility. The relevant covenant threshold and compliance analysis are set forth below:
CNTA (Q3 2024): C$3,920.0 million
Environmental Liability Covenant Threshold (25% of CNTA): C$980.0 million (approximately US$724.4 million)
Current Total Estimated Environmental Liabilities (including consent decree): Approximately US$409.9 million (approximately C$554.4 million)
Covenant Headroom: C$980.0 million – C$554.4 million = C$425.6 million (approximately US$314.7 million)
Based on the foregoing analysis, TMC is currently in full compliance with all covenants under the RCF, including the environmental liability covenant, and expects to remain in compliance following the entry of the consent decree. The covenant headroom of approximately C$425.6 million provides a substantial cushion against potential increases in estimated environmental liabilities. TMC has discussed the consent decree and its financial implications with Harborstone National Bank, N.A. in its capacity as administrative agent under the RCF, and Harborstone has not raised any concerns regarding TMC's continued covenant compliance.
TMC has no other material long-term indebtedness outstanding as of the date of this Application, other than equipment financing and capital lease obligations in the ordinary course of business, which are described in the schedule of outstanding indebtedness included as Appendix D to this Application.
3.4 Financial Statements to Be Provided
The following financial statements and schedules are being provided (or will be provided upon completion) as appendices to this Application for Ironbark's review in connection with its underwriting evaluation:
(a) TMC audited consolidated financial statements for the fiscal years ended December 31, 2021, December 31, 2022, and December 31, 2023, as audited by Ridgeline Accounting Partners LLP (Appendix A);
(b) TMC unaudited interim consolidated financial statements for the quarterly periods ended March 31, 2024, June 30, 2024, and September 30, 2024 (Appendix B);
(c) Torchlight Mining (U.S.) Inc. audited financial statements for the fiscal year ended December 31, 2023 (Appendix C);
(d) Schedule of outstanding indebtedness and material contingent liabilities as of September 30, 2024 (Appendix D); and
(e) Schedule of surety bonds and letters of credit currently outstanding as of the date of this Application (Appendix E).
All financial statements of TMC (parent) have been prepared in accordance with IFRS. All financial statements of U.S. subsidiaries have been prepared in accordance with U.S. GAAP. TMC will make its finance team available for any follow-up questions or requests for additional financial information that Ironbark may have in connection with its underwriting review.
3.5 Financial Advisor
TMC has engaged the following financial advisory firm to advise on the financial aspects of the consent decree and the financial assurance package:
Firm Name: Northspire Capital Markets, Inc.
Entity Type: Ontario corporation; registered broker-dealer with the U.S. Securities and Exchange Commission ("SEC") and the Financial Industry Regulatory Authority ("FINRA")
Principal Office:
100 King Street West, Suite 4500 Toronto, Ontario M5X 1E3 Canada
U.S. Office:
277 Park Avenue, 40th Floor New York, New York 10172
Engagement Lead: Vivian Okafor, Managing Director, Liability & Risk Advisory
Northspire's engagement encompasses advising TMC on the financial structuring of the remediation reserve, consent-decree cost modeling (including the net present value analyses presented in Section 4 of this Application), evaluation of the proposed financial assurance package structure (surety bond plus remediation trust fund), and assessment of the potential impact of the consent decree obligations on TMC's existing credit facilities, financial covenants, and overall credit profile. Northspire's analysis has been instrumental in determining the optimal allocation between the surety bond and the remediation trust fund and in assessing TMC's capacity to service the annual premium obligations and fund the trust in parallel with ongoing remediation expenditures.
SECTION 4: DESCRIPTION OF UNDERLYING OBLIGATION — CONSENT DECREE
4.1 Litigation Background
The following sets forth the procedural history of the enforcement action and consent decree negotiations that give rise to the financial assurance obligations for which the Bond is being sought:
September 12, 2023: EPA issued a comprehensive Notice of Violation ("NOV") to TMC and its U.S. subsidiaries covering all four sites that are the subject of this Application — namely, the Ridgecrest Copper-Molybdenum Mine (Granite County, Montana), the Gallatin Chemical Works (Gallatin County, Montana), the Bonanza Creek Gold Mine (Lander County, Nevada), and the Kanawha Bend Chemical Plant (Kanawha County, West Virginia). The NOV identified alleged violations of the Clean Water Act, the Resource Conservation and Recovery Act, the Comprehensive Environmental Response, Compensation, and Liability Act, and the Migratory Bird Treaty Act, and demanded that TMC undertake corrective action and provide financial assurances for the long-term remediation of all four sites.
January 18, 2024: The United States of America, acting through the DOJ, ENRD, on behalf of EPA, and the State of Montana, acting through the Montana Department of Environmental Quality ("MT DEQ") and the Montana Attorney General's Office, filed a complaint in the United States District Court for the District of Montana, Missoula Division, captioned United States of America and State of Montana v. Torchlight Mining Corp. et al., Civil Action No. 9:24-cv-00087-DWM. The complaint was subsequently amended to add the State of Nevada (through the Nevada Division of Environmental Protection ("NV DEP") and the Nevada Attorney General's Office) and the State of West Virginia (through the West Virginia Department of Environmental Protection ("WV DEP") and the West Virginia Attorney General's Office) as co-plaintiffs. The case was assigned to the Honorable Donald W. Molloy, Senior Judge.
March 5, 2024: TMC and its co-defendant subsidiaries filed their answer to the complaint, denying certain allegations while acknowledging others, and asserting various affirmative defenses. At this stage, TMC was represented by prior environmental counsel.
April 22, 2024: The parties entered into a Tolling Agreement, which tolled all applicable statutes of limitations and repose through December 31, 2025, in order to facilitate settlement discussions without prejudice to either party's litigation position.
May 15, 2024: The Court referred the matter to Magistrate Judge Clara Finnegan for court-ordered mediation. The mediation sessions, held over the course of several days in May and June 2024, helped to narrow the outstanding issues between the parties and establish a framework for further negotiations.
July 30, 2024: Following the mediation and subsequent bilateral negotiations, the parties reached an agreement in principle on the fundamental framework of a consent decree, including the scope of remediation obligations, the general structure of the financial assurance requirements, and the framework for civil penalties and supplemental environmental projects.
October 21, 2024: Calderwood & Harkness LLP opened its engagement as lead outside counsel for TMC in connection with the consent decree and related financial assurance matters, replacing TMC's prior environmental counsel. Calderwood & Harkness was retained to lead the final phases of consent decree negotiation, to coordinate with TMC's financial advisor (Northspire Capital Markets) on the financial assurance structure, and to manage the surety bond application process.
November 8, 2024: DOJ circulated its first draft of the full consent decree text to TMC's counsel. The draft incorporated the framework agreed upon during mediation and subsequent negotiations, together with detailed remedy specifications, financial assurance provisions, stipulated penalty provisions, and other standard EPA consent decree terms.
Current Status (as of December 10, 2024): The parties are currently engaged in active redline negotiations over the consent decree text. Principal outstanding issues include certain technical specifications in the remedy for the Ridgecrest site, the precise mechanism for annual financial assurance adequacy reviews, and certain details of the dispute resolution provision. TMC and its counsel are optimistic that all outstanding issues can be resolved and that a substantially final agreed text will be available in early February 2025.
Anticipated Timeline:
4.2 Parties to the Consent Decree
The parties to the consent decree, as reflected in the current draft text, are as follows:
Plaintiffs / Co-Plaintiffs:
(a) United States of America, acting through the U.S. Environmental Protection Agency ("EPA") and the U.S. Department of Justice ("DOJ"), Environment and Natural Resources Division ("ENRD");
(b) State of Montana, acting through the Montana Department of Environmental Quality ("MT DEQ") and the Montana Attorney General's Office; lead state counsel: Annika Hedstrom, Assistant Attorney General;
(c) State of Nevada, acting through the Nevada Division of Environmental Protection ("NV DEP") and the Nevada Attorney General's Office; lead state counsel: Ricardo Fuentes, Senior Deputy Attorney General; and
(d) State of West Virginia, acting through the West Virginia Department of Environmental Protection ("WV DEP") and the West Virginia Attorney General's Office; lead state counsel: Loretta May Hatcher, Assistant Attorney General.
Defendants:
(a) Torchlight Mining Corp.;
(b) Torchlight Mining (U.S.) Inc.;
(c) Torchlight Specialty Chemicals, Inc.;
(d) Ridgecrest Mine Holdings, LLC; and
(e) Bonanza Creek Mining, LLC.
Government Counsel:
(a) Philip Orenstein, Lead Trial Attorney, DOJ, Environment and Natural Resources Division, Environmental Enforcement Section;
(b) Katherine Rowe-Halpern, Supervising Attorney, DOJ, Environment and Natural Resources Division, Environmental Enforcement Section; and
(c) Margaret Coulson, Lead Case Attorney, EPA, Office of Enforcement and Compliance Assurance ("OECA").
TMC Counsel:
(a) Calderwood & Harkness LLP — lead outside counsel for TMC; responsible partner: Harrison Wexford;
(b) Holcroft, Dane & Weiss LLP — Montana local counsel; lead partner: Russell Dane;
(c) sagebrush Law Group, PLLC — Nevada local counsel; lead partner: Denise Quartaro; and
(d) Baxter, Tully & Crane PLLC — West Virginia local counsel; lead partner: Nathan Tully.
4.3 Statutes at Issue
The consent decree will resolve alleged violations of the following federal environmental statutes:
(a) Clean Water Act ("CWA") § 301 (33 U.S.C. § 1311) — Alleged unpermitted discharges of pollutants to waters of the United States from the Ridgecrest Mine, the Gallatin Chemical Works, and the Bonanza Creek Mine, in violation of the prohibition against the discharge of any pollutant by any person except in compliance with an NPDES permit or other authorization under the CWA;
(b) Resource Conservation and Recovery Act ("RCRA") §§ 3004, 3005 (42 U.S.C. §§ 6924, 6925) — Alleged mismanagement of hazardous waste, operation of unpermitted hazardous waste storage and treatment units, and failure to perform corrective action at solid waste management units and areas of concern at the Ridgecrest Mine, the Gallatin Chemical Works, the Bonanza Creek Mine, and the Kanawha Bend Chemical Plant;
(c) Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA") § 107 (42 U.S.C. § 9607) — Cost recovery claims by EPA for past response costs incurred in connection with removal actions at the Ridgecrest Mine ($14.3 million, January 2021 through May 2023) and emergency response actions at the Kanawha Bend Chemical Plant ($3.8 million, June 2020); and
(d) Migratory Bird Treaty Act (16 U.S.C. §§ 703–712) — Alleged taking of migratory birds at the Bonanza Creek Gold Mine, involving 17 documented avian mortalities in solution ponds at the heap-leach facility during the period 2021 through 2023.
4.4 Summary of Consent Decree Financial Obligations
The consent decree, as currently contemplated in the draft text under negotiation, imposes the following categories of financial obligations on the Defendants:
4.4.1 Remediation Costs (by Site)
The table below summarizes the estimated remediation costs for each of the four sites, the anticipated duration of remediation activities at each site, and the net present value of each site's remediation costs discounted at a rate of 3%:
The Ridgecrest site represents the largest remediation obligation, accounting for approximately 57.8% of total nominal remediation costs. The negotiated cost of $198.6 million for the Ridgecrest site was the product of extensive technical negotiations between the parties. TMC's internal estimate for the Ridgecrest remediation, as prepared by Pinnacle Creek Environmental, LLC, was $187.5 million, while EPA's independent estimate, as prepared by its technical reviewer, Cascade Geosciences, Inc. (Dr. Patricia Voss, Ph.D., Hydrogeology), was $224.0 million. The mid-point between these two estimates was $205.75 million. Through further negotiation, taking into account TMC's proposed remedial technologies (including a semi-passive water treatment system for acid mine drainage and an enhanced evapotranspiration cover system for the tailings impoundment), the parties negotiated the Ridgecrest remediation cost down to $198.6 million.
EPA's independent technical reviewer for the Ridgecrest and Bonanza Creek sites is:
Cascade Geosciences, Inc. Dr. Patricia Voss, Ph.D., Hydrogeology, Principal Hydrogeologist 804 Salmon Bay Drive Seattle, Washington 98107
The remediation cost estimates for all four sites were prepared by TMC's environmental consultant, Pinnacle Creek Environmental, LLC, and are based on detailed remedial investigation and feasibility study ("RI/FS") work conducted at each site. The cost estimates incorporate engineering design assumptions, construction cost databases, long-term operation and maintenance cost projections, and contingency allowances consistent with EPA guidance for remediation cost estimation. A summary of the remediation cost estimates by site, as prepared by Pinnacle Creek, is included as Appendix H to this Application.
4.4.2 Civil Penalties
The consent decree will require TMC and its subsidiaries to pay civil penalties totaling $31,500,000, allocated among the four sites as follows:
The civil penalties will be payable in four equal installments over a three-year period following entry of the consent decree, on the following schedule:
(a) First installment (25%): $7,875,000, due within 30 days of entry of the consent decree;
(b) Second installment (25%): $7,875,000, due 12 months after entry of the consent decree;
(c) Third installment (25%): $7,875,000, due 24 months after entry of the consent decree; and
(d) Fourth installment (25%): $7,875,000, due 36 months after entry of the consent decree.
The civil penalty amounts reflect the application of EPA's Civil Penalty Policies and the BEN and ABEL penalty calculation models, adjusted through negotiation to account for TMC's cooperation, the scope of the remediation commitments, and TMC's ability to pay.
4.4.3 EPA Past-Costs Reimbursement (CERCLA § 107)
The consent decree will require TMC and its subsidiaries to reimburse EPA for past response costs incurred by EPA in connection with removal and emergency response actions at two of the four sites:
These amounts represent EPA's documented and audited response costs and have been verified by TMC's counsel through review of EPA's cost documentation submitted pursuant to CERCLA § 107(a)(4)(A). The past-cost reimbursement amounts are payable in a lump sum within 60 days of entry of the consent decree.
4.4.4 Supplemental Environmental Projects (SEPs)
The consent decree will require TMC to fund and implement three Supplemental Environmental Projects ("SEPs") with a combined value of $12,000,000. The SEPs are designed to provide environmental or public health benefits in the communities affected by TMC's operations and were negotiated as part of the overall settlement framework in accordance with EPA's Supplemental Environmental Projects Policy (2015):
Flint Creek Watershed Restoration Project (Montana) — $5,500,000
This project will fund stream-bank stabilization, riparian habitat replanting, and fish-passage improvements along approximately 12 miles of Flint Creek in Granite County, Montana, downstream of the Ridgecrest Mine. The project will benefit native trout populations and improve water quality in a watershed that has been impacted by historic and ongoing mining activities. The project is expected to be completed within 5 years of the Effective Date of the consent decree.
Battle Mountain Community Drinking Water Improvement Project (Nevada) — $3,500,000
This project will fund the upgrade of the municipal water treatment facility in Battle Mountain, Lander County, Nevada, which serves the community nearest to the Bonanza Creek Gold Mine. The upgrade will include installation of advanced filtration and disinfection systems to improve the quality and reliability of the community's drinking water supply. The project is expected to be completed within 3 years of the Effective Date of the consent decree.
Institute Community Air Quality Monitoring Network (West Virginia) — $3,000,000
This project will fund the installation and 10-year operation of six ambient air quality monitoring stations in the Institute community in Kanawha County, West Virginia, near the Kanawha Bend Chemical Plant. The monitoring network will provide real-time data on ambient concentrations of sulfur dioxide, particulate matter, and volatile organic compounds in the community, improving public health surveillance and environmental awareness. The monitoring stations will be operated and maintained by TMC for a period of 10 years following installation, after which ownership and operation will be transferred to the West Virginia Department of Environmental Protection.
4.4.5 Independent Monitor Costs
The consent decree will require TMC to fund the costs of an independent environmental monitor appointed by EPA to oversee TMC's compliance with the consent decree's remediation and reporting obligations. The estimated cost of the independent monitor over the initial 5-year monitoring period is $4,800,000 (approximately $960,000 per year). The monitor is:
Verdant Analytics, Inc. Dr. Kamal Osei, Senior Managing Director 1550 NW Couch Street, Suite 400 Portland, Oregon 97209
The independent monitor's responsibilities will include conducting quarterly compliance audits at each of the four sites, reviewing TMC's remediation progress reports and data submittals, issuing annual public reports on the status of remediation activities, and advising EPA on TMC's compliance with the consent decree. The monitor's costs are subject to adjustment after the initial 5-year period based on the scope of remaining monitoring obligations.
4.4.6 Grand Total Obligations
The following table summarizes the grand total of all financial obligations under the consent decree, both in nominal terms and on a net present value / cash equivalent basis:
The difference between the nominal grand total of $409.9 million and the NPV/cash equivalent of $311.5 million reflects the time value of money applied to the long-duration remediation costs (which span 15 to 30 years depending on the site), discounted at a rate of 3% per annum. The NPV figure is relevant for financial assurance sizing purposes, as the consent decree financial assurance requirement of $245.0 million is sized to cover the NPV of the remediation obligations.
4.5 Financial Assurance Requirements under Consent Decree
The consent decree will require TMC and its subsidiaries to post total financial assurance of $245,000,000 to secure the performance of the remediation obligations described in Section 4.4.1 above. The financial assurance must be in a form acceptable to EPA under 40 C.F.R. Part 264, Subpart H (RCRA financial assurance) and must satisfy the requirements of the financial assurance provisions of the consent decree.
The proposed structure of the financial assurance package is as follows:
The remediation trust fund will be established pursuant to a trust agreement (Trust Agreement No. LTC-REM-2025-1177) between TMC (as grantor), Larchfield Trust Company, N.A. (as trustee), and EPA (as beneficiary). The trust officer responsible for the trust account is:
David Henshaw, Senior Vice President and Trust Officer Larchfield Trust Company, N.A. 200 South Tryon Street, Suite 1100 Charlotte, North Carolina 28202
TMC will fund the trust with $80,000,000 in cash or cash equivalents upon establishment of the trust, and the trust assets will be invested in accordance with a conservative investment policy to be approved by EPA. Trust disbursements will be made to fund remediation activities at the four sites as approved by EPA.
The financial assurance must be posted no later than September 12, 2025 (90 days after the Effective Date of the consent decree, currently anticipated to be June 14, 2025). TMC is applying for the Bond in advance of this deadline to ensure that all financial assurance instruments are in place on a timely basis and to allow adequate time for Ironbark's underwriting process.
The penal sum of the Bond and the balance of the remediation trust fund will be subject to an annual adjustment mechanism as provided in the consent decree, which will account for inflation (indexed to the Consumer Price Index for All Urban Consumers, CPI-U, or other appropriate index) and any updates to estimated remedy costs arising from EPA's annual financial assurance adequacy review. TMC and Ironbark will coordinate on any required adjustments to the Bond penal sum on an annual basis.
4.6 Key Consent Decree Enforcement Provisions
The consent decree includes the following key enforcement provisions, which are relevant to Ironbark's assessment of the risk profile of the Bond:
Stipulated Penalties: The consent decree provides for the following escalating schedule of stipulated penalties for violations of the decree's requirements:
(a) $1,500 per day per violation for the first 30 days of non-compliance;
(b) $3,000 per day per violation for days 31 through 60 of non-compliance; and
(c) $5,500 per day per violation for each day of non-compliance beyond 60 days.
Stipulated penalties are in addition to any other remedies available to the Government under the decree or applicable law. TMC notes that stipulated penalties are payable to the United States and are not secured by the surety bond; the Bond secures only the performance of the remediation obligations.
Force Majeure: The consent decree includes a standard EPA force-majeure provision, which excuses non-compliance with the decree's requirements to the extent caused by circumstances beyond the reasonable control of the Defendants. TMC must provide written notice to EPA within 15 days of becoming aware of any force-majeure event. Disputes regarding the applicability of the force-majeure provision are subject to the decree's dispute resolution procedures.
Dispute Resolution: The consent decree provides for a multi-step dispute resolution process:
(a) Informal Negotiation: 30-day period for the parties to attempt to resolve the dispute informally through direct negotiation;
(b) Formal EPA Decision: If the dispute is not resolved through informal negotiation, EPA will issue a formal decision within 30 days of the conclusion of the informal negotiation period; and
(c) Judicial Review: Any party may petition the Court for judicial review of EPA's formal decision within 30 days of issuance of the decision.
Termination: Termination of the consent decree will occur on a site-by-site basis. With respect to each site, the decree's obligations will terminate upon: (a) certification by EPA, after consultation with the independent monitor, that all remedial construction and performance standards at the site have been achieved; and (b) the expiration of a minimum period of 5 years following the completion of all remedial construction at the relevant site. The 5-year minimum period is intended to ensure that the remedy is performing as designed and that long-term monitoring data confirm the effectiveness of the remediation.
SECTION 5: DESCRIPTION OF THE FOUR SITES
5.1 Ridgecrest Copper-Molybdenum Mine
Location: 14200 Ridgecrest Mine Road, Drummond, Granite County, Montana 59832
Operator: Torchlight Mining (U.S.) Inc. Real property and mineral rights are held by Ridgecrest Mine Holdings, LLC.
Site Area: Approximately 3,200 acres (mine footprint), within a total controlled property of approximately 8,700 acres including buffer lands, access roads, and water management infrastructure.
Operational History: The Ridgecrest Mine is an open-pit copper-molybdenum mine that has been in operation since 1978. The mine produced copper and molybdenum concentrates through conventional open-pit mining, crushing, milling, flotation, and solvent extraction/electrowinning ("SX/EW") processes. Active mining operations ceased on December 31, 2019, and the site is currently in the closure and reclamation phase. During its operational life, the mine produced approximately 1.2 billion pounds of copper and 85 million pounds of molybdenum, making it one of the significant copper-molybdenum operations in the Northern Rocky Mountain region.
EPA Designation: The Ridgecrest Mine has been proposed for listing on the National Priorities List ("NPL") under CERCLA. The site is currently being addressed under an Administrative Order on Consent ("AOC"), Docket No. CERCLA-08-2022-0039, executed September 15, 2022, between EPA Region 8 and TMC. The consent decree will supersede the existing AOC and establish a comprehensive remediation framework for the site.
EPA Project Coordinator: Dr. Samuel Tesfaye, EPA Region 8, Denver, Colorado.
Principal Contaminants and Environmental Conditions:
The primary environmental concern at the Ridgecrest site is acid mine drainage ("AMD") generated by the oxidation of sulfide minerals in waste rock dumps, pit walls, and the tailings impoundment. The AMD is characterized by low pH and elevated concentrations of dissolved metals, including:
•  Dissolved copper: average 47 mg/L (exceeding the Montana surface-water standard of 0.0087 mg/L for chronic aquatic life by a factor of approximately 5,400);
•  Dissolved molybdenum: average 1.2 mg/L;
•  Dissolved selenium: average 0.082 mg/L; and
•  Sulfate: average 3,400 mg/L.
The site also includes a 425-acre tailings impoundment with documented seepage to Flint Creek, a tributary of the Clark Fork River. Monitoring data collected by EPA and TMC over the past decade confirm that AMD and tailings seepage have impacted surface water quality in Flint Creek and groundwater in the shallow alluvial aquifer beneath and downgradient of the mine.
Alleged Violations:
(a) CWA § 301 — Unpermitted discharges of AMD and tailings seepage to Flint Creek and its tributaries;
(b) RCRA § 3004 — Mismanagement of hazardous waste generated by the SX/EW circuit, including spent electrolyte and solvent extraction raffinate; and
(c) CERCLA § 107 — Cost recovery for $14.3 million in EPA removal actions conducted at the site from January 2021 through May 2023, including emergency Bramwell Group, installation of a temporary water treatment system, and removal of contaminated sediments from Flint Creek.
Negotiated Remediation Cost: $198,600,000 over 30 years (NPV at 3%: $134,900,000). The 30-year remediation period reflects the long-term nature of AMD management, which is expected to require active water treatment for several decades until passive treatment systems reach steady-state performance. The remediation plan includes construction of a semi-passive water treatment system, installation of an enhanced evapotranspiration cover system over the tailings impoundment, reconstruction of Flint Creek channel segments, and a 30-year groundwater and surface-water monitoring program.
5.2 Gallatin Chemical Works
Location: 8800 Industrial Park Lane, Belgrade, Gallatin County, Montana 59714
Operator: Torchlight Specialty Chemicals, Inc.
Site Area: 145 acres.
Operational History: The Gallatin Chemical Works is a specialty chemical manufacturing facility that has been in continuous operation since 1993. The facility produces flotation reagents, sodium xanthate, dithiophosphate collectors, and related products used in mineral processing operations. The facility is currently active and is expected to continue operations throughout the remediation period. TMC has invested approximately $35 million in capital improvements at the facility over the past five years, including upgrades to process equipment, wastewater treatment systems, and secondary containment structures.
EPA Designation: The Gallatin Chemical Works is a RCRA Corrective Action facility operating under Permit No. MTD098712456, which requires investigation and cleanup of contamination associated with three identified solid waste management units ("SWMUs") and two areas of concern ("AOCs") at the facility.
Principal Contaminants and Environmental Conditions:
The primary contaminant of concern at the Gallatin Chemical Works is carbon disulfide ("CS₂") in groundwater, which has been detected at concentrations up to 890 µg/L — approximately 89 times the federal maximum contaminant level ("MCL") of 10 µg/L. Additional contaminants include xanthate decomposition products and volatile organic compounds (toluene and xylene) in subsurface soils. The contamination is associated with three SWMUs: (i) a former waste solvent storage area, (ii) a surface impoundment used for wastewater treatment, and (iii) a former drum storage area.
Alleged Violations:
(a) RCRA §§ 3004, 3005 — Operation of an unpermitted hazardous waste storage unit (former drum storage area used for temporary storage of spent solvents without a RCRA Part B permit) and failure to perform corrective action at the three identified SWMUs; and
(b) CWA § 301 — Fourteen exceedances of the Montana Pollutant Discharge Elimination System ("MPDES") permit effluent limits for CS₂ and total suspended solids between January 2021 and June 2024.
Estimated Remediation Cost: $42,800,000 over 15 years (NPV at 3%: $34,100,000). The remediation plan includes in-situ chemical oxidation of the CS₂ groundwater plume, excavation and off-site disposal of contaminated soils at the three SWMUs, installation of a groundwater extraction and treatment system, and a 15-year groundwater monitoring program.
5.3 Bonanza Creek Gold Mine
Location: County Road 447, Mile Marker 12, Lander County, Nevada 89820 (approximately 28 miles south of Battle Mountain)
Operator: Torchlight Mining (U.S.) Inc. Real property, mineral rights, and water rights are held by Bonanza Creek Mining, LLC.
Site Area: Approximately 5,600 acres (mine footprint), within a total controlled property of approximately 12,400 acres.
Operational History: The Bonanza Creek Mine is an open-pit heap-leach gold mine that has been in operation since 2001. The mine uses conventional open-pit mining, crushing, and heap-leach cyanidation to extract gold from oxide ore. Active mining operations are ongoing, and the mine currently produces approximately 120,000 troy ounces of gold per year. The mine's proven and probable gold reserves, as reported in TMC's most recent NI 43-101 technical report, support an additional estimated mine life of 8 to 10 years at current production rates.
EPA Designation: The Bonanza Creek Mine is subject to a combined RCRA Corrective Action / CWA enforcement action by EPA Region 9.
EPA Project Coordinator: Jennifer Whitfield, EPA Region 9, San Francisco, California.
Principal Contaminants and Environmental Conditions:
The primary environmental concerns at the Bonanza Creek Mine relate to three documented releases of cyanide-bearing process solution from the heap-leach pad to an ephemeral tributary of the Reese River, caused by tears in the heap-leach pad liner. The releases occurred on March 17, 2022, August 9, 2022, and January 22, 2023, and resulted in measurable impacts to surface water quality. Key contaminant concentrations include:
•  WAD (weak acid dissociable) cyanide: 0.62 mg/L in heap-leach pad underdrain (exceeding the discharge limit of 0.022 mg/L by a factor of approximately 28);
•  Mercury: average 12.4 µg/L in pit-lake water (exceeding the water quality criterion of 0.77 µg/L by a factor of approximately 16); and
•  Selenium in pit-lake water at concentrations exceeding applicable water quality criteria.
In addition, 17 avian mortalities were documented in solution ponds at the heap-leach facility during the period 2021 through 2023, in violation of the Migratory Bird Treaty Act. The deceased birds included waterfowl and shorebirds attracted to the open solution ponds, which contained cyanide concentrations lethal to avian species.
Alleged Violations:
(a) CWA § 301 — Three unpermitted discharges of process solution from the heap-leach pad, via torn liner, to an ephemeral tributary of the Reese River (March 17, 2022; August 9, 2022; January 22, 2023);
(b) RCRA § 3004 — Management of spent heap-leach ore as hazardous waste without compliance with applicable RCRA treatment, storage, and disposal requirements; and
(c) Migratory Bird Treaty Act — Taking of 17 migratory birds in solution ponds at the heap-leach facility during 2021–2023.
Estimated Remediation Cost: $63,200,000 over 20 years (NPV at 3%: $47,100,000). The remediation plan includes replacement and double-lining of the heap-leach pad, installation of enhanced leak detection and response systems, construction of a pit-lake water treatment system for mercury and selenium removal, closure and capping of spent heap-leach pads, installation of wildlife deterrent systems (netting, hazing devices) at all open solution ponds, and a 20-year groundwater and surface-water monitoring program.
5.4 Kanawha Bend Chemical Plant
Location: 2200 Chemical Valley Road, Institute, Kanawha County, West Virginia 25112
Operator: Torchlight Specialty Chemicals, Inc.
Site Area: 78 acres.
Operational History: The Kanawha Bend Chemical Plant is a chemical manufacturing facility that has been in continuous operation since 1985. The facility manufactures leaching agents and performs sulfuric acid regeneration in support of TMC's hydrometallurgical operations. The facility is situated in the Kanawha Valley, commonly known as "Chemical Valley," an area with a high concentration of industrial chemical operations. The facility is currently active and is expected to continue operations throughout the remediation period.
EPA Designation: The Kanawha Bend Chemical Plant is a RCRA Corrective Action facility operating under Permit No. WVD048823915.
Principal Contaminants and Environmental Conditions:
The Kanawha Bend site presents a complex environmental profile involving multiple contaminant media and multiple types of contamination. The principal environmental conditions include:
•  Sulfuric acid residuals in soils: Soil pH as low as 1.8 in the vicinity of the former acid storage and handling areas, indicating severe acid contamination of soils and shallow subsurface materials;
•  Heavy metals near former waste lagoon: Lead concentrations up to 4,200 mg/kg and arsenic concentrations up to 890 mg/kg in soils near the former waste lagoon, which was used historically for disposal of process residuals;
•  DNAPL in fractured bedrock aquifer: Dense non-aqueous phase liquid ("DNAPL") consisting of chlorinated solvents (including trichloroethylene and perchloroethylene) has been identified in the fractured bedrock aquifer beneath the facility, presenting a complex and challenging groundwater remediation scenario.
Alleged Violations:
(a) RCRA §§ 3004, 3005 — Failure to properly close the former surface impoundment (waste lagoon) in accordance with RCRA closure requirements, and unpermitted treatment of listed hazardous wastes K062 (spent pickle liquor from steel finishing operations, received from a third-party generator) and D002 (corrosive waste) at the facility; and
(b) CERCLA § 107 — Cost recovery for $3.8 million in EPA emergency response costs incurred following the June 14, 2020 sulfuric acid release to a tributary of the Kanawha River, which resulted in a fish kill and temporary closure of downstream public water intakes.
Estimated Remediation Cost: $38,900,000 over 20 years (NPV at 3%: $29,000,000). The remediation plan includes excavation and off-site disposal of acid-contaminated soils, excavation and consolidation of metals-contaminated soils from the former waste lagoon area into an engineered on-site repository, in-situ thermal treatment of DNAPL in the fractured bedrock aquifer, installation of a groundwater extraction and treatment system for chlorinated solvents, and a 20-year groundwater monitoring program.
SECTION 6: ENVIRONMENTAL CONSULTANT INFORMATION
6.1 TMC's Environmental Remediation Consultant
TMC has engaged the following environmental consulting firm to provide technical support for the remediation obligations arising under the consent decree:
Firm Name: Pinnacle Creek Environmental, LLC
Entity Type: Limited liability company organized under the laws of the State of Delaware
Principal Office:
320 Willowbrook Drive, Suite 100 Bozeman, Montana 59715
Engagement Lead: Dr. Astrid Bergmann, P.E., Senior Principal
Role and Scope of Engagement: Pinnacle Creek Environmental has been engaged by TMC to provide the following services in connection with the four sites subject to the consent decree:
(a) Environmental site assessments and data compilation;
(b) Remedial investigation and feasibility study ("RI/FS") support, including the development of conceptual site models, evaluation of remedial alternatives, and preparation of technical memoranda for use in consent decree negotiations;
(c) Remediation design, including the preparation of detailed engineering designs, construction specifications, and cost estimates for the selected remedies at each site;
(d) Long-term monitoring program design, including the development of monitoring well networks, sampling protocols, and data management systems for each site; and
(e) Ongoing technical advisory services to TMC's management and legal counsel throughout the consent decree negotiation and implementation process.
Pinnacle Creek Environmental prepared the remediation cost estimates presented in Section 4.4.1 of this Application, totaling $343,500,000 in nominal costs and $245,100,000 in net present value (NPV at 3%). These cost estimates are based on Pinnacle Creek's detailed knowledge of the site conditions, the selected remedial technologies, and current construction and operation cost databases, and incorporate contingency allowances of 15% to 25% depending on the level of design completion for each site. A summary of the remediation cost estimates by site is included as Appendix H to this Application.
Pinnacle Creek Environmental has extensive experience in the remediation of mining and industrial sites, including numerous CERCLA and RCRA corrective action projects. Dr. Bergmann, the engagement lead, holds a doctorate in environmental engineering from the Colorado School of Mines and is a licensed Professional Engineer in Montana, Nevada, and West Virginia.
SECTION 7: INSURANCE INFORMATION
7.1 Pollution Legal Liability (PLL) Insurance
TMC maintains a Pollution Legal Liability ("PLL") insurance policy with the following carrier and terms:
Carrier:
Meridian Environmental Insurance Company 233 South Wacker Drive, Suite 4100 Chicago, Illinois 60606
Policy Number: MEI-ENV-2021-04738
Policy Period: July 1, 2021 through July 1, 2024 (3-year term)
Coverage Limits:
Claims Adjuster: Sheila Grantham, Senior Claims Examiner, Meridian Environmental Insurance Company
Coverage Dispute Status:
TMC has submitted claims under the PLL policy for environmental remediation costs at all four sites. The current status of coverage determinations by Meridian is as follows:
(a) Ridgecrest Copper-Molybdenum Mine: Meridian has denied coverage based on the policy's pollution/known-conditions exclusion, asserting that contamination at the Ridgecrest site constituted a "known condition" at the time of policy inception. TMC's counsel is evaluating the denial and reserving TMC's rights to dispute the coverage determination;
(b) Kanawha Bend Chemical Plant: Meridian has denied coverage based on late notice, asserting that TMC failed to provide timely notice of the June 2020 sulfuric acid release. TMC's counsel disagrees with this determination and has reserved TMC's rights;
(c) Gallatin Chemical Works: Meridian has acknowledged coverage subject to the SIR of $5,000,000 per occurrence; and
(d) Bonanza Creek Gold Mine: Meridian has acknowledged coverage subject to the SIR of $5,000,000 per occurrence.
Estimated Insurance Recovery: Based on the coverage determinations described above, the maximum theoretical insurance recovery under the PLL policy (applicable to the Gallatin and Bonanza Creek sites only) is limited to the policy aggregate of $75,000,000. TMC's financial advisor, Northspire Capital Markets, Inc., has prepared a range of estimated recoveries, taking into account the SIR, the scope of covered remediation costs at the Gallatin and Bonanza Creek sites, and the risk of further coverage disputes. Northspire's realistic estimate of net insurance recoveries is in the range of $45,000,000 to $55,000,000.
A copy of the PLL policy declarations page is included as Appendix K to this Application.
7.2 Directors' and Officers' Liability Insurance
TMC also maintains Directors' and Officers' Liability ("D&O") insurance, which is noted here for completeness in connection with Ironbark's evaluation of TMC's overall risk management profile:
Carrier:
Clearwater Mutual Insurance, Ltd. Crawford House, 50 Cedar Avenue Hamilton HM 11, Bermuda
U.S. Managing Agent:
Clearwater Mutual Services, Inc. 1345 Avenue of the Americas, Suite 3200 New York, New York 10105
Policy Number: CMI-DO-2023-10221
Account Manager: Brendan Forsythe
The D&O policy is not directly relevant to the financial assurance obligations under the consent decree but is maintained in accordance with TMC's corporate governance and risk management practices.
SECTION 8: REPRESENTATIONS AND COVENANTS OF PRINCIPAL
8.1 Representations
In connection with this Application and the issuance of the Bond, TMC and each co-applicant subsidiary make the following representations:
(a) Organization and Good Standing. TMC and each co-applicant subsidiary are duly organized, validly existing, and in good standing under the laws of their respective jurisdictions of organization, and each entity is duly qualified to do business in each jurisdiction in which the nature of its business or the ownership of its properties requires such qualification.
(b) Power and Authority. TMC has full corporate power and authority to execute and deliver the surety bond and the related General Agreement of Indemnity, and to perform its obligations thereunder. Upon adoption of the Board resolution anticipated in February 2025, the execution and delivery of such instruments will have been duly authorized by all necessary corporate action on the part of TMC.
(c) Accuracy of Information. All information provided in this Applicat