ENVIRONMENTAL REMEDIATION SURETY BOND
Bond No. ISA-ENV-2025-08934
Execution Date: February 15, 2025
Penal Sum: $165,000,000.00 (One Hundred Sixty-Five Million and 00/100 Dollars)
Annual Premium: $3,052,500.00 (1.85% of Penal Sum Per Annum)
Issued in connection with the Consent Decree entered in
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
THIS BOND IS AN EXECUTION VERSION AND CONSTITUTES A LEGALLY BINDING OBLIGATION OF THE SURETY AND THE PRINCIPAL. THIS BOND HAS BEEN ISSUED PURSUANT TO AND IN SATISFACTION OF THE FINANCIAL ASSURANCE REQUIREMENTS SET FORTH IN THE CONSENT DECREE REFERENCED HEREIN AND IS SUBJECT TO THE TERMS AND CONDITIONS STATED BELOW.
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SECTION 1: PARTIES TO THE BOND
1.1 Principal
The following entities are collectively referred to herein as the "Principal" and are jointly and severally bound under this Bond:
(a) Torchlight Mining Corp. ("TMC"), a corporation duly incorporated and validly existing under the Canada Business Corporations Act (R.S.C. 1985, c. C-44) (the "CBCA"), dual-listed on the Toronto Stock Exchange (TSX: TRC) and the New York Stock Exchange (NYSE: TRC). TMC maintains its principal office at 1800 Bayfield Tower, 401 Bay Street, Toronto, Ontario M5H 2Y4, Canada, and maintains U.S. headquarters at 750 Copper Ridge Boulevard, Suite 200, Helena, Montana 59601. TMC is the ultimate parent company of all other Principal entities identified herein and is a reporting issuer under Canadian securities laws and a registrant under the U.S. Securities Exchange Act of 1934, as amended.
(b) Torchlight Mining (U.S.) Inc. ("TM(US)"), a corporation duly incorporated and validly existing under the laws of the State of Delaware, with Employer Identification Number 83-2047156. TM(US) maintains its registered agent as Ashgrove Services Inc., 1209 Orange Street, Wilmington, Delaware 19801, and its principal place of business at 750 Copper Ridge Boulevard, Suite 200, Helena, Montana 59601. TM(US) is a wholly owned subsidiary of TMC and serves as the principal U.S. operating entity and holding company for TMC's domestic subsidiaries.
(c) Torchlight Specialty Chemicals, Inc. ("TSC"), a corporation duly incorporated and validly existing under the laws of the State of Delaware, with Employer Identification Number 47-3819204. TSC is a wholly owned subsidiary of TM(US) and operates certain chemical manufacturing and processing facilities within the United States, including the Gallatin Chemical Works and the Kanawha Bend Chemical Plant, each as more particularly described in Section 11 and Exhibit B hereto.
(d) Ridgecrest Mine Holdings, LLC ("RMH"), a limited liability company duly organized and validly existing under the laws of the State of Montana, with Montana Secretary of State Identification Number E1042738. RMH is a wholly owned subsidiary of TM(US) and holds the real property, mineral rights, water rights, and associated permits for the Ridgecrest Copper-Molybdenum Mine located in Granite County, Montana.
(e) Bonanza Creek Mining, LLC ("BCM"), a limited liability company duly organized and validly existing under the laws of the State of Nevada, with Nevada Secretary of State Entity Number E0518294731. BCM is a wholly owned subsidiary of TM(US) and holds the real property, mineral rights, water rights, and associated permits for the Bonanza Creek Gold Mine located in Lander County, Nevada.
All of the foregoing entities — TMC, TM(US), TSC, RMH, and BCM — are jointly and severally bound as Principal under this Bond. Any obligation of the "Principal" hereunder is an obligation of each such entity, and the Obligee may proceed against any one or more of them without being required to exhaust remedies against any other.
1.2 Surety
Ironbark Surety of America, Inc. (the "Surety"), a corporation duly incorporated and validly existing under the laws of the State of New York, with its principal office located at 599 Lexington Avenue, 26th Floor, New York, New York 10022. Surety is a wholly owned subsidiary of Ironbark Surety Group, Ltd., a Bermuda-domiciled insurer and reinsurer. Surety is licensed and authorized to transact surety business in the States of Montana, Nevada, and West Virginia and in all other jurisdictions relevant to the obligations secured hereunder. Surety's current financial strength rating from A.M. Best Company is A (Excellent), Financial Size Category XIV. Surety is listed on the U.S. Department of the Treasury's Listing of Approved Sureties (Department Circular 570) and possesses underwriting capacity sufficient to support the penal sum of this Bond.
1.3 Obligee
The United States Environmental Protection Agency ("EPA"), through its Office of Enforcement and Compliance Assurance ("OECA"), with offices in Washington, D.C., is the principal Obligee under this Bond. The Lead EPA Case Attorney for the underlying enforcement action is Margaret Coulson. The EPA Project Coordinator for the Ridgecrest Copper-Molybdenum Mine (Operable Unit 1) is Dr. Samuel Tesfaye. The EPA Project Coordinator for the Bonanza Creek Gold Mine is Jennifer Whitfield.
This Bond is also issued for the benefit of the U.S. Department of Justice, Environment and Natural Resources Division ("DOJ ENRD"), Environmental Enforcement Section, and the following co-plaintiff states and their respective environmental agencies, each of which joined in or consented to the terms of the Consent Decree:
(i) The State of Montana, acting through the Montana Department of Environmental Quality ("MT DEQ");
(ii) The State of Nevada, acting through the Nevada Division of Environmental Protection ("NV DEP"); and
(iii) The State of West Virginia, acting through the West Virginia Department of Environmental Protection ("WV DEP").
References in this Bond to "Obligee" shall mean the EPA, and where the context permits, shall also include DOJ ENRD and the co-plaintiff states identified above, each acting within its respective jurisdictional authority.
SECTION 2: RECITALS
WHEREAS, the parties set forth the following facts and circumstances as the basis for the issuance of this Bond:
2.1 The Consent Decree
A Consent Decree (the "Consent Decree") has been negotiated and agreed upon among the United States of America, acting through EPA and DOJ ENRD, the State of Montana, the State of Nevada, and the State of West Virginia (collectively, the "Plaintiffs"), and Torchlight Mining Corp., Torchlight Mining (U.S.) Inc., Torchlight Specialty Chemicals, Inc., Ridgecrest Mine Holdings, LLC, and Bonanza Creek Mining, LLC (collectively, the "Defendants"), in the matter captioned United States of America and State of Montana v. Torchlight Mining Corp., Torchlight Mining (U.S.) Inc., Torchlight Specialty Chemicals, Inc., Ridgecrest Mine Holdings, LLC, and Bonanza Creek Mining, LLC, consolidated with the States of Nevada and West Virginia as co-plaintiffs, Civil Action No. 9:24-cv-00087-DWM, pending before the Honorable Donald W. Molloy, Senior United States District Judge, in the United States District Court for the District of Montana, Missoula Division.
The Consent Decree was lodged with the Court on February 19, 2025, and is subject to a thirty (30) day public comment period pursuant to 28 C.F.R. § 50.7 and CERCLA § 122(d)(2), 42 U.S.C. § 9622(d)(2). The target date for entry of the Consent Decree by the Court is May 15, 2025. Pursuant to Section IV of the Consent Decree, the "Effective Date" of the Consent Decree shall be thirty (30) days after the date of entry, which is anticipated to be June 14, 2025.
The enforcement action giving rise to the Consent Decree alleges violations by the Defendants of, inter alia: (a) Section 301 of the Clean Water Act ("CWA"), 33 U.S.C. § 1311, including the discharge of pollutants from the Ridgecrest Mine and Bonanza Creek Mine without or in violation of National Pollutant Discharge Elimination System permits; (b) Sections 3004 and 3005 of the Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C. §§ 6924 and 6925, including the treatment, storage, and disposal of hazardous waste at the Gallatin Chemical Works and the Kanawha Bend Chemical Plant without conformance with applicable RCRA requirements; and (c) Section 107 of the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), 42 U.S.C. § 9607, including liability for response costs incurred and to be incurred at the Ridgecrest Mine and the Kanawha Bend Chemical Plant.
2.2 The Secured Obligations
The Consent Decree requires the Principal to perform comprehensive environmental remediation at four (4) facilities located in three (3) states, as described below:
(a) Ridgecrest Copper-Molybdenum Mine, located at 14200 Ridgecrest Mine Road, Drummond, Granite County, Montana 59832. The negotiated remediation cost for this facility is One Hundred Ninety-Eight Million Six Hundred Thousand Dollars ($198,600,000) in nominal terms, to be expended over an estimated period of thirty (30) years. The net present value of this remediation obligation, calculated at a discount rate of three percent (3%), is One Hundred Thirty-Four Million Nine Hundred Thousand Dollars ($134,900,000).
(b) Gallatin Chemical Works, located at 8800 Industrial Park Lane, Belgrade, Gallatin County, Montana 59714. The estimated remediation cost for this facility is Forty-Two Million Eight Hundred Thousand Dollars ($42,800,000) in nominal terms, to be expended over an estimated period of fifteen (15) years. The net present value of this remediation obligation, calculated at a discount rate of three percent (3%), is Thirty-Four Million One Hundred Thousand Dollars ($34,100,000).
(c) Bonanza Creek Gold Mine, located at County Road 447, Mile Marker 12, Lander County, Nevada 89820. The estimated remediation cost for this facility is Sixty-Three Million Two Hundred Thousand Dollars ($63,200,000) in nominal terms, to be expended over an estimated period of twenty (20) years. The net present value of this remediation obligation, calculated at a discount rate of three percent (3%), is Forty-Seven Million One Hundred Thousand Dollars ($47,100,000).
(d) Kanawha Bend Chemical Plant, located at 2200 Chemical Valley Road, Institute, Kanawha County, West Virginia 25112. The estimated remediation cost for this facility is Thirty-Eight Million Nine Hundred Thousand Dollars ($38,900,000) in nominal terms, to be expended over an estimated period of twenty (20) years. The net present value of this remediation obligation, calculated at a discount rate of three percent (3%), is Twenty-Nine Million Dollars ($29,000,000).
The total nominal remediation cost across all four sites is Three Hundred Forty-Three Million Five Hundred Thousand Dollars ($343,500,000). The total net present value of all remediation obligations, calculated at a discount rate of three percent (3%), is Two Hundred Forty-Five Million One Hundred Thousand Dollars ($245,100,000). These cost estimates were developed by Pinnacle Creek Environmental, LLC and validated by the court-appointed independent monitor, Verdant Analytics, Inc.
2.3 Financial Assurance Requirements
The Consent Decree requires the Principal to establish and maintain financial assurance in the aggregate amount of Two Hundred Forty-Five Million Dollars ($245,000,000) to guarantee the performance of the remediation obligations described in Section 2.2 above. The financial assurance package approved by the EPA and reflected in the Consent Decree consists of the following instruments:
(i) This Surety Bond, Bond No. ISA-ENV-2025-08934, in the amount of One Hundred Sixty-Five Million Dollars ($165,000,000), issued by Ironbark Surety of America, Inc. in favor of the Obligee; and
(ii) A Remediation Trust Fund in the amount of Eighty Million Dollars ($80,000,000), established pursuant to Trust Agreement No. LTC-REM-2025-1177 with Larchfield Trust Company, N.A., a national banking association, as trustee. The Trust Agreement was executed contemporaneously with this Bond. The Trust Officer assigned to the Remediation Trust Fund is David Henshaw, and the trustee's address is 200 South Tryon Street, Suite 1100, Charlotte, North Carolina 28202.
The combined value of the surety bond and the remediation trust fund is One Hundred Sixty-Five Million Dollars ($165,000,000) plus Eighty Million Dollars ($80,000,000), for an aggregate of Two Hundred Forty-Five Million Dollars ($245,000,000), thereby satisfying the financial assurance requirements of the Consent Decree.
2.4 RCRA and CERCLA Financial Assurance Authority
This Bond is issued in furtherance of and consistent with the financial assurance requirements applicable to environmental remediation under the following authorities:
(a) The regulations promulgated under RCRA at 40 C.F.R. Part 264, Subpart H (Financial Requirements for Owners and Operators of Hazardous Waste Treatment, Storage, and Disposal Facilities), and 40 C.F.R. Part 265, Subpart H (Financial Requirements for Interim Status Facilities), including specifically the provisions relating to surety bonds guaranteeing performance of closure, post-closure care, and corrective action obligations;
(b) CERCLA § 107, 42 U.S.C. § 9607, and the cost-recovery assurance requirements thereunder, including EPA's authority to require financial assurance from potentially responsible parties as a condition of settlement;
(c) The applicable provisions of the Consent Decree, including Sections XII and XIII thereof, which specify the forms and amounts of financial assurance instruments acceptable to EPA and the procedures for establishment, maintenance, adjustment, and release of such instruments; and
(d) EPA guidance documents relating to the use of surety bonds as financial assurance mechanisms in RCRA corrective action and CERCLA settlements, including EPA's Interim Guidance on Financial Responsibility for Facilities Subject to RCRA Corrective Action (1996) and the Financial Assurance Fact Sheet for CERCLA settlements.
2.5 Purpose of Bond
NOW, THEREFORE, this Bond is issued to satisfy a portion — specifically, One Hundred Sixty-Five Million Dollars ($165,000,000) of the total Two Hundred Forty-Five Million Dollars ($245,000,000) — of the financial assurance requirements imposed upon the Principal under the Consent Decree. This Bond secures the Principal's obligations to perform remediation, comply with all schedules and milestones, and fund costs in accordance with the Consent Decree at all four sites identified in Section 2.2 above. The issuance of this Bond, together with the establishment and funding of the Remediation Trust Fund, is a condition precedent to the entry of the Consent Decree by the Court.
SECTION 3: BOND OBLIGATION
3.1 Penal Sum
KNOW ALL PERSONS BY THESE PRESENTS, that the Surety, Ironbark Surety of America, Inc., jointly and severally with the Principal, Torchlight Mining Corp., Torchlight Mining (U.S.) Inc., Torchlight Specialty Chemicals, Inc., Ridgecrest Mine Holdings, LLC, and Bonanza Creek Mining, LLC, are firmly bound and obligated unto the Obligee, the United States Environmental Protection Agency, in the penal sum of One Hundred Sixty-Five Million and 00/100 Dollars ($165,000,000.00), lawful money of the United States of America, for the payment of which the Surety and Principal bind themselves, their successors, and assigns, jointly and severally.
All payments made by the Surety under this Bond shall reduce the penal sum by the amount of each such payment. In no event shall the aggregate of all payments made by the Surety under this Bond exceed the penal sum of One Hundred Sixty-Five Million and 00/100 Dollars ($165,000,000.00), as the same may be adjusted from time to time pursuant to Section 8 hereof. The penal sum represents the maximum aggregate liability of the Surety under this Bond, and the Surety shall have no obligation to make any payment or perform any obligation that would cause the total payments and the reasonable cost of performance under this Bond to exceed such amount.
3.2 Condition of the Bond
The obligation of the Surety under this Bond is conditioned upon the Principal's faithful performance of all remediation obligations required of the Principal under the Consent Decree at the four sites identified in Sections 2.2 and 11 hereof, including, without limitation, the timely commencement, continuation, and completion of all remedial investigation, feasibility study, remedial design, remedial action, construction, operation and maintenance, monitoring, institutional controls, and any other activities required by the Consent Decree at each site, in accordance with the terms, deadlines, performance standards, and schedules set forth in the Consent Decree and any EPA-approved work plans, quality assurance project plans, sampling and analysis plans, health and safety plans, and other documents required thereunder.
IF the Principal faithfully performs all such remediation obligations in accordance with the Consent Decree, and if all conditions for termination of the Consent Decree are met, then this Bond shall be null and void and of no further force or effect. OTHERWISE, this Bond shall remain in full force and effect, subject to the terms and conditions set forth herein.
3.3 Trigger Events / Default
For purposes of this Bond, a "Default" shall be deemed to have occurred upon the happening of any one or more of the following events:
(a) The Principal fails to commence, continue, or complete any remediation work, remedial action, corrective action, removal action, construction activity, monitoring obligation, or any other performance obligation required under the Consent Decree within the deadlines and in accordance with the schedules specified therein, and such failure is not excused by the force majeure provisions of the Consent Decree (Section X thereof), which require the Principal to provide written notice to EPA within fifteen (15) calendar days of the occurrence of an event claimed to constitute force majeure and to demonstrate that the failure was caused by circumstances beyond the Principal's control that could not have been foreseen or prevented by the exercise of due diligence;
(b) The Principal fails to fund remediation costs as required under the Consent Decree, including any failure to make timely contributions to the Remediation Trust Fund, any failure to pay contractors and consultants performing remediation work, or any failure to reimburse EPA for oversight costs within the timeframes established in the Consent Decree;
(c) The Court having jurisdiction over the Consent Decree (the U.S. District Court for the District of Montana, Missoula Division, Civil Action No. 9:24-cv-00087-DWM) enters an order or judgment finding the Principal in material breach of the Consent Decree, whether upon motion of the Plaintiffs or upon the Court's own motion;
(d) The Principal (meaning any one or more of the entities constituting the Principal) becomes insolvent, admits in writing its inability to pay its debts as they become due, makes a general assignment for the benefit of creditors, files a voluntary petition under any chapter of the United States Bankruptcy Code (Title 11, U.S.C.) or any analogous provision of Canadian insolvency law (including the Companies' Creditors Arrangement Act, R.S.C. 1985, c. C-36, or the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3), or is the subject of an involuntary bankruptcy petition or analogous insolvency proceeding that is not dismissed within sixty (60) calendar days of filing.
Upon the occurrence of any Default, the Obligee shall provide written notice to the Surety and the Principal specifying the nature of the Default with reasonable particularity, in accordance with the notice provisions set forth in Section 6.1 and Section 13 of this Bond. The Surety's liability under this Bond arises only upon the occurrence of a Default as defined in this Section 3.3 and the delivery of a written demand to the Surety in accordance with Section 6.1 hereof. Nothing in this Bond shall be construed to impose upon the Surety any obligation to monitor or supervise the Principal's performance of its remediation obligations under the Consent Decree independent of a Default and demand as described herein.
3.4 Surety's Performance Obligations Upon Default
Upon the occurrence of a Default and the delivery by the Obligee of a written demand to the Surety in accordance with Section 6.1 hereof, the Surety shall, at its sole election, fulfill its obligations under this Bond by one of the following means:
(a) Performance. The Surety shall perform or cause to be performed the remediation obligations that the Principal has failed to perform, utilizing qualified environmental contractors, consultants, and engineers selected by the Surety and approved by the EPA. Any such contractors and consultants shall possess all requisite licenses, certifications, and qualifications required by applicable federal and state law and shall carry insurance coverage in types and amounts satisfactory to EPA. The Surety's performance shall be conducted in accordance with the Consent Decree, all applicable EPA-approved work plans, and all applicable environmental laws and regulations. The Surety shall bear the costs of such performance up to the remaining available balance of the penal sum.
(b) Payment. The Surety shall make payment to the Obligee in an amount sufficient to fund the performance of the remediation obligations that the Principal has failed to perform, up to the remaining available balance of the penal sum. Payment shall be made in the manner specified in Section 6.4 hereof.
The Surety shall respond to any demand by the Obligee within thirty (30) calendar days of receipt of such demand, by notifying the Obligee in writing of its election to perform or to make payment. In the event the Surety elects to perform pursuant to clause (a) above, the Surety shall submit a remediation work plan to the EPA for review and approval within sixty (60) calendar days of the date of its election notice. Such work plan shall address the specific remediation obligations in default and shall propose a schedule for completion that is consistent with the requirements of the Consent Decree. The EPA shall review and approve, conditionally approve, or disapprove the Surety's proposed work plan within forty-five (45) calendar days of receipt, subject to the procedures set forth in the Consent Decree.
If the Surety fails to respond to a demand within the thirty (30) day period, or fails to submit a work plan within the sixty (60) day period following an election to perform, the Surety shall be deemed to have elected to make payment, and the Obligee may demand immediate payment of the amount specified in its demand notice, up to the remaining available balance of the penal sum.
SECTION 4: TERM AND RENEWAL
4.1 Effective Date
This Bond shall become effective on the Effective Date of the Consent Decree, which is anticipated to be June 14, 2025 (being thirty (30) days after the anticipated entry of the Consent Decree on May 15, 2025, as provided in Section IV of the Consent Decree). From the date of execution of this Bond through the Effective Date of the Consent Decree, this Bond shall be held in escrow by Calderwood & Harkness LLP, counsel to the Principal, pending the entry and effectiveness of the Consent Decree.
Notwithstanding anything to the contrary herein, if the Consent Decree is not entered by the Court for any reason, this Bond shall be null and void ab initio and shall be of no force or effect whatsoever, and all premiums paid by the Principal to the Surety in connection with this Bond shall be returned to the Principal in full, without deduction, within thirty (30) calendar days of the determination that the Consent Decree will not be entered. In such event, neither the Surety nor the Principal shall have any obligation or liability under this Bond.
4.2 Initial Term
Subject to the provisions of Section 4.1 above, the initial term of this Bond shall be one (1) year from the Effective Date (the "Initial Term"), commencing on June 14, 2025, and expiring on June 14, 2026, unless sooner terminated, discharged, or extended in accordance with the provisions of this Bond.
4.3 Renewal and Continuation
This Bond shall automatically renew for successive periods of one (1) year each (each such period, a "Renewal Term"), without the necessity of any additional action by the Surety or the Principal, unless the Surety provides written notice of non-renewal to both the Principal and the Obligee at least one hundred twenty (120) calendar days prior to the expiration of the then-current term (whether the Initial Term or any Renewal Term).
If the Surety elects to provide notice of non-renewal in accordance with this Section 4.3, the following procedures shall apply:
(a) Upon receipt of the Surety's notice of non-renewal, the Principal shall promptly, and in any event within sixty (60) calendar days of receiving such notice, obtain replacement financial assurance in a form and from a source acceptable to the EPA, in an amount not less than the then-current penal sum of this Bond. The Principal shall provide evidence of such replacement financial assurance to the Obligee and the Surety promptly upon obtaining it.
(b) If the Principal fails to obtain replacement financial assurance acceptable to the EPA within sixty (60) calendar days of receiving the Surety's notice of non-renewal, the Surety shall, upon demand by the Obligee delivered in writing in accordance with Section 6.1 hereof, pay the penal sum of this Bond (or the remaining available balance thereof) into the Remediation Trust Fund established pursuant to Trust Agreement No. LTC-REM-2025-1177 with Larchfield Trust Company, N.A., 200 South Tryon Street, Suite 1100, Charlotte, North Carolina 28202, Trust Officer: David Henshaw. Such payment shall be made within thirty (30) calendar days of the Obligee's demand.
(c) Payment of the penal sum (or remaining available balance thereof) into the Remediation Trust Fund pursuant to clause (b) above shall fully discharge the Surety's obligations under this Bond, and the Surety shall have no further liability hereunder, except with respect to any pending claims or demands made prior to such payment.
4.4 Duration
This Bond shall remain in full force and effect until the earliest to occur of the following:
(a) EPA's written certification, delivered to both the Surety and the Principal, that all remediation obligations at all four sites identified in Sections 2.2 and 11 hereof have been completed in accordance with the Consent Decree and that the Consent Decree has been terminated by order of the Court. Termination of the Consent Decree may occur no sooner than five (5) years after the completion of all remedial construction at each relevant site, as certified by the EPA and the independent monitor, Verdant Analytics, Inc.;
(b) The replacement of this Bond with alternative financial assurance in a form and from a source acceptable to the EPA, in an amount equal to or greater than the then-current penal sum of this Bond, and the EPA's written acknowledgment that such replacement financial assurance has been accepted;
(c) The exhaustion of the penal sum of this Bond through valid claims paid by the Surety pursuant to Sections 3.4 and 6 hereof, provided that the Surety shall have no further obligation to make payments once the aggregate of all payments equals the penal sum (as the same may have been adjusted pursuant to Section 8);
(d) The written release of the Surety by the Obligee, delivered to the Surety in accordance with the notice provisions of Section 13 hereof, expressly releasing the Surety from all obligations under this Bond.
Upon the occurrence of any of the events described in clauses (a) through (d) above, this Bond shall be discharged and the Surety shall have no further liability hereunder. The Surety shall return any original executed copies of this Bond in its possession to the Principal upon discharge, and the Principal shall promptly return the original Bond to the Surety for cancellation if requested.
SECTION 5: PREMIUM
5.1 Annual Premium
The annual premium for this Bond is One and Eighty-Five Hundredths Percent (1.85%) of the penal sum, which as of the date of execution equals Three Million Fifty-Two Thousand Five Hundred Dollars ($3,052,500.00) per annum. The first annual premium is due and payable upon execution of this Bond on February 15, 2025. Subsequent annual premiums shall be due and payable on each anniversary of the Effective Date of the Consent Decree (anticipated to be June 14 of each year). Premiums are fully earned upon payment and are non-refundable except as expressly provided in Section 4.1 of this Bond (return of premium in the event the Consent Decree is not entered by the Court).
5.2 Premium Adjustments
In the event that the penal sum of this Bond is adjusted — whether increased or decreased — pursuant to the annual adjustment mechanism described in Section 8 of this Bond, the annual premium shall be recalculated at the rate of One and Eighty-Five Hundredths Percent (1.85%) of the adjusted penal sum. Any increase in the premium resulting from an increase in the penal sum shall be due and payable upon issuance of the rider or endorsement effecting the adjustment. Any decrease in the premium resulting from a reduction in the penal sum shall be applied as a credit against the next annual premium due.
The failure of the Principal to pay any premium when due shall not affect the Surety's obligations to the Obligee under this Bond, and the Surety shall remain bound to the Obligee hereunder notwithstanding any non-payment of premium. However, the failure of the Principal to pay any premium when due shall constitute a breach of the General Indemnity Agreement between the Surety and the Principal executed contemporaneously herewith, and the Surety shall have all rights and remedies available to it under such agreement, including the right to demand collateral, to offset amounts owing, and to pursue legal action for the recovery of unpaid premiums together with interest and costs.
SECTION 6: OBLIGEE'S RIGHTS AND PROCEDURES
6.1 Written Demand
The Obligee may make demand upon the Surety under this Bond by delivering written notice of demand to the Surety at the following address:
Ironbark Surety of America, Inc. 599 Lexington Avenue, 26th Floor New York, New York 10022
Attention: Thomas Rennick, Account Executive
Each written demand shall specify with reasonable particularity the following information:
(a) The particular remediation obligation(s) that the Principal has failed to perform, including a description of the specific work activities, construction milestones, monitoring obligations, or other performance requirements that are the subject of the Default;
(b) The relevant provision(s) of the Consent Decree and the site(s) to which the Default relates, including applicable section numbers, schedule dates, and performance standards;
(c) The estimated cost of completing the defaulted obligation(s), supported by such cost estimates, engineering assessments, or other documentation as the Obligee may have available; and
(d) A statement of any prior notice to the Principal of the Default and the Principal's failure to cure, including the date(s) of any notices of violation, stipulated penalty demands, or other communications from the Obligee to the Principal concerning the Default.
The Obligee's demand shall be accompanied by a certification, executed by the Lead EPA Case Attorney or other authorized EPA official, that the conditions for a Default under Section 3.3 of this Bond have been satisfied and that the demand is made in good faith.
6.2 Investigation Period
The Surety shall have thirty (30) calendar days from the date of receipt of the Obligee's written demand to investigate the claimed Default and to formulate its response. During this investigation period, the Surety may, and is encouraged to, consult with the Principal and the Obligee regarding the nature and scope of the claimed Default, the estimated cost of cure, and the feasibility of the Surety's performance options under Section 3.4 hereof. The Surety may also, during the investigation period, conduct inspections of the relevant site(s), review documents and records in the possession of the Principal or the Obligee, and engage independent engineers, environmental consultants, and legal counsel as it deems appropriate to evaluate the demand. The Principal shall cooperate fully with any such investigation, as required by Section 7.4 hereof.
The investigation period shall not be construed as a cure period or as extending the time within which remediation work must be performed under the Consent Decree. The Obligee's rights under the Consent Decree, including the right to seek injunctive relief or stipulated penalties, are not limited or affected by the investigation period.
6.3 Partial Draws
The Obligee may make successive partial draws against this Bond for separate Defaults, for separate sites, or for ongoing remediation costs arising from a continuing Default, provided that the aggregate of all payments made by the Surety shall not exceed the penal sum of this Bond. Each partial draw shall be accompanied by a written demand conforming to the requirements of Section 6.1 hereof. The Surety shall maintain a running account of all amounts paid and the remaining available balance of the penal sum, and shall provide a statement of such account to the Obligee and the Principal upon request.
6.4 Payment
All payments made by the Surety under this Bond shall be made to the Obligee or, at the Obligee's written direction, to the Remediation Trust Fund established pursuant to Trust Agreement No. LTC-REM-2025-1177, Larchfield Trust Company, N.A., 200 South Tryon Street, Suite 1100, Charlotte, North Carolina 28202, Trust Officer: David Henshaw, or to such other account, fund, or financial institution as the Obligee may designate in writing. Payments shall be made by wire transfer of immediately available funds or by certified check, as directed by the Obligee, within thirty (30) calendar days of the Surety's election to make payment (or, in the case of a deemed election pursuant to the last paragraph of Section 3.4, within thirty (30) calendar days of the expiration of the applicable response period).
SECTION 7: PRINCIPAL'S OBLIGATIONS
7.1 General Indemnity
The Principal, jointly and severally, shall indemnify, defend, and hold harmless the Surety from and against all losses, costs, damages, expenses (including reasonable attorneys' fees, consultants' fees, and court costs), liabilities, claims, demands, judgments, settlements, and other amounts arising from, related to, or in connection with the Surety's obligations under this Bond, including any payments made or performance rendered by the Surety hereunder. This indemnification obligation is in addition to, and not in limitation of, the indemnification obligations of the Principal under the separate General Indemnity Agreement executed contemporaneously with this Bond by and among the Surety and all entities constituting the Principal (the "General Indemnity Agreement"). In the event of any conflict between the indemnification provisions of this Bond and those of the General Indemnity Agreement, the provisions more favorable to the Surety shall control.
7.2 Collateral
The Principal agrees to provide and maintain such collateral as may be required under the General Indemnity Agreement, including without limitation letters of credit, cash deposits, pledges of marketable securities, assignments of contract rights, and such other security as the Surety may reasonably require from time to time. The nature, amount, and form of any collateral arrangements are subject to the negative covenants, lien restrictions, and secured creditor provisions of the Principal's C$750,000,000 syndicated revolving credit facility (the "Harborstone RCF"), for which Harborstone National Bank, N.A. serves as Administrative Agent, and which has a stated maturity date of March 15, 2027. The Principal represents that it has obtained all waivers, consents, and approvals necessary under the Harborstone RCF to enter into this Bond and the General Indemnity Agreement and to provide collateral to the Surety as contemplated herein, to the extent such collateral does not conflict with the terms of the Harborstone RCF.
7.3 Notice Obligations
The Principal shall promptly notify the Surety in writing (and in no event later than five (5) business days after obtaining knowledge thereof) of the occurrence of any of the following events:
(a) Any notice of Default, notice of violation, stipulated penalty demand, show-cause order, or other enforcement communication received by the Principal from the EPA, DOJ ENRD, or any co-plaintiff state agency in connection with the Consent Decree or any of the four sites covered by this Bond;
(b) Any modification, amendment, supplement, or variance to the Consent Decree, whether proposed or executed, including any modification to the remediation schedules, performance standards, or financial assurance requirements;
(c) Any material change in the Principal's financial condition, including without limitation: any breach or anticipated breach of the environmental liability covenant under the Harborstone RCF, which requires that the Principal's aggregate environmental liabilities shall not exceed twenty-five percent (25%) of the Principal's consolidated net tangible assets ("CNTA") (as of the third quarter of fiscal year 2024, reported CNTA was C$3.92 billion, establishing a threshold of C$980.0 million); any downgrade of the Principal's credit rating by any nationally recognized statistical rating organization; any default or event of default under the Harborstone RCF or any other material credit agreement; or any material adverse change in revenues, earnings, assets, or liquidity;
(d) Any bankruptcy, insolvency, reorganization, receivership, assignment for the benefit of creditors, or similar proceeding filed by or against any entity constituting the Principal, whether under U.S. or Canadian law, including any proceeding under the U.S. Bankruptcy Code, the Companies' Creditors Arrangement Act (Canada), or the Bankruptcy and Insolvency Act (Canada);
(e) Any change in the status, renewal, cancellation, non-renewal, material modification, or exhaustion of any insurance coverage maintained by the Principal that is relevant to the obligations secured by this Bond, including without limitation Policy No. MEI-ENV-2021-04738, a Pollution Legal Liability policy issued by Meridian Environmental Insurance Company, and Policy No. CMI-DO-2023-10221, a Directors and Officers Liability policy issued by Clearwater Mutual Insurance, Ltd.
7.4 Cooperation
The Principal shall cooperate fully and in good faith with the Surety in connection with any investigation of a demand made by the Obligee under this Bond, or any other matter arising under this Bond. Such cooperation shall include, without limitation, providing the Surety with reasonable access to the four sites covered by this Bond, all books and records relating to the remediation obligations, all correspondence with the EPA and other regulatory agencies, all work plans, reports, monitoring data, and environmental assessments, and all personnel with knowledge of the relevant facts and circumstances. The Principal shall respond to reasonable requests for information from the Surety within ten (10) business days of receipt of such requests.
The Principal shall not take or omit to take any action that would materially impair, prejudice, or diminish the Surety's rights of subrogation, indemnification, or contribution under this Bond, the General Indemnity Agreement, or applicable law. Without limiting the foregoing, the Principal shall not settle, compromise, or release any claim or right that would affect the Surety's subrogation or recovery rights without the prior written consent of the Surety.
SECTION 8: ADJUSTMENT OF PENAL SUM
8.1 Annual Review
The penal sum of this Bond shall be subject to annual review in connection with the annual adjustment mechanism established under Section XIII of the Consent Decree. Such annual review shall occur not later than ninety (90) days prior to each anniversary of the Effective Date of the Consent Decree. Adjustments to the penal sum may be made based on any one or more of the following factors:
(a) Updated remedy cost estimates prepared by the Principal's environmental consultant, Pinnacle Creek Environmental, LLC (lead consultant: Dr. Astrid Bergmann, P.E., Principal Environmental Engineer), reflecting revised engineering assessments, changed site conditions, updated unit costs, revised remediation timeframes, or other factors affecting the projected cost of completing the remediation obligations under the Consent Decree, which updated estimates shall be validated by the court-appointed independent monitor, Verdant Analytics, Inc. (lead reviewer: Dr. Kamal Osei, Senior Environmental Scientist);
(b) The completion of remediation milestones at one or more of the four sites, as certified by the EPA and the independent monitor, allowing a reduction of the penal sum commensurate with the obligations that have been fulfilled and the costs that have been expended;
(c) Inflation indexing, as specified in the Consent Decree, to account for increases in the Consumer Price Index for All Urban Consumers (CPI-U), Engineering News-Record Construction Cost Index, or such other index as may be designated in the Consent Decree; and
(d) EPA approval of any proposed adjustment, which approval shall not be unreasonably withheld, delayed, or conditioned.
8.2 Increase in Penal Sum
If the annual review conducted pursuant to Section 8.1 indicates that an increase in the penal sum is required — whether due to updated cost estimates, inflation adjustments, changed site conditions, or other factors — the Surety shall, upon receipt of the additional premium and execution of any required amendment to the General Indemnity Agreement, issue a rider or endorsement to this Bond increasing the penal sum to the amount specified in the EPA-approved adjustment. The form of rider or endorsement shall substantially conform to the template attached hereto as Exhibit D.
Notwithstanding the foregoing, the Surety retains the right to decline to increase the penal sum in its sole discretion, in which event the Surety shall notify the Principal and the Obligee in writing within thirty (30) calendar days of receiving a request for an increase. Upon the Surety's declination, the Principal shall be obligated to obtain supplemental financial assurance from another source acceptable to the EPA in an amount equal to the required increase, and such supplemental financial assurance shall be established within sixty (60) calendar days of the Surety's notice of declination.
8.3 Reduction of Penal Sum
Any reduction of the penal sum of this Bond requires the prior written approval of the EPA. Reductions shall be commensurate with completed and EPA-certified remediation milestones and shall be documented by a rider or endorsement to this Bond executed by the Surety and the Principal, with written acknowledgment of the EPA. No reduction shall be effective until all of the following conditions have been satisfied:
(a) The Principal has submitted a request for reduction to the EPA, supported by documentation demonstrating that the relevant remediation milestones have been completed in accordance with the Consent Decree;
(b) The EPA and the independent monitor have certified that the milestones forming the basis of the requested reduction have been achieved and that the remaining penal sum, together with any other financial assurance instruments in place, is sufficient to cover the estimated cost of the remaining remediation obligations;
(c) The EPA has provided its written approval of the reduction; and
(d) The Surety has issued a rider or endorsement reflecting the reduced penal sum and the correspondingly adjusted annual premium.
SECTION 9: SUBROGATION
9.1 Subrogation Rights
Upon any payment made or performance rendered by the Surety under this Bond, the Surety shall be automatically and immediately subrogated to all rights, remedies, claims, and recoveries of the Obligee against the Principal and against any other person or entity, to the full extent of such payment or the reasonable cost of such performance. The subrogation rights of the Surety shall include, without limitation:
(a) All rights of the Obligee to recover response costs, damages, penalties, and other amounts from the Principal under CERCLA § 107, 42 U.S.C. § 9607, and under any other applicable federal or state environmental statute or regulation;
(b) All rights of the Obligee under the Consent Decree, including rights to enforce performance obligations, to seek stipulated penalties, and to recover costs of oversight and enforcement;
(c) All rights of the Obligee against third parties who may be liable for contribution to the costs of remediation under CERCLA § 113(f), 42 U.S.C. § 9613(f), or under any other applicable theory of contribution, indemnity, or cost-sharing; and
(d) All liens, security interests, and other encumbrances held by or available to the Obligee in connection with the enforcement of the remediation obligations under the Consent Decree.
The Obligee shall cooperate with the Surety in the exercise of its subrogation rights, including by providing reasonable access to documents, records, and information relevant to any subrogation claim or recovery. The Obligee shall not take any action to impair or diminish the Surety's subrogation rights without the Surety's prior written consent.
9.2 Assignment of Recoveries
The Principal hereby irrevocably assigns to the Surety, effective upon any payment or performance by the Surety under this Bond, any and all rights of the Principal to recover amounts paid by the Surety from the following sources:
(a) Insurance proceeds under any applicable insurance policies, including without limitation Policy No. MEI-ENV-2021-04738, a Pollution Legal Liability policy issued by Meridian Environmental Insurance Company, with a per-occurrence limit of Fifty Million Dollars ($50,000,000) and an aggregate limit of Seventy-Five Million Dollars ($75,000,000), subject to a self-insured retention of Five Million Dollars ($5,000,000) per occurrence. Based on the estimated recovery analysis prepared by Northspire Capital Markets, Inc. and delivered to the Surety in connection with the underwriting of this Bond, the estimated recovery range under the Meridian PLL policy is Forty-Five Million Dollars ($45,000,000) to Fifty-Five Million Dollars ($55,000,000), depending on the nature and scope of qualifying occurrences and the application of policy terms, conditions, and exclusions;
(b) Contribution or indemnity claims against third parties, including any former operators, lessees, tenants, transporters, generators, or other potentially responsible parties who may be liable for a share of the remediation costs under CERCLA § 113(f), RCRA, or any other applicable statute or common law theory; and
(c) Any recovery from the Remediation Trust Fund established pursuant to Trust Agreement No. LTC-REM-2025-1177 with Larchfield Trust Company, N.A., to the extent that amounts in the Trust Fund are attributable to the same remediation obligations for which the Surety has made payment or rendered performance under this Bond, and subject to the terms and conditions of the Trust Agreement.
The foregoing assignments shall be self-executing and shall not require any further action by the Principal. However, the Principal shall, at the Surety's request and expense, execute and deliver such additional instruments, assignments, and documents as may be necessary or desirable to evidence or effectuate the foregoing assignments.
SECTION 10: CONSENT DECREE PROVISIONS INCORPORATED BY REFERENCE
10.1 Stipulated Penalties
The Consent Decree contains stipulated penalty provisions (Section IX thereof) that impose daily monetary penalties upon the Principal for violations of specified requirements. The stipulated penalty schedule is as follows:
• For each violation, for the first thirty (30) days of noncompliance: $1,500 per day per violation;
• For each violation, for days thirty-one (31) through sixty (60) of noncompliance: $3,000 per day per violation; and
• For each violation, for each day of noncompliance beyond sixty (60) days: $5,500 per day per violation.
Stipulated penalties imposed under the Consent Decree are not directly secured by this Bond, and the Surety shall have no obligation to pay stipulated penalties as such. However, the accrual of stipulated penalties, or EPA's demand for stipulated penalties, may constitute evidence of a Default under Section 3.3 of this Bond, thereby triggering the Surety's obligation to perform or make payment as described in Section 3.4 hereof, with respect to the underlying remediation obligation that gave rise to the stipulated penalty.
10.2 Force Majeure
The Consent Decree contains standard EPA force majeure provisions (Section X thereof) that excuse the Principal from liability for delays in performance caused by circumstances beyond the Principal's control, including acts of God, war, civil unrest, strikes, fires, floods, epidemics, and other events that could not have been foreseen or prevented by the exercise of due diligence. To invoke force majeure protection, the Principal must provide written notice to the EPA within fifteen (15) calendar days of the occurrence of the force majeure event, describing the event, the anticipated duration of the delay, and the measures being taken to mitigate the delay.
Events that qualify as force majeure under the Consent Decree, and for which the Principal has provided timely and adequate notice as required thereunder, shall not constitute a Default under this Bond. The Surety shall have no obligation to perform or make payment under this Bond with respect to any failure of performance that is excused by a valid force majeure determination under the Consent Decree.
10.3 Dispute Resolution
The Consent Decree establishes a three-tier dispute resolution mechanism (Section XI thereof) for resolving disputes between the parties regarding the interpretation or implementation of the Consent Decree:
(a) Informal Negotiation. The parties shall attempt to resolve the dispute through informal negotiation for a period of thirty (30) calendar days following the date of written notice of the dispute.
(b) Formal EPA Decision. If the dispute is not resolved through informal negotiation, the EPA shall issue a formal written decision within thirty (30) calendar days of the conclusion of the informal negotiation period.
(c) Judicial Review. Either party may petition the Court for judicial review of the EPA's formal decision by filing a motion within thirty (30) calendar days of receiving the EPA's written decision.
The Surety shall not be required to make any payment or render any performance under this Bond while a bona fide dispute regarding the existence of a Default is pending under the dispute resolution mechanism established by the Consent Decree, unless ordered to do so by the Court. The existence of a bona fide dispute shall be determined by reference to the Principal's timely invocation of the dispute resolution mechanism and the pendency of proceedings thereunder. The Surety bears the burden of demonstrating the existence and pendency of a bona fide dispute as a basis for suspending its obligations under this Bond.
10.4 Termination of Consent Decree
The Consent Decree provides for site-by-site termination (Section XVIII thereof). The Consent Decree may be terminated with respect to a particular site upon the satisfaction of all of the following conditions:
(a) The Principal has completed all remedial construction, operation and maintenance, monitoring, and other remediation activities required at the site under the Consent Decree;
(b) The EPA and the independent monitor, Verdant Analytics, Inc., have certified that all remediation obligations at the site have been fulfilled in accordance with the applicable performance standards;
(c) A period of not less than five (5) years has elapsed since the completion of all remedial construction at the site; and
(d) The Court has entered an order terminating the Consent Decree with respect to such site, upon motion of the parties.
Upon the termination of the Consent Decree with respect to all four sites, and the entry by the Court of a final order terminating the Consent Decree in its entirety, this Bond shall be fully discharged and the Surety shall have no further liability hereunder, subject to the resolution of any pending claims or demands made prior to such termination.
SECTION 11: SITES COVERED
11.1 Schedule of Sites
This Bond secures the Principal's remediation obligations at the following four (4) sites:
(a) Ridgecrest Copper-Molybdenum Mine
Address: 14200 Ridgecrest Mine Road, Drummond, Granite County, Montana 59832
Acreage: Approximately 3,200 acres (mine footprint), approximately 8,700 acres (total property, including buffer zones, access roads, and associated infrastructure)
Principal Contaminants: Acid mine drainage ("AMD") containing elevated concentrations of copper (47 mg/L), molybdenum (1.2 mg/L), selenium (0.082 mg/L), and sulfate (3,400 mg/L); 425-acre tailings impoundment containing approximately 78 million tons of sulfide-bearing tailings; contaminated groundwater plume extending approximately 2.3 miles downgradient from the tailings impoundment; contaminated surface water in Clark Fork River tributaries
Nominal Remediation Cost: $198,600,000 over 30 years
Regulatory Designation: AOC Docket No. CERCLA-08-2022-0039; proposed for listing on the National Priorities List ("NPL")
(b) Gallatin Chemical Works
Address: 8800 Industrial Park Lane, Belgrade, Gallatin County, Montana 59714
Acreage: Approximately 145 acres
Principal Contaminants: Carbon disulfide ("CS₂") in groundwater at concentrations up to 890 µg/L (versus the Maximum Contaminant Level ("MCL") of 10 µg/L); volatile organic compounds ("VOCs") including trichloroethylene ("TCE"), perchloroethylene ("PCE"), and vinyl chloride; three Solid Waste Management Units ("SWMUs") requiring corrective action, including a former waste lagoon, a contaminated soil area, and a decommissioned underground storage tank farm
Nominal Remediation Cost: $42,800,000 over 15 years