BONANZA CREEK LINER REPAIR AND CONTAINMENT PLAN
SCOPE OF WORK
Prepared for:
Torchlight Mining Corp. and Bonanza Creek Mining, LLC
Prepared by:
Calderwood & Harkness LLP in coordination with Pinnacle Creek Environmental, LLC
February 14, 2025
C&H Matter No.: 1039-00003
Case Reference: 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
Consent Decree Reference: Execution Version dated February 19, 2025 (anticipated lodging date)
CONFIDENTIAL TREATMENT REQUESTED. This document is Subject to Attorney-Client Privilege and Work Product Doctrine. It has been prepared in connection with pending litigation and should not be disclosed to any person or entity without the prior written consent of Calderwood & Harkness LLP and Torchlight Mining Corp. Any unauthorized dissemination, distribution, or copying of this document is strictly prohibited.
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1. Introduction and Purpose
1.1 Background
This Scope of Work ("SOW") is prepared pursuant to 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, before the Honorable Donald W. Molloy, Senior United States District Judge, United States District Court for the District of Montana, Missoula Division. The Consent Decree, in its Execution Version dated February 19, 2025, establishes the overarching framework governing the obligations of Torchlight Mining Corp. ("TMC") and its subsidiaries, including Bonanza Creek Mining, LLC ("BCM"), with respect to environmental remediation activities at the Bonanza Creek Gold Mine located in Lander County, Nevada.
This SOW establishes the comprehensive framework for liner repair and containment activities at the Bonanza Creek Gold Mine heap-leach pad and associated process-solution management infrastructure. The scope encompasses the full range of remedial activities necessary to address three documented process-solution releases from the heap-leach pad, including the assessment, repair, and upgrade of the liner system; remediation of contaminated soils, surface water, and groundwater; enhancement of process-solution containment systems; implementation of avian protection measures; and establishment of a long-term monitoring and reporting program designed to ensure sustained environmental compliance over the twenty-year remediation period mandated by the Consent Decree.
This SOW has been prepared by Calderwood & Harkness LLP ("C&H"), lead outside counsel to Torchlight Mining Corp., in coordination with Pinnacle Creek Environmental, LLC ("Pinnacle Creek"), TMC's environmental remediation consultant. Pinnacle Creek's engagement is led by Dr. Astrid Bergmann, P.E., Senior Principal, whose principal office is located at 320 Willowbrook Drive, Suite 100, Bozeman, Montana 59715. Dr. Bergmann brings more than twenty-five years of experience in mining-related environmental remediation, with particular expertise in heap-leach pad liner systems, cyanide management, and the design and implementation of long-term groundwater treatment programs in arid and semi-arid environments.
This SOW has also been reviewed by local counsel sagebrush Law Group, PLLC, led by Denise Quartaro, Lead Partner, whose principal office is located at 3960 Howard Hughes Parkway, Suite 500, Las Vegas, Nevada 89169. Sagebrush Law Group serves as TMC's Nevada counsel of record and is responsible for coordinating with the Nevada Division of Environmental Protection and managing all state-level regulatory filings and permitting activities associated with the remediation program.
1.2 Purpose and Objectives
The fundamental purpose of this SOW is to define, with specificity sufficient to satisfy the requirements of the Consent Decree and applicable regulatory standards, the scope, sequencing, and performance criteria for the full program of remedial activities at the Bonanza Creek Gold Mine. The objectives of this SOW are as follows:
(a) To address three documented process-solution releases from the Bonanza Creek heap-leach pad, which occurred on March 17, 2022, August 9, 2022, and January 22, 2023, respectively. Each release resulted in the unpermitted discharge of cyanide-bearing process solution from the heap-leach pad to an ephemeral tributary of the Reese River, in violation of the Clean Water Act, Section 301, 33 U.S.C. § 1311.
(b) To remediate cyanide and mercury contamination in soils, surface water, and groundwater resulting from those releases. Site investigations conducted by Pinnacle Creek Environmental and confirmed by the Government's technical expert, Dr. Patricia Voss of Cascade Geosciences, Inc., have documented concentrations of Weak Acid Dissociable ("WAD") cyanide and mercury in affected media at levels significantly exceeding applicable regulatory standards and water-quality criteria.
(c) To repair and upgrade the heap-leach pad liner system to prevent future releases. The root cause analyses performed following each release event have identified systemic deficiencies in the existing liner system, including material degradation, construction deficiencies, and design limitations that collectively render the liner system inadequate for long-term containment without comprehensive repair and upgrade.
(d) To implement long-term containment, monitoring, and corrective action measures that will ensure sustained protection of human health and the environment over the full twenty-year remediation period established by the Consent Decree, and to provide mechanisms for adaptive management and contingency response in the event that initial remedial actions do not achieve specified performance standards.
(e) To comply with all remediation requirements set forth in the Consent Decree, including obligations arising under Section 301 of the Clean Water Act ("CWA"), 33 U.S.C. § 1311; Section 3004 of the Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C. § 6924; and related regulatory obligations under the Migratory Bird Treaty Act ("MBTA"), 16 U.S.C. §§ 703–712, and the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), 42 U.S.C. §§ 9601–9675.
The Consent Decree requires commencement of liner repair and containment work no later than June 14, 2026, which is twelve months after the anticipated Effective Date of the Consent Decree (June 14, 2025). The estimated total cost of the remediation program at the Bonanza Creek Gold Mine is $63.2 million over twenty years. Applying a discount rate of three percent (3%), the net present value ("NPV") of these remediation costs is approximately $47.1 million. These cost estimates are based on the preliminary engineering assessments and cost modeling prepared by Pinnacle Creek Environmental in consultation with Northspire Capital Markets, Inc., TMC's financial advisor, and are subject to revision as the remedial design process advances and additional site characterization data become available.
1.3 Regulatory Context
The regulatory actions that gave rise to the Consent Decree, and consequently to this SOW, involve alleged violations of multiple federal and state environmental statutes. The following summarizes the regulatory context in which this SOW has been prepared:
Clean Water Act, Section 301 (33 U.S.C. § 1311). The Government alleges that on three separate occasions — March 17, 2022, August 9, 2022, and January 22, 2023 — Bonanza Creek Mining, LLC discharged process solution containing elevated concentrations of cyanide and mercury from the heap-leach pad, through tears in the liner system, into subsurface pathways that ultimately delivered contaminants to an ephemeral tributary of the Reese River. These discharges were unpermitted and constituted violations of the CWA's prohibition on the discharge of pollutants from a point source to waters of the United States without a valid National Pollutant Discharge Elimination System ("NPDES") permit.
Resource Conservation and Recovery Act, Section 3004 (42 U.S.C. § 6924). The Government further alleges that spent heap-leach ore at the Bonanza Creek Gold Mine constitutes hazardous waste under RCRA due to the presence of cyanide, mercury, and other constituents at concentrations exceeding toxicity characteristic thresholds as determined through Toxicity Characteristic Leaching Procedure ("TCLP") testing. The Government contends that TMC and BCM have managed this waste in a manner inconsistent with the requirements of RCRA Subtitle C, including the failure to obtain a RCRA Part B permit for the management and disposal of hazardous waste.
Migratory Bird Treaty Act (16 U.S.C. §§ 703–712). Between 2021 and 2023, seventeen documented avian mortalities occurred in the process-solution ponds at the Bonanza Creek Gold Mine. These mortalities involved migratory bird species protected under the MBTA. The Government alleges that the failure to implement adequate bird-deterrent systems at the solution ponds constituted a violation of the MBTA's prohibition on the taking of migratory birds.
The United States Environmental Protection Agency ("EPA"), Region 9, based in San Francisco, California, serves as the lead regulatory office for the Bonanza Creek Gold Mine remediation. The EPA Project Coordinator for the Bonanza Creek site is Jennifer Whitfield. The State of Nevada, through its Division of Environmental Protection ("NV DEP"), participates as a co-plaintiff in the enforcement action. Lead state counsel is Ricardo Fuentes, Deputy Attorney General, Nevada Attorney General's Office, who has coordinated closely with the federal enforcement team throughout the litigation.
The Government's technical expert for the Bonanza Creek site is Dr. Patricia Voss, Ph.D. (Hydrogeology), of Cascade Geosciences, Inc., located at 804 Salmon Bay Drive, Seattle, Washington 98107. Dr. Voss has conducted independent technical reviews of the site investigation data, the root cause analyses, and the preliminary remedial design concepts that inform this SOW. Her technical assessments have been instrumental in establishing the performance standards and cleanup goals incorporated into the Consent Decree.
1.4 Relationship to Consent Decree
This SOW constitutes a referenced deliverable under the Consent Decree and is appended thereto or incorporated by reference, as specified in the Consent Decree. The terms of this SOW are subject to, and shall be interpreted consistently with, the provisions of the Consent Decree. In the event of any conflict between the provisions of this SOW and the terms of the Consent Decree, the Consent Decree shall control.
All work performed under this SOW is subject to the stipulated penalty provisions of the Consent Decree. Failure to comply with the deadlines, milestones, performance standards, and reporting requirements established in this SOW may result in the imposition of stipulated penalties at the following rates:
(a) One Thousand Five Hundred Dollars ($1,500) per day per violation for the first thirty (30) days of noncompliance;
(b) Three Thousand Dollars ($3,000) per day per violation for days thirty-one (31) through sixty (60) of noncompliance; and
(c) Five Thousand Five Hundred Dollars ($5,500) per day per violation for each day of noncompliance beyond sixty (60) days.
Any disputes arising under this SOW shall be resolved in accordance with the three-tier dispute resolution mechanism established in the Consent Decree:
(i) Informal Negotiation. The parties shall engage in informal negotiation for a period of thirty (30) days following written notice of a dispute.
(ii) Formal EPA Decision. If informal negotiation does not resolve the dispute within the thirty-day period, EPA shall issue a formal written decision within thirty (30) days thereafter.
(iii) Judicial Review. Any party aggrieved by EPA's formal decision may petition the Court for judicial review within thirty (30) days of receipt of EPA's decision.
Force majeure events shall be governed by the force majeure provisions of the Consent Decree. TMC shall provide written notice to EPA within fifteen (15) days of any qualifying force majeure event, as further described in Section 16 of this SOW.
The Consent Decree further provides for the appointment of an independent environmental monitor. Verdant Analytics, Inc., led by Dr. Kamal Osei, Senior Managing Director, has been designated as the independent monitor and will perform quarterly compliance audits of all work conducted under this SOW. The findings of Verdant Analytics will be documented in quarterly audit reports submitted to the Court, to EPA, and to all parties to the Consent Decree.
2. Site Description
2.1 General Site Information
The Bonanza Creek Gold Mine is a large-scale open-pit heap-leach gold mining operation located in a remote area of Lander County, Nevada. The following summarizes the key site identification and operational information:
Facility Name: Bonanza Creek Gold Mine
Owner/Operator: Bonanza Creek Mining, LLC ("BCM"), a limited liability company organized under the laws of the State of Nevada. BCM is wholly owned by Torchlight Mining (U.S.) Inc. ("TM(US)"), a corporation organized under the laws of the State of Delaware, which in turn is wholly owned by Torchlight Mining Corp. ("TMC"), a publicly traded corporation incorporated in the Province of Ontario, Canada.
Nevada Secretary of State Entity No.: E0518294731
Location: County Road 447, Mile Marker 12, Lander County, Nevada 89820. The site is located in an unincorporated area approximately twenty-eight (28) miles south of the town of Battle Mountain, Nevada. Access to the site is via County Road 447, a maintained gravel road connecting to State Route 305.
Site Area: The mine footprint encompasses approximately 5,600 acres, which includes the open pit, heap-leach pad, process areas, waste rock dumps, haul roads, and ancillary facilities. The total controlled property, including buffer lands, access corridors, and contiguous land holdings, comprises approximately 12,400 acres.
Operations: The Bonanza Creek Gold Mine is an active open-pit heap-leach gold mine that has been in continuous operation since 2001. Mining operations involve conventional drill-and-blast open-pit methods, with run-of-mine ore placed on the heap-leach pad for gold recovery through cyanide-based heap leaching and carbon adsorption.
Employees on Site: The site workforce constitutes a portion of TMC's approximately 4,200 U.S. employees. The site operates on a continuous basis with multiple shifts to support around-the-clock leaching operations and mine production activities.
2.2 Heap-Leach Pad Description
The heap-leach pad is the central process facility at the Bonanza Creek Gold Mine and is the focus of the liner repair and containment activities addressed in this SOW. The pad is situated in a natural drainage basin on the eastern side of the mine property, approximately 1.5 miles east of the main open pit. The pad was originally constructed in 2001 and has been expanded in multiple phases as mining operations have progressed, with the most recent expansion (Phase IV) completed in 2017.
The current heap-leach pad covers an area of approximately 320 acres, divided into eight operational cells designated as Cells 1A, 1B, 2A, 2B, 3A, 3B, 4A, and 4B. Cells 1A and 1B represent the original construction (2001), Cells 2A and 2B were added during the Phase II expansion (2006), Cells 3A and 3B during Phase III (2011), and Cells 4A and 4B during Phase IV (2017). The pad is designed for permanent closure-in-place, with ore stacked to design heights ranging from approximately 150 feet in the older cells to approximately 250 feet in the most recently loaded cells.
Liner System Design. The original liner system for Cells 1A and 1B consisted of a single 60-mil high-density polyethylene ("HDPE") geomembrane liner placed over a two-foot layer of compacted clay with a maximum hydraulic conductivity of 1 × 10⁻⁷ cm/sec. The liner system for subsequent phases incorporated design improvements, including an increase to 80-mil HDPE for the primary liner in Cells 2A through 4B, and the addition of a geosynthetic clay liner ("GCL") beneath the primary liner in Cells 3A through 4B. However, no cells were originally constructed with a double-liner system incorporating leak detection between primary and secondary liners. The original design life of the liner system was specified as twenty years for Cells 1A and 1B and thirty years for subsequent phases.
The liner system includes an overliner drainage layer consisting of twelve inches of gravel over a geocomposite drainage net, designed to facilitate the collection and conveyance of pregnant solution (gold-bearing cyanide solution) to collection pipes and ultimately to the pregnant solution pond. A network of perforated HDPE collection pipes, ranging from 6-inch to 12-inch diameter, is installed within the overliner drainage layer in a herringbone pattern, grading toward a central collection trench in each cell.
Leaching Operations. The heap-leach process at Bonanza Creek employs dilute cyanide solution (sodium cyanide) as the primary lixiviant for gold extraction. Barren solution (solution from which gold has been recovered in the carbon adsorption circuit) is pumped from the barren solution pond to a distribution system at the top of the ore heap, where it is applied via drip emitters at a typical application rate of approximately 0.005 gallons per minute per square foot. The solution percolates through the ore, dissolving gold and forming a gold-cyanide complex, and is collected as pregnant solution at the base of the pad by the overliner drainage and collection system.
Cyanide concentrations in the active barren solution typically range from 150 to 250 parts per million ("ppm") as sodium cyanide. Pregnant solution gold concentrations vary depending on the stage of leaching and ore grade but typically range from 0.3 to 1.2 mg/L gold. The process-solution circuit is a closed-loop system; under normal operating conditions, no process solution is discharged to the environment. Annual process-solution volumes in circulation are approximately 2.5 billion gallons, with an average inventory of approximately 50 million gallons in the solution management system at any given time. Gold recovery rates at Bonanza Creek have historically averaged approximately 72% of the contained gold in placed ore.
Solution Management. The solution management system consists of the following principal components: (i) a barren solution distribution system, including pumps, pipelines, and drip emitters; (ii) an overliner pregnant solution collection system; (iii) a pregnant solution pond (approximately 15 acres, double-lined, with a capacity of approximately 40 million gallons); (iv) a barren solution pond (approximately 10 acres, double-lined, with a capacity of approximately 25 million gallons); (v) an overflow/stormwater pond (approximately 8 acres, single-lined, with a capacity of approximately 20 million gallons); (vi) a carbon adsorption/desorption/recovery circuit for gold extraction from pregnant solution; and (vii) ancillary pumping stations, pipelines, and control systems.
2.3 Solution Ponds and Avian Protection
The solution pond complex at the Bonanza Creek Gold Mine consists of three principal ponds, as described in Section 2.2 above: the pregnant solution pond, the barren solution pond, and the overflow/stormwater pond. These ponds are located in a lined containment area approximately 0.5 miles south of the heap-leach pad, at an elevation approximately 150 feet lower than the pad surface, to facilitate gravity flow of pregnant solution from the pad to the ponds.
The pregnant solution pond and barren solution pond are both constructed with double-liner systems consisting of an 80-mil HDPE primary liner, a geocomposite drainage layer for leak detection, and a 60-mil HDPE secondary liner over compacted subgrade. The overflow/stormwater pond is constructed with a single 60-mil HDPE liner over compacted subgrade. All ponds are equipped with high-level alarms, automated pump-back systems, and emergency overflow provisions.
Bird Deterrent Systems. Prior to the release events at issue in this litigation, the solution ponds were equipped with the following bird deterrent measures: (i) partial netting over approximately 60% of the pregnant solution pond surface; (ii) visual deterrents, including flagging and reflective tape along pond perimeters; and (iii) propane-fired hazing cannons positioned at intervals around the ponds. These measures proved inadequate to prevent avian access to the open-water surfaces of the ponds.
Avian Mortalities. Between 2021 and 2023, seventeen (17) documented avian mortalities occurred in or adjacent to the process-solution ponds at the Bonanza Creek Gold Mine. The mortalities are summarized as follows:
All mortalities were reported to the U.S. Fish and Wildlife Service and NV DEP in accordance with applicable reporting requirements. Necropsy results confirmed cyanide poisoning as the cause of death in all seventeen cases. In response to the mortality events, BCM implemented corrective actions in late 2022 and early 2023, including the installation of additional netting coverage (increasing coverage from approximately 60% to approximately 80% of the pregnant solution pond), deployment of two additional propane hazing cannons, and installation of ultraviolet reflective deterrent tape around the barren solution pond. Despite these measures, mortalities continued into early 2023, demonstrating the inadequacy of the corrective actions and the need for the comprehensive avian protection upgrades specified in this SOW.
2.4 Environmental Setting
Climate. The Bonanza Creek Gold Mine is situated in a semi-arid high-desert environment characteristic of the north-central Great Basin. The region receives an average annual precipitation of approximately 8.5 inches, with the majority falling as snow during the winter months (November through March) and as brief, intense convective thunderstorms during the summer months (July through September). Annual average temperature is approximately 48°F, with temperature extremes ranging from approximately -25°F during winter cold events to approximately 108°F during peak summer conditions. The site experiences significant diurnal temperature variations, particularly in spring and fall. Freeze-thaw cycles are common from October through April, with an average of 150 freeze-thaw days per year. These freeze-thaw cycles are significant to the liner integrity issues at the site, as discussed in Section 3 of this SOW.
Topography. The mine site is located at an elevation of approximately 5,200 to 5,800 feet above mean sea level, within a broad, east-sloping alluvial basin flanked by the Shoshone Range to the west and the Toiyabe Range to the southeast. The terrain is characterized by gentle to moderate slopes with scattered sagebrush-covered hills and arroyos. The heap-leach pad is located in a natural topographic depression that was selected for its favorable containment geometry, with the pad surface grading from approximately 5,450 feet at the northern end to approximately 5,300 feet at the southern collection point. Drainage from the pad area flows generally southward and eastward toward the ephemeral tributary of the Reese River.
Hydrology. The primary receiving water for the site is an unnamed ephemeral tributary of the Reese River, which flows in a generally northeasterly direction from the mine area to its confluence with the Reese River approximately 8.5 miles downstream of the site. The ephemeral tributary has a drainage area of approximately 22 square miles above the mine site. Surface water flow in the tributary is intermittent, occurring primarily during spring snowmelt (typically March through May) and following significant precipitation events. Peak flows in the tributary during spring runoff have been estimated at approximately 50 to 150 cubic feet per second, while base-flow conditions during much of the year result in zero flow. The Reese River itself is a gaining stream in the lower reaches below the mine area, with perennial flows sustained by groundwater discharge.
Hydrogeology. The regional hydrogeologic setting consists of a shallow alluvial aquifer overlying deeper fractured bedrock aquifer systems. The shallow alluvial aquifer is composed of unconsolidated Quaternary sediments, including sand, gravel, silt, and clay, with an average saturated thickness of approximately 40 to 60 feet. Depth to groundwater beneath the heap-leach pad ranges from approximately 65 to 95 feet below ground surface, depending on location and seasonal conditions. Groundwater flow in the shallow alluvial aquifer is generally to the northeast, toward the Reese River, with a hydraulic gradient of approximately 0.008 to 0.012 ft/ft. Hydraulic conductivity values in the alluvial aquifer range from approximately 5 × 10⁻⁴ to 3 × 10⁻² cm/sec based on slug tests and pumping tests conducted during prior site investigations.
The deeper bedrock aquifer system consists of Paleozoic carbonate and siliciclastic rocks, including limestone, dolomite, and quartzite. A discontinuous clay confining layer separates the shallow alluvial aquifer from the deeper bedrock aquifer system in parts of the site area. Site investigation data suggest a hydraulic connection between the shallow alluvial aquifer and the deeper bedrock aquifer in the vicinity of the heap-leach pad, particularly in areas where the confining layer is thin or absent. This hydraulic connection is a significant concern because it creates a potential pathway for contaminant migration from the shallow system to the deeper aquifer.
Ecology. The vegetation at and surrounding the mine site is predominantly Great Basin sagebrush scrub, dominated by big sagebrush (Artemisia tridentata), rabbitbrush (Ericameria nauseosa), and bitterbrush (Purshia tridentata), with scattered greasewood (Sarcobatus vermiculatus) in lower-elevation drainage areas. Riparian vegetation along the ephemeral tributary and the Reese River includes willows (Salix spp.), cottonwoods (Populus spp.), and various sedges and rushes. Wildlife species present in the area include mule deer, pronghorn antelope, greater sage-grouse (a species of conservation concern), various raptors including golden eagle and red-tailed hawk, and numerous migratory waterfowl and shorebird species. The migratory waterfowl are of particular concern due to the documented avian mortalities in the solution ponds. The nearest human community is the town of Battle Mountain (population approximately 3,600), located approximately 28 miles to the north.
2.5 Contaminant Profile
Site investigations conducted by Pinnacle Creek Environmental, confirmed and supplemented by the independent technical review of Dr. Patricia Voss of Cascade Geosciences, Inc., have identified the following contaminants of concern at the Bonanza Creek Gold Mine:
Weak Acid Dissociable (WAD) Cyanide. WAD cyanide has been measured at concentrations of 0.62 mg/L in the heap-leach pad underdrain system, compared to the applicable discharge limit of 0.022 mg/L, representing an exceedance of approximately twenty-eight times (28×) the regulatory standard. WAD cyanide concentrations in groundwater monitoring wells downgradient of the pad range from 0.035 to 0.48 mg/L, with the highest concentrations detected in wells immediately downgradient of the Cell 1A/1B area, where the first and third liner failures occurred. WAD cyanide has also been detected in surface water samples collected from the ephemeral tributary at concentrations up to 0.19 mg/L during spring flow events, well in excess of the applicable aquatic life water-quality criterion.
Mercury. Total mercury concentrations in groundwater downgradient of the heap-leach pad average 12.4 µg/L, compared to the applicable water-quality criterion of 0.77 µg/L, representing an exceedance of approximately sixteen times (16×) the regulatory standard. Mercury concentrations in the ephemeral tributary surface water have been measured at up to 8.7 µg/L during flow events coinciding with or shortly following the documented release events. Mercury is present in the ore at the Bonanza Creek deposit as a naturally occurring constituent, and it is mobilized during the heap-leaching process along with gold.
Selenium. Elevated selenium concentrations have been detected in pit-lake water, with concentrations ranging from 18 to 34 µg/L, compared to the applicable aquatic life water-quality criterion of 5.0 µg/L and the drinking water maximum contaminant level ("MCL") of 50 µg/L. While selenium contamination in groundwater downgradient of the heap-leach pad has not been definitively linked to the liner release events, elevated selenium in pit-lake water is a concern for eventual pit-lake management and long-term water quality in the Reese River watershed.
Contaminant Transport Pathways. The primary contaminant transport pathway involves the migration of process solution through tears and breaches in the heap-leach pad liner, followed by vertical percolation through the vadose zone to the shallow alluvial aquifer, and lateral transport within the aquifer toward the ephemeral tributary and the Reese River. Secondary pathways include overland flow during spring snowmelt and precipitation events, which can mobilize contaminated soils along the ephemeral tributary channel. The extent of contamination has been delineated by existing site investigations, including soil borings, monitoring wells, surface water sampling, and geophysical surveys. Contaminant plume maps depicting the spatial extent of cyanide and mercury contamination in soils and groundwater are provided in Appendix A to this SOW.
3. Release History and Root Cause Analysis
3.1 First Release — March 17, 2022
The first documented release of process solution from the Bonanza Creek heap-leach pad was discovered on March 17, 2022, during a routine inspection of the underdrain monitoring system for Cell 1B. The site environmental technician observed an anomalous increase in flow rates at the underdrain sump for Cell 1B, with measured flow rates of approximately 8.5 gallons per minute ("gpm"), compared to a historical baseline of less than 0.5 gpm. The increase was corroborated by an elevated WAD cyanide concentration of 0.54 mg/L in the underdrain effluent, indicating that process solution was migrating through the liner system.
Subsequent investigation identified a linear tear approximately 18 feet in length in the 60-mil HDPE primary liner of Cell 1B, located along a panel seam in the southeastern quadrant of the cell, at approximately Station 14+50, Offset 65 feet east. The tear was located at the base of a steep section of the pad subgrade, in an area subject to high ore loading (approximately 200 feet of stacked ore above the liner) and significant mechanical stress from haul-truck traffic during ore placement.
Based on the duration and flow rate of the anomalous underdrain discharge, Pinnacle Creek estimated that approximately 1.8 million gallons of process solution had been released through the liner breach over a period of approximately forty-five (45) days prior to detection. The released solution contained WAD cyanide at a concentration of approximately 0.48 mg/L and total mercury at approximately 9.2 µg/L. The released solution migrated through the vadose zone beneath the pad and entered the shallow alluvial aquifer, which transported contaminants toward the ephemeral tributary of the Reese River. Soil sampling along the drainage pathway between the pad and the tributary revealed cyanide contamination in soils to a depth of approximately 6 feet over a lateral area of approximately 2.5 acres. Surface water sampling in the tributary during the March 2022 spring flow event detected WAD cyanide at 0.12 mg/L approximately 0.8 miles downstream of the pad.
Immediate response actions included: (i) cessation of solution application to Cell 1B; (ii) deployment of temporary pumping systems to recover solution from the underdrain sump; (iii) notification to EPA Region 9 and NV DEP within 24 hours; (iv) initiation of enhanced monitoring at downgradient wells and surface water stations; and (v) emergency repair of the liner tear using a field-welded HDPE patch.
The root cause analysis for the first release identified multiple contributing factors: (a) the original 60-mil HDPE liner in Cell 1B (installed in 2001) had reached the end of its effective service life, with evidence of stress cracking, oxidative degradation, and reduced elongation properties; (b) the panel seam where the tear occurred exhibited substandard fusion-weld quality, likely attributable to construction deficiencies during original installation; (c) the high mechanical stress from ore loading at the tear location exceeded the tensile strength of the degraded liner material; and (d) the steepness of the subgrade slope at the tear location (approximately 3H:1V) contributed to differential settlement and strain concentration at the seam.
3.2 Second Release — August 9, 2022
The second release was discovered on August 9, 2022, when routine quarterly groundwater monitoring detected a significant increase in WAD cyanide concentrations at monitoring well MW-7, located approximately 500 feet downgradient of the Cell 2A area. The WAD cyanide concentration at MW-7 increased from 0.008 mg/L (below the cleanup standard) in the May 2022 sampling round to 0.31 mg/L in August 2022. Concurrently, the underdrain flow rate at Cell 2A showed a gradual increase over the preceding weeks, although the increase was less dramatic than the anomaly observed at Cell 1B in March 2022.
Investigation of the Cell 2A liner identified a series of puncture-type defects in the 80-mil HDPE liner in the northern section of Cell 2A, at approximately Station 8+25, Offset 30 feet west, and Station 9+10, Offset 48 feet west. The punctures appeared to result from damage caused by angular rock fragments in the overliner drainage gravel, which had penetrated the liner under the weight of approximately 175 feet of stacked ore. The largest puncture was approximately 4 inches in diameter, with three smaller punctures ranging from 0.5 to 2 inches within a surrounding area of approximately 200 square feet.
The estimated volume of process solution released through the Cell 2A punctures was approximately 950,000 gallons over an estimated period of approximately sixty (60) days. Contaminant concentrations in the released solution included WAD cyanide at approximately 0.39 mg/L and total mercury at approximately 7.8 µg/L. The contaminant plume from the second release overlapped partially with the plume from the first release, complicating delineation efforts. Soil contamination was identified to a depth of approximately 4 feet over an area of approximately 1.8 acres between the Cell 2A area and the ephemeral tributary.
Emergency response measures included: (i) temporary cessation of leaching operations on Cell 2A; (ii) enhanced groundwater monitoring, including installation of two additional monitoring wells (MW-12 and MW-13) between the Cell 2A area and the tributary; (iii) liner repair using field-welded HDPE patches over all identified punctures; and (iv) installation of a geotextile cushion layer over the repaired areas to prevent recurrence of puncture damage.
The root cause analysis for the second release concluded that the primary cause was physical damage to the liner from angular rock fragments in the overliner drainage gravel. This was identified as a systemic design deficiency, as the original overliner drainage layer specification for Phase II cells (Cells 2A and 2B) did not require a geotextile protection layer between the drainage gravel and the liner surface. The analysis further noted that the angular rock used in the drainage layer was locally sourced waste rock that was not adequately screened for particle size and angularity, and that the loading stress from 175 feet of stacked ore amplified the puncture risk. The relationship between the first and second releases was noted as reflecting systemic liner integrity issues across multiple cells and multiple failure mechanisms — stress cracking and seam failure in the older cells, and puncture damage in the newer cells.
3.3 Third Release — January 22, 2023
The third release was discovered on January 22, 2023, under winter conditions, when the site environmental team observed discolored ice and staining on the surface of the ephemeral tributary channel approximately 0.3 miles downstream of the heap-leach pad. Subsequent investigation revealed that process solution was discharging from the subsurface to the tributary channel at a visible seep, with estimated flow of approximately 2 gpm. Field testing of the seep discharge confirmed the presence of WAD cyanide at 0.19 mg/L and total mercury at 11.6 µg/L.
Investigation traced the source of the discharge to Cell 1A, where a compound liner failure was identified consisting of a 22-foot tear along a panel seam in the southeastern corner of the cell and multiple smaller tears and stress cracks in the surrounding area, encompassing a total compromised liner area of approximately 600 square feet. The failure was located at approximately Station 3+80, Offset 20 feet south, in a zone of the pad that had been subject to repeated freeze-thaw cycles due to the exposure of the liner edge at the pad perimeter.
The estimated volume of process solution released in the third event was approximately 2.4 million gallons over an estimated period of approximately ninety (90) days, making it the largest of the three documented releases. The extended duration before detection was attributed to several factors: (i) winter conditions, which masked visual indicators of the release; (ii) frozen ground conditions, which reduced the rate of subsurface migration and delayed the appearance of contaminants at downgradient monitoring points; and (iii) the location of the failure at the pad perimeter, where underdrain monitoring was less comprehensive than in the central pad area.
Contaminant impacts from the third release were the most severe of the three events. WAD cyanide concentrations at monitoring well MW-3, located approximately 200 feet downgradient of Cell 1A, reached 0.62 mg/L — the highest concentration recorded at any monitoring location. Mercury concentrations at the same well reached 18.3 µg/L. The visible seep to the ephemeral tributary constituted a direct discharge of process solution to a water of the United States, providing the most clear-cut CWA violation among the three events. Ice sampling and early-spring surface water monitoring confirmed cyanide and mercury contamination in the tributary extending approximately 2.5 miles downstream of the seep location.
Immediate response actions included: (i) installation of a temporary containment berm around the visible seep; (ii) deployment of pumping systems to intercept and recover contaminated groundwater before it reached the tributary; (iii) cessation of all solution application to Cell 1A; (iv) notification to EPA, NV DEP, and the U.S. Fish and Wildlife Service; and (v) initiation of an expanded site investigation to define the full extent of contamination from all three releases.
The root cause analysis for the third release identified freeze-thaw damage as a primary contributing factor. The 60-mil HDPE liner in Cell 1A, originally installed in 2001, had been subjected to over twenty years of freeze-thaw cycling at the pad perimeter, where the liner was exposed to ambient temperature extremes. Laboratory testing of liner samples recovered from the failure zone confirmed significant reductions in tensile strength, elongation at break, and stress crack resistance compared to the original material specifications. The analysis also identified the inadequacy of the emergency repair performed on Cell 1B following the first release in March 2022, noting that the repair methodology had not addressed the underlying systemic degradation of the liner system in the Phase I cells. Furthermore, the analysis concluded that the design of the Cell 1A/1B liner system, which incorporated only a single liner without leak detection, made it inherently vulnerable to undetected releases once the liner began to degrade.
3.4 Comprehensive Root Cause Summary
The three release events at the Bonanza Creek heap-leach pad reflect a convergence of systemic factors rather than isolated incidents. The comprehensive root cause analysis, performed jointly by Pinnacle Creek Environmental and reviewed by Dr. Patricia Voss of Cascade Geosciences, identified the following overarching factors:
Liner Age and Material Degradation. The Phase I cells (1A and 1B), constructed in 2001 with 60-mil HDPE, have exceeded their effective design life. Testing of liner samples from these cells demonstrates oxidative degradation, reduced stress crack resistance (NCTL values below 100 hours, compared to original specification of greater than 400 hours), and reduced elongation at break (approximately 200%, compared to original specification of greater than 700%). The 60-mil thickness specified for the Phase I cells is below current industry standards for heap-leach pad liners, which typically specify a minimum of 80-mil HDPE.
Design Limitations. The single-liner design used in the Phase I and Phase II cells lacks the redundancy and leak detection capability provided by modern double-liner systems. The absence of a leak detection and response system between primary and secondary liners means that liner failures in these cells cannot be detected until contaminants appear in the underdrain system or at downgradient monitoring points, resulting in potentially extended periods of undetected release. Additionally, the absence of geotextile protection layers between the drainage gravel and the liner surface in the Phase II cells created a vulnerability to puncture damage.
Operational Stresses. The loading stresses from ore placement, including dynamic loading from haul-truck traffic, have exceeded the assumptions used in the original liner design for the Phase I cells. The stacking of ore to heights exceeding original design elevations has increased static and dynamic loads on the liner system.
Climatic Factors. The extreme temperature ranges and frequent freeze-thaw cycles characteristic of the semi-arid high-desert environment at the site have accelerated liner degradation, particularly at exposed perimeter areas. UV exposure at the liner edges has further contributed to material breakdown.
Management System Deficiencies. The root cause analysis identified deficiencies in BCM's liner integrity monitoring and management systems, including: (i) inadequate frequency and scope of underdrain monitoring, particularly for the older cells; (ii) insufficient inspection of liner perimeter areas; (iii) lack of a formal liner integrity management plan with trigger thresholds for corrective action; and (iv) delays in implementing comprehensive repairs following the first release, which allowed continued degradation and the occurrence of subsequent releases.
These conclusions directly inform the scope of the repair, upgrade, and containment measures described in Sections 5 through 8 of this SOW, and underscore the necessity for a comprehensive approach that addresses not only the specific liner failures that have occurred but the underlying systemic vulnerabilities that made those failures possible.
4. Regulatory Requirements and Performance Standards
4.1 Federal Requirements
The remedial activities described in this SOW must comply with all applicable federal environmental laws and regulations, including the following:
Clean Water Act (CWA), 33 U.S.C. §§ 1251–1387. Section 301 of the CWA, 33 U.S.C. § 1311, prohibits the discharge of any pollutant from a point source to navigable waters of the United States without a valid NPDES permit. The three documented releases from the heap-leach pad constituted unpermitted discharges of cyanide-bearing process solution to the ephemeral tributary of the Reese River, a water of the United States. The Consent Decree requires the cessation of all unpermitted discharges and the implementation of remedial measures to prevent future discharges. Any future discharges of treated water from the remediation systems must be conducted in compliance with applicable NPDES permit requirements.
Resource Conservation and Recovery Act (RCRA), 42 U.S.C. §§ 6901–6992k. Section 3004 of RCRA, 42 U.S.C. § 6924, establishes standards for the management of hazardous waste. The Government alleges that spent heap-leach ore at the Bonanza Creek Gold Mine exhibits the toxicity characteristic for cyanide and mercury under 40 C.F.R. § 261.24, and therefore constitutes hazardous waste subject to RCRA Subtitle C management requirements. The SOW addresses spent ore management, including characterization, rinsing/detoxification, closure-in-place, and long-term monitoring, in compliance with RCRA closure and post-closure requirements under 40 C.F.R. Part 264, Subparts G and N.
Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), 42 U.S.C. §§ 9601–9675. While the enforcement action is principally brought under the CWA and RCRA, CERCLA response and cost recovery provisions may apply to the extent that releases of hazardous substances from the site trigger CERCLA notification and response obligations. The remedial activities under this SOW are designed to be consistent with CERCLA response standards, including the requirement that remedies be protective of human health and the environment and comply with applicable or relevant and appropriate requirements ("ARARs").
Migratory Bird Treaty Act (MBTA), 16 U.S.C. §§ 703–712. The MBTA prohibits the taking of migratory birds without authorization. The seventeen avian mortalities documented at the solution ponds between 2021 and 2023 constituted takings in violation of the MBTA. The Consent Decree requires the implementation of enhanced avian protection measures to achieve a target of zero avian mortalities in the solution management areas, as further described in Section 6.2 of this SOW.
Consent Decree-Specific Requirements. The Consent Decree establishes specific remediation performance standards and completion criteria that supplement the general requirements of the applicable statutes. These Consent Decree-specific requirements include: (i) specific contaminant reduction targets and points of compliance; (ii) milestone deadlines for completion of specified remedial actions; (iii) monitoring and reporting obligations; (iv) stipulated penalties for noncompliance; and (v) contingency remedy provisions if initial remedies do not achieve performance standards.
4.2 State of Nevada Requirements
In addition to federal requirements, the remedial activities at the Bonanza Creek Gold Mine must comply with applicable State of Nevada environmental laws and regulations, including the following:
NV DEP Water Pollution Control Permits. The site operates under Water Pollution Control Permit No. NEV-0093751, issued by the Nevada Division of Environmental Protection, Bureau of Mining Regulation and Reclamation. This permit establishes requirements for the containment and management of process fluids, monitoring of groundwater and surface water, and prevention of unauthorized discharges. Modifications to the permit may be required to incorporate the remedial actions described in this SOW, including the upgraded liner system, enhanced monitoring program, and groundwater treatment system discharges.
Nevada Mining Reclamation Permit. BCM holds Mining Reclamation Permit No. 0218, issued by the NV DEP Bureau of Mining Regulation and Reclamation. This permit establishes reclamation requirements for the mine site, including the closure of the heap-leach pad. The spent ore management and closure activities described in Section 8 of this SOW must be coordinated with the requirements of the mining reclamation permit, and amendments to the permit may be necessary.
State Water-Quality Standards. Nevada water-quality standards applicable to the Reese River drainage and associated groundwater resources are established under Nevada Administrative Code ("NAC") Chapter 445A. These standards establish beneficial use classifications, numeric criteria for priority pollutants (including cyanide, mercury, and selenium), and antidegradation requirements. The remediation performance standards in this SOW are designed to achieve compliance with Nevada water-quality standards at applicable points of compliance.
State Hazardous Waste Regulations. Nevada hazardous waste regulations, codified at NAC Chapter 444A, incorporate by reference the federal RCRA regulations with certain state-specific modifications. The characterization and management of spent heap-leach ore must comply with these state regulations in addition to federal RCRA requirements.
4.3 Performance Standards and Cleanup Goals
The following performance standards and cleanup goals shall apply to the remedial activities conducted under this SOW. These standards are derived from the Consent Decree, applicable federal and state regulations, and risk-based assessments conducted during the site investigation process.
WAD Cyanide. Groundwater and surface water concentrations of WAD cyanide shall be reduced to below 0.022 mg/L at all points of compliance, including designated monitoring wells downgradient of the heap-leach pad and surface water sampling stations on the ephemeral tributary. This standard is consistent with the Nevada water-quality standard for cyanide and the EPA ambient water-quality criterion for the protection of aquatic life.
Mercury. Groundwater and surface water concentrations of total mercury shall be reduced to below 0.77 µg/L at all points of compliance. This standard is consistent with the EPA ambient water-quality criterion for the protection of aquatic life. Soil remediation goals for mercury are 23 mg/kg for residential and 310 mg/kg for industrial/commercial exposure scenarios, as derived from EPA Regional Screening Levels.
Selenium. Pit-lake water and groundwater concentrations of selenium shall not exceed the applicable water-quality criterion of 5.0 µg/L for the protection of aquatic life. The drinking water MCL of 50 µg/L shall apply as a secondary standard. Soil remediation goals for selenium are 390 mg/kg for residential and 5,100 mg/kg for industrial/commercial exposure scenarios.
Soil Remediation Goals. In addition to the mercury and selenium soil standards specified above, soil remediation goals for total cyanide are 1,600 mg/kg for residential and 20,000 mg/kg for industrial/commercial exposure scenarios. All soil remediation goals are derived from EPA Regional Screening Levels and site-specific risk assessments.
Groundwater Remediation Goals and Monitoring Well Performance Benchmarks. Compliance with groundwater remediation goals shall be evaluated at designated point-of-compliance monitoring wells, which include existing wells MW-3, MW-5, MW-7, MW-10, and MW-11, and additional wells to be installed as part of the expanded monitoring network. Compliance shall be demonstrated by eight consecutive quarterly sampling events in which all analytes are below the applicable cleanup goals, consistent with EPA guidance for demonstrating remedy completion.
Avian Mortality. Upon completion of the enhanced avian protection measures described in Section 6.2 of this SOW, the performance standard for avian mortality at the solution management areas shall be zero mortalities. Any avian mortality occurring after installation of the enhanced protection measures shall be immediately reported and investigated, and corrective actions shall be implemented as necessary.
5. Scope of Work — Liner Repair and Upgrade
5.1 Liner System Assessment
The first step in the liner repair and upgrade program shall be a comprehensive integrity assessment of the existing liner system across all eight heap-leach pad cells. The assessment shall be designed and executed by Pinnacle Creek Environmental, with oversight by Verdant Analytics, and shall encompass the following activities:
Non-Destructive Testing. Electrical leak location ("ELL") surveys shall be conducted on all accessible liner surfaces using dipole-dipole and water puddle methods, as appropriate for the cell configuration and ore loading conditions. ELL surveys provide a means of identifying breaches, pinholes, and areas of compromised liner integrity without physically sampling or removing the liner. Infrared thermography shall be employed as a supplementary non-destructive technique to identify areas of anomalous heat flow indicative of fluid migration through the liner. Visual inspections of all exposed liner surfaces, seams, penetrations, and anchor trenches shall be conducted by qualified CQA inspectors.
Destructive Testing. Liner panel samples shall be collected from representative locations across all cells for laboratory analysis of material properties, including tensile strength, elongation at break, stress crack resistance (NCTL), carbon black content and dispersion, oxidative induction time (OIT), and thickness. A minimum of three samples per cell (24 samples total) shall be collected, with additional samples taken from areas identified as suspect during non-destructive testing. The destructive testing program shall be designed to characterize the current condition of the liner material relative to original specifications and industry standards.
Sub-Liner Drainage and Leak Detection System Assessment. The functionality of the existing underdrain and leak detection systems shall be assessed, including flow measurement at all underdrain sumps, chemical analysis of underdrain effluent, hydraulic capacity testing of collection pipes, and visual inspection (via video camera, where feasible) of pipe interiors. The assessment shall identify any areas of pipe blockage, collapse, sedimentation, or mineral encrustation that may impair the performance of the underdrain system.
Deliverable. The results of the comprehensive integrity assessment shall be documented in a Liner Integrity Assessment Report, to be submitted to EPA and NV DEP within six months of the Effective Date of the Consent Decree (target date: December 14, 2025). The Report shall include: (i) a detailed description of all identified liner deficiencies, categorized by type, severity, and location; (ii) an assessment of remaining liner service life for each cell; (iii) recommendations for repair, upgrade, or replacement of the liner system in each cell; and (iv) risk-ranking of identified deficiencies to prioritize remedial actions.
5.2 Liner Repair Program
Based on the findings of the Liner Integrity Assessment Report, a comprehensive repair program shall be implemented to address all identified liner breaches, tears, punctures, seam failures, stress cracks, and other deficiencies. The repair program shall be designed to restore the containment integrity of the liner system in all cells where repair is technically feasible and where the remaining liner material has sufficient service life to support effective repair.
Repair Materials and Methods. All liner repairs shall be performed using HDPE materials that are compatible with the existing liner system and that meet or exceed the material specifications for the original liner installation. Repairs shall employ one or more of the following methods, as appropriate to the nature and severity of the deficiency:
(a) Extrusion welding: For small tears, punctures, and localized defects (less than 6 inches in length or diameter), extrusion welding of HDPE repair material using a calibrated extrusion welder with documented preheat and weld temperature control.
(b) Cap patching: For larger defects, seam failures, and areas of stress cracking, installation of HDPE cap patches extending a minimum of 6 inches beyond the edges of the defect in all directions, attached by dual-track hot-wedge fusion welding.
(c) Panel replacement: For areas with extensive degradation or multiple defects in close proximity, removal and replacement of entire liner panels using new HDPE material meeting the specifications set forth in Section 5.3 and Appendix E.
Quality Assurance/Quality Control. All repairs shall be subject to rigorous QA/QC protocols, including: (i) non-destructive testing of all repair welds using vacuum box testing, air pressure testing, or spark testing; (ii) destructive testing (peel and shear testing) of trial welds performed at the beginning of each work shift and at minimum four-hour intervals thereafter; (iii) documentation of all repairs, including location (GPS coordinates), photographs, weld test results, and technician certification; and (iv) independent verification by the CQA engineer.
Phased Repair Schedule. The repair program shall be executed in phases coordinated with ongoing mining operations to maintain continuity of gold production to the extent practicable. Cells with the most critical deficiencies, as determined by the risk-ranking in the Liner Integrity Assessment Report, shall be prioritized for repair. A detailed phasing plan shall be developed as part of the Liner Repair and Upgrade Design, with input from BCM mine operations personnel to ensure safe access to repair areas and minimize interference with ore loading and solution management operations.
Temporary Containment. During repair activities, temporary containment measures shall be implemented to prevent process-solution releases from repair areas, including temporary berms, pumping systems, and solution diversion to alternative collection points.
5.3 Liner Upgrade and Replacement
In cells or portions of cells where repair alone is insufficient to restore adequate containment integrity — including all Phase I cells (1A and 1B), which have exceeded their original design life — the liner system shall be upgraded or replaced in accordance with the following design criteria:
Double-Liner System. All cells or cell areas identified for liner upgrade shall be constructed with a double-liner system consisting of:
(a) Primary liner: Minimum 80-mil smooth HDPE geomembrane, manufactured from virgin resin meeting the requirements of GRI-GM13 (or current equivalent), with a minimum tensile strength at yield of 126 lb/in, a minimum elongation at break of 700%, a minimum stress crack resistance (NCTL) of 400 hours, and a minimum oxidative induction time (standard OIT) of 100 minutes.
(b) Leak detection and response system (LDRS): A geocomposite drainage layer between the primary and secondary liners, consisting of a geonet core with geotextile filter on both sides, with a minimum transmissivity of 1 × 10⁻³ m²/sec under design loading conditions. The LDRS shall be connected to dedicated collection sumps equipped with flow measurement, automated sampling, and telemetric alarm systems.
(c) Secondary liner: A geosynthetic clay liner ("GCL") with a minimum sodium bentonite mass per unit area of 0.75 lb/ft², a maximum hydraulic conductivity of 5 × 10⁻⁹ cm/sec, and internal shear strength adequate for the design slope conditions. The GCL shall be placed over a prepared subgrade meeting compaction and smoothness requirements.
(d) Overliner protection and drainage: A minimum 16-ounce nonwoven geotextile protection layer placed directly over the primary liner, beneath the overliner drainage gravel. The drainage gravel shall be screened to a maximum particle size of 1.5 inches and shall be free of angular or sharp-edged fragments capable of causing puncture damage to the liner.
Design Life. The upgraded liner sy