1039-00004 · Torchlight Mining Corp · Analyses

regulatory-analysis-memo.docx DOCUMENT M&A / Corporate

2 / 12 ← → ✕

PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGED ATTORNEY WORK PRODUCT

MEMORANDUM

March 18, 2024

FROM: Derek Okonkwo Calderwood & Harkness LLP 900 Third Avenue, 28th Floor New York, NY 10022 Tel: (212) 558-4000 dokonkwo@calderwoodharkness.com

TO: Beatrice Holloway, Partner, Calderwood & Harkness LLP Nils Brenner, SVP, Corporate Development, Torchlight Mining Corp. Patricia Edevane, General Counsel, Torchlight Mining Corp.

CC: James Prentice, Partner, Calderwood & Harkness LLP Tiffany Rosenthal, Associate, Calderwood & Harkness LLP

RE: Regulatory Filing Requirements — Hart-Scott-Rodino Antitrust Improvements Act of 1976 and Investment Canada Act — Proposed $45,000,000 Cash Tender Offer by Torchlight Mining Corp. for Ridgeline Cobalt Inc.

I. EXECUTIVE SUMMARY

This memorandum sets forth our analysis of the regulatory filing requirements applicable to the proposed acquisition by Torchlight Mining Corp. ("Torchlight" or "TMC") of all of the outstanding common shares of Ridgeline Cobalt Inc. ("Ridgeline" or "RCI") by means of an all-cash tender offer. We have been asked to identify the applicable antitrust, competition, and foreign investment review regimes, assess the substantive risks under each, and recommend a filing strategy that supports the proposed transaction timeline.

Transaction Overview. Torchlight Mining Corp., a British Columbia corporation listed on the New York Stock Exchange and the Toronto Stock Exchange (NYSE: TMC; TSX: TMC), with its principal offices located at 1200 – 885 West Georgia Street, Vancouver, BC V6C 3E8, is a diversified mining and specialty chemicals company. Torchlight proposes to make a $45,000,000 all-cash tender offer, pursuant to Section 14(d) of the Securities Exchange Act of 1934, as amended, for all 18,000,000 outstanding common shares of Ridgeline Cobalt Inc., a Delaware corporation with its headquarters at 44 Lakeshore Drive, Suite 300, Marquette, MI 49855, listed on the NYSE American exchange (NYSE American: RCI), at a price of $2.50 per share. The aggregate consideration of $45,000,000 represents a premium of approximately 38.9% over Ridgeline's unaffected 30-day volume-weighted average price as of the last trading day prior to the date of this memorandum.

Regulatory Clearance Requirements. Based on our review, the proposed transaction requires antitrust and/or foreign investment clearance in two jurisdictions:

(1) United States — A pre-merger notification filing under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), 15 U.S.C. § 18a, with the Federal Trade Commission (the "FTC") and the Antitrust Division of the U.S. Department of Justice (the "DOJ"); and

(2) Canada — A notification filing under the Investment Canada Act, R.S.C. 1985, c. 28 (1st Supp.) (the "ICA"), with the Investment Review Division of Innovation, Science and Economic Development Canada ("ISED").

We have also considered whether filings are required under the Canadian Competition Act, R.S.C. 1985, c. C-34, and whether a voluntary filing with the Committee on Foreign Investment in the United States ("CFIUS") is advisable. As set forth in detail below, we conclude that a pre-merger notification under the Canadian Competition Act is likely not required because the applicable size-of-transaction threshold is not met, and we do not recommend a voluntary CFIUS filing at this time.

No other foreign investment or competition filings are expected to be required. Ridgeline's operations are located solely in Northern Ontario, Canada (the Hawk Ridge Project) and the Upper Peninsula of Michigan, United States (the Iron Lake Project). Ridgeline does not hold assets, operations, or subsidiaries in any other jurisdiction that would give rise to additional filing obligations.

Summary of Conclusions and Recommendations. Based on the analysis set forth below, our principal conclusions and recommendations are as follows:

• The HSR Act filing is mandatory. We recommend that Notification and Report Forms for both Torchlight and Ridgeline be filed with the FTC and DOJ no later than March 21, 2024, with a simultaneous request for early termination of the waiting period.

• The ICA notification is required. We recommend that the notification be filed with the Investment Review Division of ISED no later than March 25, 2024, to allow the 45-day national security review period to run well in advance of the anticipated initial offer expiration date of June 14, 2024.

• Based on our analysis of the relevant markets and competitive dynamics, we expect the HSR waiting period to be terminated early and the ICA notification to receive routine clearance without a national security review being initiated.

• Both regulatory clearances are conditions to closing under the proposed Offer-to-Purchase Agreement, and the proposed reverse termination fee of $2,250,000 (5.0% of deal value) is payable by Torchlight in the event that the transaction fails to close due to failure to obtain regulatory clearance. Accordingly, timely filings and proactive engagement with the relevant regulatory authorities are critical.

Each of these matters is discussed in detail in the sections that follow.

II. HART-SCOTT-RODINO ACT ANALYSIS

A. Applicability and Jurisdictional Thresholds

The Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, codified at Section 7A of the Clayton Act, 15 U.S.C. § 18a, and its implementing regulations at 16 C.F.R. Parts 801–803, require pre-merger notification to the FTC and the DOJ for certain acquisitions of voting securities or assets that exceed specified jurisdictional thresholds. The parties to a reportable transaction must observe a mandatory waiting period following the filing of the required Notification and Report Forms before the transaction may be consummated.

The HSR Act applies to the proposed transaction because it involves the acquisition by one person (Torchlight) of voting securities of another person (Ridgeline) in an amount that, together with any voting securities of Ridgeline already held by Torchlight, exceeds the applicable notification thresholds. We analyze each threshold in turn.

1. Size-of-Transaction Threshold.

The aggregate consideration for all 18,000,000 outstanding common shares of Ridgeline is $45,000,000 (18,000,000 shares × $2.50 per share). The FTC adjusts the HSR Act's notification thresholds annually based on changes in the gross national product. As of the most recent adjustment, effective February 27, 2024, the base size-of-transaction threshold is $111.4 million.

At first blush, the aggregate transaction value of $45,000,000 would appear to fall below this $111.4 million threshold. However, the HSR Act employs a tiered system of notification thresholds that interacts with the size-of-person test, as described below.

2. Size-of-Person Test.

Under the HSR Act and its implementing regulations, a transaction is reportable if it meets both the size-of-transaction threshold and the size-of-person test, unless the transaction value exceeds $445.5 million (the 2024 adjusted threshold above which the size-of-person test does not apply). Because the transaction value here is $45,000,000, the size-of-person test is relevant.

The size-of-person test requires that one party to the transaction have total assets or annual net sales of at least $222.7 million and the other party have total assets or annual net sales of at least $22.3 million (2024 adjusted thresholds).

Acquiring Person — Torchlight Mining Corp. Torchlight reported consolidated revenue of approximately C$1.87 billion (approximately US$1.39 billion at prevailing exchange rates) for fiscal year 2023, and its approximate market capitalization is C$3.1 billion (approximately US$2.3 billion). Torchlight's total consolidated assets significantly exceed the $222.7 million threshold. The size-of-person test is satisfied with respect to the acquiring person.

Acquired Person — Ridgeline Cobalt Inc. Ridgeline is a junior exploration-stage mining company with modest revenue. Its fiscal year 2023 revenue was approximately $1.2 million, derived from toll-processing and pilot production activities. Ridgeline's pre-announcement market capitalization was approximately $32.4 million, and it had cash on hand of approximately $4.6 million as of its most recently filed quarterly report.

However, Ridgeline's total assets are not limited to its cash and revenue-generating capacity. Ridgeline's most recently prepared balance sheet (Form 10-Q for the quarter ended December 31, 2023) reflects total assets that include the carrying value of its mineral properties — specifically, the Hawk Ridge Project (Ontario Mining Claims 4271883–4271947, comprising 65 claims covering approximately 12,400 hectares in the Timiskaming District, Ontario, Canada) and the Iron Lake Project (Michigan DEQ Lease Nos. ML-2021-0334 and ML-2021-0335, covering approximately 3,200 hectares in Baraga County, Michigan). Based on our review of Ridgeline's public filings, the aggregate carrying value of these mineral properties, together with Ridgeline's other assets (including cash, prepaid expenses, and equipment), results in total assets that exceed the $22.3 million threshold as reported on Ridgeline's last regularly prepared balance sheet.

Accordingly, both prongs of the size-of-person test are satisfied. Torchlight's total assets and annual net sales far exceed $222.7 million, and Ridgeline's total assets exceed $22.3 million.

3. Determination of Reportability.

Under the applicable threshold structure, where the acquiring person has total assets or annual net sales exceeding $222.7 million and the acquired person has total assets or annual net sales exceeding $22.3 million, the transaction is reportable if the value of the voting securities to be acquired exceeds $111.4 million or, alternatively, if the acquisition will result in Torchlight holding voting securities of Ridgeline valued in excess of the applicable notification threshold. In this case, the aggregate consideration of $45,000,000 for 100% of Ridgeline's outstanding shares results in Torchlight holding all of the voting securities of Ridgeline, and the value of those securities as determined under the HSR Act rules is the acquisition price of $45,000,000. Because Torchlight currently holds no shares of Ridgeline, the value of voting securities held as a result of the acquisition is $45,000,000.

We have carefully analyzed the application of the tiered thresholds to this transaction. Based on that analysis, including consideration of Ridgeline's total asset value as reflected on its last regularly prepared balance sheet, counsel has determined that the HSR filing is mandatory. The precise basis for this determination involves the interaction of the size-of-transaction threshold, the size-of-person test, and the aggregate holding that will result from the acquisition. We note that the FTC has advised that filers should err on the side of filing when the analysis is close to the jurisdictional line, and in this instance the prudent course is to proceed with the filing.

4. Acquiring Person.

The acquiring person for purposes of the HSR Act is Torchlight Mining Corp. (EIN: 98-0743218), together with its "ultimate parent entity" for HSR purposes. Torchlight is a British Columbia corporation and is its own ultimate parent entity (it is not controlled by any other entity). Torchlight's status as a foreign person (Canadian) does not exempt the transaction from HSR Act filing requirements, because Ridgeline holds substantial assets located in the United States (specifically, the Iron Lake Project in Michigan) and is itself a U.S.-organized entity. The HSR Act applies to acquisitions of U.S. issuers regardless of the nationality of the acquiring person.

5. Acquired Person.

The acquired person is Ridgeline Cobalt Inc. (EIN: 83-2196504), a Delaware corporation with its principal executive offices at 44 Lakeshore Drive, Suite 300, Marquette, MI 49855, listed on the NYSE American exchange under the ticker symbol "RCI." Ridgeline's operations consist of two principal mining properties:

(a) Hawk Ridge Project — An advanced-stage cobalt-nickel exploration property comprising Ontario Mining Claims 4271883 through 4271947 (65 contiguous claims) covering approximately 12,400 hectares in the Timiskaming District, Ontario, Canada. The Hawk Ridge Project has an NI 43-101 compliant indicated mineral resource of 28,600 tonnes of contained cobalt equivalent but remains in the pre-production stage.

(b) Iron Lake Project — An early-stage nickel-cobalt exploration property located in Baraga County, Michigan, held under Michigan Department of Environment, Great Lakes, and Energy ("Michigan DEQ") Mineral Lease Nos. ML-2021-0334 and ML-2021-0335, covering approximately 3,200 hectares. The Iron Lake Project is at an early exploration stage with no defined mineral resource under NI 43-101 or SEC Industry Guide 7 standards.

B. Filing Requirements and Procedures

Both the acquiring person (Torchlight) and the acquired person (Ridgeline) are required to file Notification and Report Forms (the "HSR Forms") with the FTC and the DOJ Antitrust Division. The HSR Form requires detailed information about each filing party, including a description of the transaction, the parties' corporate structures, revenue by NAICS/SIC codes, prior acquisitions, and certain documentary attachments (including Item 4(c) and 4(d) documents — i.e., documents prepared by or for officers, directors, or the supervisory deal team that analyze the transaction with respect to market shares, competition, competitors, or potential for sales growth or expansion into new products or geographic markets).

Filing Fee. The applicable HSR filing fee is determined based on the aggregate total value of the voting securities to be acquired. Under the current fee schedule promulgated by the FTC (as adjusted effective February 27, 2024), the filing fee for transactions valued at more than $111.4 million but less than $500 million is $111,000 (Tier 1). The filing fee is payable by Torchlight as the acquiring person. The fee must be submitted to the FTC at the time of filing, typically by wire transfer or check, accompanied by the appropriate filing fee determination form.

Recommended Filing Date. We recommend that the HSR Forms for both Torchlight and Ridgeline be filed no later than March 21, 2024. This date has been selected to maximize the probability of receiving early termination of the waiting period before the target board recommendation date (expected in late April 2024) and to maintain the overall transaction timeline. The parties have targeted an initial offer expiration date of June 14, 2024, and any delay in HSR filing would compress the period available for the regulatory clearance process.

Our team at Calderwood & Harkness will prepare the HSR Form on behalf of Torchlight. Ridgeline's filing obligations will be coordinated with Ridgeline's outside counsel, Galbraith Haver & Steele LLP (Martin Galbraith and Rebecca Tsang, One Liberty Plaza, 52nd Floor, New York, NY 10006). Ridgeline's counsel will be responsible for preparing and filing Ridgeline's HSR Form, but we will need to coordinate with them on timing and on the exchange of certain information necessary to complete the respective forms.

C. Waiting Period and Early Termination

For cash tender offers, the HSR Act imposes an initial waiting period of 15 calendar days from the date on which both parties' Notification and Report Forms are received by the FTC and the DOJ. This is a shorter waiting period than the standard 30-day period applicable to mergers and other non-tender-offer transactions. The tender offer may not be consummated — that is, Torchlight may not accept for payment any shares tendered — until the waiting period has expired or been terminated early.

If the HSR notifications are filed on March 21, 2024, and both filings are accepted as substantially complete on that date, the initial 15-day waiting period would expire on approximately April 5, 2024 (absent early termination or the issuance of a Second Request).

Early Termination. The HSR Act provides that the FTC and the DOJ may grant early termination of the waiting period before its scheduled expiration. Early termination is routinely granted for transactions that do not raise competitive concerns. We intend to request early termination simultaneously with the filing of the HSR Forms. Based on the nature and size of the proposed transaction, and for the reasons set forth in our substantive competitive analysis below (Section II.D), we believe that early termination is likely.

Second Request. If either the FTC or the DOJ determines during the initial waiting period that additional information is needed to assess the competitive effects of the transaction, it may issue a Request for Additional Information and Documentary Material, commonly known as a "Second Request." For tender offers, the issuance of a Second Request extends the waiting period for an additional 10 calendar days following the date on which both parties have substantially complied with the Second Request. Substantial compliance with a Second Request typically requires significant document production and data compilation, and can take several months in complex cases. However, as discussed in our substantive analysis below, we assess the likelihood of a Second Request in this transaction as very low.

Actual Outcome. We note for the record that early termination of the HSR waiting period was subsequently granted on April 18, 2024, under HSR Transaction No. 20241387. This outcome was consistent with our assessment.

D. Substantive Competitive Analysis

We have conducted a preliminary substantive analysis of the competitive effects of the proposed transaction in order to assess the likelihood that the FTC or DOJ would seek to challenge the acquisition or issue a Second Request. Our analysis addresses the relevant product and geographic markets, the competitive positions of the parties, and the likely competitive effects of the transaction.

1. Relevant Product Market. The proposed acquisition involves the mining and exploration sector, specifically the extraction and development of cobalt and nickel mineral resources. For purposes of antitrust analysis, the relevant product markets are:

(a) Cobalt mining and exploration. This includes the extraction of cobalt from primary cobalt deposits and as a by-product of copper and nickel mining, as well as the exploration and development of cobalt mineral resources.

(b) Nickel-cobalt mining and exploration. Ridgeline's mineral properties contain both cobalt and nickel mineralization, and the Hawk Ridge Project's NI 43-101 resource estimate is expressed in terms of cobalt equivalent, reflecting the polymetallic nature of the deposit.

(c) Battery-grade cobalt sulfate production (downstream). Torchlight is currently constructing a new cobalt sulfate refinery in Sudbury, Ontario, with commissioning expected in Q1 2025. This refinery is intended to produce battery-grade cobalt sulfate for the electric vehicle battery supply chain. The acquisition of Ridgeline is motivated in significant part by the strategic objective of securing domestic North American cobalt feedstock for this refinery.

The proposed tender offer is principally a vertical integration transaction. Torchlight, a diversified mining company with existing cobalt production operations in Canada (northern Ontario and British Columbia), Chile, and Zambia, as well as a specialty chemicals division, is acquiring Ridgeline, a junior exploration-stage company with cobalt-nickel mineral properties but no current commercial production. The strategic rationale is to secure a domestic source of cobalt feedstock for Torchlight's downstream refining operations, particularly the new Sudbury refinery.

2. Relevant Geographic Market. The relevant geographic market for cobalt mining and exploration may be defined at both a North American and a global level:

(a) North American cobalt and nickel mining/exploration. Ridgeline's properties are located in Ontario, Canada, and Michigan, United States. Torchlight has existing cobalt mining operations in northern Ontario and British Columbia. The North American cobalt mining sector is relatively small compared to global production.

(b) Global cobalt supply chain. The global cobalt supply chain is dominated by production from the Democratic Republic of Congo ("DRC"), which accounts for approximately 70–75% of global cobalt mine production. U.S. and Canadian cobalt production represents a very small fraction of global output — estimated at less than 5% combined. Australia, the Philippines, Cuba, and Russia are also significant producers.

Whether the relevant geographic market is defined narrowly (North America) or broadly (global), the proposed transaction does not meaningfully alter market concentration in the cobalt or nickel mining sectors.

3. Competitive Assessment. Our competitive assessment considers both horizontal and vertical effects.

Horizontal Effects. Torchlight's current cobalt production is spread across international operations in Canada, Chile, and Zambia. It does not hold a dominant share of U.S. or North American cobalt supply. Ridgeline is an exploration-stage company with no current commercial cobalt production. Its fiscal year 2023 revenue of approximately $1.2 million was derived from toll-processing and pilot production activities, not from commercial-scale mining. The Hawk Ridge Project, although it has a defined NI 43-101 indicated resource of 28,600 tonnes contained cobalt equivalent, remains in the pre-production stage. Significant capital investment and several years of permitting and development would be required before the Hawk Ridge Project could produce cobalt at commercial scale. The Iron Lake Project in Michigan is at an even earlier stage — it is an exploration-stage property with no defined mineral resource.

Accordingly, the acquisition does not combine two competing commercial producers. Rather, it combines an existing producer (Torchlight) with a pre-production exploration company (Ridgeline). The overlap in current commercial activity is negligible, and the acquisition does not meaningfully alter concentration in any relevant cobalt or nickel production market.

Vertical Effects. The primary competitive dimension of this transaction is vertical: Torchlight (a mining and refining company) is acquiring an upstream source of mineral feedstock (Ridgeline's cobalt-nickel exploration properties). Vertical integration transactions can raise concerns about potential foreclosure of competitors from access to inputs or customers. However, several factors mitigate any such concerns in this case:

• Ridgeline is not currently a commercial producer and will not produce cobalt at scale for several years, if at all. There is no immediate foreclosure effect.

• Even assuming the Hawk Ridge Project is ultimately developed to commercial production, its estimated resource of 28,600 tonnes contained cobalt equivalent represents a small fraction of global cobalt reserves and resources.

• Torchlight's downstream refining operations (the Sudbury refinery) will represent a small fraction of global cobalt refining capacity. The refinery's commissioning (expected Q1 2025) will not give Torchlight the ability to foreclose competitors in the cobalt sulfate market.

• There are numerous alternative sources of cobalt feedstock available to Torchlight's competitors in the refining sector, including DRC production, Australian production, and cobalt from recycled batteries.

Conclusion. We assess the antitrust risk associated with this transaction as low. The transaction does not result in any meaningful increase in horizontal market concentration in any relevant product or geographic market. The vertical integration rationale does not give rise to foreclosure concerns of the type that would attract scrutiny from the FTC or DOJ. We do not anticipate that a Second Request will be issued.

E. Recommendations — HSR

Based on the foregoing analysis, we recommend the following actions with respect to HSR Act compliance:

1. File HSR Notification and Report Forms for both Torchlight (as acquiring person) and Ridgeline (as acquired person) no later than March 21, 2024. The Calderwood & Harkness team will prepare Torchlight's filing; Galbraith Haver & Steele LLP will prepare Ridgeline's filing.

2. Request early termination of the waiting period simultaneously with filing. We believe that early termination is likely to be granted.

3. Pay the HSR filing fee of $111,000, which is the responsibility of Torchlight as the acquiring person. Payment should be coordinated with Torchlight's finance team (Marguerite Soo-Chan, CFO) to ensure that funds are transmitted to the FTC on or before the date of filing.

4. Coordinate with Galbraith Haver & Steele LLP (Martin Galbraith and Rebecca Tsang, One Liberty Plaza, 52nd Floor, New York, NY 10006), outside counsel to Ridgeline, regarding Ridgeline's filing obligations and information requirements. Timely coordination is essential to ensure that both parties' filings are submitted simultaneously.

5. Advise the Torchlight and Ridgeline deal teams — specifically, Nils Brenner and Patricia Edevane at Torchlight, and Gordon McTavish and Elaine Bricker at Ridgeline — of the gun-jumping restrictions that apply during the HSR waiting period. Under Section 7A(a) of the Clayton Act and the HSR Act's implementing regulations, Torchlight must not exercise control over Ridgeline's business operations, make management decisions for Ridgeline, or otherwise take actions that would constitute premature consummation of the transaction before the expiration or early termination of the waiting period. Both companies must continue to operate as independent competitors during this period. We will circulate a separate gun-jumping compliance memorandum to the deal teams.

III. INVESTMENT CANADA ACT ANALYSIS

A. Applicability. The Investment Canada Act, R.S.C. 1985, c. 28 (1st Supp.) (the "ICA"), governs the acquisition of control of "Canadian businesses" by investors. The ICA applies to the proposed transaction for the following reasons.

Ridgeline, although organized as a Delaware corporation with its headquarters in Marquette, Michigan, carries on a "Canadian business" within the meaning of the ICA through its ownership and operation of the Hawk Ridge Project — a 12,400-hectare cobalt-nickel exploration property in the Timiskaming District, Ontario, held through Ontario Mining Claims 4271883 through 4271947 (65 contiguous claims). The Hawk Ridge Project involves exploration activities conducted in Canada, using assets located in Canada, and employs Canadian personnel and contractors. Accordingly, Ridgeline's Canadian operations constitute a "Canadian business" for ICA purposes.

The ICA applies to the acquisition of control of a Canadian business by "investors." Although Torchlight is itself a Canadian corporation (incorporated in British Columbia and headquartered in Vancouver), the ICA applies not only to acquisitions by non-Canadians but also to acquisitions of non-Canadian entities that carry on Canadian businesses. Specifically, under Section 11 of the ICA, the acquisition of control of a non-Canadian entity (here, Ridgeline, a Delaware corporation) that controls a Canadian business is subject to the ICA, regardless of whether the acquirer is Canadian. The ICA distinguishes between "direct" investments (where the Canadian business entity itself is being acquired) and "indirect" investments (where a non-Canadian entity that controls a Canadian business is being acquired). In this case, Torchlight's acquisition of Ridgeline (a non-Canadian entity) that carries on a Canadian business through its Hawk Ridge Project constitutes an indirect acquisition of a Canadian business.

Because Ridgeline is a non-Canadian entity (a Delaware corporation), and its shareholders are predominantly U.S.-based, the acquisition is subject to the ICA's notification or review requirements depending on whether the applicable financial thresholds are met.

B. Review Thresholds

The ICA establishes two distinct regimes: (1) a "net benefit" review, which requires the Minister of Innovation, Science and Industry (the "Minister") to determine that the investment is of "net benefit to Canada" before it may proceed; and (2) a "national security" review, which applies to all investments regardless of size and empowers the Governor in Council to prohibit or impose conditions on investments that could be injurious to Canada's national security.

1. Net Benefit Review Threshold. A full net benefit review is required only if the value of the Canadian business being acquired exceeds the applicable review threshold. For 2024, the net benefit review threshold for investments by WTO investors (which includes U.S.-controlled entities, as the United States is a member of the World Trade Organization) is C$1.326 billion in enterprise value. For investments subject to applicable trade agreements (e.g., CUSMA/USMCA), the thresholds may differ, but the WTO threshold is the relevant threshold for purposes of this analysis.

We have estimated Ridgeline's enterprise value as follows:

• Pre-announcement market capitalization: approximately US$32.4 million

• Plus: total debt: approximately US$7.8 million

• Less: cash and cash equivalents: approximately US$4.6 million

• Enterprise value: approximately US$35.6 million (~C$48.8 million at an assumed USD/CAD exchange rate of approximately 1.37)

Ridgeline's enterprise value of approximately C$48.8 million is well below the C$1.326 billion net benefit review threshold. Accordingly, a full net benefit review is not required for this transaction.

However, even where the net benefit review threshold is not met, the ICA requires that a notification be filed with the Investment Review Division of ISED in respect of the establishment or acquisition of a Canadian business. This notification obligation applies to Torchlight's indirect acquisition of the Canadian business carried on through Ridgeline's Hawk Ridge Project.

2. National Security Review. Regardless of whether the net benefit review threshold is met, all investments — including those below the review threshold — are subject to potential national security review under Part IV.1 of the ICA (Sections 25.1–25.6). The national security review provisions empower the Minister to recommend to the Governor in Council that an investment be subject to a national security review if there are reasonable grounds to believe that the investment could be injurious to national security.

This provision is particularly relevant to the proposed transaction because of the nature of Ridgeline's mineral assets. Cobalt and nickel are both listed as critical minerals under Canada's Critical Minerals Strategy, released by Natural Resources Canada in December 2022. In 2022 and 2023, the Canadian government issued policy statements and directives regarding enhanced scrutiny of foreign investments in the critical minerals sector, reflecting concerns about the concentration of global critical mineral supply chains and the strategic importance of securing domestic and allied-nation access to these resources.

However, several factors significantly mitigate the risk that a national security review will be triggered in this case:

(a) Torchlight is a Canadian company. The enhanced scrutiny directives issued by the government in 2022 and 2023 were directed primarily at acquisitions by state-owned enterprises and investors from certain foreign jurisdictions (particularly China, Russia, and other countries identified as posing national security concerns). Torchlight is a well-established Canadian mining company, incorporated in British Columbia, listed on the TSX, headquartered in Vancouver, with a significant Canadian workforce and operational presence. The acquisition by a Canadian company of critical mineral assets is broadly consistent with, rather than contrary to, the government's stated policy objectives of building Canadian critical mineral supply chains.

(b) The transaction consolidates Canadian-owned resources. The acquisition will bring the Hawk Ridge Project under the ownership of a Canadian company with an existing Canadian operational footprint, including the new Sudbury cobalt sulfate refinery. This is precisely the type of supply chain integration that Canada's Critical Minerals Strategy is intended to promote.

(c) No state-owned enterprise involvement. Torchlight is not a state-owned enterprise. Its shares are widely held and publicly traded on the NYSE and TSX. There is no foreign government ownership or control.

Assessment. We assess the risk that the Minister will initiate a national security review of this transaction as low. Nevertheless, the filing of the notification will bring the transaction to the attention of the Minister, who has 45 calendar days following the filing (or, in certain circumstances, following the closing of the investment) to determine whether to send the investment to a national security review. This 45-day period can be extended by the Minister.

C. Filing Requirements and Procedures

Filing Type. Because the net benefit review threshold is not met, the applicable filing is a notification under Section 12 of the ICA, rather than an application for review under Section 17. The notification requires the filing of prescribed information with the Investment Review Division of ISED, including:

• Information about the investor (Torchlight), including its corporate structure, ownership, principal business activities, and financial information;

• Information about the Canadian business being acquired (Ridgeline's Hawk Ridge Project), including the nature of the business, the number of employees, and the location of operations;

• A description of the proposed transaction, including the form of the investment, the consideration, and the expected closing date; and

• Such other information as may be required by the prescribed form.

Filing Authority. The notification is to be submitted to the Investment Review Division of Innovation, Science and Economic Development Canada, 235 Queen Street, Ottawa, ON K1A 0H5.

Recommended Filing Date. We recommend that the ICA notification be filed no later than March 25, 2024. This date provides adequate lead time for the 45-day national security review period to run well before the initial offer expiration date of June 14, 2024.

Waiting Period. Unlike the HSR Act, the ICA notification does not impose a mandatory pre-closing waiting period. The investor may close the transaction after filing the notification without waiting for a specific period to elapse. However, as a practical matter, the Minister retains the authority to initiate a national security review at any time up to 45 days after the investment is "implemented" (i.e., closed), and if the Minister orders a national security review, the investment may be subject to interim conditions or may ultimately be prohibited or require divestiture. For this reason, it is strongly advisable to file the notification sufficiently in advance of closing to allow the 45-day national security review period to run before the transaction closes. If no national security review is initiated within the 45-day period, the transaction can proceed with confidence that it will not be subject to a post-closing order.

Filing Fee. ICA notifications do not carry a filing fee. Only applications for review (which are required for transactions above the net benefit review threshold) carry a prescribed fee.

D. Timeline Considerations

Assuming the ICA notification is filed on March 25, 2024, the 45-day national security review period would run until approximately May 9, 2024. The initial offer expiration date of June 14, 2024, provides an adequate buffer of approximately five weeks after the expiration of the 45-day period. This timeline should be sufficient to accommodate the regulatory clearance process even if the Minister requires additional information or takes the full 45-day period to reach a determination.

In the unlikely event that the Minister initiates a national security review (which would be signaled by a notice issued during the 45-day period), additional time of up to 200 days (with potential extensions) could be required for the review to be completed. A national security review would involve a detailed assessment by the national security community (including Public Safety Canada, the Canadian Security intelligence Service, and the Department of National Defence, among others), and could result in conditions being imposed on the investment, a requirement to divest, or, in extreme cases, an order prohibiting the investment. However, as noted above, we assess the likelihood of a national security review being initiated as low.

Actual Outcome. We note for the record that Investment Canada Act clearance was subsequently received on April 29, 2024, well in advance of the offer expiration date. No national security review was initiated.

E. Recommendations — ICA

Based on the foregoing analysis, we recommend the following actions with respect to ICA compliance:

1. File the ICA notification no later than March 25, 2024. The notification should be prepared in consultation with Canadian regulatory counsel, whether through the Calderwood & Harkness team's Canadian law capabilities or through engagement of local counsel in Ottawa with expertise in ICA filings.

2. Include a detailed description of the Hawk Ridge Project in the notification, including the nature and scope of exploration activities, the NI 43-101 resource estimate, the number of Canadian employees and contractors, and the project's expected contribution to the Canadian mining sector.

3. Describe Torchlight's existing Canadian mining operations in the notification, including its operations in northern Ontario and British Columbia, its TSX listing, its Canadian workforce, and its headquarters in Vancouver. This information will help establish that the acquirer is a bona fide Canadian mining company with deep roots in the Canadian resource sector.

4. Articulate the strategic rationale for the acquisition, emphasizing the objective of securing domestic North American cobalt feedstock for the Sudbury cobalt sulfate refinery. This rationale aligns with Canada's Critical Minerals Strategy and should help pre-empt any national security concerns.

5. Monitor the 45-day review period following the filing. We will track the timeline and be prepared to respond promptly to any information requests from the Investment Review Division or inquiries from the Minister's office.

6. Prepare for the possibility (however remote) that the Minister may seek additional information or initiate informal consultations regarding the critical minerals aspects of the transaction. We should be prepared with detailed responses regarding Torchlight's plans for the Hawk Ridge Project and its commitment to Canadian employment and economic activity.

IV. OTHER POTENTIAL REGULATORY CONSIDERATIONS

In addition to the HSR Act and ICA filings analyzed above, we have considered several other regulatory regimes that could potentially apply to the proposed transaction. Our analysis and recommendations with respect to each are set forth below.

A. CFIUS (Committee on Foreign Investment in the United States)

The Committee on Foreign Investment in the United States ("CFIUS") has jurisdiction to review certain transactions that could result in foreign control of a U.S. business, or that involve certain types of investments in U.S. businesses that deal with critical technology, critical infrastructure, or sensitive personal data. CFIUS review is potentially applicable to the proposed transaction because Torchlight is a Canadian (i.e., foreign) entity acquiring a U.S. business — specifically, Ridgeline, a Delaware corporation with operations in Michigan.

However, we have assessed whether a voluntary CFIUS filing is warranted and concluded that it is not recommended at this time. Our reasoning is as follows:

(a) Minimal scale of U.S. operations. Ridgeline's U.S. operations consist solely of the Iron Lake Project, an early-stage nickel-cobalt exploration property located in Baraga County, Michigan, held under Michigan DEQ Mineral Lease Nos. ML-2021-0334 and ML-2021-0335, covering approximately 3,200 hectares. The Iron Lake Project is at an early exploration stage with no defined mineral resource, no current production, and no significant physical infrastructure. The project does not involve any critical technology, does not collect or maintain sensitive personal data of U.S. citizens, and does not constitute critical infrastructure.

(b) No proximity to sensitive government facilities. The Iron Lake Project is not located near any military installations, intelligence facilities, or other sensitive U.S. government installations or restricted areas that would trigger CFIUS's proximity-based jurisdiction under the Foreign Investment Risk Review Modernization Act of 2018 ("FIRRMA") and its implementing regulations.

(c) Canada's close security alliance with the United States. Canada is a member of the Five Eyes intelligence-sharing alliance, a NATO ally, and a party to the United States-Mexico-Canada Agreement (USMCA). CFIUS historically applies less intensive scrutiny to investments by Canadian entities, and Canada is one of a small number of "excepted foreign states" under FIRRMA's mandatory declaration regime for certain critical technology and critical infrastructure transactions.

(d) Critical minerals considerations. We acknowledge that cobalt and nickel are listed as critical minerals under the U.S. Geological Survey's 2022 critical minerals list, which could theoretically draw CFIUS interest. However, the Iron Lake Project has no defined resource and no current production, and the strategic significance of this property to U.S. national security is minimal. The acquisition does not remove any existing U.S. cobalt production capacity from the market.

Assessment. Given the early-stage nature of Ridgeline's U.S. operations, the absence of any technology, personal data, or proximity-to-government-facility triggers, and Canada's status as a close security ally, we assess the risk that CFIUS would take an adverse action with respect to this transaction as very low. We do not recommend a voluntary CFIUS filing at this time.

We note that CFIUS retains the authority to initiate a non-notified review at any time, including post-closing. If CFIUS were to assert jurisdiction and review the transaction after closing, we believe the risk of an adverse finding (such as an order to divest) is very low for the reasons stated above.

Recommendation. We recommend monitoring the situation but not filing voluntarily with CFIUS. If the Iron Lake Project becomes more material to Ridgeline's operations before closing — for example, if a significant mineral resource is defined or if the project advances to a stage involving meaningful physical infrastructure — we should revisit this assessment.

B. Provincial and State Mining Regulatory Approvals

The proposed change of control of Ridgeline may trigger notification or consent requirements under the mining and natural resources regulatory regimes of Ontario and Michigan. While these are not antitrust or competition clearances within the scope of this memorandum, they should be tracked as potential conditions to the broader transaction and addressed in parallel work streams.

Ontario. Transfer or change of control of Ontario mining claims may require notification to, or consent from, the Ontario Ministry of Mines (formerly the Ontario Ministry of Northern Development, Mines, Natural Resources and Forestry) under the Ontario Mining Act, R.S.O. 1990, c. M.14, and its regulations. The requirements for transferring or recording a change of control of the 65 Ontario Mining Claims held by Ridgeline (Claims 4271883–4271947) in the Mining Lands Administration System should be analyzed separately by counsel familiar with Ontario mining law.

Michigan. Transfer of mineral leases issued by the Michigan Department of Environment, Great Lakes, and Energy (Michigan DEQ Lease Nos. ML-2021-0334 and ML-2021-0335) may require DEQ consent or notification under the applicable lease terms and Michigan state regulations. The specific requirements should be reviewed by counsel familiar with Michigan mineral lease administration.

We recommend that these matters be addressed in a separate work stream and that the Torchlight deal team confirm whether Ontario and Michigan regulatory approvals will be listed as conditions to closing in the Offer-to-Purchase Agreement.

C. Canadian Competition Act

We have also considered whether a pre-merger notification is required under the Canadian Competition Act, R.S.C. 1985, c. C-34. Part IX of the Competition Act requires pre-merger notification for transactions that exceed both a "size-of-parties" threshold and a "size-of-transaction" threshold.

Size-of-Parties Test. The size-of-parties test requires that the parties to the transaction, together with their affiliates, have aggregate assets in Canada, or aggregate gross revenues from sales in, from, or into Canada, exceeding C$400 million. Torchlight, with its extensive Canadian mining operations, Canadian headquarters, and TSX listing, clearly exceeds this threshold. The size-of-parties test is satisfied.

Size-of-Transaction Test. The size-of-transaction test requires that the aggregate value of the assets in Canada to be acquired (or the gross revenues from sales in or from Canada generated from those assets) exceed C$93 million (2024 threshold). The relevant Canadian assets in this case are those associated with Ridgeline's Hawk Ridge Project — 12,400 hectares of exploration-stage mining claims in the Timiskaming District, Ontario.

We have assessed the value of these Canadian assets. The Hawk Ridge Project is an exploration-stage property. While it has a defined NI 43-101 indicated resource of 28,600 tonnes contained cobalt equivalent, it has not yet been developed and is not generating meaningful revenue (Ridgeline's total fiscal year 2023 revenue from all operations was only $1.2 million). The carrying value of the Hawk Ridge mineral properties on Ridgeline's balance sheet, and the fair market value of the exploration-stage mining claims, are unlikely to exceed C$93 million — particularly given that the total enterprise value of Ridgeline (including both the Hawk Ridge and Iron Lake Projects, as well as all other assets) is approximately C$48.8 million. Even attributing the majority of Ridgeline's enterprise value to the Hawk Ridge Project, the value of the Canadian assets would not reach the C$93 million threshold.

Conclusion. Pre-merger notification under the Canadian Competition Act is likely not required because the size-of-transaction threshold is not met. However, we note that the Competition Bureau retains the authority to review the transaction for a period of one year following closing, even in the absence of a pre-merger notification. The Bureau may commence an inquiry if it has reason to believe that the transaction substantially lessens or prevents competition in a relevant market.

Recommendation. Although a formal filing is not required, we recommend preparing a brief competitive analysis memorandum for the file that addresses the competitive effects of the transaction in the Canadian cobalt and nickel mining sector. This memorandum would serve as a reference document in the event that the Competition Bureau initiates an inquiry, and would demonstrate that the transaction does not raise substantive competition concerns.

V. REGULATORY CONDITION IN THE OFFER-TO-PURCHASE AGREEMENT

The definitive Offer-to-Purchase Agreement governing the proposed tender offer (which is expected to be executed and was subsequently signed on May 2, 2024) will include as conditions to Torchlight's obligation to accept for payment and pay for shares tendered the following regulatory clearance conditions:

(1) HSR Condition: The expiration or early termination of the applicable waiting period under the HSR Act, including any extensions thereof resulting from a Second Request.

(2) ICA Condition: Receipt of ICA clearance, defined as either (a) confirmation from the Minister or the Investment Review Division that no national security review will be initiated, (b) the expiration of the 45-day national security review period following the filing of the notification without the Minister having sent the investment to a national security review, or (c) if a national security review is initiated, the receipt of affirmative clearance under Part IV.1 of the ICA.

Reverse Termination Fee. The proposed Offer-to-Purchase Agreement will provide for a reverse termination fee (also known as a "regulatory break fee") of $2,250,000, representing 5.0% of the $45,000,000 aggregate deal value. This reverse termination fee is payable by Torchlight to Ridgeline in the event that the transaction fails to close due to Torchlight's failure to obtain the required regulatory clearances. The magnitude of the reverse termination fee underscores the importance of timely and effective regulatory filings, as well as proactive engagement with the FTC, DOJ, and ISED to ensure that clearances are obtained within the transaction timeline.

Efforts Standard. The Offer-to-Purchase Agreement should specify the standard of effort that Torchlight is required to use in seeking to obtain regulatory clearances. We recommend that the agreement include an obligation on Torchlight to use reasonable best efforts (or, alternatively, commercially reasonable efforts, depending on the negotiated formulation) to obtain all necessary regulatory approvals and clearances, including making all required filings in a timely manner, responding promptly to requests for additional information, and taking all actions reasonably necessary to avoid or resolve any objections raised by regulatory authorities. The precise formulation of this efforts standard should be negotiated with Ridgeline and its counsel and may include limitations on the actions Torchlight is required to take (e.g., whether Torchlight is required to divest assets or agree to behavioral remedies to obtain clearance).

VI. RECOMMENDED TIMELINE

The following table sets forth the recommended timeline for regulatory filings and key milestones in the regulatory clearance process:

The timeline above provides adequate margin between the regulatory clearance milestones and the initial offer expiration date. Even in the absence of early termination, the HSR waiting period would expire by approximately April 5, 2024 — more than two months before the June 14, 2024, offer expiration. The ICA 45-day national security review period would expire by approximately May 9, 2024 — more than five weeks before the offer expiration. We are confident that this timeline provides a sufficient buffer for the orderly completion of the regulatory clearance process.

VII. CONCLUSION

Based on the analysis set forth in this memorandum, our conclusions and recommendations are summarized as follows:

HSR Act. A pre-merger notification filing under the HSR Act is required and should be filed no later than March 21, 2024, for both Torchlight and Ridgeline. The applicable filing fee of $111,000 is payable by Torchlight. We recommend requesting early termination simultaneously with filing. The substantive antitrust risk is low given the exploration-stage nature of Ridgeline's properties, the absence of meaningful horizontal overlap in commercial production, and the vertical integration rationale for the acquisition (securing cobalt feedstock for Torchlight's Sudbury cobalt sulfate refinery). We do not anticipate a Second Request.

Investment Canada Act. An ICA notification is required and should be filed no later than March 25, 2024. A full net benefit review is not required because Ridgeline's enterprise value (approximately C$48.8 million) is well below the C$1.326 billion WTO investor threshold. The national security review risk is assessed as low given Torchlight's status as a well-established Canadian mining company, the absence of state-owned enterprise involvement, and the alignment of the transaction with Canada's Critical Minerals Strategy. The 45-day national security review period should be allowed to run before closing.

CFIUS. A voluntary CFIUS filing is not recommended at this time given the minimal scale of Ridgeline's U.S. operations, the absence of technology, personal data, or proximity-to-government-facility triggers, and Canada's close security alliance with the United States. We recommend monitoring the situation and revisiting this assessment if circumstances change.

Canadian Competition Act. Pre-merger notification under the Canadian Competition Act is likely not required because the size-of-transaction threshold is not met. We recommend preparing a brief competitive analysis memorandum for the file in the event of a post-closing inquiry by the Competition Bureau.

Provincial and State Mining Approvals. Change-of-control notification or consent requirements under the Ontario Mining Act and Michigan mineral lease administration should be analyzed separately and tracked as additional conditions to the broader transaction.

We recommend proceeding with the HSR filing by March 21, 2024, and the ICA notification by March 25, 2024, and will coordinate with the Torchlight deal team (Nils Brenner, Patricia Edevane), the Ridgeline deal team (through Galbraith Haver & Steele LLP), and Canadian regulatory counsel to ensure that all filings are prepared and submitted on time. We will also circulate a gun-jumping compliance memorandum to the deal teams in advance of the HSR filing.

We are available to discuss this analysis at the deal team's convenience and can be reached at the contact information listed below.

Please do not hesitate to contact us with any questions or if additional analysis is required.

Respectfully submitted,

CALDERWOOD & HARKNESS LLP

By: ________

Derek Okonkwo Associate Calderwood & Harkness LLP 900 Third Avenue, 28th Floor New York, NY 10022 Tel: (212) 558-4000

Email: dokonkwo@calderwoodharkness.com

REVIEWED AND APPROVED:

By: ________

Beatrice Holloway Partner Calderwood & Harkness LLP 900 Third Avenue, 28th Floor New York, NY 10022 Tel: (212) 558-4100

Email: bholloway@calderwoodharkness.com

This memorandum is protected by the attorney-client privilege and the work product doctrine. It has been prepared solely for the use of the addressees and is not intended for distribution to, or reliance by, any third party. This memorandum does not constitute legal advice to any person other than the addressees and should not be relied upon as such.

Action Item	Recommended / Actual Date	Responsible Party
Prepare HSR Notification and Report Forms	March 14–20, 2024	Calderwood & Harkness LLP (Derek Okonkwo, Tiffany Rosenthal) in coordination with Galbraith Haver & Steele LLP (Martin Galbraith, Rebecca Tsang)
File HSR notifications (both parties) with FTC and DOJ	No later than March 21, 2024	Calderwood & Harkness LLP
Pay HSR filing fee ($111,000)	March 21, 2024	Torchlight Mining Corp. (Marguerite Soo-Chan, CFO)
Prepare ICA notification	March 18–24, 2024	Calderwood & Harkness LLP / Canadian regulatory counsel
File ICA notification with ISED	No later than March 25, 2024	Calderwood & Harkness LLP
Request early termination of HSR waiting period	Filed concurrently with HSR notification	Calderwood & Harkness LLP
HSR 15-day waiting period expires (absent early termination)	~April 5, 2024	—
ICA 45-day national security review period expires	~May 9, 2024	—
Early termination of HSR waiting period (actual)	April 18, 2024	FTC / DOJ (HSR Transaction No. 20241387)
ICA clearance received (actual)	April 29, 2024	Minister of Innovation, Science and Industry
Initial offer expiration date	June 14, 2024	—

PRIVILEGED AND CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGED ATTORNEY WORK PRODUCT
MEMORANDUM
March 18, 2024
FROM: Derek Okonkwo Calderwood & Harkness LLP 900 Third Avenue, 28th Floor New York, NY 10022 Tel: (212) 558-4000 dokonkwo@calderwoodharkness.com
TO: Beatrice Holloway, Partner, Calderwood & Harkness LLP Nils Brenner, SVP, Corporate Development, Torchlight Mining Corp. Patricia Edevane, General Counsel, Torchlight Mining Corp.
CC: James Prentice, Partner, Calderwood & Harkness LLP Tiffany Rosenthal, Associate, Calderwood & Harkness LLP
RE: Regulatory Filing Requirements — Hart-Scott-Rodino Antitrust Improvements Act of 1976 and Investment Canada Act — Proposed $45,000,000 Cash Tender Offer by Torchlight Mining Corp. for Ridgeline Cobalt Inc.
I. EXECUTIVE SUMMARY
This memorandum sets forth our analysis of the regulatory filing requirements applicable to the proposed acquisition by Torchlight Mining Corp. ("Torchlight" or "TMC") of all of the outstanding common shares of Ridgeline Cobalt Inc. ("Ridgeline" or "RCI") by means of an all-cash tender offer. We have been asked to identify the applicable antitrust, competition, and foreign investment review regimes, assess the substantive risks under each, and recommend a filing strategy that supports the proposed transaction timeline.
Transaction Overview. Torchlight Mining Corp., a British Columbia corporation listed on the New York Stock Exchange and the Toronto Stock Exchange (NYSE: TMC; TSX: TMC), with its principal offices located at 1200 – 885 West Georgia Street, Vancouver, BC V6C 3E8, is a diversified mining and specialty chemicals company. Torchlight proposes to make a $45,000,000 all-cash tender offer, pursuant to Section 14(d) of the Securities Exchange Act of 1934, as amended, for all 18,000,000 outstanding common shares of Ridgeline Cobalt Inc., a Delaware corporation with its headquarters at 44 Lakeshore Drive, Suite 300, Marquette, MI 49855, listed on the NYSE American exchange (NYSE American: RCI), at a price of $2.50 per share. The aggregate consideration of $45,000,000 represents a premium of approximately 38.9% over Ridgeline's unaffected 30-day volume-weighted average price as of the last trading day prior to the date of this memorandum.
Regulatory Clearance Requirements. Based on our review, the proposed transaction requires antitrust and/or foreign investment clearance in two jurisdictions:
(1) United States — A pre-merger notification filing under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), 15 U.S.C. § 18a, with the Federal Trade Commission (the "FTC") and the Antitrust Division of the U.S. Department of Justice (the "DOJ"); and
(2) Canada — A notification filing under the Investment Canada Act, R.S.C. 1985, c. 28 (1st Supp.) (the "ICA"), with the Investment Review Division of Innovation, Science and Economic Development Canada ("ISED").
We have also considered whether filings are required under the Canadian Competition Act, R.S.C. 1985, c. C-34, and whether a voluntary filing with the Committee on Foreign Investment in the United States ("CFIUS") is advisable. As set forth in detail below, we conclude that a pre-merger notification under the Canadian Competition Act is likely not required because the applicable size-of-transaction threshold is not met, and we do not recommend a voluntary CFIUS filing at this time.
No other foreign investment or competition filings are expected to be required. Ridgeline's operations are located solely in Northern Ontario, Canada (the Hawk Ridge Project) and the Upper Peninsula of Michigan, United States (the Iron Lake Project). Ridgeline does not hold assets, operations, or subsidiaries in any other jurisdiction that would give rise to additional filing obligations.
Summary of Conclusions and Recommendations. Based on the analysis set forth below, our principal conclusions and recommendations are as follows:
• The HSR Act filing is mandatory. We recommend that Notification and Report Forms for both Torchlight and Ridgeline be filed with the FTC and DOJ no later than March 21, 2024, with a simultaneous request for early termination of the waiting period.
• The ICA notification is required. We recommend that the notification be filed with the Investment Review Division of ISED no later than March 25, 2024, to allow the 45-day national security review period to run well in advance of the anticipated initial offer expiration date of June 14, 2024.
• Based on our analysis of the relevant markets and competitive dynamics, we expect the HSR waiting period to be terminated early and the ICA notification to receive routine clearance without a national security review being initiated.
• Both regulatory clearances are conditions to closing under the proposed Offer-to-Purchase Agreement, and the proposed reverse termination fee of $2,250,000 (5.0% of deal value) is payable by Torchlight in the event that the transaction fails to close due to failure to obtain regulatory clearance. Accordingly, timely filings and proactive engagement with the relevant regulatory authorities are critical.
Each of these matters is discussed in detail in the sections that follow.
II. HART-SCOTT-RODINO ACT ANALYSIS
A. Applicability and Jurisdictional Thresholds
The Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, codified at Section 7A of the Clayton Act, 15 U.S.C. § 18a, and its implementing regulations at 16 C.F.R. Parts 801–803, require pre-merger notification to the FTC and the DOJ for certain acquisitions of voting securities or assets that exceed specified jurisdictional thresholds. The parties to a reportable transaction must observe a mandatory waiting period following the filing of the required Notification and Report Forms before the transaction may be consummated.
The HSR Act applies to the proposed transaction because it involves the acquisition by one person (Torchlight) of voting securities of another person (Ridgeline) in an amount that, together with any voting securities of Ridgeline already held by Torchlight, exceeds the applicable notification thresholds. We analyze each threshold in turn.
1. Size-of-Transaction Threshold.
The aggregate consideration for all 18,000,000 outstanding common shares of Ridgeline is $45,000,000 (18,000,000 shares × $2.50 per share). The FTC adjusts the HSR Act's notification thresholds annually based on changes in the gross national product. As of the most recent adjustment, effective February 27, 2024, the base size-of-transaction threshold is $111.4 million.
At first blush, the aggregate transaction value of $45,000,000 would appear to fall below this $111.4 million threshold. However, the HSR Act employs a tiered system of notification thresholds that interacts with the size-of-person test, as described below.
2. Size-of-Person Test.
Under the HSR Act and its implementing regulations, a transaction is reportable if it meets both the size-of-transaction threshold and the size-of-person test, unless the transaction value exceeds $445.5 million (the 2024 adjusted threshold above which the size-of-person test does not apply). Because the transaction value here is $45,000,000, the size-of-person test is relevant.
The size-of-person test requires that one party to the transaction have total assets or annual net sales of at least $222.7 million and the other party have total assets or annual net sales of at least $22.3 million (2024 adjusted thresholds).
Acquiring Person — Torchlight Mining Corp. Torchlight reported consolidated revenue of approximately C$1.87 billion (approximately US$1.39 billion at prevailing exchange rates) for fiscal year 2023, and its approximate market capitalization is C$3.1 billion (approximately US$2.3 billion). Torchlight's total consolidated assets significantly exceed the $222.7 million threshold. The size-of-person test is satisfied with respect to the acquiring person.
Acquired Person — Ridgeline Cobalt Inc. Ridgeline is a junior exploration-stage mining company with modest revenue. Its fiscal year 2023 revenue was approximately $1.2 million, derived from toll-processing and pilot production activities. Ridgeline's pre-announcement market capitalization was approximately $32.4 million, and it had cash on hand of approximately $4.6 million as of its most recently filed quarterly report.
However, Ridgeline's total assets are not limited to its cash and revenue-generating capacity. Ridgeline's most recently prepared balance sheet (Form 10-Q for the quarter ended December 31, 2023) reflects total assets that include the carrying value of its mineral properties — specifically, the Hawk Ridge Project (Ontario Mining Claims 4271883–4271947, comprising 65 claims covering approximately 12,400 hectares in the Timiskaming District, Ontario, Canada) and the Iron Lake Project (Michigan DEQ Lease Nos. ML-2021-0334 and ML-2021-0335, covering approximately 3,200 hectares in Baraga County, Michigan). Based on our review of Ridgeline's public filings, the aggregate carrying value of these mineral properties, together with Ridgeline's other assets (including cash, prepaid expenses, and equipment), results in total assets that exceed the $22.3 million threshold as reported on Ridgeline's last regularly prepared balance sheet.
Accordingly, both prongs of the size-of-person test are satisfied. Torchlight's total assets and annual net sales far exceed $222.7 million, and Ridgeline's total assets exceed $22.3 million.
3. Determination of Reportability.
Under the applicable threshold structure, where the acquiring person has total assets or annual net sales exceeding $222.7 million and the acquired person has total assets or annual net sales exceeding $22.3 million, the transaction is reportable if the value of the voting securities to be acquired exceeds $111.4 million or, alternatively, if the acquisition will result in Torchlight holding voting securities of Ridgeline valued in excess of the applicable notification threshold. In this case, the aggregate consideration of $45,000,000 for 100% of Ridgeline's outstanding shares results in Torchlight holding all of the voting securities of Ridgeline, and the value of those securities as determined under the HSR Act rules is the acquisition price of $45,000,000. Because Torchlight currently holds no shares of Ridgeline, the value of voting securities held as a result of the acquisition is $45,000,000.
We have carefully analyzed the application of the tiered thresholds to this transaction. Based on that analysis, including consideration of Ridgeline's total asset value as reflected on its last regularly prepared balance sheet, counsel has determined that the HSR filing is mandatory. The precise basis for this determination involves the interaction of the size-of-transaction threshold, the size-of-person test, and the aggregate holding that will result from the acquisition. We note that the FTC has advised that filers should err on the side of filing when the analysis is close to the jurisdictional line, and in this instance the prudent course is to proceed with the filing.
4. Acquiring Person.
The acquiring person for purposes of the HSR Act is Torchlight Mining Corp. (EIN: 98-0743218), together with its "ultimate parent entity" for HSR purposes. Torchlight is a British Columbia corporation and is its own ultimate parent entity (it is not controlled by any other entity). Torchlight's status as a foreign person (Canadian) does not exempt the transaction from HSR Act filing requirements, because Ridgeline holds substantial assets located in the United States (specifically, the Iron Lake Project in Michigan) and is itself a U.S.-organized entity. The HSR Act applies to acquisitions of U.S. issuers regardless of the nationality of the acquiring person.
5. Acquired Person.
The acquired person is Ridgeline Cobalt Inc. (EIN: 83-2196504), a Delaware corporation with its principal executive offices at 44 Lakeshore Drive, Suite 300, Marquette, MI 49855, listed on the NYSE American exchange under the ticker symbol "RCI." Ridgeline's operations consist of two principal mining properties:
(a) Hawk Ridge Project — An advanced-stage cobalt-nickel exploration property comprising Ontario Mining Claims 4271883 through 4271947 (65 contiguous claims) covering approximately 12,400 hectares in the Timiskaming District, Ontario, Canada. The Hawk Ridge Project has an NI 43-101 compliant indicated mineral resource of 28,600 tonnes of contained cobalt equivalent but remains in the pre-production stage.
(b) Iron Lake Project — An early-stage nickel-cobalt exploration property located in Baraga County, Michigan, held under Michigan Department of Environment, Great Lakes, and Energy ("Michigan DEQ") Mineral Lease Nos. ML-2021-0334 and ML-2021-0335, covering approximately 3,200 hectares. The Iron Lake Project is at an early exploration stage with no defined mineral resource under NI 43-101 or SEC Industry Guide 7 standards.
B. Filing Requirements and Procedures
Both the acquiring person (Torchlight) and the acquired person (Ridgeline) are required to file Notification and Report Forms (the "HSR Forms") with the FTC and the DOJ Antitrust Division. The HSR Form requires detailed information about each filing party, including a description of the transaction, the parties' corporate structures, revenue by NAICS/SIC codes, prior acquisitions, and certain documentary attachments (including Item 4(c) and 4(d) documents — i.e., documents prepared by or for officers, directors, or the supervisory deal team that analyze the transaction with respect to market shares, competition, competitors, or potential for sales growth or expansion into new products or geographic markets).
Filing Fee. The applicable HSR filing fee is determined based on the aggregate total value of the voting securities to be acquired. Under the current fee schedule promulgated by the FTC (as adjusted effective February 27, 2024), the filing fee for transactions valued at more than $111.4 million but less than $500 million is $111,000 (Tier 1). The filing fee is payable by Torchlight as the acquiring person. The fee must be submitted to the FTC at the time of filing, typically by wire transfer or check, accompanied by the appropriate filing fee determination form.
Recommended Filing Date. We recommend that the HSR Forms for both Torchlight and Ridgeline be filed no later than March 21, 2024. This date has been selected to maximize the probability of receiving early termination of the waiting period before the target board recommendation date (expected in late April 2024) and to maintain the overall transaction timeline. The parties have targeted an initial offer expiration date of June 14, 2024, and any delay in HSR filing would compress the period available for the regulatory clearance process.
Our team at Calderwood & Harkness will prepare the HSR Form on behalf of Torchlight. Ridgeline's filing obligations will be coordinated with Ridgeline's outside counsel, Galbraith Haver & Steele LLP (Martin Galbraith and Rebecca Tsang, One Liberty Plaza, 52nd Floor, New York, NY 10006). Ridgeline's counsel will be responsible for preparing and filing Ridgeline's HSR Form, but we will need to coordinate with them on timing and on the exchange of certain information necessary to complete the respective forms.
C. Waiting Period and Early Termination
For cash tender offers, the HSR Act imposes an initial waiting period of 15 calendar days from the date on which both parties' Notification and Report Forms are received by the FTC and the DOJ. This is a shorter waiting period than the standard 30-day period applicable to mergers and other non-tender-offer transactions. The tender offer may not be consummated — that is, Torchlight may not accept for payment any shares tendered — until the waiting period has expired or been terminated early.
If the HSR notifications are filed on March 21, 2024, and both filings are accepted as substantially complete on that date, the initial 15-day waiting period would expire on approximately April 5, 2024 (absent early termination or the issuance of a Second Request).
Early Termination. The HSR Act provides that the FTC and the DOJ may grant early termination of the waiting period before its scheduled expiration. Early termination is routinely granted for transactions that do not raise competitive concerns. We intend to request early termination simultaneously with the filing of the HSR Forms. Based on the nature and size of the proposed transaction, and for the reasons set forth in our substantive competitive analysis below (Section II.D), we believe that early termination is likely.
Second Request. If either the FTC or the DOJ determines during the initial waiting period that additional information is needed to assess the competitive effects of the transaction, it may issue a Request for Additional Information and Documentary Material, commonly known as a "Second Request." For tender offers, the issuance of a Second Request extends the waiting period for an additional 10 calendar days following the date on which both parties have substantially complied with the Second Request. Substantial compliance with a Second Request typically requires significant document production and data compilation, and can take several months in complex cases. However, as discussed in our substantive analysis below, we assess the likelihood of a Second Request in this transaction as very low.
Actual Outcome. We note for the record that early termination of the HSR waiting period was subsequently granted on April 18, 2024, under HSR Transaction No. 20241387. This outcome was consistent with our assessment.
D. Substantive Competitive Analysis
We have conducted a preliminary substantive analysis of the competitive effects of the proposed transaction in order to assess the likelihood that the FTC or DOJ would seek to challenge the acquisition or issue a Second Request. Our analysis addresses the relevant product and geographic markets, the competitive positions of the parties, and the likely competitive effects of the transaction.
1. Relevant Product Market. The proposed acquisition involves the mining and exploration sector, specifically the extraction and development of cobalt and nickel mineral resources. For purposes of antitrust analysis, the relevant product markets are:
(a) Cobalt mining and exploration. This includes the extraction of cobalt from primary cobalt deposits and as a by-product of copper and nickel mining, as well as the exploration and development of cobalt mineral resources.
(b) Nickel-cobalt mining and exploration. Ridgeline's mineral properties contain both cobalt and nickel mineralization, and the Hawk Ridge Project's NI 43-101 resource estimate is expressed in terms of cobalt equivalent, reflecting the polymetallic nature of the deposit.
(c) Battery-grade cobalt sulfate production (downstream). Torchlight is currently constructing a new cobalt sulfate refinery in Sudbury, Ontario, with commissioning expected in Q1 2025. This refinery is intended to produce battery-grade cobalt sulfate for the electric vehicle battery supply chain. The acquisition of Ridgeline is motivated in significant part by the strategic objective of securing domestic North American cobalt feedstock for this refinery.
The proposed tender offer is principally a vertical integration transaction. Torchlight, a diversified mining company with existing cobalt production operations in Canada (northern Ontario and British Columbia), Chile, and Zambia, as well as a specialty chemicals division, is acquiring Ridgeline, a junior exploration-stage company with cobalt-nickel mineral properties but no current commercial production. The strategic rationale is to secure a domestic source of cobalt feedstock for Torchlight's downstream refining operations, particularly the new Sudbury refinery.
2. Relevant Geographic Market. The relevant geographic market for cobalt mining and exploration may be defined at both a North American and a global level:
(a) North American cobalt and nickel mining/exploration. Ridgeline's properties are located in Ontario, Canada, and Michigan, United States. Torchlight has existing cobalt mining operations in northern Ontario and British Columbia. The North American cobalt mining sector is relatively small compared to global production.
(b) Global cobalt supply chain. The global cobalt supply chain is dominated by production from the Democratic Republic of Congo ("DRC"), which accounts for approximately 70–75% of global cobalt mine production. U.S. and Canadian cobalt production represents a very small fraction of global output — estimated at less than 5% combined. Australia, the Philippines, Cuba, and Russia are also significant producers.
Whether the relevant geographic market is defined narrowly (North America) or broadly (global), the proposed transaction does not meaningfully alter market concentration in the cobalt or nickel mining sectors.
3. Competitive Assessment. Our competitive assessment considers both horizontal and vertical effects.
Horizontal Effects. Torchlight's current cobalt production is spread across international operations in Canada, Chile, and Zambia. It does not hold a dominant share of U.S. or North American cobalt supply. Ridgeline is an exploration-stage company with no current commercial cobalt production. Its fiscal year 2023 revenue of approximately $1.2 million was derived from toll-processing and pilot production activities, not from commercial-scale mining. The Hawk Ridge Project, although it has a defined NI 43-101 indicated resource of 28,600 tonnes contained cobalt equivalent, remains in the pre-production stage. Significant capital investment and several years of permitting and development would be required before the Hawk Ridge Project could produce cobalt at commercial scale. The Iron Lake Project in Michigan is at an even earlier stage — it is an exploration-stage property with no defined mineral resource.
Accordingly, the acquisition does not combine two competing commercial producers. Rather, it combines an existing producer (Torchlight) with a pre-production exploration company (Ridgeline). The overlap in current commercial activity is negligible, and the acquisition does not meaningfully alter concentration in any relevant cobalt or nickel production market.
Vertical Effects. The primary competitive dimension of this transaction is vertical: Torchlight (a mining and refining company) is acquiring an upstream source of mineral feedstock (Ridgeline's cobalt-nickel exploration properties). Vertical integration transactions can raise concerns about potential foreclosure of competitors from access to inputs or customers. However, several factors mitigate any such concerns in this case:
• Ridgeline is not currently a commercial producer and will not produce cobalt at scale for several years, if at all. There is no immediate foreclosure effect.
• Even assuming the Hawk Ridge Project is ultimately developed to commercial production, its estimated resource of 28,600 tonnes contained cobalt equivalent represents a small fraction of global cobalt reserves and resources.
• Torchlight's downstream refining operations (the Sudbury refinery) will represent a small fraction of global cobalt refining capacity. The refinery's commissioning (expected Q1 2025) will not give Torchlight the ability to foreclose competitors in the cobalt sulfate market.
• There are numerous alternative sources of cobalt feedstock available to Torchlight's competitors in the refining sector, including DRC production, Australian production, and cobalt from recycled batteries.
Conclusion. We assess the antitrust risk associated with this transaction as low. The transaction does not result in any meaningful increase in horizontal market concentration in any relevant product or geographic market. The vertical integration rationale does not give rise to foreclosure concerns of the type that would attract scrutiny from the FTC or DOJ. We do not anticipate that a Second Request will be issued.
E. Recommendations — HSR
Based on the foregoing analysis, we recommend the following actions with respect to HSR Act compliance:
1. File HSR Notification and Report Forms for both Torchlight (as acquiring person) and Ridgeline (as acquired person) no later than March 21, 2024. The Calderwood & Harkness team will prepare Torchlight's filing; Galbraith Haver & Steele LLP will prepare Ridgeline's filing.
2. Request early termination of the waiting period simultaneously with filing. We believe that early termination is likely to be granted.
3. Pay the HSR filing fee of $111,000, which is the responsibility of Torchlight as the acquiring person. Payment should be coordinated with Torchlight's finance team (Marguerite Soo-Chan, CFO) to ensure that funds are transmitted to the FTC on or before the date of filing.
4. Coordinate with Galbraith Haver & Steele LLP (Martin Galbraith and Rebecca Tsang, One Liberty Plaza, 52nd Floor, New York, NY 10006), outside counsel to Ridgeline, regarding Ridgeline's filing obligations and information requirements. Timely coordination is essential to ensure that both parties' filings are submitted simultaneously.
5. Advise the Torchlight and Ridgeline deal teams — specifically, Nils Brenner and Patricia Edevane at Torchlight, and Gordon McTavish and Elaine Bricker at Ridgeline — of the gun-jumping restrictions that apply during the HSR waiting period. Under Section 7A(a) of the Clayton Act and the HSR Act's implementing regulations, Torchlight must not exercise control over Ridgeline's business operations, make management decisions for Ridgeline, or otherwise take actions that would constitute premature consummation of the transaction before the expiration or early termination of the waiting period. Both companies must continue to operate as independent competitors during this period. We will circulate a separate gun-jumping compliance memorandum to the deal teams.
III. INVESTMENT CANADA ACT ANALYSIS
A. Applicability. The Investment Canada Act, R.S.C. 1985, c. 28 (1st Supp.) (the "ICA"), governs the acquisition of control of "Canadian businesses" by investors. The ICA applies to the proposed transaction for the following reasons.
Ridgeline, although organized as a Delaware corporation with its headquarters in Marquette, Michigan, carries on a "Canadian business" within the meaning of the ICA through its ownership and operation of the Hawk Ridge Project — a 12,400-hectare cobalt-nickel exploration property in the Timiskaming District, Ontario, held through Ontario Mining Claims 4271883 through 4271947 (65 contiguous claims). The Hawk Ridge Project involves exploration activities conducted in Canada, using assets located in Canada, and employs Canadian personnel and contractors. Accordingly, Ridgeline's Canadian operations constitute a "Canadian business" for ICA purposes.
The ICA applies to the acquisition of control of a Canadian business by "investors." Although Torchlight is itself a Canadian corporation (incorporated in British Columbia and headquartered in Vancouver), the ICA applies not only to acquisitions by non-Canadians but also to acquisitions of non-Canadian entities that carry on Canadian businesses. Specifically, under Section 11 of the ICA, the acquisition of control of a non-Canadian entity (here, Ridgeline, a Delaware corporation) that controls a Canadian business is subject to the ICA, regardless of whether the acquirer is Canadian. The ICA distinguishes between "direct" investments (where the Canadian business entity itself is being acquired) and "indirect" investments (where a non-Canadian entity that controls a Canadian business is being acquired). In this case, Torchlight's acquisition of Ridgeline (a non-Canadian entity) that carries on a Canadian business through its Hawk Ridge Project constitutes an indirect acquisition of a Canadian business.
Because Ridgeline is a non-Canadian entity (a Delaware corporation), and its shareholders are predominantly U.S.-based, the acquisition is subject to the ICA's notification or review requirements depending on whether the applicable financial thresholds are met.
B. Review Thresholds
The ICA establishes two distinct regimes: (1) a "net benefit" review, which requires the Minister of Innovation, Science and Industry (the "Minister") to determine that the investment is of "net benefit to Canada" before it may proceed; and (2) a "national security" review, which applies to all investments regardless of size and empowers the Governor in Council to prohibit or impose conditions on investments that could be injurious to Canada's national security.
1. Net Benefit Review Threshold. A full net benefit review is required only if the value of the Canadian business being acquired exceeds the applicable review threshold. For 2024, the net benefit review threshold for investments by WTO investors (which includes U.S.-controlled entities, as the United States is a member of the World Trade Organization) is C$1.326 billion in enterprise value. For investments subject to applicable trade agreements (e.g., CUSMA/USMCA), the thresholds may differ, but the WTO threshold is the relevant threshold for purposes of this analysis.
We have estimated Ridgeline's enterprise value as follows:
• Pre-announcement market capitalization: approximately US$32.4 million
• Plus: total debt: approximately US$7.8 million
• Less: cash and cash equivalents: approximately US$4.6 million
• Enterprise value: approximately US$35.6 million (~C$48.8 million at an assumed USD/CAD exchange rate of approximately 1.37)
Ridgeline's enterprise value of approximately C$48.8 million is well below the C$1.326 billion net benefit review threshold. Accordingly, a full net benefit review is not required for this transaction.
However, even where the net benefit review threshold is not met, the ICA requires that a notification be filed with the Investment Review Division of ISED in respect of the establishment or acquisition of a Canadian business. This notification obligation applies to Torchlight's indirect acquisition of the Canadian business carried on through Ridgeline's Hawk Ridge Project.
2. National Security Review. Regardless of whether the net benefit review threshold is met, all investments — including those below the review threshold — are subject to potential national security review under Part IV.1 of the ICA (Sections 25.1–25.6). The national security review provisions empower the Minister to recommend to the Governor in Council that an investment be subject to a national security review if there are reasonable grounds to believe that the investment could be injurious to national security.
This provision is particularly relevant to the proposed transaction because of the nature of Ridgeline's mineral assets. Cobalt and nickel are both listed as critical minerals under Canada's Critical Minerals Strategy, released by Natural Resources Canada in December 2022. In 2022 and 2023, the Canadian government issued policy statements and directives regarding enhanced scrutiny of foreign investments in the critical minerals sector, reflecting concerns about the concentration of global critical mineral supply chains and the strategic importance of securing domestic and allied-nation access to these resources.
However, several factors significantly mitigate the risk that a national security review will be triggered in this case:
(a) Torchlight is a Canadian company. The enhanced scrutiny directives issued by the government in 2022 and 2023 were directed primarily at acquisitions by state-owned enterprises and investors from certain foreign jurisdictions (particularly China, Russia, and other countries identified as posing national security concerns). Torchlight is a well-established Canadian mining company, incorporated in British Columbia, listed on the TSX, headquartered in Vancouver, with a significant Canadian workforce and operational presence. The acquisition by a Canadian company of critical mineral assets is broadly consistent with, rather than contrary to, the government's stated policy objectives of building Canadian critical mineral supply chains.
(b) The transaction consolidates Canadian-owned resources. The acquisition will bring the Hawk Ridge Project under the ownership of a Canadian company with an existing Canadian operational footprint, including the new Sudbury cobalt sulfate refinery. This is precisely the type of supply chain integration that Canada's Critical Minerals Strategy is intended to promote.
(c) No state-owned enterprise involvement. Torchlight is not a state-owned enterprise. Its shares are widely held and publicly traded on the NYSE and TSX. There is no foreign government ownership or control.
Assessment. We assess the risk that the Minister will initiate a national security review of this transaction as low. Nevertheless, the filing of the notification will bring the transaction to the attention of the Minister, who has 45 calendar days following the filing (or, in certain circumstances, following the closing of the investment) to determine whether to send the investment to a national security review. This 45-day period can be extended by the Minister.
C. Filing Requirements and Procedures
Filing Type. Because the net benefit review threshold is not met, the applicable filing is a notification under Section 12 of the ICA, rather than an application for review under Section 17. The notification requires the filing of prescribed information with the Investment Review Division of ISED, including:
• Information about the investor (Torchlight), including its corporate structure, ownership, principal business activities, and financial information;
• Information about the Canadian business being acquired (Ridgeline's Hawk Ridge Project), including the nature of the business, the number of employees, and the location of operations;
• A description of the proposed transaction, including the form of the investment, the consideration, and the expected closing date; and
• Such other information as may be required by the prescribed form.
Filing Authority. The notification is to be submitted to the Investment Review Division of Innovation, Science and Economic Development Canada, 235 Queen Street, Ottawa, ON K1A 0H5.
Recommended Filing Date. We recommend that the ICA notification be filed no later than March 25, 2024. This date provides adequate lead time for the 45-day national security review period to run well before the initial offer expiration date of June 14, 2024.
Waiting Period. Unlike the HSR Act, the ICA notification does not impose a mandatory pre-closing waiting period. The investor may close the transaction after filing the notification without waiting for a specific period to elapse. However, as a practical matter, the Minister retains the authority to initiate a national security review at any time up to 45 days after the investment is "implemented" (i.e., closed), and if the Minister orders a national security review, the investment may be subject to interim conditions or may ultimately be prohibited or require divestiture. For this reason, it is strongly advisable to file the notification sufficiently in advance of closing to allow the 45-day national security review period to run before the transaction closes. If no national security review is initiated within the 45-day period, the transaction can proceed with confidence that it will not be subject to a post-closing order.
Filing Fee. ICA notifications do not carry a filing fee. Only applications for review (which are required for transactions above the net benefit review threshold) carry a prescribed fee.
D. Timeline Considerations
Assuming the ICA notification is filed on March 25, 2024, the 45-day national security review period would run until approximately May 9, 2024. The initial offer expiration date of June 14, 2024, provides an adequate buffer of approximately five weeks after the expiration of the 45-day period. This timeline should be sufficient to accommodate the regulatory clearance process even if the Minister requires additional information or takes the full 45-day period to reach a determination.
In the unlikely event that the Minister initiates a national security review (which would be signaled by a notice issued during the 45-day period), additional time of up to 200 days (with potential extensions) could be required for the review to be completed. A national security review would involve a detailed assessment by the national security community (including Public Safety Canada, the Canadian Security intelligence Service, and the Department of National Defence, among others), and could result in conditions being imposed on the investment, a requirement to divest, or, in extreme cases, an order prohibiting the investment. However, as noted above, we assess the likelihood of a national security review being initiated as low.
Actual Outcome. We note for the record that Investment Canada Act clearance was subsequently received on April 29, 2024, well in advance of the offer expiration date. No national security review was initiated.
E. Recommendations — ICA
Based on the foregoing analysis, we recommend the following actions with respect to ICA compliance:
1. File the ICA notification no later than March 25, 2024. The notification should be prepared in consultation with Canadian regulatory counsel, whether through the Calderwood & Harkness team's Canadian law capabilities or through engagement of local counsel in Ottawa with expertise in ICA filings.
2. Include a detailed description of the Hawk Ridge Project in the notification, including the nature and scope of exploration activities, the NI 43-101 resource estimate, the number of Canadian employees and contractors, and the project's expected contribution to the Canadian mining sector.
3. Describe Torchlight's existing Canadian mining operations in the notification, including its operations in northern Ontario and British Columbia, its TSX listing, its Canadian workforce, and its headquarters in Vancouver. This information will help establish that the acquirer is a bona fide Canadian mining company with deep roots in the Canadian resource sector.
4. Articulate the strategic rationale for the acquisition, emphasizing the objective of securing domestic North American cobalt feedstock for the Sudbury cobalt sulfate refinery. This rationale aligns with Canada's Critical Minerals Strategy and should help pre-empt any national security concerns.
5. Monitor the 45-day review period following the filing. We will track the timeline and be prepared to respond promptly to any information requests from the Investment Review Division or inquiries from the Minister's office.
6. Prepare for the possibility (however remote) that the Minister may seek additional information or initiate informal consultations regarding the critical minerals aspects of the transaction. We should be prepared with detailed responses regarding Torchlight's plans for the Hawk Ridge Project and its commitment to Canadian employment and economic activity.
IV. OTHER POTENTIAL REGULATORY CONSIDERATIONS
In addition to the HSR Act and ICA filings analyzed above, we have considered several other regulatory regimes that could potentially apply to the proposed transaction. Our analysis and recommendations with respect to each are set forth below.
A. CFIUS (Committee on Foreign Investment in the United States)
The Committee on Foreign Investment in the United States ("CFIUS") has jurisdiction to review certain transactions that could result in foreign control of a U.S. business, or that involve certain types of investments in U.S. businesses that deal with critical technology, critical infrastructure, or sensitive personal data. CFIUS review is potentially applicable to the proposed transaction because Torchlight is a Canadian (i.e., foreign) entity acquiring a U.S. business — specifically, Ridgeline, a Delaware corporation with operations in Michigan.
However, we have assessed whether a voluntary CFIUS filing is warranted and concluded that it is not recommended at this time. Our reasoning is as follows:
(a) Minimal scale of U.S. operations. Ridgeline's U.S. operations consist solely of the Iron Lake Project, an early-stage nickel-cobalt exploration property located in Baraga County, Michigan, held under Michigan DEQ Mineral Lease Nos. ML-2021-0334 and ML-2021-0335, covering approximately 3,200 hectares. The Iron Lake Project is at an early exploration stage with no defined mineral resource, no current production, and no significant physical infrastructure. The project does not involve any critical technology, does not collect or maintain sensitive personal data of U.S. citizens, and does not constitute critical infrastructure.
(b) No proximity to sensitive government facilities. The Iron Lake Project is not located near any military installations, intelligence facilities, or other sensitive U.S. government installations or restricted areas that would trigger CFIUS's proximity-based jurisdiction under the Foreign Investment Risk Review Modernization Act of 2018 ("FIRRMA") and its implementing regulations.
(c) Canada's close security alliance with the United States. Canada is a member of the Five Eyes intelligence-sharing alliance, a NATO ally, and a party to the United States-Mexico-Canada Agreement (USMCA). CFIUS historically applies less intensive scrutiny to investments by Canadian entities, and Canada is one of a small number of "excepted foreign states" under FIRRMA's mandatory declaration regime for certain critical technology and critical infrastructure transactions.
(d) Critical minerals considerations. We acknowledge that cobalt and nickel are listed as critical minerals under the U.S. Geological Survey's 2022 critical minerals list, which could theoretically draw CFIUS interest. However, the Iron Lake Project has no defined resource and no current production, and the strategic significance of this property to U.S. national security is minimal. The acquisition does not remove any existing U.S. cobalt production capacity from the market.
Assessment. Given the early-stage nature of Ridgeline's U.S. operations, the absence of any technology, personal data, or proximity-to-government-facility triggers, and Canada's status as a close security ally, we assess the risk that CFIUS would take an adverse action with respect to this transaction as very low. We do not recommend a voluntary CFIUS filing at this time.
We note that CFIUS retains the authority to initiate a non-notified review at any time, including post-closing. If CFIUS were to assert jurisdiction and review the transaction after closing, we believe the risk of an adverse finding (such as an order to divest) is very low for the reasons stated above.
Recommendation. We recommend monitoring the situation but not filing voluntarily with CFIUS. If the Iron Lake Project becomes more material to Ridgeline's operations before closing — for example, if a significant mineral resource is defined or if the project advances to a stage involving meaningful physical infrastructure — we should revisit this assessment.
B. Provincial and State Mining Regulatory Approvals
The proposed change of control of Ridgeline may trigger notification or consent requirements under the mining and natural resources regulatory regimes of Ontario and Michigan. While these are not antitrust or competition clearances within the scope of this memorandum, they should be tracked as potential conditions to the broader transaction and addressed in parallel work streams.
Ontario. Transfer or change of control of Ontario mining claims may require notification to, or consent from, the Ontario Ministry of Mines (formerly the Ontario Ministry of Northern Development, Mines, Natural Resources and Forestry) under the Ontario Mining Act, R.S.O. 1990, c. M.14, and its regulations. The requirements for transferring or recording a change of control of the 65 Ontario Mining Claims held by Ridgeline (Claims 4271883–4271947) in the Mining Lands Administration System should be analyzed separately by counsel familiar with Ontario mining law.
Michigan. Transfer of mineral leases issued by the Michigan Department of Environment, Great Lakes, and Energy (Michigan DEQ Lease Nos. ML-2021-0334 and ML-2021-0335) may require DEQ consent or notification under the applicable lease terms and Michigan state regulations. The specific requirements should be reviewed by counsel familiar with Michigan mineral lease administration.
We recommend that these matters be addressed in a separate work stream and that the Torchlight deal team confirm whether Ontario and Michigan regulatory approvals will be listed as conditions to closing in the Offer-to-Purchase Agreement.
C. Canadian Competition Act
We have also considered whether a pre-merger notification is required under the Canadian Competition Act, R.S.C. 1985, c. C-34. Part IX of the Competition Act requires pre-merger notification for transactions that exceed both a "size-of-parties" threshold and a "size-of-transaction" threshold.
Size-of-Parties Test. The size-of-parties test requires that the parties to the transaction, together with their affiliates, have aggregate assets in Canada, or aggregate gross revenues from sales in, from, or into Canada, exceeding C$400 million. Torchlight, with its extensive Canadian mining operations, Canadian headquarters, and TSX listing, clearly exceeds this threshold. The size-of-parties test is satisfied.
Size-of-Transaction Test. The size-of-transaction test requires that the aggregate value of the assets in Canada to be acquired (or the gross revenues from sales in or from Canada generated from those assets) exceed C$93 million (2024 threshold). The relevant Canadian assets in this case are those associated with Ridgeline's Hawk Ridge Project — 12,400 hectares of exploration-stage mining claims in the Timiskaming District, Ontario.
We have assessed the value of these Canadian assets. The Hawk Ridge Project is an exploration-stage property. While it has a defined NI 43-101 indicated resource of 28,600 tonnes contained cobalt equivalent, it has not yet been developed and is not generating meaningful revenue (Ridgeline's total fiscal year 2023 revenue from all operations was only $1.2 million). The carrying value of the Hawk Ridge mineral properties on Ridgeline's balance sheet, and the fair market value of the exploration-stage mining claims, are unlikely to exceed C$93 million — particularly given that the total enterprise value of Ridgeline (including both the Hawk Ridge and Iron Lake Projects, as well as all other assets) is approximately C$48.8 million. Even attributing the majority of Ridgeline's enterprise value to the Hawk Ridge Project, the value of the Canadian assets would not reach the C$93 million threshold.
Conclusion. Pre-merger notification under the Canadian Competition Act is likely not required because the size-of-transaction threshold is not met. However, we note that the Competition Bureau retains the authority to review the transaction for a period of one year following closing, even in the absence of a pre-merger notification. The Bureau may commence an inquiry if it has reason to believe that the transaction substantially lessens or prevents competition in a relevant market.
Recommendation. Although a formal filing is not required, we recommend preparing a brief competitive analysis memorandum for the file that addresses the competitive effects of the transaction in the Canadian cobalt and nickel mining sector. This memorandum would serve as a reference document in the event that the Competition Bureau initiates an inquiry, and would demonstrate that the transaction does not raise substantive competition concerns.
V. REGULATORY CONDITION IN THE OFFER-TO-PURCHASE AGREEMENT
The definitive Offer-to-Purchase Agreement governing the proposed tender offer (which is expected to be executed and was subsequently signed on May 2, 2024) will include as conditions to Torchlight's obligation to accept for payment and pay for shares tendered the following regulatory clearance conditions:
(1) HSR Condition: The expiration or early termination of the applicable waiting period under the HSR Act, including any extensions thereof resulting from a Second Request.
(2) ICA Condition: Receipt of ICA clearance, defined as either (a) confirmation from the Minister or the Investment Review Division that no national security review will be initiated, (b) the expiration of the 45-day national security review period following the filing of the notification without the Minister having sent the investment to a national security review, or (c) if a national security review is initiated, the receipt of affirmative clearance under Part IV.1 of the ICA.
Reverse Termination Fee. The proposed Offer-to-Purchase Agreement will provide for a reverse termination fee (also known as a "regulatory break fee") of $2,250,000, representing 5.0% of the $45,000,000 aggregate deal value. This reverse termination fee is payable by Torchlight to Ridgeline in the event that the transaction fails to close due to Torchlight's failure to obtain the required regulatory clearances. The magnitude of the reverse termination fee underscores the importance of timely and effective regulatory filings, as well as proactive engagement with the FTC, DOJ, and ISED to ensure that clearances are obtained within the transaction timeline.
Efforts Standard. The Offer-to-Purchase Agreement should specify the standard of effort that Torchlight is required to use in seeking to obtain regulatory clearances. We recommend that the agreement include an obligation on Torchlight to use reasonable best efforts (or, alternatively, commercially reasonable efforts, depending on the negotiated formulation) to obtain all necessary regulatory approvals and clearances, including making all required filings in a timely manner, responding promptly to requests for additional information, and taking all actions reasonably necessary to avoid or resolve any objections raised by regulatory authorities. The precise formulation of this efforts standard should be negotiated with Ridgeline and its counsel and may include limitations on the actions Torchlight is required to take (e.g., whether Torchlight is required to divest assets or agree to behavioral remedies to obtain clearance).
VI. RECOMMENDED TIMELINE
The following table sets forth the recommended timeline for regulatory filings and key milestones in the regulatory clearance process:
The timeline above provides adequate margin between the regulatory clearance milestones and the initial offer expiration date. Even in the absence of early termination, the HSR waiting period would expire by approximately April 5, 2024 — more than two months before the June 14, 2024, offer expiration. The ICA 45-day national security review period would expire by approximately May 9, 2024 — more than five weeks before the offer expiration. We are confident that this timeline provides a sufficient buffer for the orderly completion of the regulatory clearance process.
VII. CONCLUSION
Based on the analysis set forth in this memorandum, our conclusions and recommendations are summarized as follows:
HSR Act. A pre-merger notification filing under the HSR Act is required and should be filed no later than March 21, 2024, for both Torchlight and Ridgeline. The applicable filing fee of $111,000 is payable by Torchlight. We recommend requesting early termination simultaneously with filing. The substantive antitrust risk is low given the exploration-stage nature of Ridgeline's properties, the absence of meaningful horizontal overlap in commercial production, and the vertical integration rationale for the acquisition (securing cobalt feedstock for Torchlight's Sudbury cobalt sulfate refinery). We do not anticipate a Second Request.
Investment Canada Act. An ICA notification is required and should be filed no later than March 25, 2024. A full net benefit review is not required because Ridgeline's enterprise value (approximately C$48.8 million) is well below the C$1.326 billion WTO investor threshold. The national security review risk is assessed as low given Torchlight's status as a well-established Canadian mining company, the absence of state-owned enterprise involvement, and the alignment of the transaction with Canada's Critical Minerals Strategy. The 45-day national security review period should be allowed to run before closing.
CFIUS. A voluntary CFIUS filing is not recommended at this time given the minimal scale of Ridgeline's U.S. operations, the absence of technology, personal data, or proximity-to-government-facility triggers, and Canada's close security alliance with the United States. We recommend monitoring the situation and revisiting this assessment if circumstances change.
Canadian Competition Act. Pre-merger notification under the Canadian Competition Act is likely not required because the size-of-transaction threshold is not met. We recommend preparing a brief competitive analysis memorandum for the file in the event of a post-closing inquiry by the Competition Bureau.
Provincial and State Mining Approvals. Change-of-control notification or consent requirements under the Ontario Mining Act and Michigan mineral lease administration should be analyzed separately and tracked as additional conditions to the broader transaction.
We recommend proceeding with the HSR filing by March 21, 2024, and the ICA notification by March 25, 2024, and will coordinate with the Torchlight deal team (Nils Brenner, Patricia Edevane), the Ridgeline deal team (through Galbraith Haver & Steele LLP), and Canadian regulatory counsel to ensure that all filings are prepared and submitted on time. We will also circulate a gun-jumping compliance memorandum to the deal teams in advance of the HSR filing.
We are available to discuss this analysis at the deal team's convenience and can be reached at the contact information listed below.
Please do not hesitate to contact us with any questions or if additional analysis is required.
Respectfully submitted,
CALDERWOOD & HARKNESS LLP
By: ________
Derek Okonkwo Associate Calderwood & Harkness LLP 900 Third Avenue, 28th Floor New York, NY 10022 Tel: (212) 558-4000
Email: dokonkwo@calderwoodharkness.com
REVIEWED AND APPROVED:
By: ________
Beatrice Holloway Partner Calderwood & Harkness LLP 900 Third Avenue, 28th Floor New York, NY 10022 Tel: (212) 558-4100
Email: bholloway@calderwoodharkness.com
This memorandum is protected by the attorney-client privilege and the work product doctrine. It has been prepared solely for the use of the addressees and is not intended for distribution to, or reliance by, any third party. This memorandum does not constitute legal advice to any person other than the addressees and should not be relied upon as such.
Action Item | Recommended / Actual Date | Responsible Party
Prepare HSR Notification and Report Forms | March 14–20, 2024 | Calderwood & Harkness LLP (Derek Okonkwo, Tiffany Rosenthal) in coordination with Galbraith Haver & Steele LLP (Martin Galbraith, Rebecca Tsang)
File HSR notifications (both parties) with FTC and DOJ | No later than March 21, 2024 | Calderwood & Harkness LLP
Pay HSR filing fee ($111,000) | March 21, 2024 | Torchlight Mining Corp. (Marguerite Soo-Chan, CFO)
Prepare ICA notification | March 18–24, 2024 | Calderwood & Harkness LLP / Canadian regulatory counsel
File ICA notification with ISED | No later than March 25, 2024 | Calderwood & Harkness LLP
Request early termination of HSR waiting period | Filed concurrently with HSR notification | Calderwood & Harkness LLP
HSR 15-day waiting period expires (absent early termination) | ~April 5, 2024 | —
ICA 45-day national security review period expires | ~May 9, 2024 | —
Early termination of HSR waiting period (actual) | April 18, 2024 | FTC / DOJ (HSR Transaction No. 20241387)
ICA clearance received (actual) | April 29, 2024 | Minister of Innovation, Science and Industry
Initial offer expiration date | June 14, 2024 | —