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1 PROVINCE OF QUÉBEC DISTRICT OF MONTREAL N o : SUPERIOR COURT Commercial Division (Sitting as a court designated pursuant to the Companies Creditors Arrangement Act, R.S.C., c. 36, as amended) IN THE MATTER OF THE PLAN OF COMPROMISE OR ARRANGEMENT OF: QUÉBEC LITHIUM INC., a corporation incorporated pursuant to the laws of Quebec, having its head office at 1 Place Ville-Marie, suite 4000, Montreal, and its principal place of business at 500 Route Quebec Lithium, La Corne, Quebec. -and- QLI MÉTAUX INC., a corporation incorporated pursuant to the laws of Quebec, having its head office at 1 Place Ville-Marie, Suite 4000, Montreal. -and- RB ENERGY INC., a corporation incorporated pursuant to the laws of Canada, having its head office at 401 Bay Street, suite 2010, Toronto, Ontario. -and- SIROCCO MINING INC., a corporation incorporated pursuant to the laws of British Columbia, having its head office at Three Bentall Centre, 595 Burrard Street, suite 2600, Vancouver, British Columbia. -and- Petitioners KPMG INC., a corporation incorporated pursuant to the laws of Canada, having a place of business at Tour KPMG, 600 de Maisonneuve Boulevard West, Suite 1500, Montreal, Québec. Proposed Monitor

2 PRE-FILING REPORT OF THE PROPOSED MONITOR INTRODUCTION 1 KPMG Inc. ( KPMG or the Proposed Monitor ) understands that RB Energy Inc. ( RBE ), Quebec Lithium Inc. ( QLI ), Sirocco Mining Inc. ( Sirocco ) and QLI Métaux Inc. ( Metals ). (RBE, QLI, Sirocco and Metals, collectively, referred to as the Petitioners or the Companies ) intend to bring an application before this Honourable Court seeking certain relief under the Companies' Creditors Arrangement Act, R.S.C. 1985, c. C-36, as amended (the CCAA ) granting, inter alia, a stay of proceedings until November 13, 2014 and appointing KPMG as Monitor (the Monitor ). The proceedings to be commenced by the Companies under the CCAA will be referred to herein as the CCAA Proceedings. 2 The purpose of this pre-filing report is to provide this Honourable Court with information regarding the following: a. KPMG's qualifications to act as Monitor (if appointed) and an overview of KPMG s involvement in this matter to date; b. Background regarding the Petitioners and an overview of their overall restructuring plan; c. The proposed funding of the CCAA Proceedings, including an overview of the Companies' 13-week cash flow forecast (the CCAA Cash Flow Forecast ); d. The Proposed Monitor s assessment of the CCAA Cash Flow Forecast; e. The Company s cash management system; f. The proposed Debtor-in-Possession ( DIP ) financing facility (the Proposed DIP Facility ); g. The proposed Key Employee Retention Plan (the KERP ); h. The proposed court-ordered charges sought by the Companies in the proposed Initial Order including the Administration Charge, the DIP Charge the Directors Charge and the KERP Charge, all as further described herein; and 2

3 i. The Proposed Monitor's preliminary observations regarding the Petitioner s request for relief which is sought be its CCAA application. 3 A more detailed description of the business operations of the Companies and background of its restructuring efforts to date is provided in the motion for the issuance of an Initial Order dated October 14, 2014 filed in support of the Companies application for relief under the CCAA (the "Motion"). Certain information in respect of the Companies is summarized below. REPORT RESTRICTIONS AND SCOPE LIMITATIONS 4 In preparing this report, the Proposed Monitor has been provided with, and has relied upon, unaudited financial information, books and records and financial information prepared by certain senior management of the Companies ( Senior Management ) (collectively, the Information ). Except as further described in this report in respect of the CCAA Cash Flow Forecast and the Proposed Monitor s report thereon, and the Proposed Monitor s involvement with the Company in reviewing its liquidity constraints and need for immediate funding: a) The Proposed Monitor has reviewed the Information for reasonableness, internal consistency and use in the context in which it was provided. However, the Proposed Monitor has not audited or otherwise attempted to verify the accuracy or completeness of the Information in a manner that would wholly or partially comply with Canadian Auditing Standards ( CASs ) pursuant to the Chartered Professional Accountants Canada Handbook and, accordingly, the Proposed Monitor expresses no opinion or other form of assurance contemplated under the CASs in respect of the Information; and b) Some of the information referred to in this report consists of forecasts and projections. An examination or review of the financial forecasts and projections, as outlined in the Chartered Professional Accountants Canada Handbook, has not been performed. 5 Future oriented financial information referred to in this report was prepared based on Senior Management's estimates and assumptions. Readers are cautioned that since projections are based upon assumptions about future events and conditions that are not ascertainable, the 3

4 actual results will vary from the projections, even if the assumptions materialize, and the variations could be significant. 6 The information contained in this report is not intended to be relied upon by any prospective purchaser or investor in any transaction with the Companies. 7 Capitalized terms not defined in this report are used as defined in the Motion. 8 Unless otherwise stated, all monetary amounts contained in this report are expressed in Canadian dollars, which is the Companies common reporting currency. KPMG S QUALIFICATIONS TO ACT AS MONITOR 9 KPMG was engaged by RBE and QLI on October 3, 2014 to, among other things, assess the reasonableness of the Companies short term cash flows and provide assistance to the Companies should they need to prepare for formal proceedings under the CCAA. 10 KPMG is a trustee within the meaning of subsection 2(1) of the Bankruptcy and Insolvency Act (Canada). Neither KPMG nor any of its representatives have been at any time in the two preceding years the auditor, a director, officer or employee of the Company or otherwise related to the Company or to any director or officer of the Company or a trustee (or related to any such trustee) under a trust indenture issued by the Company or any person related to the Company. 11 KPMG has consented to act as Monitor of the Companies should this Honourable Court grant the Companies request to commence the CCAA Proceedings. 12 KPMG has retained Stikeman Elliott LLP to act as its independent counsel. BACKGROUND REGARDING THE PETITIONERS AND THEIR OVERALL RESTRUCTURING PLANS Background on the Companies and Existing Debt 13 RBE is a public company formed under the Canadian Business Corporations Act, R.S.C. 1985, c. C-44. RBE currently trades its common shares on the Toronto Stock Exchange as well as on the U.S. OTCQX marketplace. RBE s active subsidiaries include: 4

5 I. QLI, whose assets include a lithium mine and processing facility in La Corne, Quebec (the Lithium Project ); and II. Sirocco, whose assets include, through a number of inactive subsidiaries, the Aguas Blancas Project, an iodine mine located in Chile (the Chilean Operations ). 14 QLI employs approximately 230 employees in Quebec. QLI issued temporary lay-off notices to substantially all of its employees on October 7, 2014, and is maintaining a small workforce to engage in the care and maintenance of the Lithium Project and to perform certain administrative and accounting functions. 15 QLI has invested approximately $350 million in the development of the Lithium Project in the past three years. 16 The Chilean Operations have approximately 230 unionized employees and has been in operation since 2001 with annual production in the range of 1,000 tonnes of iodine per year. 17 RBE and its predecessor companies have invested approximately $130 million in the Chilean Operations over the past 20 years. 18 A detailed account of the Companies financial debt obligations is included in the Motion, and is summarized in the table, below: RB Energy Inc. and the Other Individual Petitioners Schedule of Total Liabilities CAD (millions) - As at September 30, 2014 Borrowers Total Debt Senior Debt Facility RBE, QLI $ Finance Lease Liabilities QLI Cash Advance from Customer QLI IQ Bridge Loan RBE, QLI Convertible Debentures RBE Accounts Payable RBE, QLI Royalties Payable QLI Total $

6 Notes: 1. The bank debt facility (the Senior Debt Facility ) is secured against certain of the Companies assets under a General Security and Pledge Agreement dated April 4, The outstanding balance of the fully drawn Senior Debt Facility as at September 30, 2014 is approximately $72 million. Bank of Nova Scotia ( BNS ) is the administrative agent and lead arranger, and one of the lenders which also includes Caterpillar Financial Services Limited ( CFSL ) and the Commonwealth Bank of Australia. The Senior Debt Facility matures on March 31, 2017 and bears interest and fees at 8.0% per annum. This facility is supported by a financial guarantee provided by Investment Quebec ( IQ ) for up to 80% of the amounts advanced. 2. Finance leases are repayable by June 2018 and have interest rates ranging from 0.99% to 8.75%. Accrued interest on the Lease Facilities outstanding at September 30, 2014 was $40,000. The net book value of equipment held by QLI under the Lease Facilities was $13.5 million as at September 30, QLI received two advances of US$5 million each from Tianjin Products and Energy Resources Development Co., Ltd. ( Tewoo ) in September 2014 and August 2014 respectively (the Tewoo Advances ). The Tewoo Advances carry a simple interest of 8% calculated on a monthly basis and are due November 30, Sirocco has guaranteed these advances in addition to pledging the shares of Boron Chemicals Holding Ltd., a wholly owned subsidiary of Sirocco The IQ Loan is secured by a hypothec executed by each of RBE and QLI in favour of IQ. The loan bears interest at a rate of 11.5% per annum and was to be repaid in full out of the proceeds received by RBE on completion of a debenture financing with proceeds to RBE of at least $20 million, and in any event, by no later than November 30, On or around September 17, 2014, $3 million of the IQ Loan was advanced to RBE and QLI. The Convertible Debentures are unsecured obligations of RBE and were initially comprised of 27,556 and 15,850 convertible unsecured subordinated debentures with a par value of $1,000 and US$1,000, respectively, and pay a coupon of 11.0% per annum, payable semi-annually. The Debentures were issued May 15, 2013 (the May Debentures ) and July 3, 2013 (the July Debentures ) and will mature on June 30, 2018 and July 31, 2018, respectively. The Convertible Debentures are not redeemable before June 30, As at June 30, 2014, 27,496 of the May Debentures and all of the July Debentures were unconverted. Account payable includes QLI trade creditors of $22.3 million, RBE trade creditors of $0.8 million and employee wages, source deductions and benefits of $1.4 million. 7. QLI agreed to make royalty payments to IQ based on the revenues from the Lithium Project using a graduated scale of achieved lithium sale prices beginning March 31, 2017 until the end of the mine life. The royalties payable as at September 30, 2014 are approximately $1.6 million and represent the estimated future payment of royalties discounted to its present value at the effective interest rate of the Senior Debt Facility. 19 The Companies also have a $3.9 million cash backed standby letter of credit issued in favour of Hydro-Québec for the construction of a high-voltage power infrastructure, and a $0.6 million designated cash deposit held at BNS to secure amounts due to CFSL. 20 As of October 10, 2014, there were a total of five construction legal hypothecs (2727 C.C.Q.) registered against the Lithium project totaling $1.6 million, as detailed in the Motion. Overview of the Restructuring Plan of the Petitioners 21 The Companies have indicated that their initial restructuring plan includes: 6

7 a. Stabilization of the operations and remaining workforce of the Petitioners with the relief provided by the CCAA stay of proceedings; b. Continue the care and maintenance program of the Lithium Project; c. Closely monitor the Chilean Operations, which are anticipated to be cash flow neutral over the course of the next six months; and d. With the assistance of its advisors and the Proposed Monitor, initiate a plan to sell, refinance or recapitalize one or both of the Lithium Project and the Chilean Operations within six months. CCAA CASH FLOW FORECAST 22 The Companies, with the assistance of the Proposed Monitor, have prepared the CCAA Cash Flow Forecast of the Companies for the 13-week period ending January 10, 2015 (the Cash Flow Period ) based on the terms in the Proposed DIP Facility (as further described herein). 23 A copy of the CCAA Cash Flow Forecast is attached to this report as Schedule A. The CCAA Cash Flow Forecast is presented on a combined basis as well as on an individual entity basis for RBE and QLI. An individual cash flow forecast has not been prepared either for Sirocco or Metals as these entities are holding companies and are not expected to have any cash transactions throughout the Cash Flow Period. 24 A summary of the CCAA Cash Flow Forecast is set out in the table below and presents forecast cash inflows and outflows, as well as sources of funding from the Proposed DIP Facility (as further described herein): 7

8 RB Energy Inc. and the Individual Petitioners (excluding Sirocco and Metals) Unaudited Summary of the CCAA Cash Flow Forecast (Note 1) For the 13-Week Period Ending January 10, 2015 ($000's) Consolidated RBE QLI Forecast Cash Inflow Lithium revenues $139 $ - $139 Management services Total Forecast Cash Inflow Forecast Cash Outflow Quebec energy costs (917) - (917) Quebec site admin and maintenance (831) - (831) Corporate head office costs (403) (403) - Employee and management compensation (2,260) (336) (1,924) Directors fees & benefits (90) (90) - Insurance (795) - (795) Deposits for critical suppliers (570) - (570) Professional fees (2,720) (2,720) - Proposed KERP Payments (280) (280) - Proposed DIP Facility fees and interest (599) (599) - Total Forecast Cash Outflow (9,466) (4,428) (5,038) Net Cash Flow, before DIP Advances and Intercompany Transfers (9,219) (4,320) (4,899) DIP Advances 9,520 9,520 - Intercompany Transfer - (4,750) 4,750 Net Cash Flow (149) Cash, beginning of period (October 12, 2014) 1, Cash, end of period (January 10, 2015) $1,301 $810 $491 Note 1 Readers are cautioned to read the Report Restrictions and Scope Limitations as set out on previously in this report for information regarding the preparation of the CCAA Cash Flow Forecast. 25 With respect to the CCAA Cash Flow Forecast: a. The Petitioners expect to have combined cash resources in the order of approximately $1.0 million available at the beginning of the Cash Flow Period. 8

9 b. During the Cash Flow Period, the Petitioners are forecast to experience aggregate net cash outflow of approximately $9.2 million, made up of the following net cash outflow by entity: i. RBE net cash outflow of $4.3 million; ii. iii. QLI net cash outflow of $4.9 million; Sirroco and Metals are not expected to experience any cash flow activity during the Cash Flow Period. In addition, Senior Management expect the Chilean Operations to be cash flow neutral over the Cash Flow Period, neither requiring cash nor generating excess cash from operations which would otherwise be available to fund the needs of the Petitioners. c. The CCAA Cash Flow Forecast contemplates advances under the Proposed DIP Facility of $9.5 million, including $6.7 million in the first week of the CCAA Proceedings. The CCAA Cash Flow Forecast currently estimates that $1.3 million in cash will be remaining at the end of the Cash Flow Period. As further discussed in this report under DIP financing, the Proposed DIP Facility provides an up-front funding commitment of US$6 million, with further advances becoming available on the Companies attainment of certain conditions. The maximum available borrowings under the Proposed DIP Facility are US$13 million, such funding which is designed to meet the funding requirements of the Petitioners over the coming six months. d. The following is a general breakdown of the forecast $9.2 million net cash outflow in the Cash Flow Period, by operating and other key funding categories: i. Forecast care and maintenance costs of the Lithium Project totaling $1.7 million, which includes approximately $0.9 million for energy costs (electricity and propane heating to maintain the plant during the colder weather in the Cash Flow Period) and $0.8 million for other site maintenance costs, consumables and property taxes; ii. Forecast corporate head office costs totaling $0.4 million for RBE s office premises costs, information technology services, shared accounting and administrative contractor costs and other office expenses; 9

10 iii. iv. Forecast employee payroll and benefits and executive management fees totaling $2.3 million. $1.9 million of such forecast payments are allocated to QLI to fund outstanding wages and vacation pay of the 208 temporarily laid off QLI employees, as well as ongoing payroll costs for approximately 14 ongoing employees and contractors. $0.4 million of such forecast payments are allocated to RBE for ongoing payroll and executive management costs; Forecast fees of $90,000 to be paid to RBE s directors; v. Forecast insurance costs of $0.8 million, representing premiums for QLI s property coverage and RBE s liability coverage; vi. vii. viii. ix. Forecast deposits which are expected to be made for critical suppliers totaling $0.6 million, including to QLI s utility providers and others; Forecast professional fees totaling $2.7 million to fund RBE s expected professional corporate, tax and restructuring advisors; Forecast KERP payments of $0.3 million (as further discussed herein under Proposed KERP ); and Forecast interest and financing fees of $0.6 million which are scheduled to be paid pursuant to the terms of the Proposed DIP Facility. e. Management expects to fund the cash flow requirements of the Companies with current cash resources on hand, certain forecast collections and, most significantly, the DIP Facility. 26 Assuming the Companies have access to the Proposed DIP Facility (substantially in the form as described further in this report), the CCAA Cash Flow Forecast indicates that the Companies have reasonable liquidity to fund its requirements over the Cash Flow Period. As mentioned previously in this section, the Petitioners ability to fund its cash flow needs over the Cash Flow Period requires that it achieve certain requirements of the Proposed DIP Facility, which currently provides an initial funding commitment of US$6 million versus a net funding need of $9.5 million. 10

11 MONITOR S ASSESSMENT OF THE CASH FLOW FORECAST 27 Management s representation on the Companies cash flow is attached to this report as Schedule B. In its representation, Senior Management have indicated that the assumptions underlying the Cash Flow Forecast are appropriate in the circumstances. 28 The Proposed Monitor has completed its assessment of the CCAA Cash Flow Forecast in accordance with Section 23(1)(b) of the CCAA. In accordance with the requirements of the CCAA, the Proposed Monitor provides its report on the CCAA Cash Flow Forecast in prescribed form as Schedule C. As stated in its report, nothing has come to the Proposed Monitor s attention that indicates that the CCAA Cash Flow Forecast is unreasonable given its stated assumptions. CASH MANAGEMENT SYSTEM 29 The Companies use a centralized system to deal with cash management, collections, disbursements and intercompany payments (the Cash Management System ). The Companies seek the authority to continue to use the existing Cash Management System and to maintain the funding and banking arrangements already in place. 30 Although the Cash Management System is centralized, weekly cash monitoring is performed on an entity level for RBE, QLI, Sirocco and Metals, as necessary. RBE and Sirocco hold individual bank accounts at the Canadian Imperial Bank of Commerce whereas QLI holds its accounts at the Bank of Nova Scotia. Cash is transferred between the Companies on an as needed basis. DIP FINANCING Background 31 Among other things, the following have been referenced in the Motion as contributing to the immediate need for funding: a. Delays to the full commissioning of the Lithium Project plant thereby delaying expected receipts from sales of battery grade lithium and depleting the Companies liquidity in 2014 due to weather conditions and commissioning issues encountered with the kiln and other circuits at the plant; 11

12 b. Approximately $1.7 million per month of employee costs at the Lithium Project resulting in the decision to curtail costs at QLI by issuing temporary lay-off notices to 208 employees on October 7, 2014, and initiating a care and maintenance plan for the Lithium Project; c. Lower net cash flows being generated from the Chilean Operations due to lower iodine sales volumes resulting from a port strike and earthquakes in Chile, and lower global iodine prices over the past 18 months; d. A recent debenture financing that failed to proceed due to difficult market conditions as noted in RBE s public filings dated October 3, 2014; and e. Limited cash resources of the Companies totaling approximately $1.0 million with ongoing significant overhead costs and a need to stabilize the situation in order to preserve the value of the assets, which resulted in the decision to pursue a filing under the CCAA. The Need for DIP Financing, Process and DIP Proposals Received 32 Senior Management are of the view that an interim CCAA financing facility is critical in order for the Companies to pursue their restructuring efforts in the CCAA Proceedings. The CCAA Cash Flow Forecast supports this view. 33 With respect to the Petitioners obtaining urgently needed interim funding, the Proposed Monitor observes the following: a. The Petitioner requires immediate funding in the order of $9.5 million over the Cash Flow Period, as previously discussed, and estimated total funding of approximately $13 million over the next six months; b. There has been a very short period of time since the Company learned that it would be unable to obtain sufficient funding through regular market channels; and c. Senior Management made an effort to canvas available sources of interim financing. Due to the time constraints and the urgent need for financing facing the Petitioners, the solicitation process was limited. However, the process 12

13 followed by Senior Management did result in the identification of two potential sources of interim financing - one from the Bank of Nova Scotia and one or more of the existing senior lenders (the Senior Lenders ) and one from Hale Capital L.P. ( Hale ), and in the receipt of two DIP lending proposals, including the Proposed DIP Facility provided by Hale. 34 The two DIP lending proposals as well as a summary of the economic terms prepared by the Proposed Monitor is attached as Schedule D. It is requested that this schedule be sealed pending approval by the Court. 35 The Monitor notes the following with respect to the terms of the above proposals: a. Although both interim financing proposals provide the Petitioners with some access to funds, neither of the proposed arrangements provide committed funding at this time sufficient to meet all of the Companies total requirements for either the Cash Flow Period or the next six months; and b. Although the advisors to the Senior Lenders continue their due diligence regarding potentially providing a further commitment, there is currently no certainty regarding whether or when a commitment might be forthcoming to fund the total requirements of the Petitioners over the Cash Flow Period and beyond. 36 Based on the higher amount of committed funding and the relatively higher degree of certainty provided for further funding under the Proposed DIP Facility, the Company has selected the Proposed DIP Facility and is seeking approval of same in the Motion. 37 The Proposed Monitor has been advised that the Senior Lenders intend to request an adjournment of the Proposed DIP Facility until a later date on the basis that they do not believe they were provided sufficient time to review with the Proposed DIP Facility. 38 The Proposed Monitor also notes that the Proposed DIP Facility agreement requires the Company to bring forward the approval motion on or before October 16, 2014, and that the court issue an Initial Order that is satisfactory to Hale, including inter alia granting a priority charge to Hale. The Company has advised the Proposed Monitor that it expects to fully deplete its available cash resources by no later than October 17,

14 39 On balance, the Proposed Monitor is of the view that significant near term funding of the Petitioners is required over the Cash Flow Period. In the first three weeks of the Cash Flow Period, this funding is estimated at $3.5 million. Total funding over the entire Cash Flow Period is $9.5 million. It is the Monitor s view that the Proposed DIP Facility represents the best opportunity for the Company to obtain that necessary funding. PROPOSED KERP 40 RBE s Board of Directors have identified a limited number of executives and senior management (the KERP Participants ) with extensive knowledge of the lithium and iodine markets and the Company s operations in both Quebec and Chile who they believe are critical to the Companies restructuring efforts. 41 In order to retain the KERP Participants as full time employees, the Companies have developed the KERP. 42 The proposed KERP has a total cost of approximately $0.8 million with the bonus payment scheduled to be paid in two installments for certain of the KERP Participants, and at the end of the anticipated restructuring process for certain others. The first KERP payments total $0.3 million and are proposed to be made on the date for receipt of initial bid offers in the envisaged sales and investment solicitation process (to be developed). The final $0.5 million KERP payments are proposed to be made on the earlier of a completed restructuring process or six months from the date of the Initial CCAA Order. 43 The KERP amounts are between approximately 3-6 months salary of each KERP Participant. 44 The Monitor has reviewed the terms of the proposed KERP with Senior Management in order to understand the proposed KERP, including: a. The criticality of each KERP Participant in respect of maintaining the existing assets and operations of the Petitioners, as well as in supporting a sales and investment solicitation process; b. The potential risk of individual employee departures; c. The ability to replace the key employees and the relative costs of doing so; 14

15 d. The timing of the proposed KERP payments; e. The quantum of the KERP as compared to the individual salaries of each employee and other CCAA restructuring proceedings; and f. The views of key stakeholders. 45 In order to be eligible to participate in the KERP, each of the KERP Participants must: a. be employed by the Companies as of the date the Court grants an Order approving the KERP; and b. have not prior to the receipt of any KERP payment (i) given notice that their employment will be terminated; (b) been terminated for cause; or (c) is deceased or incurred a disability. 46 In the event of a dispute with respect to the terms or payment of the KERP, the dispute shall be referred to Quebec Superior Court, sitting in Commercial Division, for the District of Montreal. 47 The details of the KERP, including the background of the KERP Participants and the specific terms of the plan have been provided to this Honourable Court subject to a sealing request. 48 The Monitor has reviewed the terms of the KERP and considers the program to be reasonable in terms of the criticality of the KERP Participants, the overall quantum and the terms of the plan. The Monitor has considered the likely extensive nature of the contemplated restructuring process envisaged by the Petitioners as well as the uncertainty facing the KERP Participants now that the Lithium Project has temporarily ceased. The Monitor also notes that the Proposed DIP Facility provides for the payments scheduled under the KERP. COURT ORDERED CHARGES SOUGHT IN THE PROPOSED INITIAL ORDER Administration Charge 49 The proposed Initial Order contemplates a charge in favour of counsel to the Companies, the counsel to the Proposed Monitor and the Proposed Monitor in the aggregate amount of $1 million (the Administration Charge ). 15

16 50 Under the proposed Initial Order, the Administration Charge is to rank in priority to all other claims. 51 The Proposed Monitor is of the view that the proposed Administration Charge is reasonable and appropriate in the circumstances having considered the complexity of the proceedings, anticipated work levels of the applicable professional firms and the size of similar charges in comparable cases. The DIP Charge 52 The proposed Initial Order contemplates a charge in favour of Hale, the Proposed DIP Facility provider, of up to US$13 million which charge is to ultimately (following notice to the relevant stakeholders) rank in priority to all other charges and claims except the Administration charge. Directors and Officers Charge 53 The proposed Initial Order contemplates a charge in favour of the Companies Directors in an amount of $1.5 million (the Directors Charge ) as security for any obligations or liabilities that may arise after the commencement of the CCAA Proceedings. The Directors Charge is proposed to be ranked only behind the Administration Charge and the DIP Charge. 54 The Proposed Monitor has reviewed the calculation of the Directors Charge taking into account various statutory liabilities. The Directors charge will only be accessible to the extent that the existing directors and officers insurance does not apply. After discussions with counsel to the Petitioners, the Proposed Monitor is of the view that the proposed charge is reasonable under the circumstances. The KERP Charge 55 The proposed Initial Order contemplates a charge in the amount of $760,000 in favour of the KERP Participants as security for the KERP payments. The KERP Charge is proposed to rank only behind the Administrative Charge, the DIP Charge and the Directors Charge. 16

17 THE PROPOSED MONITOR S PRELIMINARY OBSERVATIONS 56 The Proposed Monitor respectfully makes the following preliminary observations and comments to this Honourable Court: a. The Proposed Monitor has been involved in this matter for a limited period of time. However, in that time, KPMG has received a certain amount of background information which has allowed it to ascertain the general status and financial circumstance of the Companies; b. The Proposed Monitor notes that there has only been a short period of time afforded to the Petitioners and prospective DIP lenders (including the Senior Lenders) to arrange interim financing and the process to obtain interim funding has not been a full commercial solicitation process. However, the Petitioners efforts have resulted in potential DIP financing from both the Senior Lenders and Hale. Both DIP financing alternatives currently only allow for a partial funding of the combined funding requirements of the Petitioners through the Cash Flow Period. Of the available options, the Proposed DIP Facility represents the highest initial funding commitment with the clearest road to additional funding sufficient to provide the Petitioners with liquidity throughout the Cash Flow Period and over the next six months, where it is envisaged that the Company would be able to complete a sales and investment solicitation process. The Proposed DIP Facility represents a priming of the interests of all creditors (other than the proposed Administration Charge), including those of the Senior Lenders. We are informed that the Senior Lenders received a copy of the Proposed DIP Facility this morning. c. In order to provide stability to the Company and an incentive to its key management team, the Board of Directors and the Company is proposing, in addition to the Proposed DIP Facility described above, the Directors Charge, the KERP and associated KERP Charge. The Monitor is of the view that the aforementioned arrangements are reasonable under the circumstances. d. The Monitor notes that there has been a short notice of the CCAA Proceedings to affected parties, and that at least one party (the Senior Lenders) has taken exception to the amount of notice. 17

18 e. Considering the Petitioner s urgent need for significant short term funding, it is clear that the Petitioners cannot continue operating, let alone pursue a restructuring, without material and immediate funding. The Proposed DIP Facility appears to represent the most certain funding path forward at this time. KPMG Inc., in its sole capacity as Proposed Monitor of Québec Lithium Inc., QLI Métaux Inc., RB Energy Inc. and Sirocco Mining Inc. Per: Philip J. Reynolds Per: Anthony Tillman Senior Vice President Senior Vice President 18

19 Schedule A

20 RB Energy Inc. (consolidated) CCAA cash flow forecast for the 13 week period ending January 10, 2015 (All amounts in CAD $000, unless otherwise noted) Week No Total for Week ending Notes 18 Oct 25 Oct 1 Nov 8 Nov 15 Nov 22 Nov 29 Nov 6 Dec 13 Dec 20 Dec 27 Dec 3 Jan 10 Jan the Period 1,2 Cash receipts Lithium revenues Management services Cash Disbursments operating Quebec energy 5 (138) (1) (1) (30) (162) (30) (30) (45) (182) (45) (45) (36) (173) (917) Quebec site admin and maintenance 6 (206) (42) (42) (83) (52) (49) (49) (47) (49) (47) (47) (79) (38) (831) Corporate head office costs 7 (36) (36) (36) (33) (33) (33) (33) (26) (26) (26) (26) (26) (33) (403) Employee and management compensation 8 (483) (254) (227) (205) (193) (217) (129) (142) (64) (134) (54) (94) (67) (2,260) Directors fees & benefits 9 (90) (90) Insurance 10 (0) (506) (0) (0) (0) (0) (0) (0) (0) (0) (0) (0) (288) (795) Deposits for critical suppliers 11 (570) (570) Professional fees 12 (56) (13) (76) (145) (1,433) (838) (362) (351) (440) (329) (254) (260) (321) (252) (338) (235) (599) (6,012) Net operating cash outflow (1,361) (805) (328) (313) (440) (329) (254) (225) (321) (252) (338) (235) (564) (5,765) Cash Disbursments non operating CCAA and sales process costs 13 (1,250) (350) (200) (200) (100) (125) (125) (100) (125) (2,575) Key employee retention 14 (280) (280) DIP fees and interest 15 (364) (57) (94) (84) (599) (1,614) (407) (200) (200) (194) (125) (125) (464) (125) (3,454) Net cash outflow (2,975) (805) (735) (313) (640) (329) (454) (419) (446) (252) (463) (699) (689) (9,219) Cash beginning of period 16 1,000 4,745 3,940 3,205 2,891 2,251 1,922 1,468 1, ,151 2,688 1,989 1,000 DIP advances (in CAD equivalent) 15 6,720 2,800 9,520 Cash, end of period 4,745 3,940 3,205 2,891 2,251 1,922 1,468 1, ,151 2,688 1,989 1,301 1,301 DIP balance (in USD) 15 Opening balance (in USD) 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 8,500 8,500 8,500 DIP advances (in USD) 6,000 2,500 8,500 Ending balance (in USD) 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 8,500 8,500 8,500 8,500 8,500

21 RB Energy Inc. CCAA cash flow forecast for the 13 week period ending January 10, 2015 (All amounts in CAD $000, unless otherwise noted) Week No Total for Week ending Notes 18 Oct 25 Oct 1 Nov 8 Nov 15 Nov 22 Nov 29 Nov 6 Dec 13 Dec 20 Dec 27 Dec 3 Jan 10 Jan the Period Cash receipts Management services Cash Disbursments operating Corporate head office costs 7 (36) (36) (36) (33) (33) (33) (33) (26) (26) (26) (26) (26) (33) (403) Employee and management compensation 8 (106) (10) (100) (10) (100) (10) (336) Directors fees & benefits 9 (90) (90) Insurance 10 Professional fees 12 (56) (13) (76) (145) (142) (36) (92) (33) (43) (133) (46) (26) (36) (126) (192) (26) (43) (974) Net operating cash flow (142) (36) (92) 5 (43) (133) (46) 9 (36) (126) (192) (26) (8) (866) Cash Disbursments non operating CCAA and sales process costs 13 (1,250) (350) (200) (200) (100) (125) (125) (100) (125) (2,575) Key employee retention 14 (280) (280) DIP fees and interest 15 (364) (57) (94) (84) (599) (1,614) (407) (200) (200) (194) (125) (125) (464) (125) (3,454) Net cash outflow (1,756) (36) (499) 5 (243) (133) (246) (185) (161) (126) (317) (490) (133) (4,320) Cash beginning of period ,574 3,538 3,039 2,044 1,801 1,668 1, ,750 2,433 1, Transfer to Quebec Lithium (1,750) (1,000) (1,000) (1,000) (4,750) DIP advances (in CAD equivalent) 15 6,720 2,800 9,520 Cash, end of period 3,574 3,538 3,039 2,044 1,801 1,668 1, ,750 2,433 1, DIP balance (in USD) 15 Opening balance (in USD) 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 8,500 8,500 8,500 DIP advances (in USD) 6,000 2,500 8,500 Ending balance (in USD) 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 8,500 8,500 8,500 8,500 8,500

22 Quebec Lithium Inc. CCAA cash flow forecast for the 13 week period ending January 10, 2015 (All amounts in CAD $000) Week No Total for Week ending Notes 18 Oct 25 Oct 1 Nov 8 Nov 15 Nov 22 Nov 29 Nov 6 Dec 13 Dec 20 Dec 27 Dec 3 Jan 10 Jan the Period Cash receipts Lithium revenues Cash Disbursments operating Quebec energy 5 (138) (1) (1) (30) (162) (30) (30) (45) (182) (45) (45) (36) (173) (917) Quebec site admin and maintenance 6 (206) (42) (42) (83) (52) (49) (49) (47) (49) (47) (47) (79) (38) (831) Employee compensation 8 (377) (254) (227) (205) (183) (117) (129) (142) (54) (34) (54) (94) (57) (1,924) Insurance 10 (0) (506) (0) (0) (0) (0) (0) (0) (0) (0) (0) (0) (288) (795) Deposits for critical suppliers 11 (570) (570) (1,291) (802) (270) (318) (397) (196) (208) (234) (285) (126) (146) (209) (556) (5,038) Net operating cash flow (1,219) (769) (236) (318) (397) (196) (208) (234) (285) (126) (146) (209) (556) (4,899) Cash Disbursments non operating n/a Net cash outflow (1,219) (769) (236) (318) (397) (196) (208) (234) (285) (126) (146) (209) (556) (4,899) Cash beginning of period , Transfer from RB Energy Inc. 1,750 1,000 1,000 1,000 4,750 DIP advances Cash, end of period 1,

23 NOTES AND SUMMARY OF ASSUMPTIONS Note 1 Note 2 Note 3 Note 4 Note 5 Note 6 Note 7 Note 8 The purpose of this cash flow forecast is to set out the liquidity requirements of the Petitioners during the CCAA proceedings Sirocco Mining Inc. and QLI Metals Inc. have been omitted from this cash flow forecast as it is forecasted that their opening cash and cash flows will be approximately $nil during the period. Receipts are based on lithium shipped to date. Management services are charged to a company for shared management services and office and premises costs for the Company s head office Energy costs represent plant/mine electricity stand by charges and forecast usage, and propane heating costs to maintain the plant estimated based on historical experience during a winter period of plant inactivity Site costs include maintenance, consumables, security, equipment rentals, and includes a contingency of approximately $78,000, as well as municipal/property taxes of $144,000. Head office costs include charges for administrative and accounting services provided by affiliates, ongoing reporting costs under applicable securities legislation, general office costs and premises costs for the Company s head office. Employee payroll and benefits includes payments to all employees of all currently outstanding wages and vacation pay (including approximately $550,000 for vacation pay and related fringe benefits for the 208 temporarily laid off employees), and approximately 20 employees and contractors continuing at the mine site and head office to maintain the assets. No severance costs have been included in the forecast. Head office payroll costs and executive management fees for RB Energy Inc. are also included. Note 9 Annual Director s fees are anticipated to be paid in December Note 10 Insurance costs represent certain recently invoiced costs for renewal of coverage extending into the CCAA period, and forecast property insurance costs based on historical billings. Note 11 Estimated deposits of $450,000 and $120,000 for Hydro Quebec and Garda Security, respectively, in order to maintain uninterrupted service. Note 12 Professional fees related to the Company s annual audit and tax compliance have been forecast based on review engagements for Q and Q and an annual audit for 2014, with costs estimated by reference to historical billings Note 13 Restructuring costs consist of sales process costs and professional fees for key advisors to the Company incurred ahead of and during the CCAA proceedings and the Monitor and its counsel, including retainers of $450,000 expected to be paid during the week ending October 18, Note 14 Cost of an incentive program with the purpose of retaining key personnel of the Petitioners during the CCAA proceedings. Note 15 Anticipated DIP borrowings are required to fund operational and restructuring costs which carry an interest rate of 11%, and unused amounts of the maximum US$ 13 million DIP line will be charged a standby by fee of 3%. A DIP advance fee of US$ 325,000 is also due upon the Petitioners first advance under the DIP line.

24 DIP advances, interest and fees have been calculated assuming a CAD:USD exchange rate of 1.12:1. Note 16 Opening cash based on expected cash holdings as at October 10, 2014.

25 Schedule B

26 October 13, 2014 KPMG Inc. Tour KPMG 600 de Maisonneuve Boulevard West, Suite Montreal, QC H3A 0A3 Attention: Mr. Philip J. Reynolds Dear Sirs Re: Proceedings under the Companies Creditors Arrangement Act ( CCAA ) Responsibiliti ies/obligations and Disclosure with Respect to Cash Flow Projections In connection with the application by RB Energy Inc., Québecc Lithium Inc., Sirocco Mining Inc. and QLI Metaux Inc. (collectively, the Companies ) for the commencement of proceedings under the CCAAA in respect of the Companies, the management of the Companies ( Management ) has prepared the attached Cash-Flow Statement and the assumptions on which the Cash-Flow Statement is based. The Companies confirm that: 1. the Cash-Flow Statement and the underlying assumptions are the responsibility of the Companies; 2. all material information relevant to the Cash-Flow Statement and to the underlying assumptions has been made available to KPMG Inc. in its capacityy as Monitor; and 3. Management has taken all actions that it considers necessary to ensure: a. that the individual assumptions underlying thee Cash-Flow Statement are appropriate in the circumstances; and b. that the individual assumptions underlying thee Cash-Flow Statement, taken as a whole, are appropriate in the circumstances. Yours Truly, Alessandro Bitelli, CA Chief Financial Officer of RB Energy Inc. and Quebec Lithium Inc. Director of Sirocco Mining Inc. Treasurer of QLI Metaux Inc.

27 Schedule C

28

29 Schedule D