Tree Island Receives Notices of Reassessment from CRA

September 20, 2023

VANCOUVER, BRITISH COLUMBIA — September 20, 2023 – Tree Island Steel Ltd. (the “Company” or “Tree Island Steel”) (TSX:TSL) announced today that its wholly-owned subsidiary, Tree Island Industries Ltd. (“TII”), received notices of reassessment (“CRA Notices”) from the Canada Revenue Agency (“CRA”) for its fiscal years ended December 31, 2015 through 2018.

The CRA Notices relate to certain write downs in 2015 for bad debt and capital account losses related to intercompany loans provided by TII to its direct and indirect wholly-owned subsidiaries, Tree Island Wire (USA) Inc. and Tree Island Wire Holdings (USA), Inc., over the span of approximately 15 years. Pursuant to the CRA Notices dated September 1, 2023, total taxes and interest of approximately $11.8 million is payable by TII (the “CRA Liability”).

The Company believes that the CRA Notices are unfounded and intends to vigorously contest the CRA Notices by filing notices of objection to start the appeals process. However, there can be no assurance regarding the outcome of the appeals process or when a resolution may be reached.

In connection with the appeals process, the Company, on behalf of TII, is currently in discussions with the CRA on the timing and form of a payment for 50% of the CRA Liability, or approximately $5.9 million, which is the amount of the CRA Liability required to be remitted by TII while the appeals process is proceeding. If TII is ultimately successful in defending its position, then any taxes, interest and penalties paid to the CRA would be refunded, and if the CRA is successful then any remaining taxes payable plus interest and any penalties would have to be remitted by TII. As the CRA Liability relates to write downs of intercompany debt taken in 2015, the Company is evaluating the current accounting impact and recording of accruals relating to the CRA Liability in the third quarter.