What changed in this filing

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Item 1. Financial Statements

2020-07-08 compared with 2020-04-08 · 286 added, 771 removed, 195 unchanged (84% of the section changed)

Financial Statements

Consolidated Balance Sheets

in thousands of US dollars

and cash equivalents

Accounts receivable

and prepaid amounts

Equity method

investment (note 4)

Plant and equipment

asset (note 8)

properties and development costs (note 6)

Accounts payable

and accrued liabilities (note 7)

portion of lease liability

Long-term portion

of lease liability (note 8)

properties purchase option

in thousands of US

Current assets

Cash and cash equivalents

Accounts receivable (note 3)

Deposits and prepaid amounts

Equity method investment (note 4)

Plant and equipment (note 5)

Mineral properties and development costs (note 6)

Rent deposit (note 8 (a))

Right of use asset (note 8 (a))

Current liabilities

Accounts payable and accrued liabilities (note 7)

Current portion of lease liability

Long-term portion of lease liability (note 8 (b))

Mineral properties purchase option

Shareholders’

capital (note 9) –

unlimited common shares authorized, no par value

-140,659,776 (2019 –

surplus –

capital (note 9) – unlimited common shares authorized, no par value Issued -140,922,886

(2019 – 140,427,761)

Contributed surplus

Contributed surplus –

options (note 9(a))

surplus –

Contributed surplus –

units (note 9(b))

Commitments (note 11)

(See accompanying notes to the interim consolidated

financial statements)

/s/ James Gowans, Director

/s/ Kalidas Madhavpeddi, Director

Approved on behalf of the Board of Directors

Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)

in thousands of US dollars, except

share and per share amounts

For the three months ended

Foreign exchange loss (gain)

(See accompanying notes to the interim

consolidated financial statements)

Giardini, President, CEO and Director

Madhavpeddi, Director

Approved on behalf of the Board of

Consolidated Statements of Income (Loss)

and Comprehensive

Income (Loss)

in thousands of

US dollars, except share and per share amounts

For the three

Feasibility study

Foreign exchange (gain) loss

General and administrative

8 unchanged sentences

Interest and other income

Comprehensive earnings (loss) for the period

Basic earnings (loss) per common share

Diluted earnings (loss) per common share

Comprehensive (loss) earnings for the

Basic (loss) earnings per common share

Diluted (loss) earnings per common share

Basic weighted average number of common shares outstanding

Diluted weighted average number of common shares outstanding

(See accompanying notes to the interim consolidated

financial statements)

Consolidated Statements of Changes in Shareholders’

(See accompanying notes to the interim

consolidated financial statements)

Consolidated Statements of Changes in Shareholders’ Equity

in thousands of US dollars, except share

of shares outstanding

surplus –

1 unchanged sentence

shareholders’

Balance –

November 30, 2018

4 unchanged sentences

Balance –

February 28, 2019

Exercise of options

Stock-based compensation

Loss for the period

Balance –

November 30, 2019

Balance –

Exercise of options

3 unchanged sentences

Balance –

February 29, 2020

(See accompanying notes to the interim consolidated

financial statements)

Exercise of options

Restricted Share Units

Stock-based compensation

Earnings for the period

Balance –

(See accompanying notes to the interim

consolidated financial statements)

Consolidated Statements of Cash Flows

in thousands of US dollars

For the three months ended

February 28, 2019

Cash flows used in operating activities

5 unchanged sentences

Loss on equity investment in Ambler Metals LLC.

Unrealized foreign exchange loss (gain)

Unrealized foreign exchange loss

Stock-based compensation

6 unchanged sentences

Mineral properties funding

Increase in cash and cash equivalents

(Decrease) increase in cash and cash equivalents

Effect of exchange rate on cash and cash equivalents

3 unchanged sentences

end of period

(See accompanying notes to the interim consolidated

financial statements)

(See accompanying

notes to the interim consolidated financial statements)

to the Interim Consolidated Financial Statements

of operations

1) Nature of operations

Trilogy Metals Inc.

(“Trilogy”

or the “Company”) was incorporated in British Columbia under the Business Corporations Act (BC) on April 27, 2011.

The Company is engaged in the exploration and development of mineral properties, through our equity investee (see note 4), with

a focus on the Upper Kobuk Mineral Projects (“UKMP”), including the Arctic and Bornite Projects located in Northwest

Alaska in the United States of America (“US”).

of significant accounting policies

a focus on the Upper Kobuk Mineral Projects (“UKMP”), including the Arctic and Bornite Projects located in Northwest

Alaska in the United States of America (“US”).

2) Summary of significant accounting

Basis of presentation

These interim consolidated financial statements

have been prepared using accounting principles generally accepted in the United States (“U.S.

GAAP”) and include

have been prepared using accounting principles generally accepted in the United States (“U.S.

GAAP”) and include

the accounts of Trilogy and its wholly owned subsidiary, NovaCopper US Inc.

(dba “Trilogy Metals US”).

significant intercompany transactions are eliminated on consolidation.

For variable interest entities (“VIEs”) where

Trilogy is not the primary beneficiary, we use the equity method of accounting.

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The unaudited interim consolidated financial

statements include all adjustments necessary for the fair presentation of the Company’s financial position as of February

29, 2020 and our results of operations and cash flows for the three months ended February 29, 2020 and February 28, 2019.

of operations for the three months ended February 29, 2020 are not necessarily indicative of the results to be expected for the

statements include all adjustments necessary for the fair presentation of the Company’s financial position as of May 31,

2020 and our results of operations and cash flows for the six months ended May 31, 2020 and May 31, 2019.

of operations for the six months ended May 31, 2020 are not necessarily indicative of the results to be expected for the

fiscal year ending November 30, 2020.

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in our Annual Report on Form 10-K for the fiscal year ended November 30, 2019, filed with the U.S.

Securities and Exchange Commission

(“SEC”) and Canadian securities regulatory authorities on February 13, 2020.

Securities and Exchange

Commission (“SEC”) and Canadian securities regulatory authorities on February 13, 2020.

These interim consolidated financial statements

were approved by the Company’s Audit Committee on behalf of the Board of Directors for issue on April 7, 2020.

were approved by the Company’s Audit Committee on behalf of the Board of Directors for issue on July 7, 2020.

Accounting standards adopted

In February 2016, the FASB issued new accounting

requirements for accounting for, presentation of, and classification of leases (“ASU 2016-02”) which, together with

subsequent amendments, is included in ASC 842, Leases.

In February 2016, the FASB issued

new accounting requirements for accounting for, presentation of, and classification of leases (“ASU 2016-02”) which,

together with subsequent amendments, is included in ASC 842, Leases.

ASC 842 became effective for the Company as of December 1,

The Company adopted ASC 842 using the modified

retrospective transition method by applying the transition provision and recording our cumulative adjustment to opening deficit

at the beginning of the period of adoption on December 1, 2019, rather than at the beginning of the comparative period presented.

Therefore, in the comparative periods, we continue to apply the legacy guidance in ASC 840, including its disclosure requirements.

The Company adopted ASC 842 using the

modified retrospective transition method by applying the transition provision and recording our cumulative adjustment to opening

deficit at the beginning of the period of adoption on December 1, 2019, rather than at the beginning of the comparative period

Therefore, in the comparative periods, we continue to apply the legacy guidance in ASC 840, including its disclosure

requirements.

We elected to apply all of the transition practical expedients available, including:

the package of three practical expedients to (1) not reassess whether any expired or existing contracts

are or contain leases, (2) not reassess the lease classification for any expired or existing leases, and (3) not reassess initial

direct costs for any existing lease;

the hindsight practical expedient to use hindsight when determining lease term and assessing impairment

of right-of-use assets, if any;

the easements practical expedient to continue applying our current policy for accounting for any land

easements expired before or existing as of December 1, 2019.

package of three practical expedients to (1) not reassess whether any expired or

existing contracts are or contain leases, (2) not reassess the lease classification

for any expired or existing leases, and (3) not reassess initial direct costs for

any existing lease;

hindsight practical expedient to use hindsight when determining lease term and assessing

impairment of right-of-use assets, if any;

easements practical expedient to continue applying our current policy for accounting

for any land easements expired before or existing as of December 1, 2019.

In addition, we elected to apply the short-term

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liabilities of $786,000 as at December 1, 2019.

ii Investment in affiliates

New accounting policy

Investment in affiliates

Investments in unconsolidated ventures

over which the Company has the ability to exercise significant influence, but does not control, are accounted for under the equity

method and include the Company’s investment in the Ambler Metals project.

We identified Ambler Metals LLC as a Variable Interest

Entity (VIE) as the entity is dependent on funding from its owners.

All funding, ownership, voting rights and power to exercise

control is shared equally on a 50/50 basis between the owners of the VIE.

Therefore, the Company has determined that it is not

the primary beneficiary of the VIE.

The Company’s maximum exposure to loss is its investment in Ambler Metals LLC.

method and include the Company’s investment in the Ambler Metals project.

We identified Ambler Metals LLC as a VIE as the

entity is dependent on funding from its owners.

All funding, ownership, voting rights and power to exercise control is shared

equally on a 50/50 basis between the owners of the VIE.

Therefore, the Company has determined that it is not the primary beneficiary

The Company’s maximum exposure to loss is its investment in Ambler Metals LLC.

Ambler Metals LLC is a non-publicly traded

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The Company reviews and evaluates its investment in affiliates for

other than temporary impairment when events or changes in circumstances indicate that the related carrying amounts may not be recoverable.

Events that could indicate impairment of an investment in affiliates include a significant decrease in long-term expected commodity

prices, a significant increase in expected operating or capital costs, unfavorable exploration results or technical studies, a

significant decrease in reserves, a loss of significant mineral claims or a change in the development plan or strategy for the

Asset impairment is considered to exist if the total estimated future cash flows on an undiscounted basis are less than

the carrying amount of the asset.

If the underlying assets are not recoverable, an impairment loss is measured and recorded based

on the difference between the carrying amount of the investee and its estimated fair value which may be determined using a discounted

cash flow model .

other than temporary impairment when events or changes in circumstances indicate that the related carrying amounts may not be

Events that could indicate impairment of an investment in affiliates include a significant decrease in long-term

expected commodity prices, a significant increase in expected operating or capital costs, unfavorable exploration results or technical

studies, a significant decrease in reserves, a loss of significant mineral claims or a change in the development plan or strategy

for the project.

Asset impairment is considered to exist if the total estimated future cash flows on an undiscounted basis are

less than the carrying amount of the asset.

If the underlying assets are not recoverable, an impairment loss is measured and recorded

based on the difference between the carrying amount of the investee and its estimated fair value which may be determined using

a discounted cash flow model .

3) Accounts receivable

in thousands of dollars

November 30, 2019

GST input tax credits

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The balance due from Ambler Metals LLC

(“Ambler Metals”) (see note 4 below) consists of $110 thousand for services rendered by Trilogy per a service agreement

(the “Service Agreement”) between Trilogy and Ambler Metals, $120 thousand for additional staking costs and $130 thousand

for invoices paid by Trilogy on behalf of Ambler Metals LLC, per the Service Agreement.

method investment

(see note 4 below) consists of services rendered by Trilogy and reimbursements for invoices paid by Trilogy on behalf of Ambler

Metals LLC per a service agreement.

The balance was paid in full by Ambler Metals LLC subsequent to the quarter end.

4) Equity method investment

(a) Formation of Ambler Metals LLC

On February 11,

2020, the Company completed the formation of a 50/50 joint venture named Ambler Metals with South32 Limited (“South32”).

As part of the formation of the joint venture, Trilogy contributed all of its assets associated with the Upper Kobuk Mineral Projects

(“UKMP”), including the Arctic and Bornite projects, while South32 contributed US$145 million, resulting in each party’s

subsidiaries directly owning a 50% interest in Ambler Metals.

Ambler Metals is an independently operated

company jointly controlled by Trilogy and South32 through a four-member board, of which two members are currently appointed by

Trilogy based on its 50% equity interest.

2020, the Company completed the formation of a 50/50 joint venture named Ambler Metals LLC with South32 Limited (“South32”).

As part of the formation of the joint venture, Trilogy contributed all its assets associated with the UKMP, including the Arctic

and Bornite Projects, while South32 contributed US$145 million, resulting in each party’s subsidiaries directly owning a

50% interest in Ambler Metals LLC.

Ambler Metals LLC is an independently

operated company jointly controlled by Trilogy and South32 through a four-member board, of which two members are currently appointed

by Trilogy based on its 50% equity interest.

All significant decisions related to the UKMP require the approval of both companies.

We determined that Ambler Metals is a VIE because it is expected to need additional funding from its owners for its significant

However, we concluded that we are not the primary beneficiary of Ambler Metals as the power to direct its activities,

through its board, is shared under the Ambler Metals limited liability company agreement.

As we have significant influence over

Ambler Metals through our representation on its board, we use the equity method of accounting for our investment in Ambler Metals.

Our investment in Ambler Metals was initially measured at its fair value of $176 million upon recognition.

Our maximum exposure

to loss in this entity is limited to the carrying amount of our investment in Ambler Metals, which totaled $176 million, as well

as $0.4 million of amounts receivable per the Service Agreement.

The following table summarizes the gain on recognition of the

UKMP assets upon transfer to the Ambler Metals joint venture on February 11, 2020.

Fair value ascribed to Ambler Metals interest

We determined that Ambler Metals LLC is a VIE because it is expected to need additional funding from its owners for its significant

However, we concluded that we are not the primary beneficiary of Ambler Metals LLC as the power to direct its activities,

through its board, is shared under the Ambler Metals LLC limited liability company agreement.

As we have significant influence

over Ambler Metals LLC through our representation on its board, we use the equity method of accounting for our investment in Ambler

Our investment in Ambler Metals LLC was initially measured at its fair value of $176 million upon recognition.

maximum exposure to loss in this entity is limited to the carrying amount of our investment in Ambler Metals LLC, which totaled

$176 million, as well as $668 thousand of amounts receivable per a service agreement.

The following table summarizes the gain

on recognition of the UKMP assets upon transfer to the Ambler Metals LLC joint venture on February 11, 2020.

thousands of dollars

Fair value ascribed to Ambler Metals LLC interest

carrying value of contributed /eliminated assets

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(b) Carrying value of equity method investment

During the three-month period ended February

29, 2020, Trilogy recognized, based on its 50% ownership interest in Ambler Metals, an equity pick-up equivalent to its pro rata

share of Ambler Metals’

operating loss of $0.4 million for the period between February 11, 2020 (date of joint venture formation)

to February 29, 2020.

The carry value of Trilogy’s 50% investment in Ambler Metals as at February 29, 2020 is summarized

on the following table.

February 11, 2020, fair value ascribed to Ambler Metals interest

Share of loss on equity investment

February 29, 2020, equity method investment

During the six-month period ended May 31,

2020, Trilogy recognized, based on its 50% ownership interest in Ambler Metals LLC, an equity loss equivalent to its pro rata

share of Ambler Metals LLC’s comprehensive loss of $1.48 million for the period between February 11, 2020 (date of

joint venture formation) to May 31, 2020.

The carrying value of Trilogy’s 50% investment in Ambler Metals LLC as at

May 31, 2020 is summarized on the following table.

thousands of dollars

February 11, 2020, fair value ascribed to Ambler Metals LLC

Share of loss on equity investment for the six-month period ended May 31, 2020

May 31, 2020, equity method investment

Metals LLC’s Balance Sheet as at May 31, 2020.

thousands of dollars

Current assets:

2 unchanged sentences

Property, equipment and mineral properties

Loan receivable from South32

Current liabilities:

2 unchanged sentences

Lease obligation

(d) The following table summarizes Ambler Metals comprehensive loss from the formation of the joint

venture on February 11, 2020 to the end of the reporting period on February 29, 2020.

(d) The following table summarizes Ambler

Metals LLC’s comprehensive loss from the formation of the joint venture on February 11,

2020 to the end of the reporting period on May 31, 2020.

– May 31, 2020

Mineral properties expense

3 unchanged sentences

and equipment

in thousands of dollars

in thousands of

British Columbia, Canada

14 unchanged sentences

in thousands of dollars

costs reimbursable

in thousands of dollars

November 30, 2018

Acquisition costs

November 30, 2019

(a) Mineral properties expense

1 unchanged sentence

properties expense for the noted periods.

In thousands of dollars

In thousands of

Environmental

3 unchanged sentences

Wages and benefits

Mineral property expenses consist of direct

drilling, personnel, community, resource reporting and other exploration expenses as outlined above, as well as indirect project

support expenses such as fixed wing charters, helicopter support, fuel, and other camp operation costs.

Expenses during the first

quarter ended February 29, 2020 consisted mainly of engineering studies in preparation of the Arctic feasibility study and care

and maintenance of the camp during the winter season.

Cumulative mineral properties expense in Alaska from the initial earn-in

agreement on the property in 2004 to February 29, 2020 is $115.3 million and cumulative acquisition costs were $30.6 million.

Cumulative spend to date totaled $145.9 million through to February 29, 2020.

On February 11, 2020, upon the formation of the joint

venture with South 32, the acquisition costs of $30.6 million were derecognized upon the contribution of the mineral properties

to Ambler Metals.

No additional mineral properties expenses

were incurred during the three-month period ended May 31, 2020, as on February 11, 2020, upon the formation of the joint

venture with South 32, all mineral properties previously held by the Company were contributed to Ambler Metals LLC.

continues to fund the Arctic Project feasibility study, costs for which were $0.7 million since the formation of the joint venture

on February 11, 2020.

The table above is for comparison purposes for the respective periods.

(b) Derecognition

part of the formation of the joint venture with South32 on February 11, 2020, Trilogy contributed all of its assets associated

part of the formation of the joint venture with South32 on February 11, 2020, Trilogy contributed all its assets associated

with the UKMP, including the Arctic and Bornite projects.

11 unchanged sentences

Lease accretion

Derecognition of Fairbanks warehouse lease

Derecognition of

Fairbanks warehouse lease

The pre-transition rent deposit of $114

thousand was transferred to the Right-of-use asset upon adoption of ASC 842 on December 1, 2019 and is included in the opening

balance of $681 thousand.

(b) Lease liabilities

Company’s lease arrangements primarily consist of an operating lease for our office space ending in June 2024.

no extension options.

Company’s lease arrangements primarily consist of an operating lease for our office space ending in June 2024.

are no extension options.

lease expense recorded within general and administrative expenses was comprised of the following components:

2 unchanged sentences

Total lease expense

lease costs consist primarily of the Company’s portion of operating costs associated with the office space lease as the Company

elected to apply the practical expedient not to separate lease and non-lease components.

of February 29, 2020, the weighted-average remaining lease term was 4.3 years and the weighted-average discount rate is 8%.

judgment was used in the determination of the incremental borrowing rate which included estimating the Company’s credit rating.

cash and non-cash information relating to our leases during the three months ended February 29, 2020 are as follows:

Cash paid for amounts included in the measurement of lease

liabilities was $54,134.

No cash was paid upon termination of a lease for office and

warehouse space and reassignment to Ambler Metals that resulted in the derecognition of the right-of-use asset of $92,974 and the

operating lease liability of $93,006.

minimum payments relating to the lease recognized in our balance sheet as of February 29, 2020 are as follows:

lease costs consist primarily of the Company’s portion of operating costs associated with the office space lease as the

Company elected to apply the practical expedient not to separate lease and non-lease components.

of May 31, 2020, the weighted-average remaining lease term was 4.1 years and the weighted-average discount rate is 8%.

judgment was used in the determination of the incremental borrowing rate which included estimating the Company’s credit

cash and non-cash information relating to our leases during the six months ended May 31, 2020 are as follows:

paid for amounts included in the measurement of lease liabilities was $96,842.

cash was paid upon termination of a lease for office and warehouse space and reassignment

to Ambler Metals LLC that resulted in the derecognition of the right-of-use asset of

$92,974 and the operating lease liability of $93,006.

minimum payments relating to the lease recognized in our balance sheet as of May 31, 2020 are as follows:

thousands of dollars

Total undiscounted lease payments

Effect of discounting

Present value of lease payments recognized as lease liability

unlimited common shares, no par

in thousands of dollars,

except share amounts

Present value of lease payments recognized as

lease liability

unlimited common shares,

thousands of dollars, except share amounts

Number of shares

November 30, 2018

6 unchanged sentences

Restricted Share Units

February 29, 2020, issued and outstanding

On April 30, 2012, under the NovaGold

Arrangement, Trilogy committed to issue common shares to satisfy holders of NovaGold deferred share units (“NovaGold DSUs”)

on record as of the close of business April 27, 2012.

When vested, Trilogy committed to deliver one common share to the holder

for every six shares of NovaGold the holder is entitled to receive, rounded down to the nearest whole number.

As of February 29,

2020, 11,927 NovaGold DSUs remained outstanding representing a right to receive 1,988 common shares in Trilogy, which will settle

upon certain directors retiring from NovaGold’s board.

(a) Stock options

During the period ended February 29, 2020,

the Company granted 2,050,000 options (2019 –

2,430,000 options) at a weighted-average exercise price of CAD$3.02 (2019 –

CAD$2.94) to employees, consultants and directors exercisable for a period of five years with various vesting terms from immediate

vesting to over a two-year period.

The weighted-average fair value attributable to options granted in the period was $0.99 (2019

For the period ended February 29, 2020,

Trilogy recognized a stock-based compensation charge of $1.16 million (2019 –

$1.59 million) for options granted

to directors, employees and service providers, net of estimated forfeitures.

The fair value of the stock options recognized

in the period has been estimated using the Black-Scholes option pricing model.

Assumptions used in the pricing model for

the period are as provided below.

May 31, 2020, issued

and outstanding

On April 30, 2012,

under the NovaGold Arrangement, Trilogy committed to issue common shares to satisfy holders of NovaGold deferred share units (“NovaGold

DSUs”) on record as of the close of business April 27, 2012.

When vested, Trilogy committed to deliver one common share

to the holder for every six shares of NovaGold the holder is entitled to receive, rounded down to the nearest whole number.

of May 31, 2020, 11,927 NovaGold DSUs remained outstanding representing a right to receive 1,988 common shares in Trilogy,

which will settle upon certain directors retiring from NovaGold’s board.

During the period ended

May 31, 2020, the Company granted 2,325,000 options (2019 – 2,527,500 options) at a weighted-average exercise price

of CAD$2.93 (2019 – CAD$2.96) to employees, consultants and directors exercisable for a period of five years with various

vesting terms from immediate vesting to vesting over a two-year period.

The weighted-average fair value attributable to options

granted in the period was $0.96 (2019 - $1.08).

For the period ended May 31,

2020, Trilogy recognized a stock-based compensation charge of $1.58 million (2019 – $1.94 million) for options

granted to directors, employees and service providers, net of estimated forfeitures.

The fair value of the stock

options recognized in the period has been estimated using the Black-Scholes option pricing model.

Assumptions used in the

pricing model for the period are as provided below.

Risk-free interest rates

3 unchanged sentences

Expected dividends

As of February 29, 2020, there were 1,453,338

non-vested options outstanding with a weighted average exercise price of $2.21;

the non-vested stock option expense not yet recognized

was $0.95 million.

As of May 31, 2020,

there were 1,453,338 non-vested options outstanding with a weighted average exercise price of $2.15;

the non-vested stock option

expense not yet recognized was $0.71 million.

This expense is expected to be recognized over the next two years.

A summary of the Company’s stock

option plan and changes during the period ended February 29, 2020 is as follows:

average exercise price

A summary of the Company’s

stock option plan and changes during the period ended May 31, 2020 is as follows:

exercise price

Balance –

2 unchanged sentences

end of period

The following table summarizes information

about the stock options outstanding at February 29, 2019.

of outstanding

The following table summarizes information about

the stock options outstanding at May 31, 2020.

outstanding options

average years

exercise price

of exercisable options

exercise price

$0.33 to $0.50

$0.51 to $1.00

$1.01 to $1.50

$1.51 to $2.00

$2.01 to $2.54

The aggregate intrinsic value of vested

share options (the market value less the exercise price) at February 29, 2020 was $5.9 million (2019 - $13 million) and the aggregate

intrinsic value of exercised options for the three months ended February 29, 2020 was $0.04 million (2019 - $0.08 million).

(b) Restricted Share Units and Deferred Share Units

The Company has a Restricted Share Unit

Plan (“RSU Plan”) and a Non-Executive Director Deferred Share Unit Plan (“DSU Plan”) to provide long-term

incentives to employees, officers and directors.

Awards under the RSU Plan and DSU Plan may be settled in cash and/or common shares

of the Company at the Company’s election with each restricted share unit (“RSU”) and deferred share unit (“DSU”)

entitling the holder to receive one common share of the Company or equivalent value.

All units are accounted for as equity-settled

A summary of the Company’s unit plans

and changes during the period ended February 29, 2020 is as follows:

unvested options

The aggregate intrinsic

value of vested share options (the market value less the exercise price) at May 31, 2020 was $8.3 million (2019 - $17.6 million)

and the aggregate intrinsic value of exercised options for the three months ended May 31, 2020 was $0.18 million (2019 -

$0.30 million).

(b) Restricted

Share Units and Deferred Share Units

The Company has a Restricted

Share Unit Plan (“RSU Plan”) and a Non-Executive Director Deferred Share Unit Plan (“DSU Plan”) to provide

long-term incentives to employees, officers and directors.

Awards under the RSU Plan and DSU Plan may be settled in cash and/or

common shares of the Company at the Company’s election with each restricted share unit (“RSU”) and deferred

share unit (“DSU”) entitling the holder to receive one common share of the Company or equivalent value.

are accounted for as equity-settled awards.

A summary of the Company’s

unit plans and changes during the period ended May 31, 2020 is as follows:

Balance –

1 unchanged sentence

Balance –

end of period

For the period ended February 29, 2020,

For the period ended May 31,

2020, Trilogy recognized a stock-based compensation charge of $0.39 million (2019- $0.66 million), net of estimated forfeitures.

No RSUs were granted as part of the annual

incentive payout for the 2019 fiscal year to officers.

The 225,000 RSUs granted for the annual incentive payout for the 2018 fiscal

year vested half on the grant date and half on the first anniversary of the grant date.

RSUs vesting in December 2019 were settled

on December 17, 2019 through the issuance of 212,501 common shares.

The 200,000 RSUs granted

and fully vested during the period were settled on April 16, 2020 through the issuance of 200,000 common shares.

RSUs granted for the annual incentive payout for the 2018 fiscal year vested half on the grant date and half on the first anniversary

of the grant date.

RSUs vesting in December 2019 were settled on December 17, 2019 through the issuance of 212,501 common

10) Financial

The Company is exposed to a variety of

risks arising from financial instruments.

These risks and management’s objectives, policies and procedures for managing these

risks are disclosed as follows.

The Company’s financial

The Company is exposed to

a variety of risks arising from financial instruments.

These risks and management’s objectives, policies and procedures

for managing these risks are disclosed as follows.

The Company’s financial

instruments consist of cash and cash equivalents, accounts receivable, deposits, and accounts payable and accrued liabilities.

The fair value of the Company’s financial instruments approximates their carrying value due to the short-term nature of their

The Company’s financial instruments initially measured at fair value and then held at amortized cost include cash

and cash equivalents, accounts receivable, deposits, and accounts payable and accrued liabilities.

The fair value of the Company’s financial instruments approximates their carrying value due to the short-term nature of

their maturity.

The Company’s financial instruments initially measured at fair value and then held at amortized cost include

cash and cash equivalents, accounts receivable, deposits, and accounts payable and accrued liabilities.

Financial risk management

The Company’s activities expose it

to certain financial risks, including currency risk, credit risk, liquidity risk, interest risk and price risk.

(a) Currency risk

Currency risk is the risk of a fluctuation

in financial asset and liability settlement amounts due to a change in foreign exchange rates.

The Company operates in the United

States and Canada.

The Company’s exposure to currency risk at February 29, 2020 is limited to the Canadian dollar consisting

of cash of CDN$540,000, accounts receivable of CDN$49,000 and accounts payable of CDN$865,000.

Based on a 10% change in the US-Canadian

exchange rate, assuming all other variables remain constant, the Company’s net loss would change by approximately $21,000.

(b) Credit risk

Credit risk is the risk of an unexpected

loss if a customer or third party to a financial instrument fails to meet its contractual obligations.

The Company holds cash and

cash equivalents with Canadian Chartered financial institutions.

The Company’s accounts receivable consists of Canadian Goods

and Services Tax receivable from the Federal Government of Canada and other receivables for recoverable expenses.

The Company’s

exposure to credit risk is equal to the balance of cash and cash equivalents and accounts receivable as recorded in the financial

Liquidity risk is the risk that the Company

will encounter difficulties raising funds to meet its financial obligations as they fall due.

The Company is in the exploration

stage and does not have cash inflows from operations;

therefore, the Company manages liquidity risk through the management of its

capital structure and financial leverage.

Contractually obligated cash flow requirements

as at February 29, 2020 are as follows:

The Company’s activities

expose it to certain financial risks, including currency risk, credit risk, liquidity risk, interest risk and price risk.

Currency risk is the risk

of a fluctuation in financial asset and liability settlement amounts due to a change in foreign exchange rates.

The Company operates

in the United States and Canada.

The Company’s exposure to currency risk at May 31, 2020 is limited to the Canadian

dollar balances consisting of cash of CDN$87,000, accounts receivable of CDN$42,000 and accounts payable of CDN$347,000.

on a 10% change in the US-Canadian exchange rate, assuming all other variables remain constant, the Company’s net loss

would change by approximately $16,000.

Credit risk is the risk

of an unexpected loss if a customer or third party to a financial instrument fails to meet its contractual obligations.

holds cash and cash equivalents with Canadian Chartered financial institutions.

The Company’s accounts receivable consists

of Canadian Goods and Services Tax receivable from the Federal Government of Canada and other receivables for recoverable expenses.

The Company’s exposure to credit risk is equal to the balance of cash and cash equivalents and accounts receivable as recorded

in the financial statements.

Liquidity risk is the risk

that the Company will encounter difficulties raising funds to meet its financial obligations as they fall due.

The Company is

in the exploration stage and does not have cash inflows from operations;

therefore, the Company manages liquidity risk through

the management of its capital structure and financial leverage.

Contractually obligated

cash flow requirements as at May 31, 2020 are as follows:

in thousands of dollars

Accounts payable and accrued liabilities

(d) Interest rate risk

Interest rate risk is the risk that the

fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.

is exposed to interest rate risk with respect to interest earned on cash and cash equivalents.

Based on balances as at February

29, 2020, a 1% change in interest rates would result in a change in net loss of $0.1 million, assuming all other variables remain

Accounts payable and accrued

Interest rate risk is the

risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.

The Company is exposed to interest rate risk with respect to interest earned on cash and cash equivalents.

Based on balances as

at May 31, 2020, a 1% change in interest rates would result in a change in net loss of $0.1 million, assuming all other variables

remain constant.

11) Commitment

The Company has commitments with respect

to an office lease requiring future minimum lease payments as summarized in note 8(b) above.

Management’s Discussion and Analysis of Financial Condition and Results

of Operations

Management’s

Discussion and Analysis

in US dollars)

Forward-looking statements

This Management’s Discussion and

Analysis contains “forward-looking information”

and “forward-looking statements”

within the meaning of

Section 27A of the U.S.

Securities Act of 1933, as amended, Section 21E of the U.S.

Securities Exchange Act of 1934, as amended

(the “Exchange Act”), and other applicable securities laws.

These forward-looking statements may include statements

regarding the Company’s work programs and budgets;

perceived merit of properties, exploration results and budgets, the Company

and Ambler Metals’

funding requirements, mineral reserves and resource estimates, work programs, capital expenditures, operating

costs, cash flow estimates, production estimates and similar statements relating to the economic viability of a project, timelines,

strategic plans, statements regarding Ambler Metals’

plans and expectations relating to its Upper Kobuk Mineral Projects,

sufficiency of the $145 million subscription price to fund the UKMP through feasibility and the permitting of the first mine;

of COVID-19 on the upcoming field season;

market prices for precious and base metals, or other statements that are not statements

These statements relate to analyses and other information that are based on forecasts of future results, estimates of

amounts not yet determinable and assumptions of management.

Statements concerning mineral resource estimates may also be deemed

to constitute “forward-looking statements”

to the extent that they involve estimates of the mineralization that will

be encountered if the property is developed.

Any statements that express or involve

discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or

performance (often, but not always, identified by words or phrases such as “expects”, “is expected”, “anticipates”,

“believes”, “plans”, “projects”, “estimates”, “assumes”, “intends”,

“strategy”, “goals”, “objectives”, “potential”, “possible”

or variations

thereof or stating that certain actions, events, conditions or results “may”, “could”, “would”,

“should”, “might”

or “will”

be taken, occur or be achieved, or the negative of any of these

terms and similar expressions) are not statements of historical fact and may be forward-looking statements.

Forward-looking statements are based

on the beliefs, expectations and opinions of management on the date the statements are made, as well as on a number of material

assumptions, which could prove to be significantly incorrect, including about:

our ability to achieve production at the Upper Kobuk Mineral Projects;

the accuracy of our mineral resource and reserve estimates;

the results, costs and timing of future exploration drilling and engineering;

timing and receipt of approvals, consents and permits under applicable legislation;

the adequacy of our financial resources;

the receipt of third party contractual, regulatory and governmental approvals for the exploration,

development, construction and production of our properties;

our expected ability to develop adequate infrastructure and that the cost of doing so will be reasonable;

continued good relationships with South32, our joint venture partner, as well as local communities

and other stakeholders;

there being no significant disruptions affecting operations, whether relating to labor, supply,

power damage to equipment or other matter;

expected trends and specific assumptions regarding metal prices and currency exchange rates;

the potential impact of the novel coronavirus (COVID-19);

prices for and availability of fuel, electricity, parts and equipment and other key supplies remaining

consistent with current levels.

We have also assumed that no significant

events will occur outside of our normal course of business.

Although we have attempted to identify important factors that could

cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other

factors that cause actions, events or results not to be as anticipated, estimated or intended.

We believe that the assumptions

inherent in the forward-looking statements are reasonable as of the date of this MD&A.

However, forward-looking statements

are not guarantees of future performance and, accordingly, undue reliance should not be put on such statements due to the inherent

uncertainty therein.

Forward-looking statements are subject

to a variety of known and unknown risks, uncertainties and other factors that could cause actual events or results to differ from

those reflected in the forward-looking statements, including, without limitation:

risks related to inability to define proven and probable reserves;

risks related to our ability to finance the development of our mineral properties through external

financing, strategic alliances, the sale of property interests or otherwise;

uncertainty as to whether there will ever be production at the Company’s mineral exploration

and development properties;

risks related to our ability to commence

production and generate material revenues or obtain adequate financing for our planned exploration and development activities;

risks related to lack of infrastructure including but not limited to the risk whether or not

the Ambler Mining District Industrial Access Project, or AMDIAP, will receive the requisite permits and, if it does, whether the

Alaska Industrial Development and Export Authority will build the AMDIAP;

risks related to inclement weather which may delay or hinder exploration activities at our mineral

risks related to our dependence on a third party for the development of our projects;

commodity price fluctuations;

our history of losses and expectation of future losses;

uncertainties relating to the assumptions underlying our resource estimates, such as metal pricing,

metallurgy, mineability, marketability and operating and capital costs;

uncertainty related to inferred mineral resources;

mining and development risks, including risks related to infrastructure, accidents, equipment

breakdowns, labor disputes or other unanticipated difficulties with or interruptions in development, construction or production;

risks related to market events and general economic conditions;

risks related to the outbreak of the coronavirus (COVID-19);

risks and uncertainties relating to the interpretation of drill results, the geology, grade

and continuity of our mineral deposits;

risks related to governmental regulation and permits, including environmental regulation, including

the risk that more stringent requirements or standards may be adopted or applied due to circumstances unrelated to the Company

and outside of our control;

the risk that permits and governmental approvals necessary to develop and operate mines at our

mineral properties will not be available on a timely basis or at all;

risks related to the need for reclamation activities on our properties and uncertainty of cost

estimates related thereto;

uncertainty related to title to our mineral properties;

risks related to the acquisition and integration of operations or projects;

risks related to increases in demand for equipment, skilled labor and services needed for exploration

and development of mineral properties, and related cost increases;

our need to attract and retain qualified management and technical personnel;

risks related to conflicts of interests of some of our directors and officers;

risks related to potential future litigation;

risks related to the voting power of our major shareholders and the impact that a sale by such

shareholders may have on our share price;

risks related to global climate change;

risks related to adverse publicity from non-governmental organizations;

uncertainty as to our ability to maintain the adequacy of internal control over financial reporting

as per the requirements of Section 404 of the Sarbanes-Oxley Act;

increased regulatory compliance costs, associated with rules and regulations promulgated by

the United States Securities and Exchange Commission, Canadian Securities Administrators, the NYSE American, the Toronto Stock

Exchange, and the Financial Accounting Standards Boards, and more specifically, our efforts to comply with the Dodd-Frank Wall

Street Reform and Consumer Protection Act;

uncertainty as to the volatility in the price of the Company’s common shares;

the Company’s expectation of not paying cash dividends;

adverse federal income tax consequences for U.S.

shareholders should the Company be a passive

foreign investment company.

This list is not exhaustive of the factors

that may affect any of the Company’s forward-looking statements.

Forward-looking statements are statements about the future

and are inherently uncertain, and actual achievements of the Company or other future events or conditions may differ materially

from those reflected in the forward-looking statements due to a variety of risks, uncertainties and other factors, including, without

limitation, those referred to in Trilogy’s Form 10-K dated February 13, 2020, filed with the Canadian securities regulatory

authorities and the SEC, and other information released by Trilogy and filed with the appropriate regulatory agencies.

The Company’s forward-looking

statements are based on the beliefs, expectations and opinions of management on the date the statements are made, and the Company

does not assume any obligation to update forward-looking statements if circumstances or management’s beliefs, expectations

or opinions should change, except as required by law.

For the reasons set forth above, investors should not place undue reliance

on forward-looking statements.

Cautionary note to United States investors

Reserve and resource estimates

This Management’s Discussion and

Analysis has been prepared in accordance with the requirements of the securities laws in effect in Canada, which differ from the

requirements of U.S.

securities laws.

Unless otherwise indicated, all resource and reserve estimates included in this Management’s

Discussion and Analysis have been prepared in accordance with National Instrument 43-101 Standards of Disclosure for Mineral

Projects (“NI 43-101”) and the Canadian Institute of Mining, Metallurgy, and Petroleum Definition Standards on Mineral

Resources and Mineral Reserves.

NI 43-101 is a rule developed by the Canadian Securities Administrators which establishes standards

for all public disclosure an issuer makes of scientific and technical information concerning mineral projects.

Canadian standards,

including NI 43-101, differ significantly from the requirements of the SEC, and resource and reserve information contained herein

may not be comparable to similar information disclosed by U.S.

In particular, and without limiting the generality of

the foregoing, the term “resource”

does not equate to the term “reserves”.

standards, mineralization

may not be classified as a “reserve”

unless the determination has been made that the mineralization could be economically

and legally produced or extracted at the time the reserve determination is made.

The SEC’s disclosure standards normally

do not permit the inclusion of information concerning “measured mineral resources”, “indicated mineral resources”

or “inferred mineral resources”

or other descriptions of the amount of mineralization in mineral deposits that do not

constitute “reserves”

standards in documents filed with the SEC.

Investors are cautioned not to assume that

any part or all of mineral deposits in these categories will ever be converted into reserves.

investors should also understand

that “inferred mineral resources”

have a great amount of uncertainty as to their existence and great uncertainty as

to their economic and legal feasibility.

It cannot be assumed that all or any part of an “inferred mineral resource”

will ever be upgraded to a higher category.

Under Canadian rules, estimated “inferred mineral resources”

the basis of feasibility or pre-feasibility studies except in rare cases.

Investors are cautioned not to assume that all or any

part of an “inferred mineral resource”

exists or is economically or legally mineable.

Disclosure of “contained ounces”

in a resource is permitted disclosure under Canadian regulations;

however, the SEC normally only permits issuers to report mineralization

that does not constitute “reserves”

by SEC standards as in-place tonnage and grade without reference to unit measures.

The requirements of NI 43-101 for identification of “reserves”

are also not the same as those of the SEC, and reserves

reported by the Company in compliance with NI 43-101 may not qualify as “reserves”

under SEC standards.

information concerning mineral deposits set forth herein may not be comparable with information made public by companies that report

in accordance with U.S.

This Management’s Discussion and

Analysis (“MD&A”) of Trilogy Metals Inc.

(“Trilogy”, “Trilogy Metals”, “the Company”

or “we”) is dated April 7, 2020 and provides an analysis of our unaudited interim financial results for the quarter

ended February 29, 2020 compared to the quarter ended February 28, 2019.

The following information should be read

in conjunction with our February 29, 2020 unaudited interim condensed consolidated financial statements and related notes which

were prepared in accordance with United States generally accepted accounting principles (“U.S.

GAAP”).

should also be read in conjunction with our audited consolidated financial statements and related notes for the year ended November 30, 2019.

A summary of the U.S.

GAAP accounting policies is outlined in note 2 of the audited consolidated financial statements.

All amounts are in United States dollars unless otherwise stated.

References to “Canadian dollars”

and “C$”

and “CDN$”

are to the currency of Canada and references to “U.S.

dollars”, “$”

or “US$”

are to the currency of the United States.

West, P.Geo., an employee and

Exploration Manager, is a Qualified Person under National Instrument 43-101 - Standards of Disclosure for Mineral Projects

(“NI 43-101”), and has approved the scientific and technical information in this MD&A.

Trilogy’s shares are listed on the

Toronto Stock Exchange (“TSX”) and the NYSE American Stock Exchange (“NYSE American”) under the symbol

“TMQ”.

Additional information related to Trilogy, including our annual report on Form 10-K, is available on SEDAR at

www.sedar.com and on EDGAR at www.sec.gov .

We are a base metals exploration company

focused on exploring and developing our mineral holdings in the Ambler mining district located in Alaska, U.S.A.

We conduct our

operations through a wholly owned subsidiary, NovaCopper US Inc.

which is doing business as Trilogy Metals US (“Trilogy Metals

Our Upper Kobuk Mineral Projects, (“UKMP”

or “UKMP Projects”) were contributed into a 50/50

joint venture named Ambler Metals LLC (‘Ambler Metals”) between Trilogy and South32 Limited (‘South32”)

on February 11, 2020 (see below).

The projects contributed to the joint venture consist of:

i) the Ambler lands which host the

Arctic copper-zinc-lead-gold-silver project (the “Arctic Project”);

and ii) the Bornite lands being explored under

a collaborative long-term agreement with NANA Regional Corporation, Inc.

(“NANA”), a regional Alaska Native Corporation,

which host the Bornite carbonate-hosted copper project (the “Bornite Project”) and related assets.

Long-term incentives

19, 2019, the Board of Directors approved the granting of 2,050,000 stock options to employees and directors with various vesting

2020 Operating Budget for the Upper

Kobuk Mineral Projects

release dated February 26, 2020, the Company announced that Ambler Metals had approved a 2020 program budget of $22.8 million for

the advancement of the UKMP.

The budget is 100% funded by Ambler Metals.

The 2020 program budget includes 10,000 meters of drilling

at the Arctic Project, 2,500 meters of drilling within the Ambler Volcanogenic massive Sulphide (“VMS”) Belt and geological

mapping and geochemical soil sampling at the Bornite Project.

However, the timing of these programs may be delayed , see

Impact of Coronavirus (COVID-19) ”

Arctic Project

at the Arctic Project will continue to focus on advancing studies and preparing for permit applications.

Ambler Metals plans to

conduct a 10,000-meter drilling program at the Arctic Project during the summer field season to gather additional drill data for

the conversion of resources to the measured category, the next phase of metallurgical studies, including pilot plant testing, and

geotechnical drilling for infrastructure placement.

The drill program is expected to commence in mid-June and finish at the end

Studies are expected to continue throughout the year.

Bornite Project

2020 field program at the Bornite Project will consist of geological mapping and geochemical soil sampling over the northern Cosmos

Hills and review of drill core and surface exposures to determine controls on high grade zones of copper mineralization.

there is no planned drilling at the Bornite Project in 2020, the Bornite geological database will be updated and the team will

identify priority drill targets for the 2021 field season.

Regional Exploration Project

up from the 2019 work performed by Trilogy along the 70-mile (100 kilometer) Ambler VMS belt, Ambler Metals will continue exploration

efforts within the Ambler VMS belt to discover and define potential deposits that can provide additional feed to a future Arctic

Ambler Metals plans to conduct a 2,500-meter drill campaign in the VMS belt, following up from last year’s drilling

at the Sunshine prospect and at other identified targets.

The drill program is expected to commence in mid-July and finish at the

end of August.

The drilling will be preceded by detailed geologic mapping, geochemical soil sampling, and ground geophysics.

Impact of Coronavirus (COVID-19)

With respect to the outbreak of the novel

coronavirus (COVID-19), Trilogy recognizes that the situation is extremely fluid and is monitoring the State of Alaska Health Department

recommendations and restrictions on travel.

These recommendations and restrictions may significantly impact our ability to conduct

the planned work programs during the upcoming field season.

So, although the work programs discussed above are still currently

scheduled to commence as originally planned, our highest priority is the health, safety and welfare of our employees, contractors

and community members.

As a result, we and our joint venture partner, through Ambler Metals, will make the necessary adjustments

to the work programs, including extending the timeline or scope for the remainder of the programs, or even cancelling the planned

exploration activities at the UKMP for this season, if it is determined to be necessary or prudent to do so.

Option agreement

On April 10, 2017, Trilogy and Trilogy

Metals US entered into an Option Agreement to form a Joint Venture with South32 Group Operations Pty Ltd., a wholly-owned subsidiary

of South32, which agreement was later assigned by South32 Operations to its affiliate, South32 USA Exploration Inc.

(“Option Agreement”).

Under the terms of the Option Agreement, as amended, Trilogy Metals US granted South32 the right

to form a 50/50 joint venture to hold all of Trilogy Metals US’

Alaskan assets which South32 exercised on December 19, 2019.

Formation of joint venture

On February 11, 2020, Trilogy completed

the 50/50 joint venture with South32.

Trilogy contributed all of its assets associated with the 172,675-hectare UKMP, including

the Arctic and Bornite projects, while South32 contributed a subscription price of US$145 million (the “Subscription Price”),

resulting in each party owning a 50% interest in Ambler Metals.

The Subscription Price will be used to advance the Arctic and Bornite

Projects, along with exploration in the Ambler mining district.

With Ambler Metals being well funded, with access to $145 million,

Trilogy does not expect to fund programs and budgets to advance the UKMP until the Subscription Price is spent by Ambler Metals.

Ambler Metals is an independently operated

company controlled by Trilogy and South32 through a four-member board of which two members are currently appointed by Trilogy based

on its 50% equity interest.

All significant decisions related to the UKMP require the approval of both companies.

We determined

that Ambler Metals is a variable interest entity, or VIE, because it is expected to need additional funding from its owners for

its significant activities.

However, we concluded that we are not the primary beneficiary of Ambler Metals as the power to direct

its activities, through its board, is shared under the limited liability company agreement.

As we have significant influence over

Ambler Metals through our representation on its board, we use the equity method of accounting for our investment in Ambler Metals.

Our investment in Ambler Metals was initially measured at its fair value of $176 million upon recognition.

Our maximum exposure

to loss in this entity is limited to the carrying amount of our investment in Ambler Metals, which totaled $176 million as well

as $0.4 million of amounts receivable per a Service Agreement between Trilogy and Ambler Metals.

Subsequent to the end of the first quarter,

Ambler Metals loaned US$57.5 million back to South32 and retained $87.5 million.

The loan has a 7-year maturity date, but Ambler

Metals can demand earlier repayment in installments as required to advance development studies, resource drilling and regional

exploration programs.

The loan is secured by South32’s membership interest in the LLC and guaranteed by South32 International

Investment Holdings Pty Ltd.

Trilogy currently estimates that the Subscription Price, which includes the funds to be repaid under

the loan, will fund the UKMP through feasibility and the permitting of the first mine to be developed in the Ambler mining district.

Once the full amount of the Subscription Price payment of $145 million is expended, the parties will contribute funding pro rata,

as contemplated by the operating agreement which governs Ambler Metals.

thousands of dollars,

except for per share amounts

Three months ended

General and administrative

Mineral properties expense

Professional fees

Salaries –

stock-based compensation

Total expenses

Gain on derecognition of assets contributed to joint venture

Equity in investee

Comprehensive earnings (loss) for the period

Basic earnings (loss) per common share

Diluted earnings (loss) per common share

For the three months ended February 29,

2020, Trilogy reported net earnings of $171 million (or $1.22 basic and $1.16 diluted earnings per common share).

For the comparable

period in 2019, we reported a net loss of $4.3 million (or $0.03 basic and diluted loss per common share).

The first quarter 2020

differences, when compared to the first quarter 2019, are primarily due to the gain of $176 million recognized from the contribution

of mineral property assets to the joint venture with South32 upon formation of the joint venture on February 11, 2020.

was slightly offset by $0.18 million in loss from equity investee, consisting of Trilogy’s 50% share of Ambler Metals’

operating loss for the first quarter of 2020, for which there is no comparable amount in the first quarter of 2019.

Other variances noted for the comparable

period were i) an increase in general and administrative expenses of $0.16 million primarily due to an additional $0.07 million

in regulatory fees due mostly to the filing of the base shelf prospectus and $0.1 million in executive recruiting fees;

increase in professional fees of $0.58 million mainly consisting of $0.12 million for consulting fees for the research and implementation

of new accounting standards, legal fees of $0.25 million related to the formation of the joint venture, valuation and loan capacity

analysis fees of $0.07 million related to the formation of the joint venture, and consulting fees of $0.1 million for Rick Van

Nieuwenhuyse who remained as a consultant to Trilogy through to February 29, 2020;

iii) a decrease of $0.06 million in salaries

due to reductions in head office staffing levels;

and iv) a decrease in stock-based compensation driven primarily by a 0.38 million

reduction in the number of stock options granted during the first quarter versus the comparative period as well as no vesting of

RSUs during the period, resulting in stock based compensation savings of approximately $0.74 million and $0.33 million, respectively.

Mineral property expenses for the three

months ended February 29, 2020 were consistent with the comparative period and mainly include engineering costs related to the

Company’s Arctic feasibility study.

financial data

Quarterly information

in thousands of dollars,

except per share amounts

Interest and other income

Mineral property expenses

Earnings (loss) for the period

Earnings (loss) per common share –

Factors that can cause fluctuations in

our quarterly results include the length of the exploration field season at the properties, the type of program conducted, stock

option vesting, and issuance of shares.

Other factors that have caused fluctuations in the quarterly results that would not be

expected to re-occur include the acquisition and disposition of assets and financing activities.

For the first quarter of 2020, we reported

comprehensive earnings of $171 million which consisted of a gain of $176 million arising from the derecognition of our Alaskan

mineral properties upon contribution to the joint venture with South32, offset by Trilogy’s 50% share of the joint venture’s

operating loss for the period from February 11, 2020 to February 29, 2020 and total expenses of $4.5 million for the period.

are no prior period comparatives for the gain on contribution of Alaskan assets or the pro rata share of the joint venture’s

operating loss.

The remaining difference between the expense of $4.4 million incurred for the current quarter and the loss of $6.5

million for the fourth quarter of 2019 was primarily due to a $2.3 million reduction in mineral property expenses and reflects

the seasonal nature of this cost.

The loss of $6.5 million for the fourth

quarter ended November 30, 2019 is higher when compared to the net loss of $5.3 million incurred in the fourth quarter ended November

The primary drivers for the difference were $0.7 million higher stock-based compensation, $0.6 million higher professional

fees and $0.1 million increase in general and administrative expenses, all offset by $0.2 million in decreased salaries and benefits

in the fourth quarter 2019.

Our net loss for the third quarter ended

August 31, 2019 of $12.5 million was significantly higher versus the comparative loss of $9.9 million for the same quarter in the

The $2.6 million increase is primarily due to an increase in mineral properties expenditures due to the size of the

2019 field program which included the new regional exploration program which did not exist in the comparative period.

Our net loss for the second quarter ended

May 31, 2019 of $4.5 million is $0.9 million higher when compared to the comparative second quarter ended May 31, 2018.

The difference

is primarily due to an increase in mineral properties expenses related to the new regional exploration program commencing in the

period with district-wide airborne geophysical surveys completed in the quarter and an increase in stock-based compensation.

and capital resources

29, 2020, we had $15.2 million in cash and cash equivalents and working capital of $14.5 million, which is sufficient to

fund our ongoing operations for at least the next 12 months.

The projects will be funded by Ambler Metals and we do not anticipate

needing to fund our 50% share of future expenditures to advance the projects until the approximately $145 million is spent.

Contractual obligated undiscounted cash

flow requirements as at February 29, 2020 are as follows.

In thousands of dollars

1–2 Years

2–5 Years

Accounts payable and accrued liabilities

sheet arrangements

material off-balance sheet arrangements.

At April 7, 2020, we had 140,665,733 common

shares issued and outstanding.

At April 7, 2020, we had outstanding, 10,983,933 stock options with a weighted-average exercise

price of $1.21 as well as 1,182,391 deferred share units (“DSUs”) and 11,927 NovaGold DSUs for which the holder is

entitled to receive one common share for every six NovaGold shares received.

Upon exercise of all the foregoing convertible securities,

the Company would be required to issue aggregate of 12,168,312 common shares.

accounting pronouncements

Certain recent

accounting pronouncements have been included under note 2 in our February 29, 2020 unaudited interim consolidated financial statements.

accounting estimates

The most critical accounting estimates

upon which our financial status depends are those requiring estimates of the recoverability of our capitalized mineral properties,

impairment of long-lived assets, equity method investment, income taxes and valuation of stock-based compensation.

Mineral properties and development costs

All direct costs related to the acquisition

of mineral property interests are capitalized.

The acquisition of title to mineral properties is a complicated and uncertain process.

The Company has taken steps, in accordance with industry standards, to verify the title to mineral properties in which it has an

Although the Company has made efforts to ensure that legal title to its mining assets is properly recorded, there can

be no assurance that such title will be secured indefinitely.

Impairment of long-lived assets

Management assesses the possibility of

impairment in the carrying value of its long-lived assets whenever events or circumstances indicate that the carrying amounts of

the asset or asset group may not be recoverable.

Significant judgments are made in assessing the possibility of impairment.

considers several factors in considering if an indicator of impairment has occurred, including but not limited to, indications

of value from external sources, significant changes in the legal, business or regulatory environment, and adverse changes in the

use of physical condition of the asset.

These factors are subjective and require consideration at each period end.

If an indicator

of impairment is determined to exist, management calculates the estimated undiscounted future net cash flows relating to the asset

or asset group using estimated future prices, mineral resources, and operating, capital and reclamation costs.

When the carrying

value of an asset exceeds the related undiscounted cash flows, the asset is written down to its estimated fair value, which is

usually determined using discounted future cash flows.

Management’s estimates of mineral prices, mineral resources, foreign

exchange rates, production levels and operating capital and reclamation costs are subject to risk and uncertainties that may affect

the determination of the recoverability of the long-lived asset.

We must make estimates and judgments in

determining the provision for income tax expense, deferred tax assets and liabilities, and liabilities for unrecognized tax benefits

including interest and penalties.

We are subject to income tax law in the United States and Canada.

The evaluation of tax liabilities

involving uncertainties in the application of complex tax regulation is based on factors such as changes in facts or circumstances,

changes in tax law, new audit activity, and effectively settled issues.

The evaluation of an uncertain tax position requires significant

judgment, and a change in such recognition would result in an additional charge to the income tax expense and liability.

Stock-based compensation

Compensation expense for options granted

to employees, directors and certain service providers is determined based on estimated fair values of the options at the time of

grant using the Black-Scholes option pricing model, which takes into account, as of the grant date, the fair market value of the

shares, expected volatility, expected life, expected forfeiture rate, expected dividend yield and the risk-free interest rate over

the expected life of the option.

The use of the Black-Scholes option pricing model requires input estimation of the expected life

of the option, volatility, and forfeiture rate which can have a significant impact on the valuation model, and resulting expense

Investment in affiliates

Investments in unconsolidated ventures

over which the Company has the ability to exercise significant influence, but does not control, are accounted for under the equity

method and include the Company’s investment in the Ambler Metals project.

We identified Ambler Metals LLC as a Variable Interest

Entity (VIE) as the entity is dependent on funding from its owners.

All funding, ownership, voting rights and power to exercise

control is shared equally on a 50/50 basis between the owners of the VIE.

Therefore, the Company has determined that it is not

the primary beneficiary of the VIE.

The Company’s maximum exposure to loss is its investment in Ambler Metals LLC.

Ambler Metals LLC is a non-publicly traded

equity investee holding exploration and development projects.

The Company reviews and evaluates its investment in affiliates for

other than temporary impairment when events or changes in circumstances indicate that the related carrying amounts may not be recoverable.

Events that could indicate impairment of an investment in affiliates include a significant decrease in long-term expected gold

price, a significant increase in expected operating or capital costs, unfavorable exploration results or technical studies, a significant

decrease in reserves, a loss of significant mineral claims or a change in the development plan or strategy for the project.

impairment is considered to exist if the total estimated future cash flows on an undiscounted basis are less than the carrying

amount of the asset.

If the underlying assets are not recoverable, an impairment loss is measured and recorded based on the difference

between the carrying amount of the investee and its estimated fair value which may be determined using a discounted cash flow model .

information regarding the Company, including our annual report on Form 10-K, is available on SEDAR at www.sedar.com and

EDGAR at www.sec.gov and on our website at www.trilogymetals.com .

Information contained on our website is not incorporated

by reference.

The Company has commitments

with respect to an office lease requiring future minimum lease payments as summarized in note 8(b) above.

12) Subsequent

Subsequent to the end of

the second quarter, on June 1, 2020, the newly appointed CEO was granted a one-time stock option grant, per his employment

agreement, of 1.6 million stock options vesting equally in thirds on the grant date, the first anniversary of the grant date,

and the second anniversary of the grant date.

In addition to this grant, the new CEO was also granted 170,000 stock options in

lieu of salary for the June 1, 2020 to September 30, 2020 employment period.

These options fully vest on September 30,

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements