Trilogy Metals Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Trilogy Metals Inc. Management’s Discussion & Analysis For the Quarter Ended August 31, 2025 (expressed in US dollars) Cautionary notes Forward-looking statements This Management’s Discussion and Analysis (“MD&A”) 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; the aggregate value of common shares that may be issued pursuant to the at-the-market equity offering program and the anticipated use of net proceeds; 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 (the “UKMP”, as defined below), sufficiency of the Ambler Metals’ cash to fund the UKMP, market prices for precious and base metals, statements regarding the Ambler Access Project ( also known as the Ambler Mining District Industrial Access Project, “AMDIAP”) , or other statements that are not statements of fact. 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 UKMP; ● 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 and any litigation or challenges to such approvals; ​ ​ ​ ​ ​ Trilogy Metals Inc. For the Quarter Ended August 31, 2025 16 ​ Table of contents ● 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 matters; ● expected trends and specific assumptions regarding metal prices and currency exchange rates; and ● 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 properties; ● risks related to our dependence on a third party for the development of our projects; ● none of the Company’s mineral properties are in production or are under development; ● commodity price fluctuations; ● uncertainty related to title to our mineral properties; ● our history of losses and expectation of future losses; ● risks related to increases in demand for equipment, skilled labor and services needed for exploration and development of mineral properties, and related cost increases; ​ ​ ​ ​ ​ Trilogy Metals Inc. For the Quarter Ended August 31, 2025 17 ​ Table of contents ● 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, indicated and measured 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; ● uncertainty related to successfully acquiring commercially mineable mineral rights; ● 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; ● risks related to the acquisition and integration of operations or projects; ● risks related to industry competition in the acquisition of exploration properties and the recruitment and retention of qualified personnel; ● 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 market events and general economic conditions; ● risks related to future sales or issuances of equity securities decreasing the value of existing Trilogy common shares, diluting voting power and reducing future earnings per share; ● 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; ● 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; ● risks related to global climate change; ● risks related to adverse publicity from non-governmental organizations; ​ ​ ​ ​ ​ Trilogy Metals Inc. For the Quarter Ended August 31, 2025 18 ​ Table of contents ● changes in U.S. laws and policies regulating international trade, including currently imposed and any future potential tariffs; ● 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 Stock Exchange (“NYSE American”), the Toronto Stock Exchange (“TSX”), and the Financial Accounting Standards Boards(“FASB”), and more specifically, our efforts to comply with the Dodd-Frank Wall Street Reform and Consumer Protection Act; ● the need for future financing; ● risks related to the sales by existing shareholders; ● risks related to the possible utilization of the ATM Program; ● loss of the entire investment; ● risks related to the Company’s use of proceeds from the sale of its securities; ● risks associated with negative operating cash flow; ● the uncertainty of maintaining a liquid trading market for the common shares; and ● the absence of a public market for certain of the securities. 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 for the fiscal year ended November 30, 2024, filed with the Canadian securities regulatory authorities and the SEC on February 14, 2025, 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. General This MD&A of Trilogy Metals Inc. (“Trilogy”, “Trilogy Metals”, “the Company” or “we”) is dated September 30, 2025 and provides an analysis of our unaudited condensed interim consolidated financial results for the quarter ended August 31, 2025 compared to the quarter ended August 31, 2024. The following information should be read in conjunction with our August 31, 2025 unaudited condensed interim consolidated financial statements and related notes which were prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”). The MD&A should also be read in conjunction with our audited consolidated financial statements and related notes for the year ended November 30, 2024. 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 ​ ​ ​ ​ ​ Trilogy Metals Inc. For the Quarter Ended August 31, 2025 19 ​ Table of contents States dollars unless otherwise stated. References to “Canadian dollars” and “CDN$” are to the currency of Canada and references to “U.S. dollars”, “$” or “US$” are to the currency of the United States. Richard Gosse, P.Geo., Vice President, Exploration of the Company, is a Qualified Person under National Instrument 43-101 - Standards of Disclosure for Mineral Projects and S-K 1300, and has approved the scientific and technical information in this MD&A. Trilogy’s shares are listed on the TSX and the NYSE American under the symbol “TMQ”. Additional information related to Trilogy, including our annual report on Form 10-K for the fiscal year ended November 30, 2024, is available on SEDAR+ at www.sedarplus.ca and on EDGAR at www.sec.gov. Description of business We are a base metals exploration company focused on the exploration and development of mineral properties, through our equity investee, 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 US”). The UKMP 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 Ambler Metals 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., a regional Alaska Native Corporation, which hosts the Bornite carbonate-hosted copper project (the “Bornite Project”) and related assets. The Company may also conduct early-stage exploration through a wholly owned subsidiary, 995 Exploration Inc. Corporate and project activities Base Shelf Prospectus The Company filed a final short form base shelf prospectus base shelf prospectus with the securities commissions in each of the provinces and territories of Canada (the “Canadian Base Shelf Prospectus”), and a corresponding shelf registration statement on Form S-3 (the “Registration Statement”, and together with the Canadian Base Shelf Prospectus, the “Base Shelf Prospectus”) with the United States Securities and Exchange Commission (“SEC”) allowing for the future issuance, from time to time, of up to $50 million in common shares of the Company (the “Common Shares”), warrants to purchase Common Shares, share purchase contracts of the Company, subscription receipts and units comprised of some or all of the foregoing securities (collectively, the “Securities”). Any amounts, prices and terms will be determined based on market conditions at the time of an offering and will be set out in an accompanying prospectus supplement. The final Base Shelf Prospectus became effective on April 14, 2025. The Canadian Base Shelf Prospectus will remain effective for 25 months, while the Registration Statement will remain effective for three years. At-The-Market Offering On May 27, 2025, the Company entered into an equity distribution agreement (the “Distribution Agreement”) with BMO Nesbitt Burns Inc., Cantor Fitzgerald Canada Corporation (the “Canadian Agents”), BMO Capital Markets Corp. and Cantor Fitzgerald & Co. (the “U.S. Agents”, and together with the Canadian Agents, the “Agents”) for an at-the-market equity program (“ATM Program”). On the same date, the Company filed a prospectus supplement (the “Prospectus Supplement”) to the Canadian Base Shelf Prospectus and the US shelf registration statement on Form S-3 qualifying the distribution of the Common Shares under the ATM Program. Under the ATM Program and pursuant to the Distribution Agreement and the Prospectus Supplement, the Company may sell up to $25 million of Common Shares. The Common Shares sold under the ATM Program, if any, will be sold at the prevailing market price at the time of sale. The net proceeds ​ ​ ​ ​ ​ Trilogy Metals Inc. For the Quarter Ended August 31, 2025 20 ​ Table of contents of any such sales under the ATM Program are anticipated to be used for continued development of the UKMP and for general corporate purposes. Budget -Trilogy The Company has an initial 2025 fiscal year budget totaling $3.1 million. For the nine-month period ended August 31, 2025, we spent $3.1 million primarily for personnel costs, professional fees, regulatory and office expenses comparable with budgeted expenditures totaling $2.6 million. Our overall corporate expenditures are tracking as planned to the initial budget except for the costs associated with the establishment of the Base Shelf Prospectus and ATM program, which was approved during the year by the Board of Directors. Budget - Ambler Metals LLC The board of Ambler Metals approved an initial 2025 fiscal year budget totaling $5.8 million to support external and community affairs, to maintain the State of Alaska mineral claims in good standing, and for the maintenance of physical assets. For the nine-month period ended August 31, 2025, Ambler Metals spent $3.8 million in expenses primarily related to salaries and wages, professional fees, engineering, and project support. This compared to a budget amount for the nine-month period of $4.0 million, resulting in expenditures being under budget by $0.2 million. The variance was mainly due to delayed hiring and lower than planned general administrative expenses. In addition, the board of Ambler Metals approved a supplemental budget of $0.8 million to support the Ambler Access Project for the nine-month period ended August 31, 2025. For the nine-month ended August 31, 2025, Ambler Metals incurred $0.7 million related to the Ambler Access Project costs, primarily consisting of community engagement activities. Summary of results ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ in thousands of US dollars, except share and per share amounts ​ ​ ​ Three months ended Nine months ended ​ ​ ​ ​ August 31, 2025 ​ ​ August 31, 2024 ​ ​ August 31, 2025 ​ ​ August 31, 2024 ​ ​ ​ $ ​ $ ​ $ ​ $ General and administrative ​ ​ 214 ​ ​ 293 ​ ​ 910 ​ ​ 1,027 ​ Investor relations ​ ​ 38 ​ ​ 15 ​ ​ 72 ​ ​ 46 ​ Professional fees ​ ​ 246 ​ ​ 138 ​ ​ 1,305 ​ ​ 530 ​ Salaries ​ ​ 251 ​ ​ 158 ​ ​ 774 ​ ​ 527 ​ Salaries and directors expense – stock-based compensation ​ ​ 374 ​ ​ 506 ​ ​ 2,971 ​ ​ 3,014 ​ Share of loss on equity investment ​ ​ 891 ​ ​ 624 ​ ​ 2,236 ​ ​ 2,019 ​ Comprehensive loss for the period ​ ​ (1,747) ​ ​ (1,591) ​ ​ (7,547) ​ ​ (6,951) ​ Basic and diluted loss per common share ​ ​ (0.01) ​ ​ (0.01) ​ ​ (0.05) ​ ​ (0.04) ​ ​ For the three-month period ended August 31, 2025, we reported a net loss of $1.7 million compared to a net loss of $1.6 million for the three-month period ended August 31, 2024. The increase in comprehensive loss in the third quarter of 2025, compared to the same quarter in 2024, was primarily driven by site activities of Ambler Metals during the summer for environmental baseline work and the start of a core re-boxing program. For the nine-month period ended August 31, 2025, we reported a net loss of $7.5 million, compared to a net loss of $7.0 million for the same period in 2024. The increase in net loss was primarily driven by higher regulatory expenses and legal fees related to the Company’s Base Shelf Prospectus and ATM Program and our share of losses from Ambler Metals for ​ ​ ​ ​ ​ Trilogy Metals Inc. For the Quarter Ended August 31, 2025 21 ​ Table of contents incorporating the environmental baseline work and core re-boxing program. These increases were partially offset by lower office expenses and higher interest income earned. Liquidity and capital resources During the nine-month period ending August 31, 2025, we used $2.7 million in operating activities. The majority of these funds was spent on corporate salaries, professional fees to complete the Bornite PEA, and the establishment of the Base Shelf Prospectus and ATM Program along with related regulatory filing fees with the United States and Canadian securities commissions. In addition, the Company incurred annual listing fees for the NYSE American and the TSX during the first fiscal quarter. These cash outflows were partially offset by $0.2 million received in financing activities related to the exercise of stock options. ​ As at August 31, 2025, we had cash and cash equivalents of $23.4 million and working capital of $23.4 million, which we define as current assets less current liabilities. There is sufficient cash on hand to fund the initial fiscal 2025 budget of $3.1 million, as well as the subsequently approved expenditures related to the Base Shelf Prospectus and ATM Program. ​ To ensure sufficient liquidity in the future to support our operations, administration expenses and contributions for our share of Ambler Metals, we have an effective Base Shelf Prospectus that allows for the future issuance, from time to time, of up to $50.0 million in Securities. We have also established an ATM Program whereby we may, from time to time and at our discretion, offer and sell the Common Shares having an aggregate gross sales price of up to $25.0 million under the ATM Program, through the Agents, at the prevailing market price at the time of sale. As at September 30, 2025, we have not utilized the ATM program. ​ We believe our current cash position is sufficient to meet our working capital requirement for the next 12 months. Beyond the next year, future cash requirements may vary materially from current expectations. We may need to raise additional funds in the future to support our operations, administration expenses and our contributions for our share of Ambler Metals. ​ Off-balance sheet arrangements We have no material off-balance sheet arrangements. Outstanding share data As at September 30, 2025, we had 164,311,410 common shares issued and outstanding. As at September 30, 2025, we had 11,695,234 stock options outstanding with a weighted-average exercise price of CDN$1.45, 3,206,355 DSUs, 353,948 Fixed DSUs and 1,798,338 RSUs outstanding. As at September 30, 2025 we have 5,144 NovaGold Resources Inc. (“NovaGold”) DSUs for which the NovaGold director is entitled to receive one common share of Trilogy for every six NovaGold shares to be received upon their retirement from the NovaGold board. A total of 859 common shares will be issued upon redemption of the NovaGold DSUs. Upon the exercise of all the foregoing convertible securities, the Company would be required to issue an aggregate of 17,054,734 common shares. New accounting pronouncements Updates to Reportable Segment Disclosures In November 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-07 “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures”. ASU 2023-07 expands public entities’ segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss and interim disclosures of a reportable segment’s ​ ​ ​ ​ ​ Trilogy Metals Inc. For the Quarter Ended August 31, 2025 22 ​ Table of contents profit or loss and assets. The standard is effective for the Company’s Annual Report on Form 10-K for the fiscal year ended November 30, 2025, and subsequent interim periods, with early adoption permitted. The Company is evaluating the impact of the guidance on the consolidated financial statements. Updates to Income Tax Disclosure In December 2023, the FASB issued ASU 2023-09 “Income Taxes (Topic 740): Improvements to Income Tax Disclosures”. ASU 2023-09 enhances the transparency and decision usefulness of income tax disclosures through changes to the rate reconciliation and income taxes paid information. The standard is effective beginning with the Company’s Annual Report on Form 10-K for the fiscal year ended November 30, 2026, and subsequent interim periods, with early adoption permitted. The Company is evaluating the impact of the guidance on the consolidated financial statements. Critical accounting estimates The most critical accounting estimates upon which our financial status depends are those requiring estimates of the recoverability of our equity method investment in Ambler Metals, income taxes and valuation of stock‐based compensation. ​ Impairment of Investment in Ambler Metals LLC Management assesses the possibility of impairment in the carrying value of its equity method investment in Ambler Metals whenever events or circumstances indicate that the carrying amount of the investment may not be recoverable. Ambler Metals is a non-publicly traded equity investment owning exploration and development projects. Significant judgments are made in assessing the possibility of impairment. The Company assesses whether there has been a potential triggering event for other-than-temporary impairment by assessing the underlying assets of Ambler Metals for recoverability and assessing whether there has been a change in the development plan or strategy for the projects. If the Company concludes there is sufficient evidence for an other-than-temporary impairment, an assessment of fair value is performed. If the underlying assets are not recoverable, the Company will record an impairment charge equal to the difference between the carrying amount of the equity investment and its fair value. This assessment is subjective and requires consideration at each period end. ​ Income taxes 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 and 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. ​ ​ ​ ​ ​ Trilogy Metals Inc. For the Quarter Ended August 31, 2025 23 ​ Table of contents Stock-based compensation Compensation expense for stock options granted to employees, directors and certain service providers is determined based on estimated fair values of the stock 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 recorded. Additional information Additional information regarding the Company, including our annual report on Form 10-K for the fiscal year ended November 30, 2024, is available on SEDAR+ at www.sedarplus.ca and EDGAR at www.sec.gov and on our website at www.trilogymetals.com. Information contained on our website is not incorporated by reference. Item 3. Quantitative and Qualitative Disclosures about Market Risk Not applicable.