What changed in this filing

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Item 2. Management’s Discussion and Analysis

2020-10-07 compared with 2020-07-08 · 233 added, 465 removed, 59 unchanged (92% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Discussion and Analysis

Trilogy Metals Inc.

Management’s Discussion & Analysis

For the Third Quarter Ended August 31, 2020

(expressed in US dollars)

1 unchanged sentence

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.

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 LLC’s 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 (as defined below) through

feasibility and the permitting of the first mine;

impact of COVID-19 on the 2020 field season;

market prices for precious and

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 LLC’s 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 (as defined below) through feasibility and the permitting of the first mine;

impact of COVID-19 on the Company’s operations;

market prices for precious and base metals;

the timing of the feasibility study on the Arctic project;

timing of the issuance of the Record of Decision by the

BLM and the issuance of the Clean Water Act (CWA) Section 404 permit from the United States Army Corp.

of Engineers, 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:

ability to achieve production at the Upper Kobuk Mineral Projects;

accuracy of our mineral resource and reserve estimates;

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

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

adequacy of our financial resources;

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

development, construction and production of our properties;

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

good relationships with South32 Limited (“South32”), our joint venture partner,

as well as local communities and other stakeholders;

no significant disruptions affecting operations, whether relating to labor, supply, power

damage to equipment or other matter;

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

the potential

impact of the novel coronavirus (COVID-19);

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:

related to inability to define proven and probable reserves;

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

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

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

and development properties;

related to our ability to commence production and generate material revenues or obtain

adequate financing for our planned exploration and development activities;

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;

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

mineral properties;

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

price fluctuations;

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;

related to inferred mineral resources;

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;

related to market events and general economic conditions;

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

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

and continuity of our mineral deposits;

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;

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;

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

estimates related thereto;

related to title to our mineral properties;

related to the acquisition and integration of operations or projects;

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

and development of mineral properties, and related cost increases;

need to attract and retain qualified management and technical personnel;

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

related to potential future litigation;

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

shareholders may have on our share price;

related to global climate change;

related to adverse publicity from non-governmental organizations;

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;

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;

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

Company’s expectation of not paying cash dividends;

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.

This Management’s Discussion and

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

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

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

ended May 31, 2020 compared to the quarter ended May 31, 2019.

The following information should be read

in conjunction with our May 31, 2020 unaudited interim condensed consolidated financial statements and related notes which

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

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

timing of the issuance of the Record of Decision by the BLM (as defined below) and the issuance of the Clean Water Act (CWA) Section 404 permit from the United States Army Corp.

of Engineers, 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 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 and any litigation or challenges to such approvals;

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

● continued good relationships with South32 Limited (“South32”), our joint venture partner, as well as local communities and other stakeholders;

Trilogy Metals Inc.

For the Quarter Ended August 31, 2020

● 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 properties;

● 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;

Trilogy Metals Inc.

For the Quarter Ended August 31, 2020

● 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.

This Management’s Discussion and Analysis (“MD&A”) of Trilogy Metals Inc.

(“Trilogy”, “Trilogy Metals”, “the Company” or “we”) is dated October 6, 2020 and provides an analysis of our unaudited interim financial results for the quarter ended August 31, 2020 compared to the quarter ended August 31, 2019.

The following information should be read in conjunction with our August 31, 2020 unaudited interim condensed consolidated financial statements and related notes which were prepared in accordance with United States generally accepted accounting principles (“U.S.

The MD&A 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.

1 unchanged sentence

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

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 .

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.

Trilogy Metals Inc.

For the Quarter Ended August 31, 2020

Richard Gosse, P.Geo., 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.

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 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”).

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

on February 11, 2020 (see below).

which is doing business as Trilogy Metals US (“Trilogy Metals US”).

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 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.

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

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

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

Project Activities

Deferral of the 2020 Summer Exploration

Programs at the UKMP

Through Ambler

Metals , we and our joint venture partner, South32 Limited (“South32”) have decided

not to proceed with the 2020 exploration program after assessing the current novel coronavirus (COVID-19) environment.

Metals gave due consideration to the merits of carrying out an abridged work program at the UKMP.

However, given the

continued uncertainty resulting from COVID-19, ongoing safety concerns (despite added safety protocols including physical distancing,

protective equipment and testing)and the fact that, due to COVID-19, the planned field season had already been delayed to the point

at which any field season would provide limited critical path benefits, the decision has been made not to proceed with a 2020 field

The safety of our employees, contractors and the communities where we work is paramount.

We are disappointed as we know

delay affects everyone involved, including our partner NANA and our NANA shareholder hires.

2020 Operating Budget for the Upper

Kobuk Mineral Projects

a press 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, due to the Coronavirus outbreak, the

drilling programs have been deferred, see “Deferral of the 2020 Summer Exploration Programs at the UKMP”

“Impact of Coronavirus (COVID-19)”

Project activities during the second quarter consisted of non-drilling,

off-site analytical activities focused on updating drilling data, composite sample collection and updates to geological models.

Activities at the Arctic Project during

the second quarter focused mainly on updating the 2020 Arctic resource and metallurgical drill program for resource definition

and variability testing and planning for the next stages of engineering studies to advance the project towards permitting and development.

Work on the feasibility study for the Arctic project continued during the second quarter, with an expected completion date early

in the third quarter of 2020.

Deferral of the 2020 Summer Exploration Programs at the UKMP

Through Ambler Metals, we and our joint venture partner, South32 decided not to proceed with the 2020 exploration program after assessing the current novel coronavirus (COVID-19) environment.

Ambler Metals gave due consideration to the merits of carrying out an abridged work program at the UKMP.

However, given the continued uncertainty resulting from COVID-19, ongoing safety concerns (despite added safety protocols including physical distancing, protective equipment and testing) and the fact that, due to COVID-19, the planned field season had already been delayed to the point at which any field season would provide limited critical path benefits, the decision was made not to proceed with a 2020 field season.

We are disappointed at having to defer the 2020 exploration program as we know this delay affects all stakeholders, including our partner NANA and our NANA shareholder hires.

However, the safety of our employees, contractors and the communities where we work is paramount.

2020 Operating Budget for the Upper Kobuk Mineral Projects

In a press 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 was to be 100% funded by Ambler Metals.

The 2020 program budget included 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, due to the Coronavirus outbreak, the drilling programs were deferred, see “Deferral of the 2020 Summer Exploration Programs at the UKMP” above and “Impact of Coronavirus (COVID-19)” below.

Project activities during the third quarter consisted of non-drilling and off-site activities described below.

Arctic Project

During the third quarter, the Company updated the geologic model for the Arctic Project and focused mainly on refining the 2020 Arctic resource and metallurgical drill program for resource definition and variability testing.

In addition, a conditional simulation for the Arctic resource to optimize drill spacing for the conversion of resources to the measured category and to upgrade the talc model and Life of Mine Plan was initiated with Golder and Associates.

Trilogy Metals Inc.

For the Quarter Ended August 31, 2020

Arctic Project Feasibility Results

In a press release dated August 20, 2020, the Company announced the positive results of its feasibility study (“FS”) for the Arctic Project.

The FS was prepared on a 100% ownership basis, of which Trilogy’s share is 50%.

The FS describes the technical and economic viability of establishing a conventional open-pit copper-zinc-lead-silver-gold mine and mill complex for a 10,000 tonne per day operation for a minimum 12-year mine life.

Bornite Project

The Bornite geological model was updated

during the second quarter incorporating the 2019 drill program results.

Additional sample collection from Bornite drill core was

completed during the quarter for age determinations on certain mineral species.

Five additional composite samples from the potential

underground resource area were collected and metallurgical work was started during the quarter.

The Bornite geologic model was updated during the third quarter incorporating the 2019 drill program results.

A machine learning geochemical modelling project to assist in defining the controls on high-grade copper mineralization was initiated during the third quarter with the Irish Centre for Research in Applied Geosciences.

Metallurgical work continued during the third quarter on five composite samples from the below-pit Bornite resource area.

Test work is ongoing and will continue through the fourth quarter.

Regional Exploration Project

Regional project activities during the

second quarter consisted mainly of updating the Sunshine prospect geologic model incorporating the 2019 drill results.

metallurgical work began on five composite samples from the Sunshine prospect.

Test work is ongoing and will continue through the

third quarter.

The Company also continued its review of historical exploration data collected for the Ambler Mining District.

Impact of Coronavirus (COVID-19)

With respect to the outbreak of COVID-19,

Trilogy recognizes that the situation is extremely fluid and is monitoring the State of Alaska Health Department and Federal Centers

for Disease Control and Prevention (“CDC”) recommendations and restrictions on travel.

These recommendations and restrictions

have significantly impacted our ability to conduct the planned work programs during the fiscal 2020 field season.

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, have determined it prudent to defer the planned exploration drilling activities at the UKMP for this season.

Ambler Mining District Industrial Access

Project (AMDIAP)

In a press release dated March 27, 2020,

the Company announced the release of the final Environmental Impact Statement (EIS) by the United States Bureau of Land Management

The final step in the permitting process for the AMDIAP is the issuance of the Record

of Decision by the BLM, which is expected to be issued in July 2020.

Corporate developments

Annual General Meeting

The Annual General Meeting of shareholders

was held on May 28, 2020.

At the Annual General Meeting, all directors nominated by the Company and standing for election

were elected by shareholders of the Company, with each director receiving no less than 99.75% of the votes cast.

Appointment of New President and CEO

Tony Giardini was appointed as President

and CEO of the Company effective June 1, 2020.

Giardini has been a director

of the Company since 2012 and will continue to be an executive director.

Giardini has extensive experience as an executive

officer and key leadership team member with his previous roles as President of Ivanhoe Mines Ltd.

(“Ivanhoe”), a base

metals development and exploration company, and as Chief Financial Officer at Kinross Gold Corporation, a senior gold producer.

Giardini has extensive experience with joint ventures and large capital projects, including Ivanhoe’s three large

development assets, Platreef, Kipushi and Kamoa-Kakula.

Regional project activities during the third quarter consisted mainly of updating the Sunshine prospect geologic model with the 2019 drill results.

Metallurgical work continued during the third quarter on five composite samples from the Sunshine prospect.

Test work is ongoing and will continue through the fourth quarter.

Multispectral WorldView-3 satellite imagery was collected over the central portion of the Ambler VMS Belt during the third quarter.

Processing and interpretation of the imagery will be completed during the fourth quarter.

Ambler Mining District Industrial Access Project (AMDIAP)

In a press release dated July 23, 2020, the Company, along with our joint venture partner South32, announced the signing of the Record of Decision by the United States Bureau of Land Management (“BLM”) for the Ambler Mining District Industrial Access Project.

The Record of Decision approves the development of the northern route which is to be a 211-mile private gravel access road in the southern Brooks Range foothills to provide industrial access to the Ambler Mining District.

Joint Venture

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.

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 Pty Ltd.

to its affiliate, South32 USA Exploration Inc.

on the UKMP (“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.

South32 exercised its option on December 19, 2019.

Formation of joint venture

On February 11, 2020, Trilogy completed

the formation of the 50/50 joint venture with South32.

Trilogy contributed all 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.

To assist Ambler Metals during the initial set up phase, Trilogy is paying all of Ambler Metals’

invoices and being reimbursed pursuant to a services agreement (the “Services Agreement”) until the back office is

fully transitioned to a new team employed by Ambler Metals, which will be no longer than the end of the year.

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.

On February 11, 2020, Trilogy completed the formation of the 50/50 joint venture with South32.

Trilogy contributed all 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.

To assist Ambler Metals during the initial set up phase, Trilogy is paying all of Ambler Metals’ invoices and being reimbursed pursuant to a services agreement (the “Services Agreement”) until the back office is fully transitioned to a new team employed by Ambler Metals, which will be no longer than the end of the year.

Trilogy Metals Inc.

For the Quarter Ended August 31, 2020

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.

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 $175 million as well

as $0.7 million of amounts receivable per a Service Agreement between Trilogy and Ambler Metals.

The amounts receivable as at

May 31, 2020 has been subsequently collected.

During the three-month period ended May 31,

2020, Ambler Metals loaned $57.5 million back to South32 and retained $87.5 million.

The loan has a 7-year maturity date, but

Ambler Metals will begin to draw down on the loan with cash calls to South32 to fund its 50% share of the 2021 budget to advance

development studies, resource drilling and regional exploration programs.

The loan is secured by South32’s membership interest

in Ambler Metals 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.

Our maximum exposure to loss in this entity is limited to the carrying amount of our investment in Ambler Metals, which, as of August 31, 2020, totaled $174 million as well as $106,000 of amounts receivable per a Service Agreement between Trilogy and Ambler Metals.

The amounts receivable as at August 31, 2020 was subsequently collected.

During the three-month period ended May 31, 2020, Ambler Metals loaned $57.5 million back to South32 and retained $87.5 million.

The loan has a 7-year maturity date, but Ambler Metals will begin to draw down on the loan with cash calls to South32 to fund its 50% share of the 2021 budget to advance development studies, resource drilling and regional exploration programs.

The loan is secured by South32’s membership interest in Ambler Metals 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.

Summary of results

2 unchanged sentences

Three months ended

Six months ended

Nine months ended

August 31, 2020

August 31, 2019

August 31, 2020

August 31, 2019

Selected expenses

3 unchanged sentences

Professional fees

Salaries –

stock-based compensation

Salaries – stock-based compensation

Investor relations

4 unchanged sentences

Diluted earnings (loss) per common share

For the three months ended May 31,

2020, Trilogy reported loss of $3.0 million (or $0.02 basic and diluted loss per common share).

For the comparable period in 2019,

we reported a net loss of $4.5 million (or $0.04 basic and diluted loss per common share).

The decrease in comprehensive loss is

primarily due to the elimination of mineral properties expense as these expenditures became the responsibility of Ambler Metals

subsequent to the formation of the joint venture with South32 on February 11, 2020.

For the three-month period ended May 31,

2019, Trilogy spent $2.9 million in mineral properties expense, mostly consisting of internal engineering studies for the Bornite

and Arctic Projects, meteorological and air quality studies for the Arctic Project and costs associated with preparing the camp

for the field season.

Other variances in relation to the comparative

three-month period ended May 31, 2020 consists of the following:

i) feasibility study expenses of $0.7 million were related

to the Arctic Project, and include costs incurred subsequent to the formation of Ambler Metals on February 11, 2020, for

which there are no prior year comparatives;

ii) share of loss in equity investment in Ambler Metals of $0.6 million, amounts for

which do not exist in the comparable second quarter of 2019;

iii) an increase of $0.1 million in stock-based compensation primarily

due to option and restricted share unit (“RSU”) awards that were granted and fully vested during the quarter;

iv) a decrease of $0.07 million in investor relations as marketing events scheduled during the quarter were postponed due to the

impact of COVID-19.

For the six- month period ended May 31,

2020, Trilogy reported comprehensive earnings of $168 million (or $1.20 basic and $1.13 diluted earnings per common share).

the comparable period in 2019, we reported a comprehensive loss of $8.8 million (or $0.07 basic and diluted loss per common share).

The differences for the six-month period ended May 31, 2020, when compared to the same period in 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 Ambler Metals on February 11, 2020.

This gain was offset by a $0.7 million loss reflecting the Company’s

50% equity share of Ambler Metals operating loss for the six-month period ended May 31, 2020.

There is no comparable amount

in the second quarter of 2019.

Other variances noted for the comparative

six-month period ended May 31, 2020 consist of the following:

i) an increase in general and administrative expenses of $0.2

million, primarily due to executive recruiting fees;

ii) an elimination of $2.9 million in mineral properties expense as all mineral

property assets were contributed to Ambler Metals upon formation of the joint venture on February 11, 2020;

iii) an increase

of $0.6 million in professional fees primarily attributed to the implementation of new lease accounting standards, legal fees

related to the formation of the joint venture and consulting fees for the former CEO Rick Van Nieuwenhuyse who remained as a consultant

to Trilogy through to February 29, 2020;

iv) the inclusion of $0.1 million in salaries in stock based compensation for the

and iv) a decrease of $0.6 million in stock-based compensation driven primarily by a combination of a 200,000 unit

reduction in the number of stock options granted as well as a lower share price contributing to a lower fair value for stock options,

RSUs and deferred share units (“DSU”) granted during the six-month period ended May 31, 2020.

Selected financial

For the three months ended August 31, 2020, Trilogy reported a loss of $3.2 million (or $0.02 basic and diluted loss per common share).

For the comparable period in 2019, we reported a net loss of $12.5 million (or $0.09 basic and diluted loss per common share).

The decrease in comprehensive loss is primarily due to the elimination of mineral properties expense as these expenditures became the responsibility of Ambler Metals subsequent to the formation of the joint venture with South32 on February 11, 2020.

For the three-month period ended August 31, 2019, for which there are no current period comparatives, Trilogy spent $11 million in mineral properties expense, mostly consisting of drilling costs for the Bornite,

Trilogy Metals Inc.

For the Quarter Ended August 31, 2020

Arctic and Regional Projects, project support costs such as camp operations, fixed wing charters and helicopters for the field season, and engineering and environment studies for the Arctic Project.

Other variances in relation to the comparative three-month period ended August 31, 2020 consists of the following:

i) feasibility study expenses of $0.2 million were related to the Arctic Project, and include costs incurred subsequent to the formation of Ambler Metals on February 11, 2020;

ii) share of loss in equity investment in Ambler Metals of $1.1 million, which do not exist in the comparable third quarter of 2019;

iii) a decrease of $0.1 million in salaries as CEO compensation that was salary based in the comparative period is stock based in the current period;

iv) a decrease of $0.2 million in professional fees primarily due to lower legal fees;

v) a decrease of $0.2 million in general and administrative expenses primarily due to lower travel cost imposed by COVID-19 restrictions;

and vi) an increase of $0.7 million in stock-based compensation due to 1.8 million more options being granted during the current quarter versus the comparative period.

For the nine-month period ended August 31, 2020, Trilogy reported comprehensive earnings of $165 million (or $1.17 basic and $1.12 diluted earnings per common share).

For the comparable period in 2019, we reported a comprehensive loss of $21.3 million (or $0.16 basic and diluted loss per common share).

The differences for the nine-month period ended August 31, 2020, when compared to the same period in 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 Ambler Metals on February 11, 2020.

This gain was offset by a $1.8 million loss reflecting the Company’s 50% equity share of Ambler Metals operating loss for the nine-month period ended August 31, 2020.

There is no comparable amount in the third quarter of 2019.

Other variances noted for the comparative nine-month period ended August 31, 2020 consist of the following:

i) a decrease in mineral properties expenses of $13.9 million as all mineral property assets were contributed to Ambler Metals upon formation of the joint venture on February 11, 2020;

ii) feasibility study expenses of $1.0 million for the Arctic project incurred subsequent to the joint venture formation;

iii) an increase of $0.4 million in professional fees primarily attributed to the implementation of new lease accounting standards and legal fees related to the formation of the joint venture;

and iv) a decrease of $0.2 million in salaries due to the inclusion of CEO salaries in stock based compensation.

Selected financial data

Quarterly information

5 unchanged sentences

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 three-month period ended May 31,

2020, we reported a comprehensive loss of $3.0 million, which consists of $2.4 million in operating expenses and $0.6 million

for Trilogy’s 50% share of Ambler Metals’ operating loss, from the formation of the joint venture on February 11,

2020, to May 31, 2020.

There is no prior period comparative for the pro rata share of Ambler Metals operating loss as the

joint venture formation was completed during fiscal 2020.

When compared to the three-month period ended May 31, 2019, the

current period operating expenses was $2.1 million lower.

The decrease is primarily due to the elimination of $2.9 million of

mineral properties expense for which there are no comparable expenses in the current period, offset by $0.7 million in feasibility

study costs in the current period.

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 Ambler Metals’

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

There are no prior period comparatives for the gain on contribution of Alaskan assets or the pro rata share of Ambler

Metals’ operating loss.

The expense of $4.4 million incurred for the first quarter of 2020 was slightly higher than the

loss of $4.3 million for the first quarter of 2019 primarily due to higher professional fees, general and administrative expense,

share of loss on equity investment offset by a lower stock-based compensation 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 30, 2018.

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 prior year.

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.

Liquidity and capital

At May 31, 2020,

we had $12.3 million in cash and cash equivalents and working capital of $12.8 million, which is sufficient to fund our ongoing

operations for at least the next 12 months.

The projects are fully funded by Ambler Metals and we do not anticipate needing to

fund our 50% share of future expenditures to advance the projects until Ambler Metals’ $145 million is spent.

Earnings (loss) per common share – basic

Earnings (loss) per common share – diluted

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.

Trilogy Metals Inc.

For the Quarter Ended August 31, 2020

For the three-month period ended August 31, 2020, we reported a comprehensive loss of $3.2 million, which consists of $2.1 million in operating expenses and $1.1 million for Trilogy’s 50% share of Ambler Metals’ operating loss.

When compared to the three-month period ended August 31, 2019, the current period operating expenses was $10.6 million lower.

The decrease is primarily due to the elimination of $11 million in mineral properties expenses due to the formation of the joint venture, for which there are no comparable expenses in the current period, offset by $1 million in feasibility study costs in the current period.

For the three-month period ended May 31, 2020, we reported a comprehensive loss of $3.0 million, which consists of $2.4 million in operating expenses and $0.6 million for Trilogy’s 50% share of Ambler Metals’ operating loss.

There is no prior period comparative for the pro rata share of Ambler Metals operating loss as the joint venture formation was completed during fiscal 2020.

When compared to the three-month period ended May 31, 2019, the operating expenses for the second quarter of current year was $2.1 million lower.

The decrease is primarily due to the elimination of $2.9 million of mineral properties expense for which there are no comparable expenses for the same quarter in the 2019 period, offset by $0.7 million in feasibility study costs in the second quarter of 2020.

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

There are no prior period comparatives for the gain on contribution of Alaskan assets or the pro rata share of Ambler Metals’ operating loss.

The expense of $4.4 million incurred for the first quarter of 2020 was slightly higher than the loss of $4.3 million for the first quarter of 2019 primarily due to higher professional fees, general and administrative expense, share of loss on equity investment offset by a lower stock-based compensation 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 30, 2018.

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.

Liquidity and capital resources

At August 31, 2020, we had $12.8 million in cash and cash equivalents and working capital of $11.8 million, which is sufficient to fund our ongoing operations for at least the next 12 months.

The projects are fully funded by Ambler Metals and we do not anticipate needing to fund our 50% share of future expenditures to advance the projects until Ambler Metals’ $145 million is spent.

Contractual obligations

Contractual obligated undiscounted cash

flow requirements as at May 31, 2020 are as follows.

Contractual obligated undiscounted cash flow requirements as at August 31, 2020 are as follows.

In thousands of dollars

1 unchanged sentence

Off-balance sheet arrangements

We have no material off-balance sheet

arrangements.

We have no material off-balance sheet arrangements.

Trilogy Metals Inc.

For the Quarter Ended August 31, 2020

Outstanding share data

At July 7, 2020, we had 140,965,583 common

shares issued and outstanding.

At July 7, 2020, we had outstanding, 12,848,538 stock options with a weighted-average exercise price

of $1.37 as well as 1,204,170 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

an aggregate of 14,054,695 common shares.

At October 6, 2020, we had 143,004,178 common shares issued and outstanding.

At October 6, 2020, we had outstanding, 9,952,500 stock options with a weighted-average exercise price of $1.62, no RSUs, as well as 1,221,262 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 an aggregate of 11,175,749 common shares.

New accounting pronouncements

Certain recent accounting pronouncements

have been included under note 2 in our May 31, 2020 unaudited interim consolidated financial statements

Critical accounting

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

All direct costs related to the acquisition

of mineral property interests are capitalized.

Certain recent accounting pronouncements have been included under note 2 in our August 31, 2020 unaudited interim 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 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

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.

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

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.

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.

Management 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.

Management 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.

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.

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.

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.

Trilogy Metals Inc.

For the Quarter Ended August 31, 2020

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 recorded.

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 recorded.

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 Ambler Metals.

We identified Ambler Metals 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.

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 Ambler Metals.

We identified Ambler Metals 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.

Ambler Metals 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

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

expected copper 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.

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 .

Ambler Metals 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 copper 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.

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.

Additional information

Additional 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 .

Additional 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.

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 2. Management’s Discussion and Analysis