Item 9A. Controls and Procedures
Item 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted by the Company under U.S. and Canadian securities legislation is recorded, processed, summarized and reported within the time periods specified in those rules, including providing reasonable assurance that material information is gathered and reported to senior management, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), as appropriate, to permit timely decisions regarding public disclosure. Management, including the CEO and CFO, has evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures, as defined in Rule 13a-15(e) and15d-15(e) of the Exchange Act and the rules of Canadian Securities Administrators, as at November 30, 2021. Based on this evaluation, the CEO and CFO have concluded that the Company’s disclosure controls and procedures were effective as at November 30, 2021.
Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act and National Instrument 52-109 Certification of Disclosure in Issuer’s Annual and Interim filings. Any system of internal control over financial reporting, no matter how well designed, has inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Management has used the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control – Integrated Framework (2013) to evaluate the effectiveness of the Company’s internal control over financial reporting. Based on this assessment, management has concluded that as at November 30, 2021, the Company’s internal control over financial reporting was effective.
Attestation Report of the Registered Public Accounting Firm
This Annual Report does not include an attestation report of the company’s registered public accounting firm regarding internal controls over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to law, rules and regulations that permit us to provide only management’s report in this Annual Report.
Changes in Internal Controls
There has been no change in our internal control over financial reporting during the quarter ended November 30, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. OTHER INFORMATION
None.
Item 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
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PART III
Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information in our 2022 Proxy Statement regarding directors and executive officers and Section 16 reporting information appearing under the headings “Election of Directors” and “Information Concerning the Board of Directors and Executive Officers” is incorporated by reference in this section. The information under the heading “Executive Officers of Trilogy” in Part I, Item 1 of this Form 10-K is also incorporated by reference in this section. The information in our 2022 Proxy Statement regarding our Code of Business Conduct and Ethics under the subheading “Ethical Business Conduct” under “Statement of Corporate Governance Practices” is also incorporated by reference in this section. Finally, the information in our 2022 Proxy Statement regarding the Audit Committee under the heading “Statement of Corporate Governance Practices” is incorporated herein by reference.
Item 11. EXECUTIVE COMPENSATION
The information appearing in our 2022 Proxy Statement under the headings “Compensation Committee Interlocks and Insider Participation”, “Statement of Executive Compensation”, and “Director Compensation” is incorporated by reference in this section.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information appearing in our 2022 Proxy Statement under the heading “Securities Authorized For Issuance Under Equity Compensation Plans” (which is also contained in this report in Part II, Item 5) and the information under the heading “Security Ownership Of Certain Beneficial Owners And Management And Related Shareholder Matters” is incorporated herein by reference.
Securities Authorized for Issuance under Equity Compensation Plans
The following table is as of November 30, 2021.
Plan category
Number of securities to be issued
upon exercise of outstanding
options, warrants and rights
Weighted-average exercise price of
outstanding options, warrants and
rights
Number of securities remaining
available for future issuance under
equity compensation plans
(excluding securities reflected in
column (a))
(a)
(b)
(c)
Equity compensation plans approved by security holders
11,816,769
$
1.92
9,934,703
Equity compensation plans not approved by security holders
—
—
—
Total
11,816,769
$
1.92
9,934,703
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information appearing in our 2022 Proxy Statement under the heading “Independence of Directors” under the heading “Information Concerning the Board of Directors and Executive Officers” and under the heading “Statement of Corporate Governance Practices” is incorporated herein by reference.
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Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information appearing in our 2022 Proxy Statement regarding Audit Fees, Audit-Related Fees, Tax Fees, All Other Fees and Audit Committee Pre-Approval Policies under the subheading “Appointment of Auditors” is incorporated herein by reference.
PART IV
Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Documents Filed With This Report
1. FINANCIAL STATEMENTS
Page
Report of Independent Registered Public Accounting Firm (PCAOB ID 271)
133
Consolidated Balance Sheets
107
Consolidated Statements of Loss and Comprehensive Loss
108
Consolidated Statements of Shareholders ’ Equity
109
Consolidated Statements of Cash Flows
110
Notes to Consolidated Financial Statements
111
2. FINANCIAL STATEMENT SCHEDULES
None.
3. EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS
Employment Agreement between the Registrant and James Gowans, dated October 21, 2019, identified in exhibit list below.
Amendment Agreement between the Company and James Gowans, dated April 9, 2020, identified in exhibit list below.
Employment Agreement between the Registrant and Tony Giardini, dated April 20, 2020, identified in exhibit list below.
Employment Agreement between the Registrant and Elaine Sanders, dated November 5, 2012, identified in exhibit list below.
NovaCopper Inc. Equity Incentive Plan identified in exhibit list below.
Form of NovaCopper Inc. Stock Option Agreement identified in exhibit list below.
NovaCopper Inc. 2012 Restricted Share Unit Plan identified in exhibit list below.
Form of NovaCopper Inc. 2012 Restricted Share Unit Award Agreement identified in exhibit list below.
NovaCopper Inc. 2012 Deferred Share Unit Plan identified in exhibit list below.
Form of NovaCopper Inc. Deferred Share Unit Award Agreement identified in exhibit list below.
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(b) Exhibits
Exhibit
No.
Description
2.1
Contribution Agreement, dated February 11, 2020, between NovaCopper US Inc., Trilogy Metals Inc. and Ambler Metals LLC (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on February 18, 2020)
3.1
Certificate of Incorporation (incorporated by reference to Exhibit 99.2 to the Company’s Registration Statement on Form 40-F filed on March 1, 2012)
3.2
Articles of Trilogy Metals Inc., effective April 27, 2011, as altered March 20, 2011 (incorporated by reference to Exhibit 99.3 to Amendment No. 1 to the Company ’ s Registration Statement on Form 40-F filed on April 19, 2012)
3.3
Notice of Articles and Certificate of Name Change, dated September 1, 2016 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K dated September 8, 2016)
4.1
Description of Common Stock (incorporated by reference to Exhibit 4.1 to the Company’s Annual Report on Form 10-K filed on February 13, 2020)
10.1
Net Smelter Returns Royalty Agreement, dated effective January 7, 2010, among Kennecott Exploration Company, Kennecott Arctic Company, Alaska Gold Company, and NovaGold Resources Inc. (incorporated by reference to Exhibit 99.1 to the Company’s Report on Form 6-K filed on April 25, 2012)
10.2
Exploration Agreement and Option to Lease, dated October 19, 2011, between NovaCopper US Inc. and NANA Regional Corporation, Inc. (incorporated by reference to Exhibit 99.1 to the Company’s Report on Form 6-K filed on April 25, 2012)
10.3
Option Agreement to Form Joint Venture, dated April 10, 2017, among the Company, NovaCopper US Inc. and South32 Group Operations Pty Ltd. (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K/A filed on April 20, 2017)
10.4
Amended and Restated Limited Liability Company Agreement of Ambler Metals LLC dated February 11, 2020 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on February 18, 2020)
10.5
NovaCopper Inc. 2012 Restricted Share Unit Plan (incorporated by reference to Exhibit 10.11 to the Company’s Annual Report on Form 10-K filed on February 12, 2013)
10.6
NovaCopper Inc. 2012 Deferred Share Unit Plan (incorporated by reference to Exhibit 10.12 to the Company’s Annual Report on Form 10-K filed on February 12, 2013, File No. 001-35447)
10.7
Form of NovaCopper Inc. Stock Option Agreement (incorporated by reference to Exhibit 4.5 to the Company’s Registration Statement on Form S-8 filed on April 27, 2012)
10.8
NovaCopper Inc. Equity Incentive Plan (incorporated by reference to Schedule G of Exhibit 99.1 to the Company’s Registration Statement on Form 40-F filed on March 1, 2012)
10.9
Employment Agreement, dated October 21, 2019, between the Company and James Gowans (incorporated by reference to Exhibit 10.15 to the Company ’ s Annual Report on Form 10-K filed on February 13, 2020)
10.10
Amendment Agreement, dated April 9, 2020, between the Company and James Gowans (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on April 9, 2020)
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10.11
Employment Agreement, dated April 20, 2020, between the Company and Tony Giardini (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on April 20, 2020)
10.12
Employment Agreement, dated November 5, 2012, between the Company and Elaine Sanders (incorporated by reference to Exhibit 10.5 to the Company’s Registration Statement on Form 10-K filed on February 12, 2013)
10.13
Equity Incentive Plan for Ambler Metals LLC Officers and Employees (incorporated by reference to the Revised Appendix D to the Company’s proxy statement filed April 30, 2021)
21.1
Subsidiaries of the Registrant
23.1
Consent of PricewaterhouseCoopers LLP
23.2
Consent of Richard Gosse
23.3
Consent of Bruce M. Davis
23.4
Consent of SIM Geological Inc.
23.5
Consent of International Metallurgical & Environmental Inc.
23.6
Consent of Ausenco Engineering Canada Inc.
23.7
Consent of Wood Canada Limited
23.8
Consent of SRK Consulting (Canada) Inc.
31.1
Certification of the Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a)
31.2
Certification of the Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a)
32.1
Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350
32.2
Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350
101
The following materials from Trilogy Metals Inc.’s Annual Report on Form 10-K for the year ended November 30, 2021, formatted in Inline XBRL (eXtensible Business Reporting Language): (i) the Consolidated Statements of Operations, (ii) the Consolidated Statements of Comprehensive Income (iii) the Consolidated Balance Sheets, (iv) the Consolidated Statements of Shareholders’ Equity, (v) the Consolidated Statements of Cash Flows, (vi) the Notes to the Consolidated Financial Statements, and (vii) Schedule II – Valuation and Qualifying Accounts.
104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
(c) Financial Statement Schedules
Schedule A – The Financial Statement of Ambler Metals LLC as of November 30, 2021.
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Schedule A
Report of Independent Registered Public Accounting Firm
To the Board of Ambler Metals LLC
Opinion on the Financial Statements
We have audited the accompanying balance sheets of Ambler Metals LLC (the Company) as of November 30, 2021 and 2020, and the related statements of loss and comprehensive loss, changes in members’ equity and cash flows for the year ended November 30, 2021 and for the period from February 11, 2020 to November 30, 2020, including the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of November 30, 2021 and 2020, and the results of its operations and its cash flows for the year ended November 30, 2021 and for the period from February 11, 2020 to November 30, 2020 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Assessment of impairment indicators of mineral properties
As described in Notes 2 and 5 to the financial statements, management assesses the possibility of impairment in the carrying value of mineral properties whenever events or changes in circumstances indicate that the carrying value may not be recoverable (impairment indicators). The carrying value of the Company’s mineral properties was $30.8 million as of November 30, 2021. Management applies judgment to assess whether events or changes in circumstances indicate the carrying value of an asset may not be recoverable, giving rise to the requirement to conduct an impairment test. Events or changes in circumstances that could trigger an impairment test include (i) significant adverse changes in the business climate including significant decreases in copper, zinc, and other metal prices, or significant adverse changes in
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legal factors, (ii) an accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the mineral properties, and (iii) significant decreases in the market prices of the mineral properties.
The principal considerations for our determination that performing procedures relating to the assessment of impairment indicators of mineral properties is a critical audit matter are that there was judgment by management when assessing whether there were impairment indicators related to the Company’s mineral properties, specifically in regards to assessing whether there were: (i) significant adverse changes in the business climate including significant decreases in copper, zinc, and other metal prices, or significant adverse changes in legal factors, (ii) an accumulation of costs significantly in excess of the amount originally expected for the acquisition or con struction of the mineral properties, and (iii) significant decreases in the market prices of the mineral properties. This in turn led to a high degree of auditor judgment and subjectivity in performing procedures to evaluate audit evidence relating to the judgment made by management in their assessment of impairment indicators that could give rise to the requirement to conduct an impairment test.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the financial statements. These procedures included, among others, (i) evaluating whether there were significant adverse changes in the business climate including significant decreases in copper, zinc, and other metal prices by considering external market and industry data, (ii) evaluating whether there were significant adverse changes in legal factors with respect to title matters by obtaining on a sample basis evidence to support the rights to the mineral properties, (iii) evaluating whether there were significant decreases in the market prices of the mineral properties by considering prolonged declines in Trilogy Metals Inc.’s share price, and (iv) evaluating whether there was an accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the mineral properties, or other factors that may indicate that the carrying values of the mineral properties may not be recoverable, through consideration of evidence obtained in other areas of the audit.
/s/ PricewaterhouseCoopers LLP
Chartered Professional Accountants
Vancouver, Canada
February 10, 2022
We have served as the Company's auditor since 2020.
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Ambler Metals LLC
Balance Sheet
As of November 30, 2021 and 2020
(See accompanying notes to the financial statements)
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Ambler Metals LLC
Statement of Loss and Comprehensive Loss
For the Years Ended November 30
(See accompanying notes to the financial statements)
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Ambler Metals LLC
Statement of Changes in Members’ Equity
For the Years Ended November 30
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Ambler Metals LLC
Statement of Cash Flows
For the Years Ended November 30
(See accompanying notes to the financial statements)
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Ambler Metals LLC
Notes to financial statements
expressed in U.S. dollars, unless otherwise noted
1. Organization & basis of presentation
Ambler Metals LLC (the “Company” or “Joint Venture”), a Delaware limited liability company, is a 50-50 joint venture between NovaCopper US Inc., a wholly owned subsidiary of Trilogy Metals Inc. (collectively “Trilogy”), and South32 USA Exploration Inc., a wholly owned subsidiary of South32 Limited (collectively “South32”).
The Company is engaged in the exploration and development of mineral properties with a focus on the Upper Kobuk Mineral Projects (“UKMP”), including the Arctic and Bornite Projects located in Northwest Alaska in the United States of America (“US” or “USA”).
On February 11, 2020, pursuant to a contribution agreement among Trilogy, South32 and the Company (the “Contribution Agreement”), Trilogy contributed to the Company substantially all of Trilogy’s assets associated with the Upper Kobuk Mineral Projects ("UKMP") located in northwest Alaska in exchange for a 50% membership interest in the Company. Simultaneously, South32 contributed $145 million cash in exchange for a 50% membership interest in the Company.
The operations and governance of the Joint Venture are provided for in the Company’s Limited Liability Company Agreement dated February 11, 2020 (the “LLC Agreement”).
The mining rights, deposits and property, plant and equipment contributed to the Company from Trilogy are recognized at Trilogy’s historical carrying value on the date of contribution. The contributions, including noncash contributions, made to the Company by each respective member on February 11, 2020 are as follows:
Respective contributions to the Joint Venture
As a result of these transactions, Trilogy and South32 each have equal interests in the Company and have equal representation on the Board of the Company.
Following the formation of the Joint Venture, on March 17, 2020 the Company loaned South32 $57.5 million secured by South32’s membership interest in Ambler Metals and guaranteed by South32 International Investment Holdings Pty Ltd.,
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Ambler Metals LLC
Notes to financial statements
expressed in U.S. dollars, unless otherwise noted
a wholly owned subsidiary of South32. The loan has a 7-year maturity date and is recorded at amortized cost. The loan repayment terms were such that quarterly payments became due from South32 in 2021 and management expects continued quarterly payments in 2022 based on forecasted expenditures. See note 8 for additional information.
The financial statements have been prepared by management in conformity with generally accepted accounting principles in the United States (“U.S. GAAP”) on a going concern basis, which contemplates the realization of assets and the discharge of liabilities in the normal course of business for the foreseeable future.
These financial statements have been prepared pursuant to Rule 3-09 of SEC Regulation S-X for inclusion in Trilogy’s 10-K/A, as the Company is an equity investee of Trilogy.
2. Summary of significant accounting policies
Property, plant and equipment
Plant and equipment are recorded at cost and depreciation begins when the asset is put into service. Depreciation is calculated on a straight-line basis over the respective assets’ estimated useful lives. Depreciation periods by asset class are:
Computer hardware and software
3 years
Machinery and equipment
3 – 10 years
Office furniture and equipment
5 years
Vehicles
3 years
Leasehold Improvements
lease term
Mineral properties and development costs
All direct costs related to the acquisition of mineral property interests are capitalized. Mineral property exploration expenditures are expensed when incurred. When it has been established that a mineral deposit is commercially mineable, an economic analysis has been completed and permits are obtained, the costs subsequently incurred to develop a mine on the property prior to the start of mining operations are capitalized. Capitalized costs will be amortized following commencement of production using the unit of production method over the estimated life of proven and probable reserves.
Impairment of long-lived assets
Management assesses the possibility of impairment in the carrying value of long-lived assets whenever events or changes in circumstances indicate that the carrying amounts of the asset or asset group may not be recoverable. Management calculates the estimated undiscounted future net cash flows relating to the asset or asset group using estimated future prices, proven and probable reserves and other 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, operating, capital and reclamation costs are subject to risk and uncertainties that may affect the determination of the recoverability of the long-lived asset. It is possible that material changes could occur that may adversely affect management’s estimates.
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Ambler Metals LLC
Notes to financial statements
expressed in U.S. dollars, unless otherwise noted
Impairment testing
Management assesses the possibility of impairment in the carrying value of long-lived assets whenever events or changes in circumstances indicate that the carrying amounts of the asset or asset group may not be recoverable. Management applies judgment to assess mineral properties and property, plant and equipment for impairment indicators that could give rise to the requirement to conduct a formal impairment test. Events and circumstances that could trigger an impairment test include, but are not limited to, significant adverse changes in the business climate including significant decreases to copper, zinc and other metal prices or significant adverse changes in legal factors, an accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the long-lived asset, and significant decreases in the market prices for long-lived assets.
Leases
We determine if a contractual arrangement represents or contains a lease at inception. Operating leases are included in right of use assets and lease liabilities on our balance sheet. Assets under finance leases are included in property, plant and equipment and the related lease liabilities in lease liabilities on our balance sheet.
Operating and finance lease right of use assets and lease liabilities are recognized based on the present value of the future lease payments over the lease term at the commencement date. When the rate implicit to the lease cannot be readily determined, we utilize the incremental borrowing rate in determining the present value of the future lease payments. The incremental borrowing rate is the rate of interest our Company would have to pay to borrow on a collateralized basis over a similar term and the amount equal to the lease payments in a similar economic environment.
The operating lease expenses are recognized on a straight-line basis over the lease term and included in lease expenses.
Income taxes
The Company is not a taxable entity for income tax purposes. Accordingly, no recognition is given to income taxes for financial reporting purposes. Tax on the net income (loss) of the Company is borne by the owners through the allocation of taxable income (loss). Net income for financial statement purposes may differ significantly from taxable income for the owners as a result of differences between the tax basis and financial reporting basis of assets and liabilities and the taxable income allocation requirements under the shareholders agreement.
Financial instruments
Loans and receivables are recorded initially at fair value, net of transaction costs incurred, and subsequently at amortized cost using the effective interest rate method. Loans and receivables consist of cash, deposits, and loans receivable. Estimated future credit losses are based on historical credit loss experience and forward-looking considerations. Individual receivables are written off when management deem them to be uncollectible. Further details on credit risk are disclosed in note 9.
Other financial liabilities include accounts payable and accrued liabilities.
Translation of foreign currencies
Foreign denominated monetary assets and liabilities are translated into United States dollars at the exchange rate in effect at the balance sheet date, and non-monetary assets and liabilities at the exchange rate in effect at the time of
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Ambler Metals LLC
Notes to financial statements
expressed in U.S. dollars, unless otherwise noted
acquisition or issue. Income and expenses are translated at rates approximating the exchange rate in effect at the time of transactions. Exchange gains or losses arising on translation are included in income or loss for the period.
The functional currency of the Company and the Company’s reporting currency is the United States dollar.
3. Cash
As of November 30, 2021, included in cash is $0.2 million denominated in Canadian dollars and $61 million denominated in United States dollars.
4. Property, plant and equipment
A summary of property, plant and equipment as of November 30, 2021 and November 30, 2020, is as follows:
5. Mineral properties
a) Ambler
On February 11, 2020, the Ambler lands in Northwest Alaska, which contains the copper-zinc-lead-gold-silver Artic Project and other mineralized targets within the volcanogenic massive sulfide belt, were contributed to Ambler Metals LLC pursuant to the Contribution Agreement. The Ambler lands are subject to a 1% net smelter return (“NSR”) royalty that can be purchased at any time for a one-time payment of $10 million.
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Ambler Metals LLC
Notes to financial statements
expressed in U.S. dollars, unless otherwise noted
Mineral property acquisition costs of $118 thousand and $52 thousand were added to the Ambler land holdings during the period ended November 30, 2020 and November 30, 2021, respectively.
b) Bornite
On February 11, 2020, the exclusive right to explore and the non-exclusive right to access and enter on the Bornite lands, and lands deeded to NANA Regional Corporation, Inc. (“NANA”) through the Alaska Native Claims Settlement Act, located adjacent to the Ambler lands in Northwest Alaska, were contributed to Ambler Metals LLC pursuant to the Contribution Agreement.
Upon a decision to proceed with construction of a mine on the Ambler or Bornite lands, NANA maintains the right to purchase between a 16%-25% ownership interest in the mine or retain a 15% net proceeds royalty which is payable after Ambler Metals LLC has recovered certain historical costs, including capital and cost of capital. Should NANA elect to purchase an ownership interest, consideration will be payable equal to all historical costs incurred on the properties at the elected percentage, not to be less than zero. The parties would form a joint venture and be responsible for all future costs, including capital costs of the mine based on their pro-rata share.
NANA would also be granted a net smelter return royalty of between 1% and 2.5% upon the execution of a mining lease or a surface use agreement, the amount of which is determined by the classification of land from which production originates.
c) Mineral properties expense
The following table summarizes mineral properties expense incurred November 30, 2021 and November 30, 2020, respectively. Prior year Ambler Access Project expense of $261 thousand was previously classified as general and administrative expense and was reclassed to mineral properties to reflect current year presentation.
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Ambler Metals LLC
Notes to financial statements
expressed in U.S. dollars, unless otherwise noted
6. Accounts payable and accrued liabilities
7. Leases
(a) Right of use assets
In December 2020, the Company commenced a lease for their headquarters office in Anchorage, Alaska and recognized the right of use asset approximately $816 thousand. In August 2021, the company commenced a new lease for a warehouse in Fairbanks, Alaska and recognized the right of use asset of approximately $231 thousand. The Company’s lease arrangement for a previously recognized warehouse in Fairbanks, Alaska ended in October 2021. Total lease expense recorded was comprised of operating lease costs of $261 thousand, variable lease costs of $nil and property taxes of $15 thousand. As of November 30, 2021, the remaining lease term was 49 months for the headquarters office and 32 months for the warehouse.
Supplemental cash and non-cash information relating to our leases during the year ended November 30, 2021 are as follows:
● Cash paid for amounts included in the measurement of lease liabilities was $243 thousand.
● Non-cash amounts included in the measurement of lease liabilities was $nil.
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Ambler Metals LLC
Notes to financial statements
expressed in U.S. dollars, unless otherwise noted
Future minimum payments relating to the lease recognized in our balance sheet as of November 30, 2021 are as follows:
8. Related party transactions
The Company’s Service Agreement between Trilogy and the Company dated February 18, 2020 (“Services Agreement”) ended December 31, 2020 with minimal expenses for the year ended November 30, 2021. For the year ended November 30, 2020, the Company incurred $932 thousand of expenses related to employee compensation, payroll processing fees, office supplies, and accounting services in connection with the Services Agreement and the Company made payments of $2,772 thousand related to operating expenses paid by Trilogy and reimbursed by the Company pursuant to the Services Agreement.
As of November 30, 2021, included in accounts payable owed to Trilogy and South32 is $nil and as of November 30, 2020, is $114 thousand due to Trilogy.
For the year ended November 30, 2021, the Company earned interest of $1 million ($1 million for November 30, 2020), from the loan to South32 and received payments on the loan of $4.2 million, of which, $1.9 million applied to interest and $2.3 million applied to principal.
9. Financial risk management
(a) Currency risk
Currency risk is the risk of a fluctuation in financial asset and liability settlement amounts due to a change in foreign exchange rates. The Company operates in the United States and holds a bank account denominated in Canadian currency to facilitate payments to Canadian vendors, as necessary. The Company’s exposure to the currency risk at November 30, 2021 is limited to the Canadian dollar balances consisting of cash of CDN $252 thousand and accounts payable of CDN $75 thousand. Based on a 10% change in the US-Canadian exchange rate, assuming all other variables remain constant, the Company’s net change would be approximately $14 thousand.
(b) Credit risk
Credit risk is the risk of an unexpected loss if a customer or third party to a financial instrument fails to meet its contractual obligations. The Company holds cash with a financial institution that is federally insured through FDIC. The Company’s receivables consist of a loan receivable from South32. The Company’s exposure to credit risk is equal to the balance of cash and loan receivables recorded in the financial statements.
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Ambler Metals LLC
Notes to financial statements
expressed in U.S. dollars, unless otherwise noted
(c) Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulties raising funds to meet its financial obligations as they fall due. The Company is in the exploration stage and does not have cash inflows from operations; therefore, the Company manages liquidity risk through the terms of the LLC Agreement.
Contractually obligated cash flow requirements as of November 30, 2021 are as follows:
(d) Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company is exposed to interest rate risk with respect to interest earned on cash and the loan receivable from South32. Based on cash balances as of November 30, 2021, a 1% change in interest rates would result in a negligible change in cash, over a 12-month period, assuming all other variables remain constant.
As we are currently in the exploration phase, none of our financial instruments are exposed to commodity price risk; however, the ability for our Owners to obtain long-term financing and its economic viability could be affected by commodity price volatility.
10. Commitments and contingencies
The Company has commitments with respect to a warehouse and office lease requiring future minimum lease payments as summarized in note 7.
11. Members’ equity
The Company has been established as a limited liability company. Under the terms of the LLC Agreement, unless otherwise provided for in the LLC Agreement, all membership interests are entitled to the same benefits, rights, duties and obligations and vote on all matters.
The Company is authorized to establish a capital account for each member equal to that member’s initial capital contribution, represented by Units. The Units are voting and subject to transfer restrictions as defined in the LLC Agreement. As of November 30, 2021 and 2020, the Company had 2 million Units, with each of South32 and Trilogy owning 1 million Units each, in exchange for the contributions made to the Company at inception.
As described in the LLC Agreement, under certain circumstances a member shall have the right to transfer to any third party all or any part of its Membership Interest or any economic interest, (including its right to receive distributions of cash or property from the Company). Any such transfer is subject to the satisfaction of certain conditions, and the relevant purchase price is determined pursuant to specific formulas, all as set forth in the LLC Agreement.
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Item 16. FORM 10-K SUMMARY
None.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
TRILOGY METALS INC.
By:
/s/ Tony Giardini
Name:
Tony Giardini
Title:
President and Chief Executive Officer
Date: February 11, 2022
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:
Signature
Title
Date
/s/ Tony Giardini
President and Chief Executive Officer
February 11, 2022
Tony Giardini
(Principal Executive Officer) and Director
/s/ Elaine Sanders
Chief Financial Officer (Principal Financial
February 11, 2022
Elaine Sanders
Officer and Principal Accounting Officer)
/s/ James Gowans
Director
February 11, 2022
James Gowans
/s/ William Hayden
Director
February 11, 2022
William Hayden
/s/ William Hensley
Director
February 11, 2022
William Hensley
/s/ Gregory Lang
Director
February 11, 2022
Gregory A. Lang
/s/ Kalidas Madhavpeddi
Director
February 11, 2022
Kalidas V. Madhavpeddi
/s/ Janice Stairs
Director
February 11, 2022
Janice Stairs
/s/ Diana Walters
Director
February 11, 2022
Diana Walters
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