What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-04-06 compared with 2021-10-05 · 134 added, 164 removed, 135 unchanged (69% of the section changed)

2 unchanged sentences

Management’s Discussion & Analysis

For the Quarter Ended August 31, 2021

For the Quarter Ended February 28, 2022

(expressed in US dollars)

5 unchanged sentences

These forward-looking statements may include statements regarding the Company’s work programs and budgets;

perceived merit of properties, exploration results and budgets, the Company and Ambler Metals’ funding requirements, mineral reserves and resource estimates, work programs, capital expenditures, operating costs, cash flow estimates, production estimates and similar statements relating to the economic viability of a project, timelines, strategic plans, statements regarding Ambler Metals’ plans and expectations relating to its Upper Kobuk Mineral Projects, sufficiency of the $145 million subscription price to fund the UKMP;

perceived merit of properties, exploration results and budgets, the impact of the BLM’s suspension of permits on the right-of-way with AIDEA relating to the Ambler Road Project;

the Company and Ambler Metals’ funding requirements, mineral reserves and resource estimates, work programs, capital expenditures, operating costs, cash flow estimates, production estimates and similar statements relating to the economic viability of a project, timelines, strategic plans, statements regarding Ambler Metals’ plans and expectations relating to its Upper Kobuk Mineral Projects, sufficiency of the $145 million subscription price to fund the UKMP;

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

market prices for precious and base metals;

statements regarding the Ambler Road Project (also known as the Ambler Mining District Industrial Access Project);

statements regarding the Ambler Access Project ( also known as the Ambler Mining District Industrial Access Project) ;

or other statements that are not statements of fact.

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● 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;

Trilogy Metals Inc.

For the Quarter Ended August 31, 2021

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

For the Quarter Ended February 28, 2022

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

● continued good relationships with South32, our joint venture partner, as well as local communities and other stakeholders;

● there being no significant disruptions affecting operations, whether relating to labor, supply, power damage to equipment or other matter;

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

● 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.

9 unchanged sentences

● 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 Access Project, (formerly, Ambler Mining District Industrial Access Project, or AMDIAP), will receive all the requisite permits and, if it does, whether the Alaska Industrial Development and Export Authority will build the AMDIAP;

● risks relating to ongoing litigation regarding the AMDIAP;

● 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 the suspension by the BLM of the right-of-way permits with AIDEA relating to the Ambler access road to permit the Department of the Interior to carry out additional work on the environmental impact statement, and associated delays relating to such suspension;

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

1 unchanged sentence

● none of the Company’s mineral properties are in production or are under development;

Trilogy Metals Inc.

For the Quarter Ended February 28, 2022

● commodity price fluctuations;

● uncertainty related to title to our mineral properties;

Trilogy Metals Inc.

For the Quarter Ended August 31, 2021

● our history of losses and expectation of future losses;

● risks related to increases in demand for equipment, skilled labor and services needed for exploration and development of mineral properties, and related cost increases;

● risks related to increases in costs of fuel and other required supplies and concerns relating to supply chain and the ability to obtain needed supplies at a reasonable cost, or at all;

● risks related to global economic instability, including global supply chain issues, inflation and fuel and energy costs may affect the Company’s business;

● uncertainties relating to the assumptions underlying our resource estimates, such as metal pricing, metallurgy, mineability, marketability and operating and capital costs;

13 unchanged sentences

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

Trilogy Metals Inc.

For the Quarter Ended February 28, 2022

● the Company’s expectation of not paying cash dividends;

3 unchanged sentences

● risks related to adverse publicity from non-governmental organizations;

Trilogy Metals Inc.

For the Quarter Ended August 31, 2021

● 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;

5 unchanged sentences

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

(“Trilogy”, “Trilogy Metals”, “the Company” or “we”) is dated October 4, 2021 and provides an analysis of our unaudited interim financial results for the quarter ended August 31, 2021 compared to the quarter ended August 31, 2020.

The following information should be read in conjunction with our August 31, 2021 unaudited interim condensed consolidated financial statements and related notes which were prepared in accordance with United States generally accepted accounting principles (“U.S.

(“Trilogy”, “Trilogy Metals”, “the Company” or “we”) is dated April 5, 2022 and provides an analysis of our unaudited interim financial results for the quarter ended February 28, 2022 compared to the quarter ended February 28, 2021.

The following information should be read in conjunction with our February 28, 2022 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, 2021.

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All amounts are in United States dollars unless otherwise stated.

References to “Canadian dollars” and “C$” and “CAD$” are to the currency of Canada and references to “U.S.

References to “Canadian dollars” and “CDN$” are to the currency of Canada and references to “U.S.

dollars”, “$” or “US$” are to the currency of the United States.

2 unchanged sentences

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.

Trilogy Metals Inc.

For the Quarter Ended February 28, 2022

Description of business

We are a base metals exploration company focused on the exploration and development of mineral properties located in Alaska, U.S.A.

We conduct our joint venture operations through a wholly owned subsidiary, NovaCopper US Inc.

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).

The projects contributed to Ambler Metals consist of:

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and ii) the Bornite lands being explored under a collaborative long-term agreement with NANA Regional Corporation, Inc.

(“NANA”), a regional Alaska Native

Trilogy Metals Inc.

For the Quarter Ended August 31, 2021

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

We also conduct early-stage exploration through a wholly owned subsidiary, 995 Exploration Inc.

(“NANA”), a regional Alaska Native Corporation, which hosts the Bornite carbonate-hosted copper project (the “Bornite Project”) and related assets.

The Company also conducts early-stage exploration through a wholly owned subsidiary, 995 Exploration Inc.

Joint venture project activities

2021 Exploration Season for the Upper Kobuk Mineral Projects

In a press release dated May 17, 2021, the Company announced that Ambler Metals had finalized the details of the 2021 exploration field program at the UKMP for the previously approved $27 million exploration budget.

The exploration program was aligned with a strategy developed by the Company and South32 which prioritizes the exploration budget within the UKMP.

The strategy defines a program that advances the highest priority projects and exploration targets, both volcanogenic massive sulphide (“VMS”) and carbonate-hosted copper (“CHC”), ranging from early-stage geophysical anomalies that were identified during the 2019 airborne versatile time domain electromagnetic (“VTEM”) survey to advanced VMS and CHC prospects with historical resources.

The exploration camp opened in May in preparation for the start-up of drilling in June at the Arctic Project.

The drilling program planned for 7,600 meters of drilling at Arctic with most of the drilling targeting infill areas to improve the confidence of the mineral resources, and geotechnical and metallurgical drill holes to further de-risk the project.

An additional 7,000 meters of exploration drilling was planned at targets near the Arctic deposit and elsewhere in the Ambler Mining District.

Drilling productivity at the project was behind schedule during the quarter due to adverse weather conditions in the district and challenges with the contractor staffing the drill rigs.

As a result, a total of 7,325 meters of the originally planned drill program were completed.

Despite the lower-than-expected drill productivity, all planned geotechnical drilling at the Arctic Project was completed and sufficient mineralized material was recovered to complete the planned metallurgical program.

The summer 2021 drill program was completed on September 22, 2021.

Arctic Project

Technical activities at the Arctic Project commenced in early June with initial work focused on infill drilling to further improve the confidence of the mineral resources from the “indicated” to “measured” category.

In addition, metallurgical drilling was conducted at the project.

Most of this drilling has consisted of large diameter PQ-size (96-mm diameter) core which allows for the extraction of large sample-sized material.

During the field season a total of 18 holes were completed at Arctic comprising 4,131 meters of core.

All the core has been logged and sampled with results expected to be announced later this year.

Regional Exploration Project

During the quarter, two drill rigs were relocated from the Arctic Project to the Regional drilling program.

Regional drilling was focused on near Arctic (“Arctic Hub”) exploration targets, with the goal of discovering nearby copper-rich satellite deposits within a 3-to-5-kilometer radius of the Arctic deposit.

Drilling was completed at the Arctic East and Southeast Arctic targets before moving drills to investigate other targets within the UKMP, including Snow and the Ambler Lowlands.

During the field season a total of 8 holes were completed totaling 3,194 meters.

Core samples are being logged and sent for assaying with results expected later this year.

In addition to the regional drill program, regional geological mapping and soil geochemistry surveys within the Ambler VMS belt and Cosmos Hills was carried out during the quarter.

The goal of this program has been to follow-up on previous

Trilogy Metals Inc.

For the Quarter Ended August 31, 2021

anomalous geochemical results and to investigate geophysical anomalies that were identified during the 2019 airborne VTEM survey.

Arctic Mine Permitting

Arctic mine permitting preparation work was ongoing during the quarter for the filing of the Notice of Intent (“NOI”), which marks the commencement of formal federal permitting activities at the Arctic Project.

The next step before the submittal of the NOI is a permit preparedness review which will be an independent third-party audit of the draft NOI.

The Company expects to file the NOI before the end of the year and anticipates the overall permitting process to take 24 to 30 months.

In a press release dated March 17, 2022, the Company announced additional drill results from the 2021 summer field season at the Arctic Project .

The 2021 Arctic drill program included 4,131 meters of diamond drilling, comprising 18 holes, that were designed to convert part of the resources from the Indicated category to the Measured category, and provide material for metallurgical testing and geotechnical information.

These latest drilling results from the 2021 program contained mineralized intervals consistent with previous drilling conducted within the resource area on the property.

Based on a cut-off grade of 0.5% copper equivalent, significant zones of high-grade copper, zinc, lead, gold, and silver mineralization were intersected.

Bornite Project

The Company announced a new resource estimate for the Bornite Project in January of 2022 and subsequently filed a National Instrument 43-101 compliant Technical Report on February 11, 2022.

The report details the Bornite Project’s copper grades, specifically the South Reef area which hosts inferred resources of 35.3 million tonnes at a grade of 3.4% copper.

Overall, Bornite has indicated in-pit resources grading over 1% copper, containing almost a billion pounds of copper and inferred in-pit resources of just over two billion pounds of copper at a grade of almost 1% copper.

Ambler Mining District Industrial Access Project (“AMDIAP” or “Ambler Access Project”)

On July 23, 2020, the United States Bureau of Land Management (“BLM”) issued the Joint Record of Decision (“JROD”) for the AMDIAP.

The JROD approves the development of the northern or “A” route which is to be a 211-mile-long gravel private access road in the southern Brooks Range foothills to provide industrial access to the Ambler Mining District.

Along with the JROD, a Section 404 Permit, which is governed by the Clean Water Act (“CWA”), was issued by the United States Army Corp.

of Engineers (“USACE”) to the Alaska Industrial Development and Export Authority (“AIDEA”).

On August 3, 2020, a coalition of national and Alaska environmental non-government organizations (“ENGO”) filed the first of two lawsuits against the federal agencies responsible for issuing the JROD.

A second similar lawsuit was filed in October 2020.

The ENGO’s main position is that due process was not carried out during the permitting of the AMDIAP.

Subsequently, AIDEA, Ambler Metals, the State of Alaska and NANA have filed for and received intervenor status in each of the lawsuits and will be defending the issuance of the JROD and the permits.

On January 6, 2021, BLM, the National Park Service and AIDEA signed Right-of-Way agreements giving AIDEA the ability to cross federally owned and managed lands along the route for the Ambler Access Project approved in the JROD.

The authorizing documents with the two agencies are the final federal permits required for the Ambler Access Project.

On September 28, 2021, the Department of Justice (“DOJ”) requested a 60-day stay with respect to each of the above referenced lawsuits.

In its request for the stay, the DOJ stated that it was necessary to “accommodate review of this matter by officials within the United States Department of the Interior who have engaged in various discussions with multiple parties involving this matter and in government-to-government consultations with tribal entities”.

Development Funding Agreement regarding the Ambler Access Project with the Alaska Industrial Development and Export Authority

The summer field season for the Ambler Access Project commenced during the quarter with cultural heritage work along the proposed 211-mile, east-west-running controlled industrial access road that would provide industrial access to the Ambler Mining District in Northwestern Alaska.

The Alaska Industrial Development and Export Authority has prioritized cultural heritage work, aquatic habitat studies and geotechnical planning for this year’s and next year’s field seasons to progress the feasibility engineering and permitting work for the road.

On August 9, 2021, the Governor of Alaska, Mike Dunleavy, visited the UKMP.

During the visit, the Governor reiterated his strong support for the development of the Ambler Mining District and for the development of the Ambler Access Project.

He also announced the formation of the Subsistence Advisory Committee Working Group which is to include Native stakeholders within the Northwest Arctic Borough and the Doyon Region who could be affected by the proposed road.

This committee is being formed to develop the terms of reference for the formal Subsistence Advisory Committee that will provide guidance on subsistence and other matters for the design and operation of the road.

In a press release dated February 23, 2022, the Company announced that the United States Department of the Interior (“DOI”) filed a motion on February 22, 2022 to remand the Final Environmental Impact Statement (“FEIS”) and suspend the right-of-way permits issued to the Alaska Industrial Development and Export Authority (“AIDEA”) for the Ambler Access Project.

The DOI stated that the suspension of the road permits will allow it to carry out additional supplemental work on the FEIS.

The motion also indicated that the DOI has requested that the lawsuits filed in 2021 against the DOI by a coalition of national and Alaska environmental non-government organizations be suspended.

The lawsuits had been filed in response to the United States Bureau of Land Management’s (“BLM”) issuance of the Joint Record of Decision (“JROD”), that authorized a right-of-way across federally managed lands for AIDEA and the Ambler Access Project.

The Company has commenced discussions with its partners, including NANA Regional Corporation Inc., AIDEA, the Northwest Arctic Borough, the State of Alaska and South32 Limited to understand the potential impact of the above decision by the DOI on AIDEA’s proposed plan and budget for the 2022 summer field season activities that were previously announced.

In mid-March 2022, the BLM and the DOI suspended the right-of-way grant and the right-of-way permit (“ROW permits”) to AIDEA relating to the Ambler Access Project over federal land while the DOI conducts further analysis and consultation.

While the suspension decisions are in place:

AIDEA may not conduct any activities that rely on the authority of the ROW

Trilogy Metals Inc.

For the Quarter Ended August 31, 2021

COVID Safety Measures

During the 2021 field season, we adhered to a strict COVID safety protocol regime which included limited personnel rotations, COVID-19 testing, stringent sanitation and disinfection procedures and contact tracing.

These protocols were followed throughout the summer field season in strict observance to Government of Alaska guidelines.

Early-stage exploration

Trilogy has acquired, through staking, mineral claims located in Alaska, USA outside of the UKMP.

During the quarter ended August 31, 2021, the Company executed a 10-day preliminary reconnaissance program of the claims to confirm government-mapped geology and to collect rock and stream sediment samples.

For the Quarter Ended February 28, 2022

the terms and conditions of the ROW permits are tolled;

and all rental fee obligations are suspended.

The suspension does not preclude AIDEA from applying for special use permits to conduct activities on the lands subject to the ROW permits pursuant to applicable law or authority other than the suspended ROW permits.

On March 22, 2022, the Intervenor Defendants (the State of Alaska, NANA, AIDEA, and Ambler Metals LLC (“Ambler Metals”)) filed briefs in opposition to the DOI’s motion for a voluntary remand.

In its brief, Ambler Metals stated that it does not oppose the voluntary remand motion subject to the following conditions:

(i) no vacatur or termination of the permits;

(ii) the remand must be completed within nine months;

(iii) that there must be status updates to the court every 60 days during the remand period;

and (iv) the federal defendants (DOI) must lodge the administrative record within 30 days of issuing any new decision.

Also on March 22, 2022, the plaintiffs filed a motion asking the court to deny the motion for voluntary remand without vacatur of the permits and either allow merits briefing to proceed or simply vacate the Federal Defendants reviews and decisions.

On April 5, 2022, the Federal Defendants responded to the plaintiffs’ arguments against voluntary remand and argued that vacatur of the decisions was not appropriate.

Federal Defendants also argued that the court should retain jurisdiction, but disagreed with arguments requesting a court-imposed schedule.

The Federal Defendants propose filing a status report every 90 days.

Corporate developments

Annual General Meeting

In a press release dated March 29, 2022, the Company announced that the Annual General Meeting of shareholders will be held on May 13, 2022.

All current directors will stand for re-election at the AGM.

Other items of business include the approval of amendments to, and unallocated entitlements under, the Company’s Restricted Share Unit Plan (“RSU Plan”) and Deferred Share Unit Plan (“DSU Plan”).

The Company is asking shareholders to approve a change to the RSU Plan to remove the option for the Company to cash settle RSUs granted to Canadian resident directors due to potential Canadian tax restrictions.

The Company is asking shareholders to approve a change to the DSU Plan to allow directors to elect to receive up to 100% of their annual compensation in DSUs.

Both these amendments will provide the Company flexibility to pay our directors fees in the form of stock in an effort to preserve cash and build share ownership.

Summary of results

in thousands of dollars,

except for per share amounts

Three months ended

Nine months ended

August 31, 2021

August 31, 2020

August 31, 2021

August 31, 2020

February 28, 2022

February 28, 2021

Selected expenses

Exploration expense

Mineral properties and feasibility study expenses

General and administrative

1 unchanged sentence

Professional fees

Salaries – stock-based compensation

Gain on derecognition of assets contributed to joint venture

Salaries and directors expense – stock-based compensation

Share of loss on equity investment

Comprehensive earnings (loss) for the year

Basic earnings (loss) per common share

Diluted earnings (loss) per common share

Three months ended August 31, 2021

For the three-month period ended August 31, 2021, overall cash costs related to general and administrative expenses, investor relations, professional fees and salaries were primarily tracking to budget.

Trilogy reported a net loss of $7.7 million (or $0.05 basic and diluted loss per common share).

Comprehensive loss for the period

Basic and diluted loss per common share

For the three-month period ended February 28, 2022, overall cash costs related to general and administrative expenses, investor relations, professional fees and salaries were primarily tracking to budget.

For the three-months period ended February 28, 2022, Trilogy reported a net loss of $5.0 million (or $0.03 basic and diluted loss per common share).

For the comparable period in 2021, we reported a net loss of $4.5 million (or $0.03 basic and diluted loss per common share).

This third quarter difference is primarily due to a $5.0 million increase in our 50% pro rata share of Ambler Metals’ comprehensive loss.

This was offset by a one-time charge of $0.2 million in feasibility study costs incurred during the third quarter of 2020.

The share of loss in equity investment is higher versus the comparative period as the current quarter includes mineral property expenses that Ambler Metals incurred during the quarter for the 2021 summer drill program.

These costs were not incurred in the comparative period as the 2020 field season had been cancelled due to the COVID-19 pandemic.

Other variances noted for the comparable period were:

i) an increase in general and administrative expenses of $0.2 million primarily due to an increase in insurance premiums and additional stock exchange fees incurred for updates to the Company’s equity incentive plans;

ii) exploration costs of $0.1 million incurred during the current period for geological review work for which there is no comparative;

iii) an increase of $0.2 million in salaries as the current period cost reflects additions to the executive team in September 2020;

and iv) a decrease of $0.7 million in stock-based compensation as the Company did not award any new grants during the current period, compared to 1.8 million options that were awarded during the comparative quarter in the prior year.

This difference is primarily due to the Company’s equity pickup of Ambler Metals’ comprehensive loss, offset by a

Trilogy Metals Inc.

For the Quarter Ended August 31, 2021

Nine months ended August 31, 2021

For the nine-month period ended August 31, 2021, overall cash costs related to general and administrative expenses, investor relations, professional fees and salaries were primarily tracking to budget.

Trilogy reported a net loss of $15.6 million (or $0.11 basic and diluted loss per common share).

For the comparable period in 2020, we reported net earnings of $165 million (or $1.17 basic and $1.12 diluted earnings per common share).

The difference for the nine-month period ended August 31, 2021, when compared to the same period in 2020, is primarily due to the $176 million gain on derecognition of mineral property assets contributed to Ambler Metals upon formation of the joint venture on February 11, 2020.

This variance is offset by $1.5 million of mineral property expenses and $1.0 million of feasibility study costs incurred during the comparable prior period for which there are no current period comparatives.

Furthermore, our share of loss on the equity investment in Ambler Metals was $7.1 million higher for the nine-month period ended August 31, 2021, and reflects costs incurred by Ambler Metals for the 2021 summer drill program.

Other variances noted for the comparative nine-month period ended August 31, 2021 consist of:

i) a decrease of $0.2 million in general and administrative expenses, primarily due to $0.2 million in recruiting fees incurred in the comparative prior year period, offset by an increase in insurance costs and stock exchange fees during the current period;

ii) a decrease of $0.4 million in professional fees as the comparative period includes one-time charges for the implementation of new accounting standards and legal and accounting fees in relation to the formation of the joint venture;

and iii) an increase of $0.6 million in salaries reflecting additions to the executive team in September 2020.

For the Quarter Ended February 28, 2022

reduction in stock-based compensation.

Our 50% pro rata share of Ambler Metals’ comprehensive loss increased by $0.8 million when compared to the prior year comparative as the current quarter includes pre-development costs for the Ambler Access Project for which there are no prior year comparatives.

Salaries and directors expense - stock based-compensation decreased by $0.2 million in comparison to the prior year comparative mainly due to a reduction of 0.9 million units of overall stock-based awards granted during the current quarter.

Selected financial data

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Interest and other income

Exploration expense

Mineral properties and feasibility study expenses

Operating expenses

Share of loss on equity investment

Earnings (loss) for the period

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.

Subsequent to the formation

of the Joint Venture on February 11, 2020, project related costs may cause fluctuations in our quarterly results through our 50% share of the Joint Venture’s net operating loss.

Loss for the period

Loss per common share – basic

Loss per common share – diluted

Factors that can cause fluctuations in our quarterly results include our general and administrative expenses, stock option vesting and the type of programs conducted and length of the field season at the UKMP.

Project related costs may cause fluctuations in our quarterly results through our share of losses on equity investment where we record 50% of the net operating loss of Ambler Metals.

For the first quarter of 2022, we reported a comprehensive loss of $5.0 million, which consists of $3.1 million in operating expenses and $1.9 million for Trilogy’s 50% share of Ambler Metals’ operating loss.

In the first quarter of 2021, we reported a comprehensive loss of $4.5 million which consisted of $3.4 million in operating expenses and $1.1 million for Trilogy’s share of Ambler Metals’ operating loss.

When compared to the first quarter of 2021, our pro rata share of the joint venture’s operating loss was $0.8 million higher for the first quarter of 2022 as the current quarter includes pre-development costs incurred by Ambler Metals for the Ambler Access Project.

The $0.3 million decrease in operating expenses for the first quarter of 2022 versus the comparative was primarily due to a decrease of $0.2 million in stock-based compensation during the current quarter.

The remaining $0.1 million in cost reduction was spread over the general and administrative, investor relations, professional fees and salaries cost categories.

For the fourth quarter of 2021, we reported a comprehensive loss of $6.1 million, which consisted of $1.9 million in operating expense and $4.2 million for Trilogy’s share of Ambler Metals’ operating loss.

In the fourth quarter of 2020, we reported a comprehensive loss of $3.2 million which consisted of $3.1 million in operating expenses and $1.0 million for Trilogy’s share of Ambler Metals’ operating loss, all offset by $0.9 million in services agreement income charged to Ambler Metals.

When compared to the fourth quarter of 2020, our pro rata share of the joint venture’s operating loss was $3.2 million higher as the fourth quarter results included project activity costs that Ambler Metals incurred to complete the 2021 drill program as well as pre-development costs for the Ambler Access Project for which there were no fourth quarter 2020 comparatives.

When compared to the fourth quarter of 2020, the operating expenses were $1.2 million lower.

The decrease was primarily due to a $0.9 million reduction in salaries as Trilogy provided technical services to Ambler Metals per the Services Agreement during the comparative period.

In addition, there was $0.1 million in cost

Trilogy Metals Inc.

For the Quarter Ended February 28, 2022

savings for professional fees as the comparative included additional legal fees for corporate matters and tax consulting charges.

Lastly, stock-based compensation was $0.1 million lower in the fourth quarter of 2021 as the comparative included a RSU grant that vested during the fourth quarter of 2020.

For the third quarter of 2021, we reported a comprehensive loss of $7.7 million, which consisted of $1.6 million in operating expenses and $6.1 million for Trilogy’s 50% share of Ambler Metals’ operating loss.

In the third quarter of 2020, we reported a comprehensive loss of $3.2 million which consisted of $2.1 million in operating expenses and $1.1 million for Trilogy’s share of Ambler Metals’ operating loss.

When compared to the third quarter of 2020, our pro rata share of the joint venture’s operating loss is $5 million higher.

The increase is due to the project drilling costs incurred in

Trilogy Metals Inc.

For the Quarter Ended August 31, 2021

the 2021 field season.

When compared to the third quarter of 2020, our pro rata share of the joint venture’s operating loss was $5 million higher.

The increase was due to the project drilling costs incurred in the 2021 field season.

Ambler Metals did not incur these costs during the third quarter of 2020 due to the cancellation of the 2020 field season because of the COVID-19 pandemic.

The $0.5 million decrease in operating expenses for the current period versus the comparative was primarily due to a decrease of $0.7 million in stock-based compensation, offset by a $0.2 million increase in salaries as in the current period, CEO compensation is salary-based verses stock based in the comparative third quarter of 2020.

The $0.5 million decrease in operating expenses for the third quarter versus the comparative was primarily due to a decrease of $0.7 million in stock-based compensation, offset by a $0.2 million increase in salaries, as in the third quarter, CEO compensation was salary-based verses stock based in the comparative third quarter of 2020.

For the second quarter of 2021, we reported a comprehensive loss of $3.4 million, which consisted of $1.7 million in operating expenses and $1.7 million for Trilogy’s 50% share of Ambler Metals’ operating loss.

In the second quarter of 2020, we recognized a comprehensive loss of $3.0 million which consisted of $2.5 million in operating expenses and $0.6 million for Trilogy’s share of Ambler Metals’ operating loss.

When compared to the second quarter of 2020, our pro rata share of the joint venture’s operating loss is $1.1 million higher for the second quarter of 2021.

The increase is due to camp set up costs in relation to the 2021 field season.

When compared to the second quarter of 2020, our pro rata share of the joint venture’s operating loss was $1.1 million higher for the second quarter of 2021.

The increase was due to camp set up costs in relation to the 2021 field season.

Ambler Metals did not incur these costs during the second quarter of 2020 due to the cancellation of the 2020 field season because of the COVID-19 pandemic.

The $0.8 million decrease in operating expenses for the current period versus the comparative was primarily due to the Arctic project feasibility study costs that were incurred by Trilogy during the second quarter of 2020 for which there are no current period comparatives.

For the first quarter of 2021, we reported a comprehensive loss of $4.5 million, which consists of $3.4 million in operating expenses and $1.1 million for Trilogy’s 50% share of Ambler Metals’ operating loss.

In the first quarter of 2020, we recognized a gain of $176 million from the contribution of our Alaskan mineral properties to the joint venture for which there is no current period comparative.

Other variances, when compared to the three-month period ended February 29, 2020, include our pro rata share of the joint venture’s operating loss, which is $0.9 million higher in the current period and operating expenses, which are $1.1 million lower for the current period.

The decrease in the operating expenses is primarily due to the elimination of $1.5 million in mineral properties expenses as the mineral properties were contributed to the joint venture during the first quarter of 2020 and a cost savings of $0.4 million from professional fees, offset by an increase of $1.0 million in stock-based compensation.

For the fourth quarter ended November 30, 2020, we incurred a loss of $3.2 million, which consists of $3.1 million in operating expense and $1.0 million for Trilogy’s share of Ambler Metals’ operating loss.

When compared to the fourth quarter of 2019, the operating expenses were $3.5 million lower.

The decrease is primarily due to the elimination of $3.8 million in mineral property expenses, a decrease of $0.4 million in professional fees, $0.3 million lower stock‐based compensation and a decrease of $0.2 million in general and administrative expenses.

These cost savings were offset by a loss of $1.0 million on the equity method investment for which there is no comparative amount for the fourth quarter of 2019, and an increase of $0.3 million in salaries due to new hires to the management team in the fourth quarter 2020.

The $0.8 million decrease in operating expenses for the second quarter versus the comparative was primarily due to the Arctic project feasibility study costs that were incurred by Trilogy during the second quarter of 2020.

Liquidity and capital resources

At August 31, 2021, we had $6.8 million in cash and working capital of $6.8 million, which is sufficient to fund our ongoing operations for at least the next 12 months.

The UKMP Projects are fully funded by Ambler Metals and we do not anticipate needing to fund our 50% share of future expenditures to advance the UKMP until the subscription price paid by South32 into Ambler Metals of $145 million is spent.

We expended $1.5 million on operating activities during the first quarter of 2022 which is consistent with the prior year comparative.

The majority of cash spent on operating activities during the quarter was on corporate salaries, annual fees paid to the Toronto Stock Exchange and the NYSE American Exchange and professional fees related to our annual regulatory filings with the American and Canadian securities commissions.

At February 28, 2022, we had $4.8 million in cash and cash equivalents and working capital of $4.3 million.

The Company continues to manage its cash expenditures through its working capital.

Management has begun a review of the fiscal 2022 budget for cash preservation opportunities and has reduced cash expenditures where feasible, including but not limited to, reductions in marketing and investor conferences and office expenses.

The Company’s Board of Directors are considering taking all of their fees in shares of the Company in an effort to preserve cash and increase share ownership.

The Company’s senior management team are also considering taking a portion of their base salaries in shares of the Company to preserve cash.

Management believes that these cost reduction efforts results in sufficient cash to fund the Company’s operations for the next twelve months.

All project related costs are funded by the joint venture.

Amber Metals is well funded to advance the UKMP with $58.2 million in cash and $53.2 million loan receivable from South32 as at February 28, 2022.

There is sufficient funds at the joint venture to fund the previously announced budgets for the UKMP of $28.5 million and the Ambler Access Project of $15.4 million for fiscal 2022.

Trilogy does not anticipate having to fund the activities of Ambler Metals until the initial contribution of $145 million is expended.

Future cash requirements may vary materially from current expectations due to a number of factors, including foreign exchange denominated office related costs and insurance renewal costs.

The Company will need to raise additional funds in the future to support its operations and administration expenses.

Future sources of liquidity may include debt

Trilogy Metals Inc.

For the Quarter Ended August 31, 2021

Contractual obligations

Contractually obligated undiscounted cash flow requirements as at August 31, 2021 are as follows.

In thousands of dollars

Accounts payable and accrued liabilities

For the Quarter Ended February 28, 2022

financing, equity financing, convertible debt, exercise of options, or other means.

The continued operations of the Company are dependent on its ability to obtain additional financing or to generate future cash flows.

Off-balance sheet arrangements

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Outstanding share data

At October 4, 2021, we had 144,451,485 common shares issued and outstanding.

At October 4, 2021, we had outstanding, 11,118,316 stock options with a weighted-average exercise price of $1.94, no RSUs, as well as 1,277,447 DSUs and 11,927 NovaGold Resources Inc.

At April 5, 2022, we had 145,464,286 common shares issued and outstanding.

At April 5, 2022, we had outstanding, 12,242,150 stock options with a weighted-average exercise price of CDN$2.50, as well as 2,387,668 DSUs, 257,268 RSUs, and 11,927 NovaGold Resources Inc.

(“NovaGold”) DSUs for which the holder is entitled to receive one common share for every six NovaGold shares received.

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Critical accounting estimates

The most critical accounting estimates upon which our financial status depends are those requiring estimates of the

recoverability of our equity method investment in Ambler Metals, income taxes and valuation of stock‐based compensation.

The most critical accounting estimates upon which our financial status depends are those requiring estimates of the recoverability of our equity method investment in Ambler Metals, income taxes and valuation of stock‐based compensation.

Impairment of Investment in Ambler Metals LLC

Management assesses the possibility of impairment in the carrying value of its equity investment in Ambler Metals whenever events or circumstances indicate that the carrying amount of the investment may not be recoverable.

Management assesses the possibility of impairment in the carrying value of its equity method investment in Ambler Metals whenever events or circumstances indicate that the carrying amount of the investment may not be recoverable.

Significant judgments are made in assessing the possibility of impairment.

Factors that may be indicative of an impairment include a loss in the value of an investment that is not temporary.

Management considers several factors in considering if an indicator of impairment has occurred, including but not limited to, significant changes in the legal, business or regulatory environment, adverse changes in the use or physical condition of the underlying mineral properties asset, changes in the market interest rates or other market rates of return that are likely to significantly affect the discount rate used in the impairment assessment, significant adverse changes impacting the investee and internal reporting indicating the economic performance of an investment is, or will be, worse than expected.

Management considers several factors in considering if an indicator of impairment has occurred, including but not limited to, sustained losses by the investment, the absence of the ability to recover the carrying amount of the investment, significant changes in the legal, business or regulatory environment, significant adverse changes impacting the investee including the status of the Ambler Access Project and internal reporting indicating the economic performance of an investment is, or will be, worse than expected.

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

If an indicator of impairment is determined

to exist, the fair value of the impaired investment is determined based on the valuation of cohort companies with similar projects or upon the present value of expected future cash flows using discount rates and other assumptions believed to be consistent with those used by principal market participants and observed market earnings multiples of comparable companies.

Management’s estimates of mineral prices, mineral resources, foreign exchange rates and projected future production

If an indicator of impairment is determined to exist, the fair value of the impaired investment is determined based on the valuation of cohort companies with similar projects or upon the present value of expected future cash flows using discount rates and other assumptions believed to be consistent with those used by principal market participants and observed market earnings multiples of comparable companies.

Trilogy Metals Inc.

For the Quarter Ended August 31, 2021

levels and operating capital are subject to risk and uncertainties that may affect the determination of the recoverability

of the equity investment.

We must make estimates and judgments in determining the provision for income tax expense, deferred tax assets and liabilities, and liabilities for unrecognized charges including interest and penalties.

For the Quarter Ended February 28, 2022

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.

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.

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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 considers, 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.

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.

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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