What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-02-14 compared with 2022-02-11 · 114 added, 184 removed, 210 unchanged (59% of the section changed)

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(“Trilogy”, “the Company”, “us” or “we”) is dated February 13, 2023 and provides an analysis of our audited financial results for the year ended November 30, 2022 compared to the year ended November 30, 2021.

A discussion of our year ended November 30, 2020 compared to November 30, 2019 is contained in our report on Form 10-K for the year ended Novemebr 30, 2020.

A discussion of our year ended November 30, 2022 compared to November 30, 2021 is contained in our report on Form 10-K for the year ended November 30, 2022.

The following information should be read in conjunction with our November 30, 2022 audited consolidated financial statements and related notes which were prepared in accordance with United States generally accepted accounting principles (“U.S.

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

These consolidated financial statements have been prepared on a going concern basis which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future.

As at November 30, 2022, the Company had a working capital surplus of $2.4 million (2021 - $5.6 million) and an accumulated deficit of $66.9 million (2021 - $42.6 million).

The Company has no recurring source of cash inflows at its current stage.

The Company’s cash outflow from operations was $3.9 million for the year ended November 30, 2022.

The Company intends to finance its future requirements through a combination of debt and/or equity issuance.

There is no assurance that the Company will be able to obtain such financings or obtain them on a favourable terms.

These uncertainties raise substantial doubt about the Company’s ability to continue as a going concern.

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.

Geo, VP Exploration of the Company, 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 under the symbol “TMQ”.

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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 Limited (“South32”) on February 11, 2020 (see below).

Our Upper Kobuk Mineral Projects, (“UKMP” or “UKMP Projects”) were contributed into a 50/50 joint venture (the “Joint Venture”) named Ambler Metals LLC (“Ambler Metals”) between Trilogy and South32 Limited (“South32”) on February 11, 2020 (see below).

The projects contributed to Ambler Metals consist of:

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The UKMP Projects comprise approximately 448,217 acres (181,387 hectares) consisting of the Ambler and Bornite lands.

On October 19, 2011, NANA Regional Corporation, Inc.

(“NANA”), an Alaska Native Corporation headquartered in Kotzebue, Alaska, and Trilogy Metals US entered an Exploration Agreement and Option Agreement (as amended, the “NANA Agreement”) for the cooperative development of NANA’s respective resource interests in the Ambler mining district of Northwest Alaska.

Upon the formation of Ambler Metals, the Company assigned its rights and obligations under the NANA Agreement to Ambler Metals.

The NANA Agreement consolidates Ambler Metals’ and NANA’s land holdings into an approximately 142,831-hectare land package and provides a framework for the exploration and any future development of this high-grade and prospective poly-metallic belt.

The NANA Agreement establishes a framework for any future development of either the Bornite Project or the Arctic Project.

Both projects are included as part of a larger area of interest set forth in the NANA Agreement.

Upon the decision to proceed with development of a mine within the area of interest, inclusive of the Arctic and Bornite Projects, NANA maintains the right to purchase an ownership interest in the mine equal to between 16%-25% or retain a 15% net proceeds royalty which is payable after we have recovered certain historical costs, including capital and cost of capital.

Should NANA elect to purchase an ownership interest in the mine, consideration will be payable based on the elected percentage purchased and all the costs incurred on the properties less $40.0 million, not to be less than zero.

The parties would form a joint venture and be responsible for all future costs incurred in connection with the mine, including capital costs of the mine, based on each party’s pro-rata share.

NANA would also be granted a net smelter return royalty 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 particular area of land from which production originates.

Arctic Project

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Under the Exploration Agreement and Option to Lease (as amended, the “NANA Agreement”), we acquired, in exchange for, among other things, a $4.0 million cash payment to NANA, the exclusive right to explore the Bornite property and lands deeded to NANA through the Alaska Native Claims Settlement Act (“ANCSA”), located adjacent to the Arctic Project, and the non-exclusive right to access and entry onto NANA’s lands.

The NANA Agreement establishes a framework for any future development of either the Bornite Project or the Arctic Project.

Both projects are included as part of a larger area of interest set forth in the NANA Agreement.

Upon the decision to proceed with development of a mine within the area of interest, NANA maintains the right to purchase an ownership interest in the mine equal to between 16%-25% or retain a 15% net proceeds royalty which is payable after we have recovered certain historical costs, including capital and cost of capital.

The parties would form a joint venture and be responsible for all future costs incurred in connection with the mine, including capital costs of the mine, based on each party’s pro-rata share.

The amounts paid to NANA were recorded as acquisition costs for the Bornite Project.

Prior to the formation of the Joint Venture on February 11, 2020, we had accounted for the Bornite property as a mineral property with acquisition costs capitalized and exploration costs expensed in accordance with our accounting policies.

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 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 was paying all of Ambler Metals’ invoices and being reimbursed pursuant to a services agreement (the “Services Agreement”) between Trilogy and Ambler Metals until the back office was fully transitioned to a new permanent team employed by the Joint Venture in fiscal 2021.

The Services Agreement ended on December 31, 2020.

To ensure a successful startup of the Joint Venture, management from Trilogy and South32 took on interim management roles.

Darryl Steane, South32’s Business Development Manager assumed the duties as Interim President of Ambler Metals;

Elaine Sanders, Trilogy’s Chief Financial Officer assumed the duties as Interim Vice President Finance of Ambler Metals;

and Robert (Bob) Jacko, Trilogy’s Senior Vice President Operations assumed the duties as Interim Vice President Operations of Ambler Metals.

Prior to the end of fiscal 2020, the permanent management team at Ambler Metals was

hired and are all now based in Alaska.

The joint venture company is led by President and Chief Executive Officer, Ramzi Fawaz, Vice President Operations, Kevin Torpy and Vice President Finance, Rebecca Donald.

In addition to the appointment of the leadership team at Ambler Metals, the Trilogy technical team was also transitioned over to the joint venture entity during fiscal 2020.

On February 11, 2020, pursuant to a contribution agreement among Trilogy and South32, Trilogy contributed all its assets associated with the UKMP, including the Arctic and Bornite Projects in exchange for a 50% membership interest in Ambler Metals.

Simultaneously, South32 contributed $145 million cash in exchange for a 50% membership interest in Ambler Metals.

Ambler Metals is an independently operated company, jointly controlled by Trilogy and South32 through a four-member board of which two members are currently appointed by Trilogy based on its 50% equity interest.

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Our maximum exposure to loss in this entity is limited to the carrying amount of our investment in Ambler Metals, which, as of November 30, 2022, totaled $142.8 million.

During the year ended November 31, 2020, Ambler Metals loaned $57.5 million back to South32 and retained $87.5 million of the $146 million contributed by South32.

The loan has a 7-year maturity date.

During fiscal 2021, Ambler Metals began to draw down on the loan with cash calls to South32 to fund their 50% share of the 2021 budget.

The loan is secured by South32’s membership interest in Ambler Metals and guaranteed by South32 International Investment Holdings Pty Ltd.

Project activities

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 budget was 100% funded by Ambler Metals and included 7,600 meters of infill and metallurgical drilling at the Arctic Project as well as 7,000 meters of exploration drilling within the Ambler VMS Belt.

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

The strategy defined a program that advances the highest priority projects and exploration targets, both 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 site camp opened on June 1, 2021 with the summer drill program completed on September 22, 2021.

Drilling productivity at the project was behind schedule during the 2021 field season 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.

Arctic Project

The 2021 field season plan for the Arctic Project focused on an additional 7,600 meters of drilling in order to extract additional material for metallurgical work and for the conversion of mineral resources into the measured category.

The metallurgical program associated with this drilling was to support variability test work and pilot plant work.

T echnical 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.

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.

Regional Exploration Project

During the 2021 field season, 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.

A total of 8 holes were completed totaling 3,194 meters.

In addition to the regional drill program, geologists also carried out regional geological mapping within the Ambler VMS belt.

Traverses were completed along creeks within the Center of the Universe prospect, the DH prospect, and in Jackass Creek (between the DH and Cliff prospects), the Bud-Sunshine-West Dead Creek prospect cluster, Dead Creek, Pipe, and the Nora prospects.

Geochemical soil sampling is ongoing within the Cosmos Hills around Bornite and the Ambler VMS Belt.

The goal of this program is to follow-up on previous anomalous geochemical results and to investigate geophysical anomalies that were identified during the 2019 airborne versatile time domain electromagnetic survey.

Arctic Mine Permitting

Arctic mine permitting preparation work was ongoing during fiscal 2021 for filing formal federal permitting documentation for the Arctic Project.

An independent consulting company has completed a preparedness review of the draft permitting package for the Arctic Project and presented the results of this review to the technical teams of South32 and Trilogy.

The review concluded that the Ambler Metals permitting strategy is sound and the permitting package can proceed with minor changes.

Ambler Metals is now making the recommended changes to the permitting package and expects to file the permitting application, which expects to start the formal permitting process for the Arctic Project, with the United States Army Corps.

of Engineers (“USACE”) in 2022.

The Company expects the overall permitting process to take 24 to 30 months to be completed.

Upper Kobuk Mineral Project activities

Ambler Metals spent approximately $28.5 million during the fiscal year, which was mainly spent on the summer drilling program.

Field season activities at the UKMP commenced in late May, with the camp opening on May 20 and drilling was completed on September 16.

The field program included 10,738 meters of diamond drilling that prioritized advancing the Arctic Project with additional infill drilling to further improve the confidence in the resource and the completion of a geotechnical study to further de-risk the project.

Exploration outside of the Arctic deposit focused on identifying copper-rich satellite deposits near Arctic in the VMS Belt and Cosmos Hills.

For the 2022 Arctic field program, Ambler Metals completed 8,376 meters in 47 holes as part of an 8,400-meter infill program to increase confidence of the resource from the Indicated to Measured category.

This includes five holes totaling 815 meters completed for the geotechnical assessment of Arctic that was initiated last year and two infill holes instrumented for the ongoing geohydrological assessment.

The 2022 exploration program for the Cosmos Hills and Ambler VMS Belt includes drilling of 7 holes totaling 2,363 meters as well as detailed mapping and soil sampling to build on the work performed during the prior year.

In addition, 1,350 meters of trenching was completed around Pardner Hill.

On November 29, 2022, Trilogy announced the first set of drilling results from the first seven drill holes of the Arctic drilling, AR22-0191 through to AR22-0197, which include four infill holes and three geotechnical holes (AR22-0194, 0196 and 0197) 1 .

All drill holes are sized HQ3 (63.5 mm diameter).

Results indicate mineralization is reasonably continuous.

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

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to conduct similar activities.

On October 27, 2021, the federal defendants were granted a 60-day stay with respect to each of the 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”.

On February 7, 2022, the court granted a second request from the federal defendants for an extension to file their response to the plaintiff’s brief.

Ambler Metals had opposed the extension request.

The federal defendants are now required to file their response no later than February 22, 2022.

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

The 2021 field season for the Ambler Access Project consisted of 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.

Early-stage exploration

During the year, the Company acquired, through staking, mineral claims located in Alaska, USA outside of the UKMP.

During the 2021 field season, 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.

On January 11, 2022, the Company announced the approval of the 2022 program and budget for Ambler Metals of approximately $28.5 million to advance the UKMP.

The budget is fully funded by Ambler Metals.

The 2022 budget for Ambler Metals, approved by the owners, Trilogy and South32, will cover up to 10,000 meters of helicopter-supported diamond drilling that is expected to commence in early June.

The meterage will be divided between resource development drilling at Arctic and scout drilling of both VMS targets in the Ambler Belt, with a focus on targets near Arctic, and Carbonate-Hosted Copper targets around Bornite and the Cosmos Hills.

A greater effort on the ground to identify and evaluate new targets for drilling, including the use of ground and down-hole electro-magnetic (EM) surveys, is planned.

On February 7, 2022, the Company announced the approval of the 2022 program and budget for the Ambler Access Project of approximately $30.8 million of which $15.4 million will be funded by AIDEA and $15.4 million will be funded by Ambler Metals.

During the 2022 field season, AIDEA will be carrying out additional work including, geotechnical investigations, right-of-way surveys, environmental studies, road and bridge engineering design work, and cultural resources work.

The Company has approved a 2022 cash budget for corporate activities of approximately $5.5 million (2021 - $5.3 million).

The corporate budget consists of personnel and related costs of $2.1 million (2021 - $2.0 million), professional fees of $0.9 million (2021 - $1.1 million), investor relations and marketing costs of $0.6 million ( 2021 - $0.6 million), office related costs of $0.5 million (2021 - $0.5 million), insurance costs of $0.5 million (2021 - $0.4 million), regulatory costs of $0.3 million (2021 - $0.3 million) and exploration activities of $0.15 million (2021 - Nil).

The 2022 budget has increased slightly from the prior year due mainly to an increase in insurance costs, addition of exploration activities and foreign exchange impacts on Canadian dollar sourced amounts for personnel and office related costs.

The Company’s management team is focused on the oversight of our investment in Ambler Metals and will closely work with Ambler Metals.

The Company’s technical staff will work closely with South32’s technical team and Ambler Metals exploration staff to review opportunities on advancing its known deposits and look at potential new targets in the large land package that is held by Ambler Metals.

A significant amount of uncertainty continues to exist with the Company’s annual renewal of its insurance policies and costs are currently unpredictable.

Insurance premiums may differ significantly from our budget.

The Company has sufficient cash on hand to fund its corporate activities including any increases in insurance premiums upon renewal.

1 See press released dated November 29, 2022, titled “Trilogy Metals Announces First Results of the 2022 Arctic Drill Program at the Upper Kobuk Mineral Projects”.

On February 22, 2022, the United States Department of the Interior (“DOI”) filed a motion to remand the Final Environmental Impact Statement and suspend the right-of-way permits issued to AIDEA for the Ambler Access Project and in mid-March, the BLM and DOI suspended the right-of-way grant and the right-of-way permit over federal lands.

On September 20, 2022, the BLM published in the Federal Register a Notice of Intent (“NOI”) that it will prepare a Supplemental Environmental Impact Statement (“SEIS”) for the proposed Ambler Mining District Industrial Access Road.

The BLM anticipates publishing a draft SEIS during the second quarter of calendar year 2023 and a final SEIS within the fourth quarter of calendar year 2023.

The Company has approved a budget for Ambler Metals for fiscal 2023 in the amount of $9.2 million for advancing the UKMP and $1.0 million for the Ambler Access Project of which the entire amount is funded by the Joint Venture.

Ambler Metals had $80.8 million of cash as at the fiscal year end on November 30, 2022.

The main focus of this year’s budget is to support advancing engineering efforts and resource estimation at the Arctic Project along with preparations for the submission of mine permits.

The Company has approved a 2023 cash budget for corporate, head office, activities of approximately $4.0 million (2022 - $5.5 million).

The corporate budget consists of personnel and related costs of $0.9 million (2022 - $2.1 million), professional fees of $1.5 million (2022 - $0.9 million), investor relations and marketing costs of $0.2 million ( 2022 - $0.6 million), office related costs of $0.4 million (2022 - $0.5 million), insurance costs of $0.6 million (2022 - $0.5 million), regulatory costs of $0.3 million (2022 - $0.3 million) and exploration activities of $0.1 million (2022 - $0.15 million).

Trilogy had $2.6 million of cash at the fiscal year end on November 30, 2022.

The Company intends to finance its future requirements through a combination of debt and/or equity issuance.

Summary of results

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Exploration expense

Mineral properties and feasibility study expenses

General and administrative

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Professional fees

Salaries – stock-based compensation

Gain on derecognition of assets contributed to joint venture

Salaries and directors expense – stock-based compensation

Gain on disposition of mineral property

Share of loss on equity investment

Comprehensive earnings (loss) for the year

Basic earnings (loss) per common share

Diluted earnings (loss) per common share

For the year ended November 30, 2021, we reported a net loss of $21.7 million (or $0.15 basic and diluted loss per common share) compared to a net earnings of $161.8 million (or $1.14 basic earnings and $1.12 diluted earnings per common share) in fiscal 2020.

The $183.4 million decrease in comprehensive earnings in the current year, when compared to fiscal 2020, is primarily due to the $175.8 million gain on the derecognition of assets contributed to the joint venture during fiscal 2020.

This variance is offset by $2.6 million in mineral property and feasibility study expenses incurred in 2020 that were not incurred during 2021.

Adding to the variances in 2021 were an increase of $10.2 million in our 50% share of the joint venture’s net operating loss and an increase of $0.6 million in salaries, offset by a decrease of $0.5 million in professional fees.

Our share of loss on equity investment was higher versus the 2020 comparative due to project related drill program costs incurred by Ambler Metals during the 2021 field season.

These costs were not incurred during the prior year as the 2020 field season had been cancelled due to the COVID-19 pandemic.

The increase in salaries reflects the additions to the executive team during the third quarter of 2020.

Professional fees were higher in 2020 due to one-time charges incurred for the implementation of new accounting standards and legal and accounting fees in relation to the formation of the joint venture.

Additionally, the Company incurred exploration costs of $0.1 million for a preliminary reconnaissance program on new mineral claims that were staked outside of the UKMP during fiscal 2021.

Comprehensive loss for the year

Basic and diluted loss per common share

For the year ended November 30, 2022, we reported a net loss of $24.3 million (or $0.17 basic and diluted loss per common share) compared to a net loss of $21.7 million (or $0.15 basic and diluted loss per common share) in fiscal 2021.

The $2.6 million increase in comprehensive loss in the current year, when compared to fiscal 2021, is due to the increase in our share of losses of Ambler Metals of $4.3 million partially offset from overall savings of $1.7 million in general and administrative expenses, investor relations, professional fees and salaries when compared to prior fiscal year 2021.

The increase in our share of losses of Ambler Metals of $4.3 million is mainly due to an increase in mineral property expenses over the comparative to prior fiscal year 2021 from higher drilling and project support cost as well as higher pre-development costs for the Ambler Access Project.

Fourth quarter results

During the fourth quarter of 2021, we incurred a loss of $6.1 million compared to a loss of $3.2 million in the fourth quarter of 2020.

The primary drivers for the difference were as follows:

a) an increase of $3.2 million in our share of loss on equity investment as the current quarter results include project activity costs that Ambler Metals incurred for completing the 2021 drill program as well as pre-development costs for the Ambler Access Project for which there are no prior year fourth quarter comparatives;

b) $0.1 million lower professional fees as the comparative includes additional legal fees for corporate matters and tax consulting fees;

and c) $0.1 million lower stock-based compensation as the comparative includes a Restricted Share Unit (“RSU”) grant that vested during the fourth quarter of 2020.

There were no RSUs granted during 2021.

For the fourth quarter of 2022, there was a $0.7 million reduction in expenses compared to the fourth quarter of 2021.

When comparing the fourth quarter of 2022 with the fourth quarter of 2021, professional fees increased by $0.2 million due to additional engineering costs related to updating our technical reports;

salaries and related costs reduced by $0.8 million due to staffing reductions and timing of year-end incentive payouts;

and investor relations and general and administration reduced by $0.1 million due to cash preservation efforts.

Our share of losses of Ambler Metals for the fourth quarter of 2022 is comparable to the fourth quarter of 2021.

Selected financial data

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Services agreement income

Comprehensive (loss) earnings for the year

Comprehensive loss for the year

Total liabilities

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Exploration expense

Mineral properties and feasibility study expenses

Operating expenses

Gain on disposition of mineral property

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.

Write off of mineral properties

Loss for the period

Loss per common share – basic and 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, and stock-based compensation expensing.

Subsequent to the formation of the Joint Venture, project related costs may cause fluctuations in our quarterly results through our 50% share of the Joint Venture’s net operating loss.

For the fourth quarter of 2022, we reported a comprehensive loss of $5.2 million, which consisted of $1.2 million in operating expenses and $4.1 million for Trilogy's 50% share of Ambler Metals’ operating loss.

Operating expenses for the fourth quarter of 2022 consisted of work being done on updating technical reports for the Arctic and Bornite Projects.

For the third quarter of 2022, we reported a comprehensive loss of $9.9 million, which consisted of $1.0 million in operating expenses and $8.9 million for Trilogy’s 50% share of Ambler Metals’ operating loss.

In 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.

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 during 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.

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.

The increase in our share of losses of Ambler Metals was mainly due to an increase in mineral property expenses from higher drilling and project support costs as well as higher pre-development costs for the Ambler Access Project.

For the second quarter of 2022, we reported a comprehensive loss of $4.1 million, which consisted of $1.5 million in operating expenses, $2.5 million for Trilogy’s 50% share of Ambler Metals’ operating loss and $0.1 million in mineral properties that were written off during the quarter.

In the second quarter of 2021, we recognized a comprehensive loss of $3.4 million which consisted of $1.7 million in operating expenses and $1.7 million for Trilogy’s share of Ambler Metals’

operating loss.

When compared to the second quarter of 2021, our pro rata share of the Joint Venture’s operating loss is $0.8 million higher for the second quarter of 2022.

The increase is 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 second 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 for which there are no comparatives for the same quarter in 2021.

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 was no comparative in fiscal 2021.

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 period and operating expenses, which are $1.1 million lower for the 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.

The increase is primarily due to increased funding for the Ambler Access Project (the “AAP”), engineering and project related salaries and wages in comparison to the second quarter of 2021.

The $0.2 million decrease in operating expenses for the current period versus the comparative is primarily due to cost savings strategies implemented during the period after management review of discretionary items in general and administrative expenses, investor relations and professional fees.

Furthermore, during the second quarter of 2022, in an effort to preserve cash, the executive team received stock-based compensation in lieu of salaries.

For the first quarter of 2022, we reported a comprehensive loss of $5.0 million, which consisted 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 it included 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 first quarter of 2022.

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

Liquidity and capital resources

We expended $5.1 million on operating activities during the 2021 fiscal year compared with $8.3 million for operating activities for the same period in 2020.

A majority of cash spent on operating activities during the prior fiscal year was expended on mineral property expenses, general and administrative expenses, salaries and professional fees.

Ambler Metals assumed responsibility for project funding upon formation of the Joint Venture on February 11, 2020.

As a result, the majority of cash spent on operating activities during the 2021 fiscal year was expended on general and administrative expenses, salaries and professional fees.

At November 30, 2021, we had $6.3 million in cash and cash equivalents and working capital of $5.6 million.

Management believes that the cash available is sufficient to meet its budgeted $5.5 million operating requirements for the next twelve months.

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

We expended $3.9 million on operating activities during the 2022 fiscal year with the majority of cash spent on corporate salaries, professional fees related to our annual regulatory filings, annual insurance renewal, annual fees paid to the Toronto Stock Exchange and the NYSE American Exchange and with the American and Canadian securities commissions.

At November 30, 2022, we had $2.6 million in cash and working capital of $2.4 million.

Management continues with cash preservation strategies to reduce cash expenditures where feasible, including but not limited to reductions in marketing and investor conferences and office expenses.

In addition, the Company’s Board of Directors have agreed to take 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 taking a portion of their base salaries in shares of the Company to preserve cash.

All project related costs are funded by the Joint Venture.

Amber Metals is well funded to advance the UKMP with $61.2 million in cash and $55.4 million loan receivable from South32 as at November 30, 2021 and an operating budget of $28.5 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 to support its operations and administration expenses.

Future sources of liquidity may include debt 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.

Ambler Metals is well funded to advance the UKMP with $80.8 million in cash and $77.7 million in working capital as at November 30, 2022.

There are sufficient funds at the Joint Venture to fund an operating budget of $9.2 million and $1.0 million for the Ambler Access Project for fiscal 2023.

Trilogy does not anticipate having to fund the activities of Ambler Metals until the current cash balance $80.8 million is expended.

Future cash requirements may vary materially from current expectations.

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

Future sources of liquidity are likely in the form of an equity financing but may include debt financing, convertible debt, exercise of options, or other means.

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

There is no assurance that the Company will be able to obtain such financings or obtain them on favourable terms.

These uncertainties rise substantial doubt about the Company’s ability to continue as a going concern.

Off-balance sheet arrangements

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At February 14, 2023, we had 148,722,699 common shares issued and outstanding.

At February 11, 2022, we had 12,242,150 stock options outstanding with a weighted-average exercise price of $1.98 and 1,438,186 Deferred Share Units (“DSUs”) and 257,267 Restricted Share Units (“RSUs”) outstanding.

We continue to hold 11,927 NovaGold Resources Inc.

At February 14, 2023, we had 13,585,400 stock options outstanding with a weighted-average exercise price of CDN$2.18 and 2,260,734 Deferred Share Units (“DSUs”) and 1,610,638 Restricted Share Units (“RSUs”) outstanding.

At February 14, 2023 we hold 9,293 NovaGold Resources Inc.

(“NovaGold”) DSUs for which the NovaGold director is entitled to receive one common share of Trilogy for every six NovaGold shares to be received upon their retirement from the NovaGold board.

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Financial instruments

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

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

The fair value of the financial instruments approximates their carrying value due to the short-term nature of their maturity.

Our financial instruments initially measured at fair value and then held at amortized cost include cash and cash equivalents, accounts receivable, deposits, and accounts payable and accrued liabilities.

Our financial instruments initially measured at fair value and then held at amortized cost include cash, accounts receivable, deposits, and accounts payable and accrued liabilities.

(a) Currency risk

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

The Company holds cash and cash equivalents with Canadian Chartered financial institutions.

The Company’s accounts receivable are for recoverable expenses.

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

The Company holds cash with Canadian chartered financial institutions.

The Company’s accounts receivable are for the value added tax credit.

The Company’s exposure to credit risk is equal to the balance of cash and accounts receivable as recorded in the financial statements.

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

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

Based on balances as at November 30, 2021, a 1% change in interest rates would result in a change in net loss of $160, assuming all other variables remain constant.

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

Based on balances as at November 30, 2022, a 1% change in interest rates would result in a change in a negligible change in net loss, 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;

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New accounting pronouncements

There were no new accounting pronouncements requiring management consideration during fiscal 2021.

There were no new accounting pronouncements requiring management consideration during fiscal year 2022.

Critical accounting estimates

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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.

effectively settled issues.

The evaluation of an uncertain tax position requires significant judgment, and a change in such judgement would result in an additional charge to the income tax expense and liability.

Stock-based compensation

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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) and 15d-15(e) of the US Exchange Act and the rules of Canadian Securities Administrators, as at November 30, 2021.

Exchange Act and the rules of Canadian Securities Administrators, as at November 30, 2022.

Based on this evaluation, the CEO and CFO have concluded that the Company’s disclosure controls and procedures were effective as at November 30, 2022.

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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’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;

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 Ambler Metals’ cash to fund the UKMP;

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

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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 11, 2022, filed with the Canadian securities regulatory authorities and the SEC, and other information released by Trilogy and filed with the appropriate regulatory agencies.

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 14, 2023, filed with the Canadian securities regulatory authorities and the SEC, and other information released by Trilogy and filed with the appropriate regulatory agencies.

The Company’s forward-looking statements are based on the beliefs, expectations and opinions of management on the date the statements are made, and the Company does not assume any obligation to update forward-looking statements if circumstances or management’s beliefs, expectations or opinions should change, except as required by law.

For the reasons set forth above, investors should not place undue reliance on forward-looking statements

Cautionary note to United States investors

Reserve and resource estimates

This Management’s Discussion and Analysis has been prepared in accordance with the requirements of the securities laws in effect in Canada, which differ from the requirements of U.S.

securities laws.

Unless otherwise indicated, all resource and reserve estimates included in this Management’s Discussion and Analysis have been prepared in accordance with National Instrument 43-101 Standards of Disclosure for Mineral Projects (“NI 43-101”) and the Canadian Institute of Mining, Metallurgy, and Petroleum Definition Standards on Mineral Resources and Mineral Reserves.

NI 43-101 is a rule developed by the Canadian Securities Administrators which establishes standards for all public disclosure an issuer makes of scientific and technical information concerning mineral projects.

Canadian standards, including NI 43-101, differ significantly from the requirements of the SEC, and resource and reserve information contained herein may not be comparable to similar information disclosed by U.S.

In particular, and without limiting the generality of the foregoing, the term “resource” does not equate to the term “reserves”.

standards, mineralization may not be classified as a “reserve” unless the determination has been made that the mineralization could be economically and legally produced or extracted at the time the reserve determination is made.

The SEC’s disclosure standards normally do not permit the inclusion of information concerning “measured mineral resources”, “indicated mineral resources” or “inferred mineral resources” or other descriptions of the amount of mineralization in mineral deposits that do not constitute “reserves” by U.S.

standards in documents filed with the SEC.

Investors are cautioned not to assume that any part or all of mineral deposits in these categories will ever be converted into reserves.

investors should also understand that “inferred mineral resources” have a great amount of uncertainty as to their existence and great uncertainty as to their economic and legal feasibility.

Under Canadian rules, estimated “inferred mineral resources” may not form the basis of feasibility or pre-feasibility studies except in rare cases.

Investors are cautioned not to assume that all or any part of an “inferred mineral resource” exists or is economically or legally mineable.

Disclosure of “contained ounces” in a resource is permitted disclosure under Canadian regulations;

however, the SEC normally only permits issuers to report mineralization that does not constitute “reserves” by SEC standards as in-place tonnage and grade without reference to unit measures.

The requirements of NI 43-101 for identification of “reserves” are also not the same as those of the SEC, and reserves reported by the Company in compliance with NI 43-101 may not qualify as “reserves” under SEC standards.

Accordingly, information concerning mineral deposits set forth herein may not be comparable with information made public by companies that report in accordance with U.S.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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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-K

Item 7. Management’s Discussion and Analysis