What changed in this filing

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Item 9A. Controls and Procedures

2023-02-14 compared with 2022-02-11 · 193 added, 56 removed, 314 unchanged (44% of the section changed)

15 unchanged sentences

Changes in Internal Controls

There has been no change in our internal control over financial reporting during the quarter ended November 30, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

There has been no change in our internal control over financial reporting during fiscal year ended November 30, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

OTHER INFORMATION

39 unchanged sentences

EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS

Employment Agreement between the Registrant and James Gowans, dated October 21, 2019, identified in exhibit list below.

Amendment Agreement between the Company and James Gowans, dated April 9, 2020, identified in exhibit list below.

Employment Agreement between the Registrant and Tony Giardini, dated April 20, 2020, identified in exhibit list below.

36 unchanged sentences

Equity Incentive Plan (incorporated by reference to Schedule G of Exhibit 99.1 to the Company’s Registration Statement on Form 40-F filed on March 1, 2012)

Employment Agreement, dated October 21, 2019, between the Company and James Gowans (incorporated by reference to Exhibit 10.15 to the Company ’ s Annual Report on Form 10-K filed on February 13, 2020)

Amendment Agreement, dated April 9, 2020, between the Company and James Gowans (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on April 9, 2020)

Employment Agreement, dated April 20, 2020, between the Company and Tony Giardini (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on April 20, 2020)

4 unchanged sentences

Consent of Richard Gosse

Consent of Bruce M.

Consent of SIM Geological Inc.

Consent of International Metallurgical & Environmental Inc.

Consent of Ausenco Engineering Canada Inc.

Consent of Wood Canada Limited

Consent of Ausenco Engineering Canada Inc.

Consent of SRK Consulting (Canada) Inc.

Consent of Brown and Caldwell

Consent of Wood Canada Limited

Certification of the Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a)

2 unchanged sentences

Certification of the Chief Financial Officer pursuant to 18 U.S.C.

Arctic Project S-K 1300 Technical Report Summary, Ambler Mining District, Alaska (incorporated by reference to the Company’s Current Report on Form 8-K filed on February 14, 2023)

Technical Report Summary on the Initial Assessment of the Bornite Mineral Resource, Northwest Alaska, USA (incorporated by reference to the Company’s Current Report on Form 8-K filed on February 14, 2023)

The following materials from Trilogy Metals Inc.’s Annual Report on Form 10-K for the year ended November 30, 2022, formatted in Inline XBRL (eXtensible Business Reporting Language):

6 unchanged sentences

Opinion on the Financial Statements

We have audited the accompanying balance sheets of Ambler Metals LLC (the Company) as of November 30, 2021 and 2020, and the related statements of loss and comprehensive loss, changes in members’ equity and cash flows for the year ended November 30, 2021 and for the period from February 11, 2020 to November 30, 2020, including the related notes (collectively referred to as the financial statements).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of November 30, 2021 and 2020, and the results of its operations and its cash flows for the year ended November 30, 2021 and for the period from February 11, 2020 to November 30, 2020 in conformity with accounting principles generally accepted in the United States of America.

We have audited the accompanying balance sheets of Ambler Metals LLC (the Company) as of November 30, 2022 and 2021, and the related statements of loss and comprehensive loss, changes in members' equity and cash flows for the years then ended and for the period from February 11, 2020 to November 30, 2020, including the related notes (collectively referred to as the financial statements).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of November 30, 2022 and 2021, and the results of its operations and its cash flows for the years then ended and for the period from February 11, 2020 to November 30, 2020 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

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The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Assessment of impairment indicators of mineral properties

Assessment of impairment indicators for mineral properties

As described in Notes 2 and 5 to the financial statements, management assesses the possibility of impairment in the carrying value of mineral properties whenever events or changes in circumstances indicate that the carrying value may not be recoverable (impairment indicators).

4 unchanged sentences

The principal considerations for our determination that performing procedures relating to the assessment of impairment indicators of mineral properties is a critical audit matter are that there was judgment by management when assessing whether there were impairment indicators related to the Company’s mineral properties, specifically in regards to assessing whether there were:

(i) significant adverse changes in the business climate including significant decreases in copper, zinc, and other metal prices, or significant adverse changes in legal factors, (ii) an accumulation of costs significantly in excess of the amount originally expected for the acquisition or con struction of the mineral properties, and (iii) significant decreases in the market prices of the mineral properties.

(i) significant adverse changes in the business climate including significant decreases in copper, zinc, and other metal prices, or significant adverse changes in legal factors, (ii) an accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the mineral properties, and (iii) significant decreases in the market prices of the mineral properties.

This in turn led to a high degree of auditor judgment and subjectivity in performing procedures to evaluate audit evidence relating to the judgment made by management in their assessment of impairment indicators that could give rise to the requirement to conduct an impairment test.

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Balance Sheet

As of November 30, 2021 and 2020

As at November 30, 2022 and 2021

in thousands of US dollars

November 30, 2022

November 30, 2021

Current assets

Cash (note 3)

Deposits and prepaid

Current loan receivable (note 1,8)

Accounts receivables and other assets

Total current assets

Right of use asset (note 7)

Loan receivable (note 1,8)

Property, plant and equipment (note 4)

Mineral properties (note 5)

Current liabilities

Accounts payable and accrued liabilities (note 6,8)

Current lease liabilities (note 7)

Total current liabilities

Long term lease liabilities (note 7)

Total liabilities

Members' equity

Owner contribution - South 32

Owner contribution - Trilogy

Accumulated deficit

Total members' equity

Total liabilities and members equity

(See accompanying notes to the financial statements)

2 unchanged sentences

For the Years Ended November 30

in thousands of US dollars

February 11, 2020 - November 30, 2020

Corporate salaries and wages

General and administrative

Mineral property expense (note 5)

Professional fees

Foreign exchange (gain)/loss

Total expenses

Interest income

Loss and comprehensive loss for the year

(See accompanying notes to the financial statements)

2 unchanged sentences

For the Years Ended November 30

In thousands of US dollars, except share amounts

Number of units outstanding

Trilogy owner contribution

South32 owner contribution

Total members' equity

Opening balance

Loss for the period

Balance - November 30, 2020

Loss for the year

Balance - November 30, 2021

Owner contributions

Loss for the year

Balance - November 30, 2022

(See accompanying notes to the financial statements)

Ambler Metals LLC

1 unchanged sentence

For the Years Ended November 30

in thousands of US dollars

November 30, 2022

November 30, 2021

February 11, 2020 - November 30, 2020

Cash flows from (used in) operating activities

Loss for the year

Lease expense

Lease payments

Equity contribution by Trilogy

Change in working capital

Increase in deposits and prepaids

Decrease (increase) in accounts receivable and other assets

Increase (decrease) in accounts payable and accrued liabilities

Interest earned on South32 loan

Interest received on South32 loan

Cash used in operating activities

Cash flows from (used in) financing activities

Cash contribution by South32

Cash from financing activities

Cash flows from (used in) investing activities

Principle payment on South32 loan

Property Staking

Machinery and equipment

Computer hardware and software

Furniture and equipment

Cash from investing activities

Increase (decrease) in cash

Cash - beginning of the period

Cash - end of year

(See accompanying notes to the financial statements)

7 unchanged sentences

The Company is engaged in the exploration and development of mineral properties with a focus on the Upper Kobuk Mineral Projects (“UKMP”), including the Arctic and Bornite Projects located in Northwest Alaska in the United States of America (“US” or “USA”).

On February 11, 2020, pursuant to a contribution agreement among Trilogy, South32 and the Company (the “Contribution Agreement”), Trilogy contributed to the Company substantially all of Trilogy’s assets associated with the Upper Kobuk Mineral Projects ("UKMP") located in northwest Alaska in exchange for a 50% membership interest in the Company.

On February 11, 2020, pursuant to a contribution agreement among Trilogy, South32 and the Company (the “Contribution Agreement”), Trilogy contributed to the Company all of Trilogy’s assets associated with the Upper Kobuk Mineral Projects ("UKMP") located in northwest Alaska in exchange for a 50% membership interest in the Company.

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

1 unchanged sentence

The mining rights, deposits and property, plant and equipment contributed to the Company from Trilogy are recognized at Trilogy’s historical carrying value on the date of contribution.

The contributions, including noncash contributions, made to the Company by each respective member on February 11, 2020 are as follows:

The contributions, including noncash contributions, made to the Company by each respective member on February 11, 2020 were as follows:

Respective contributions to the Joint Venture

in thousands of US dollars

Intangible assets:

Mining rights

Trilogy contributed intangible assets

Tangible assets:

Property, plant and equipment

Trilogy contributed tangible assets

South32 contributed cash

Total capital contributed at inception

As a result of these transactions, Trilogy and South32 each have equal interests in the Company and have equal representation on the Board of the Company.

Following the formation of the Joint Venture, on March 17, 2020 the Company loaned South32 $57.5 million secured by South32’s membership interest in Ambler Metals and guaranteed by South32 International Investment Holdings Pty Ltd.,

The loan had a 7-year maturity date and was recorded at amortized cost.

The loan repayment terms were such that quarterly payments became due from South32 on a quarterly basis beginning in 2Q 2021 based on forecasted expenditures.

On June 21, 2022, South32 paid the full balance of the loan, consisting of $53.0 million principal and $0.5 million interest.

See note 8 for additional information.

Ambler Metals LLC

2 unchanged sentences

dollars, unless otherwise noted

a wholly owned subsidiary of South32.

The loan has a 7-year maturity date and is recorded at amortized cost.

The loan repayment terms were such that quarterly payments became due from South32 in 2021 and management expects continued quarterly payments in 2022 based on forecasted expenditures.

See note 8 for additional information.

The financial statements have been prepared by management in conformity with generally accepted accounting principles in the United States (“U.S.

8 unchanged sentences

Machinery and equipment

Office furniture and equipment

Furniture and equipment

Leasehold improvements

6 unchanged sentences

Management assesses the possibility of impairment in the carrying value of long-lived assets whenever events or changes in circumstances indicate that the carrying amounts of the asset or asset group may not be recoverable.

Management applies judgment to assess impairment indicators that could give rise to the requirement to conduct a formal impairment test.

Events and circumstances that could trigger an impairment test include, but are not limited to, significant adverse changes in the business climate including significant decreases to copper, zinc and other metal prices or significant adverse changes in legal factors, an accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the long-lived asset, and significant decreases in the market prices for long-lived assets.

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.

6 unchanged sentences

dollars, unless otherwise noted

Impairment testing

Management applies judgment to assess mineral properties and property, plant and equipment for impairment indicators that could give rise to the requirement to conduct a formal impairment test.

We determine if a contractual arrangement represents or contains a lease at inception.

4 unchanged sentences

The incremental borrowing rate is the rate of interest our Company would have to pay to borrow on a collateralized basis over a similar term and the amount equal to the lease payments in a similar economic environment.

The operating lease expenses are recognized on a straight-line basis over the lease term and included in lease expenses.

The operating lease expenses are recognized on a straight-line basis over the lease term.

The Company is not a taxable entity for income tax purposes.

10 unchanged sentences

Translation of foreign currencies

Foreign denominated monetary assets and liabilities are translated into United States dollars at the exchange rate in effect at the balance sheet date, and non-monetary assets and liabilities at the exchange rate in effect at the time of

Ambler Metals LLC

Notes to financial statements

expressed in U.S.

dollars, unless otherwise noted

acquisition or issue.

Income and expenses are translated at rates approximating the exchange rate in effect at the time of transactions.

2 unchanged sentences

As of November 30, 2022, included in cash is $0.4 million denominated in Canadian dollars and $80.5 million denominated in United States dollars.

Ambler Metals LLC

Notes to Financial Statements

expressed in U.S.

dollars, unless otherwise noted

Property, plant and equipment

A summary of property, plant and equipment as of November 30, 2022 and November 30, 2021, is as follows:

in thousands of US dollars

Machinery and equipment

Computer hardware and software

Furniture and Equipment

Cost at November 30, 2020

Assets derecognized

Accumulated Depreciation

Net book value at November 30, 2021

Cost at November 30, 2021

Accumulated Depreciation

Net book value at November 30, 2022

Mineral properties

On February 11, 2020, the Ambler lands in Northwest Alaska, which contains the copper-zinc-lead-gold-silver Artic Project and other mineralized targets within the volcanogenic massive sulfide belt, were contributed to Ambler Metals LLC pursuant to the Contribution Agreement.

in thousands of US dollars

November 30, 2020

November 30, 2021

November 30, 2022

On February 11, 2020, the Ambler lands in Northwest Alaska, which contains the copper-zinc-lead-gold-silver Arctic Project and other mineralized targets within the volcanogenic massive sulfide belt, were contributed to Ambler Metals LLC pursuant to the Contribution Agreement.

The Ambler lands are subject to a 1% net smelter return (“NSR”) royalty that can be purchased at any time for a one-time payment of $10 million.

Mineral property costs of approximately $142 thousand were added to the Ambler land holdings during the period ended November 30, 2022.

On February 11, 2020, the exclusive right to explore and the non-exclusive right to access and enter on the Bornite lands, and lands deeded to NANA Regional Corporation, Inc.

(“NANA”) through the Alaska Native Claims Settlement Act, located adjacent to the Ambler lands in Northwest Alaska, were contributed to Ambler Metals LLC pursuant to the Contribution Agreement.

Ambler Metals LLC

2 unchanged sentences

dollars, unless otherwise noted

Mineral property acquisition costs of $118 thousand and $52 thousand were added to the Ambler land holdings during the period ended November 30, 2020 and November 30, 2021, respectively.

On February 11, 2020, the exclusive right to explore and the non-exclusive right to access and enter on the Bornite lands, and lands deeded to NANA Regional Corporation, Inc.

(“NANA”) through the Alaska Native Claims Settlement Act, located adjacent to the Ambler lands in Northwest Alaska, were contributed to Ambler Metals LLC pursuant to the Contribution Agreement.

Upon a decision to proceed with construction of a mine on the Ambler or Bornite lands, NANA maintains the right to purchase between a 16%-25% ownership interest in the mine or retain a 15% net proceeds royalty which is payable after Ambler Metals LLC has recovered certain historical costs, including capital and cost of capital.

3 unchanged sentences

c) Mineral properties expense

The following table summarizes mineral properties expense incurred November 30, 2021 and November 30, 2020, respectively.

Prior year Ambler Access Project expense of $261 thousand was previously classified as general and administrative expense and was reclassed to mineral properties to reflect current year presentation.

The following table summarizes mineral properties expense incurred for the year ended November 30, 2022, November 30, 2021 and November 30, 2020.

Lease expense for the warehouse previously classified as general and administrative of approximately $81 thousand and $48 thousand for the years ended November 30, 2021 and November 30, 2020, respectively, were reclassified to mineral property expense under project support in order to align with the current period presentation.

in thousands of US dollars

November 30, 2022

November 30, 2021

February 11, 2020 - November 30, 2020

Ambler Access Project

Environmental

Geochemistry and geophysics

Land and permitting

Project support

Safety and risk

Wages and benefits

Mineral property expense

Accounts payable and accrued liabilities

in thousands of US dollars

November 30, 2022

November 30, 2021

Accounts payable

Accrued demobilization charges

Accrued salaries and vacation

Accrued liabilities

Accounts payable and accrued liabilities

Ambler Metals LLC

2 unchanged sentences

dollars, unless otherwise noted

Accounts payable and accrued liabilities

(a) Right of use assets

in thousands of US dollars

November 30, 2022

November 30, 2021

Opening balance

Recognition of right of use asset

Right of use asset

In December 2020, the Company commenced a lease for their headquarters office in Anchorage, Alaska and recognized the right of use asset approximately $816 thousand.

In August 2021, the Company commenced a new lease for a warehouse in Fairbanks, Alaska and recognized the right of use asset of approximately $231 thousand.

The Company’s lease arrangement for a previously recognized warehouse in Fairbanks, Alaska ended in October 2021.

Total lease expense recorded was comprised of operating lease costs of $261 thousand, variable lease costs of $nil and property taxes of $15 thousand.

(b) Lease liabilities

The headquarters and warehouse leases are operating leases ending in 2025 and 2024, respectively.

There is an option to renew for both lease agreements.

Lease expense for the headquarters is recorded within general and administrative expense and for the warehouse is recorded within mineral property expense and was comprised of the following components:

in thousands of US dollars

November 30, 2022

November 30, 2021

Operating lease costs

Variable lease costs

Operating lease costs

Variable lease costs consist primarily of the Company’s portion of common area maintenance fees including taxes.

As of November 30, 2022, variable costs were approximately $3 thousand.

As of November 30, 2022, the remaining lease term was 37 months for the headquarters office and 20 months for the warehouse.

Supplemental cash and non-cash information relating to our leases during the year ended November 30, 2021 are as follows:

● Cash paid for amounts included in the measurement of lease liabilities was $243 thousand.

Supplemental cash and non-cash information relating to our leases during the period ended November 30, 2022, are as follows:

● Cash paid for amounts included in the measurement of lease liabilities was approximately $263 thousand.

● Non-cash amounts included in the measurement of lease liabilities was $nil.

4 unchanged sentences

Future minimum payments relating to the lease recognized in our balance sheet as of November 30, 2022 are as follows:

in thousands of US dollars

November 30, 2022

Total undiscounted lease payments

Effects of discounting

Present value of lease payments recognized as lease liability

Related party transactions

The Company’s Service Agreement between Trilogy and the Company dated February 18, 2020 (“Services Agreement”) ended December 31, 2020 with minimal expenses for the year ended November 30, 2021.

For the year ended November 30, 2020, the Company incurred $932 thousand of expenses related to employee compensation, payroll processing fees, office supplies, and accounting services in connection with the Services Agreement and the Company made payments of $2,772 thousand related to operating expenses paid by Trilogy and reimbursed by the Company pursuant to the Services Agreement.

As of November 30, 2021, included in accounts payable owed to Trilogy and South32 is $nil and as of November 30, 2020, is $114 thousand due to Trilogy.

For the year ended November 30, 2021, the Company earned interest of $1 million ($1 million for November 30, 2020), from the loan to South32 and received payments on the loan of $4.2 million, of which, $1.9 million applied to interest and $2.3 million applied to principal.

During the year ended November 30, 2022, the Company earned interest of $0.6 million (2021 - $1 million), from the loan to South32 and received payments on the loan of $56 million, of which, $0.7 million applied to interest and $55.2 million applied to principal.

Financial risk management

2 unchanged sentences

The Company operates in the United States and holds a bank account denominated in Canadian currency to facilitate payments to Canadian vendors, as necessary.

The Company’s exposure to the currency risk at November 30, 2021 is limited to the Canadian dollar balances consisting of cash of CDN $252 thousand and accounts payable of CDN $75 thousand.

The Company’s exposure to the currency risk at November 30, 2022 is limited to the Canadian dollar balances consisting of cash of approximately CDN $351 thousand and accounts payable of CDN $74 thousand.

Based on a 10% change in the US-Canadian exchange rate, assuming all other variables remain constant, the Company’s net change would be approximately $22 thousand.

2 unchanged sentences

The Company holds cash with a financial institution that is federally insured through FDIC.

The Company’s receivables consist of a loan receivable from South32.

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

Ambler Metals LLC

Notes to financial statements

expressed in U.S.

dollars, unless otherwise noted

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

2 unchanged sentences

therefore, the Company manages liquidity risk through the terms of the LLC Agreement.

Ambler Metals LLC

Notes to Financial Statements

expressed in U.S.

dollars, unless otherwise noted

Contractually obligated cash flow requirements as of November 30, 2022 are as follows:

in thousands of US dollars

Accounts payable and accrued liabilities

Warehouse and office lease

(d) Interest rate risk

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

The Company is exposed to interest rate risk with respect to interest earned on cash and the loan receivable from South32.

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

Based on cash balances as of November 30, 2022, a 1% change in interest rates would result in a negligible change in cash, over a 12-month period, assuming all other variables remain constant.

41 unchanged sentences

February 14, 2023

Kalidas Madhavpeddi

/s/ Janice Stairs

5 unchanged sentences

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 9A. Controls and Procedures