What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-04-05 compared with 2022-10-05 · 46 added, 55 removed, 148 unchanged (41% of the section changed)

2 unchanged sentences

Management’s Discussion & Analysis

For the Quarter Ended August 31, 2022

For the Quarter Ended February 28, 2023

(expressed in US dollars)

23 unchanged sentences

Trilogy Metals Inc.

For the Quarter Ended August 31, 2022

For the Quarter Ended February 28, 2023

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

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● 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 the suspension by the BLM of the right-of-way permits with AIDEA relating to the AMDIAP 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;

2 unchanged sentences

Trilogy Metals Inc.

For the Quarter Ended August 31, 2022

For the Quarter Ended February 28, 2023

● commodity price fluctuations;

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Trilogy Metals Inc.

For the Quarter Ended August 31, 2022

For the Quarter Ended February 28, 2023

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

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

(“Trilogy”, “Trilogy Metals”, “the Company” or “we”) is dated October 4, 2022 and provides an analysis of our unaudited interim financial results for the quarter ended August 31, 2022 compared to the quarter ended August 31, 2021.

The following information should be read in conjunction with our August 31, 2022 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 4, 2023 and provides an analysis of our unaudited interim financial results for the quarter ended February 28, 2023 compared to the quarter ended February 28, 2022.

The following information should be read in conjunction with our February 28, 2023 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, 2022.

8 unchanged sentences

Trilogy Metals Inc.

For the Quarter Ended August 31, 2022

For the Quarter Ended February 28, 2023

Description of business

8 unchanged sentences

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

Joint venture project activities

2022 Exploration Season for the Upper Kobuk Mineral Projects

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

The Bornite camp is expected to be fully shut down during the first week of October.

The $26.2 million approved budget for Ambler Metals LLC, our 50/50 joint venture with South32 Limited, for this year was mainly spent on the summer field program, which included 10,739 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 Arctic Project.

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

The forecasted spend at Ambler Metals for the fiscal year is estimated to be approximately $28.5 million which is $2.3 million or 8.8% higher than budget.

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 approximately 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.

The Company expects to begin announcing drill results during the fourth quarter of 2022.

Project activities

The Company announced the second and third set of drilling results from the 2022 field season at the Upper Kobuk Mineral Projects (“UKMP”) on January 25, 2023 and February 27, 2023, respectively.

On April 4, 2023, the Company announced the final set of drilling results from the 2022 field season at the UKMP.

On February 14, 2023, the Company announced an updated feasibility study technical report for the Arctic Project and an updated resource for the Bornite Project, and filed NI 43-101 technical reports for both projects with the Canadian securities regulators.

In addition, the Company announced technical report summaries for both projects prepared in accordance with S-K 1300, which were filed as exhibits with the annual report on Form 10-K.

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

In a press release dated September 21, 2022, the Company provided an update on the AMDIAP.

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 AMDIAP.

The NOI includes a 45-day comment period on the SEIS, which will allow the BLM to determine if any additional impacts and resources related to previously identified deficiencies should be more thoroughly assessed.

The NOI also indicated that input by Alaska Native Tribes and Corporations will continue to be of critical importance and that the BLM will continue to consult with these entities under applicable guidance.

The BLM anticipates publishing a Draft SEIS during the second quarter of 2023, after which it will accept public comments on the Draft SEIS.

On November 15, 2022, the United States Bureau of Land Management ("USBLM") submitted a status report announcing the anticipation of publishing a draft Supplemental Environmental Impact Statement (“SEIS”) in the second quarter of calendar 2023 and a final SEIS in the fourth quarter of calendar 2023.

On January 17, 2023, the USBLM submitted a status report reaffirming the timing of the draft and final SEIS.

In March 2023, the Board of Ambler Metals approved a budget totaling $12.3 million for the Ambler Access Project, to include funding for 2023 field season work consisting of field studies, permitting and data collection to assist the USBLM in completing the additional work to support the SEIS.

Trilogy Metals Inc.

For the Quarter Ended August 31, 2022

For the Quarter Ended February 28, 2023

Summary of results

in thousands of US dollars

Three months ended

Nine months ended

August 31, 2022

August 31, 2021

August 31, 2022

August 31, 2021

in thousands of US dollars, except per share amounts

For the three months ended

February 28, 2023

February 28, 2022

Selected expenses

2 unchanged sentences

Professional fees

Salaries and directors expense – stock-based compensation

Share of loss on equity investment

For the three-month period ended August 31, 2022, cash preservation strategies resulted in overall cash savings of $0.5 million in general and administrative expenses, investor relations, professional fees and salaries when compared to the three-month period ended August 31, 2021.

The increase in our share of losses of Ambler Metals of $2.9 million was mainly due to an increase in mineral property expenses over the comparative quarter in the prior year from higher drilling and project support costs as well as higher pre-development costs for the Ambler Access Project.

For the nine-month period ended August 31, 2022, cash preservation strategies resulted in overall cash savings of $0.9 million in general and administrative expenses, investor relations, professional fees and salaries when compared to the nine-month period ended August 31, 2021.

The increase in our share of losses of Ambler Metals of $4.4 million was mainly due to an increase in mineral property expenses over the comparative period in the prior year from higher drilling and project support costs as well as higher pre-development costs for the Ambler Access Project.

Comprehensive loss for the period

Basic and diluted loss per common share

For the three-month period ended February 28, 2023, we reported a net loss of $5.1 million compared to a net loss of $5.0 million for the three-month period ended February 28, 2022.

The increase in comprehensive loss in the first quarter of 2023 compared to first quarter of 2022 is due to increase in stock based compensation and professional fees and partially offset from the decrease in our share of losses of Ambler Metals, investor relations and salaries.

The decrease in our share of losses of Ambler Metals is mainly due to decrease in mineral property expenses.

Liquidity and capital resources

We expended $3.4 million on operating activities during the nine-month period ending August 31, 2022 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 August 31, 2022, we had $3.1 million in cash and cash equivalents and working capital of $2.9 million.

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

Management continues to review 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.

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.

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

We expended $0.9 million on operating activities during the three-month period ending February 28, 2023 with the majority of cash spent on corporate salaries, professional fees related to our annual regulatory filings, and annual fees paid to the Toronto Stock Exchange and the NYSE American Exchange with the American and Canadian securities commissions.

As at February 28, 2023, we had $1.7 million in cash and working capital of $1.0 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 DSUs in an effort to preserve cash.

The Company’s senior management team is 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 $93.5 million in cash and $85.8 million in working capital as at August 31, 2022.

Amber Metals is well funded to advance the UKMP with $76.5 million in cash and $74.9 million in working capital as at February 28, 2023.

There are sufficient funds at the Joint Venture to fund this fiscal year’s budget for the UKMP and the Ambler Access Project.

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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.

Future sources of liquidity are expected to be in the form of an equity financing but may include debt 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.

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

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

Trilogy Metals Inc.

For the Quarter Ended August 31, 2022

For the Quarter Ended February 28, 2023

Off-balance sheet arrangements

1 unchanged sentence

Outstanding share data

At October 4, 2022, we had 146,225,035 common shares issued and outstanding.

At October 4, 2022, we had outstanding, 12,151,150 stock options with a weighted-average exercise price of CDN$2.51, as well as 1,560,737 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.

Upon exercise of all the foregoing convertible securities, the Company would be required to issue an aggregate of 13,971,142 common shares.

As at April 5, 2023, we had 148,956,662 common shares issued and outstanding.

As at April 5, 2023, we had 13,281,400 stock options outstanding with a weighted-average exercise price of CDN$2.17, 2,483,722 Deferred Share Units (“DSUs”), and 1,610,638 Restricted Share Units (“RSUs”) outstanding.

As at April 5, 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.

A total of 1,549 common shares will be issued upon redemption of the NovaGold DSUs.

Upon the exercise of all the foregoing convertible securities, the Company would be required to issue an aggregate of 17,377,309 common shares.

New accounting pronouncements

9 unchanged sentences

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 February 28, 2023

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.

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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

Trilogy Metals Inc.

For the Quarter Ended August 31, 2022

in the United States and Canada.

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.

9 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-Q

Item 2. Management’s Discussion and Analysis