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Item 2. Management’s Discussion and Analysis

2023-07-14 compared with 2023-04-05 · 48 added, 42 removed, 152 unchanged (37% of the section changed)

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Management’s Discussion & Analysis

For the Quarter Ended February 28, 2023

For the Quarter Ended May 31, 2023

(expressed in US dollars)

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

the plans and budget for the 2023 field exploration program ;

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

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

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

market prices for precious and base metals;

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

or other statements that are not statements of fact.

the plans and budget for the 2023 field exploration program, perceived merit of properties, exploration results and budgets, the impact of the BLM’s suspension of permits on the right-of-way with AIDEA relating to the Ambler Road Project, the Company and Ambler Metals’ funding requirements, mineral reserves and resource estimates, work programs, capital expenditures, operating costs, cash flow estimates, production estimates and similar statements relating to the economic viability of a project, timelines, strategic plans, statements regarding Ambler Metals’ plans and expectations relating to its Upper Kobuk Mineral Projects, sufficiency of the $145 million subscription price to fund the UKMP, impact of COVID-19 on the Company’s operations, market prices for precious and base metals, statements regarding the Ambler Access Project ( also known as the Ambler Mining District Industrial Access Project) , or other statements that are not statements of fact.

These statements relate to analyses and other information that are based on forecasts of future results, estimates of amounts not yet determinable and assumptions of management.

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Trilogy Metals Inc.

For the Quarter Ended February 28, 2023

For the Quarter Ended May 31, 2023

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

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Trilogy Metals Inc.

For the Quarter Ended February 28, 2023

For the Quarter Ended May 31, 2023

● commodity price fluctuations;

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Trilogy Metals Inc.

For the Quarter Ended February 28, 2023

For the Quarter Ended May 31, 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 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.

(“Trilogy”, “Trilogy Metals”, “the Company” or “we”) is dated July 13, 2023 and provides an analysis of our unaudited interim financial results for the quarter ended May 31, 2023 compared to the quarter ended May 31, 2022.

The following information should be read in conjunction with our May 31, 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.

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Trilogy Metals Inc.

For the Quarter Ended February 28, 2023

For the Quarter Ended May 31, 2023

Description of business

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

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

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

Project activities

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

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 March 20, 2023, the USBLM submitted a status report reaffirming the timing as noted in its previous reports.

On May 19, 2023, the USBLM submitted a status report revising the timeline for development of the SEIS and a subsequent Record of Decision.

The USBLM now anticipates publishing a draft SEIS in the third quarter of calendar year 2023, a final SEIS in the first quarter of calendar year 2024, and a Record of Decision within the second quarter of calendar year 2024.

Their next status report to be submitted to the United States District Court for the District of Alaska is due on July 18, 2023.

In March 2023, the Board of Ambler Metals approved a budget totaling $12.3 million for the Ambler Access Project.

The total budget of $24.6 million, funded equally by AIDEA and Ambler Metals 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.

On November 15, 2022, the United States Bureau of Land Management ("USBLM") submitted a status report announcing that it anticipated 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.

The field work is being carried out from two camps:

the Coldfoot camp from May to mid-September and the Bornite camp from mid-June to August.

The planned field program will consist of cultural resource inventory surveys and testing of sites over approximately 765 acres, hydraulic and hydrology studies at 47 bridge crossings to assess conditions for area drainage, culvert placement and bridge design, collecting topographical and bathymetric survey data to support bridge data and fish passage culverts, engineering reconnaissance surveys and fish habitat investigations on over 100 sites.

Trilogy Metals Inc.

For the Quarter Ended February 28, 2023

For the Quarter Ended May 31, 2023

Corporate developments

Private Placement

On April 25, 2023, the Company completed non-brokered private placement of 5,854,545 common shares of the Company (the “Common Share”) at a price of $0.55 per Common Share for gross proceeds of $3.2 million.

After legal and stock exchange fees, the Company received net proceeds of $3.1 million.

Annual General Meeting

The Annual General Meeting of shareholders was held on May 17, 2023.

All directors nominated by the Company and standing for election were elected by shareholders of the Company, with each director receiving greater than 97% of the votes cast.

Summary of results

in thousands of US dollars, except per share amounts

For the three months ended

February 28, 2023

February 28, 2022

Three months ended

Six months ended

Selected expenses

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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.

For the three-month period ended May 31, 2023, we reported a net loss of $2.8 million compared to a net loss of $4.1 million for the three-month period ended May 31, 2022.

The decrease in comprehensive loss in the second quarter of 2023 compared to the same quarter in 2022 is due to decrease in our share of loss of Ambler Metals, and stock-based compensation and salaries.

The decrease of our share of losses of Ambler Metals is mainly due to decrease in mineral property expenses over the comparative quarter in the prior year from decrease in drilling, engineering and project support costs, and partially offset from increase cost in the Ambler Access Project.

For the six-month period ended May 31, 2023, we reported a net loss of $7.9 million compared to a net loss of $9.1 million for the six-month period ended May 31, 2022.

The difference for the six-month period ended May 31, 2023, when compared to the same period in 2022, is primarily due to a $1.3 million decrease in our equity pick-up of Ambler Metals’ comprehensive loss in the current period as well as decreases in salaries and investor relations, and partially offset from the increase in professional fees and stock-based compensation.

The decrease in our share of losses of Ambler Metals is mainly due to a decrease in mineral property expenses over the comparable period in the prior year from decreases in drilling, engineering, and project support costs as well as the Ambler Access Project cost.

Liquidity and capital resources

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.

We expended $1.5 million on operating activities during the six-month period ending May 31, 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.

Trilogy Metals Inc.

For the Quarter Ended May 31, 2023

As at May 31, 2023, we had $4.2 million in cash and working capital of $3.5 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.

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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 $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.

All project related costs are funded by Ambler Metals.

Amber Metals is well funded to advance the UKMP with $72.8 million in cash and $71.8 million in working capital as at May 31, 2023.

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

Trilogy does not anticipate having to fund the activities of Ambler Metals until the current cash balance $72.8 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 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 February 28, 2023

Off-balance sheet arrangements

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Outstanding share data

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.

As at July 14, 2023, we had 155,559,334 common shares issued and outstanding.

As at July 14, 2023, we had 13,049,400 stock options outstanding with a weighted-average exercise price of CDN$2.16, 2,253,573 Deferred Share Units (“DSUs”), and 1,610,638 Restricted Share Units (“RSUs”) outstanding.

As at July 14, 2023 we hold 5,144 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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These factors are subjective and require consideration at each period end.

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

Trilogy Metals Inc.

For the Quarter Ended February 28, 2023

For the Quarter Ended May 31, 2023

to be consistent with those used by principal market participants and observed market earnings multiples of comparable companies.

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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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