What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-10-11 compared with 2023-07-14 · 67 added, 49 removed, 151 unchanged (43% of the section changed)

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Management’s Discussion & Analysis

For the Quarter Ended May 31, 2023

For the Quarter Ended August 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 the Alaska Industrial Development and Export Authority (“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 (as defined below), 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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● the adequacy of our financial resources;

● the receipt of third party contractual, regulatory and governmental approvals for the exploration, development, construction and production of our properties and any litigation or challenges to such approvals;

Trilogy Metals Inc.

For the Quarter Ended May 31, 2023

For the Quarter Ended August 31, 2023

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

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● expected trends and specific assumptions regarding metal prices and currency exchange rates;

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

● prices for and availability of fuel, electricity, parts and equipment and other key supplies remaining consistent with current levels.

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● risks related to our dependence on a third party for the development of our projects;

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

Trilogy Metals Inc.

For the Quarter Ended May 31, 2023

For the Quarter Ended August 31, 2023

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

● commodity price fluctuations;

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● risks related to the voting power of our major shareholders and the impact that a sale by such shareholders may have on our share price;

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

Trilogy Metals Inc.

For the Quarter Ended May 31, 2023

For the Quarter Ended August 31, 2023

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

● 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 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.

(“Trilogy”, “Trilogy Metals”, “the Company” or “we”) is dated October 11, 2023 and provides an analysis of our unaudited interim financial results for the quarter ended August 31, 2023 compared to the quarter ended August 31, 2022.

The following information should be read in conjunction with our August 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’s shares are listed on the Toronto Stock Exchange (“TSX”) and the NYSE American Stock Exchange (“NYSE American”) under the symbol “TMQ”.

Additional information related to Trilogy, including our annual report on Form 10-K, is available on SEDAR at www.sedar.com and on EDGAR at www.sec.gov.

Additional information related to Trilogy, including our annual report on Form 10-K, is available on SEDAR+ at www.sedarplus.ca and on EDGAR at www.sec.gov.

Trilogy Metals Inc.

For the Quarter Ended May 31, 2023

For the Quarter Ended August 31, 2023

Description of business

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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.

UKMP Field Activities

In July, Ambler Metals used the camp to support a small team of geologists who were continuing work started in 2022 on the stratigraphy and alteration of the Arctic deposit.

The focus of the work was to relog existing drill core from 13 holes across the deposit and 4 holes from regional prospects.

In addition, sampling was undertaken for chemostratigraphy and alteration footprint definition.

Geological and talc models for the Arctic deposit were updated and an updated geological and structural model for the area surrounding Arctic was recommended.

The camp was also utilized by Ambler Metals to conduct sampling of core from the Bornite deposit to be used in a study initiated by the Center to Advance the Science of Exploration to Reclamation in Mining (“CASERM”) at the Colorado School of Mines to investigate the occurrence and distribution of critical elements, including germanium.

Ambler Metals has recently accepted a proposal from CASERM with leveraged funding from the United States Geological Survey to contribute samples from Bornite to further investigate the occurrence, distribution, and sequestration of critical elements, including germanium, using a suite of micro-analytical methods such as SEM- and XRF-based techniques, electron probe micro analysis, and LA-ICP-MS.

Objectives of the study include compiling a comprehensive whole-rock 60+ geochemical dataset of select samples from the Bornite deposit that complement the existing dataset from the South Reef area related to a recently prepared Master of Science thesis.

Bornite Studies

Ambler Metals has engaged Wood Canada Limited and SRK Consulting (Canada) Inc.

to complete an initial scoping level study on the Bornite deposit to determine if the ore at Bornite may extend the mine life at the proposed Arctic Project.

The scope of work covers mining, processing, hydrogeology, infrastructure, tailings management, and waste rock management.

The study assumes that ore from Bornite will be transported approximately 30 km northeast to the Arctic mill for processing after completion of mining at the Arctic deposit.

Bornite will utilize the proposed infrastructure supporting the Arctic Project including power generation, airstrips and camp.

There are potential significant synergies between Arctic and Bornite which could lower the overall capital costs and extend the regional mine life from 13 years for the Arctic deposit to 30 years with both Arctic and Bornite.

The study is considering both an open-pit and an underground mine using existing geologic modelling, geotechnical information, and hydrogeological information and, where possible, will rely on concepts and costs developed for the Arctic Feasibility Study.

Trilogy Metals Inc.

For the Quarter Ended August 31, 2023

Metallurgical test work to potentially increase cobalt reporting with copper concentrate was initiated in July using three previously tested concentrates from the Bornite deposit.

The test work is being conducted by ALS Minerals and is expected to be completed in the fourth quarter of this year.

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

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

AIDEA started field work in May 2023 utilizing a camp at Coldfoot, which work was completed in mid-September.

In mid-June AIDEA started utilizing the Ambler Metals Bornite camp with an average of 40 people daily at camp throughout the summer with approximately 20 NANA shareholder hires among them.

Ambler Metals recently closed the Bornite camp with no safety incidents reported.

AIDEA successfully completed the planned field program from Bornite consisting of cultural resource inventory surveys and testing of sites over approximately 450 acres, hydraulic and hydrology studies at 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.

In March 2023, the board of Ambler Metals approved funding of $12.3 million, a 50% share of the total budget of $24.6 million for the Ambler Access Project which is being funded equally by AIDEA and Ambler Metals.

As at August 31, 2023, $6.5 million has been spent to date on logistics and cost of the field season.

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 and March 20, 2023, the USBLM submitted status reports reaffirming the timing of the draft and final SEIS.

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.

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 May 31, 2023

On July 18, 2023 and September 18, 2023, the USBLM submitted status reports reaffirming the timing of the draft SEIS, final SEIS and the Record of Decision.

Corporate developments

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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.

Trilogy Metals Inc.

For the Quarter Ended August 31, 2023

Summary of results

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Three months ended

Six months ended

Nine months ended

August 31, 2023

August 31, 2022

August 31, 2023

August 31, 2022

Selected expenses

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Basic and diluted loss per common share

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.

For the three-month period ended August 31, 2023, we reported a net loss of $4.1 million compared to a net loss of $9.9 million for the three-month period ended August 31, 2022.

The decrease in comprehensive loss in the third quarter of 2023 compared to the same quarter in 2022 is due to the 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 the decrease in mineral property expenses over the comparative quarter in the prior year from the decrease in drilling, engineering and project support costs and partially offset from the increased cost in the Ambler Access Project.

For the nine-month period ended August 31, 2023, we reported a net loss of $11.9 million compared to a net loss of $19.0 million for the nine-month period ended August 31, 2022.

The difference for the nine-month period ended August 31, 2023, when compared to the same period in 2022, is primarily due to a $7.3 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 the decrease in mineral property expenses over the comparable period in the prior year from decreases in drilling, engineering, and project support costs and partially offset from the increase in the Ambler Access Project cost.

Liquidity and capital resources

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.

We expended $2.6 million on operating activities during the nine-month period ending August 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.

As at August 31, 2023, we had cash and working capital of $3.0 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.

In addition, the Company’s Board of Directors have agreed to take all of their fees in deferred share units 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 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.

Amber Metals is well funded to advance the UKMP with $66.9 million in cash and $66.0 million in working capital as at August 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.

Trilogy does not anticipate having to fund the activities of Ambler Metals until the current cash balance of $66.9 million is expended.

Trilogy Metals Inc.

For the Quarter Ended August 31, 2023

Off-balance sheet arrangements

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Outstanding share data

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.

As at October 11, 2023, we had 155,883,843 common shares issued and outstanding.

As at October 11, 2023, we had 12,999,400 stock options outstanding with a weighted-average exercise price of CDN$2.16, 2,428,701 Deferred Share Units (“DSUs”), and 1,610,638 Restricted Share Units (“RSUs”) outstanding.

As at October 11, 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 May 31, 2023

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

For the Quarter Ended August 31, 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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Additional information

Additional information regarding the Company, including our annual report on Form 10-K, is available on SEDAR at www.sedar.com and EDGAR at www.sec.gov and on our website at www.trilogymetals.com.

Additional information regarding the Company, including our annual report on Form 10-K, is available on SEDAR+ at www.sedarplus.ca and EDGAR at www.sec.gov and on our website at www.trilogymetals.com.

Information contained on our website is not incorporated by reference.

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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