What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-04-03 compared with 2023-10-11 · 57 added, 84 removed, 134 unchanged (51% of the section changed)

2 unchanged sentences

Management’s Discussion & Analysis

For the Quarter Ended August 31, 2023

For the Quarter Ended February 29, 2024

(expressed in US dollars)

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Securities Exchange Act of 1934, as amended (the “Exchange Act”), and other applicable securities laws.

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 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 forward-looking statements may include statements regarding the Company’s work programs and budgets;

perceived merit of properties, exploration results and budgets, the impact of the Bureau of Land Management’s (“BLM”) 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 Ambler Meals’ cash 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;

Trilogy Metals Inc.

For the Quarter Ended August 31, 2023

● 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 February 29, 2024

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

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Forward-looking statements are subject to a variety of known and unknown risks, uncertainties and other factors that could cause actual events or results to differ from those reflected in the forward-looking statements, including, without limitation:

● risks related to the COVID-19 pandemic;

● risks related to inability to define proven and probable reserves;

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

Trilogy Metals Inc.

For the Quarter Ended August 31, 2023

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

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● uncertainty related to title to our mineral properties;

Trilogy Metals Inc.

For the Quarter Ended February 29, 2024

● our history of losses and expectation of future losses;

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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;

Trilogy Metals Inc.

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;

Trilogy Metals Inc.

For the Quarter Ended February 29, 2024

● adverse federal income tax consequences for U.S.

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● increased regulatory compliance costs, associated with rules and regulations promulgated by the United States Securities and Exchange Commission, Canadian Securities Administrators, the NYSE American, the Toronto Stock Exchange, and the Financial Accounting Standards Boards, and more specifically, our efforts to comply with the Dodd-Frank Wall Street Reform and Consumer Protection Act;

● risks related to the future effect of the COVID-19 pandemic.

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 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.

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 for the fiscal year ended November 30, 2023, filed with the Canadian securities regulatory authorities and the SEC on February 9, 2024, 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.

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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 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.

(“Trilogy”, “Trilogy Metals”, “the Company” or “we”) is dated April 3, 2024 and provides an analysis of our unaudited interim financial results for the quarter ended February 29, 2024 compared to the quarter ended February 28, 2023.

The following information should be read in conjunction with our February 29, 2024 unaudited interim 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, 2023.

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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.sedarplus.ca and on EDGAR at www.sec.gov.

Additional information related to Trilogy, including our annual report on Form 10-K for the fiscal year ended November 30, 2023, is available on SEDAR+ at www.sedarplus.ca and on EDGAR at www.sec.gov.

Trilogy Metals Inc.

For the Quarter Ended August 31, 2023

For the Quarter Ended February 29, 2024

Description of business

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

Project activities

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.

Corporate and project activities

The Company has a 2024 fiscal year cash budget totaling $2.8 million.

During the quarter ended February 29, 2024 we were on budget with cash expenditures of $0.8 million for personnel costs, professional fees, insurance, regulatory and office expenses.

Our current office lease expires at the end of June 2024 and we have signed a new office lease starting July 1, 2024 for four years.

Ambler Metals LLC

The Board of Ambler Metals approved a 2024 fiscal year budget totaling $5.5 million to support external and community affairs, to maintain the State of Alaska mineral claims in good standing and for the maintenance of physical assets.

During the quarter ended February 29, 2024 Ambler Metals expended $1.2 million on salaries and wages, professional fees and mineral property expenses in engineering and project support costs compared with the budget of $1.4 million for the quarter.

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

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.

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

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.

In December 2023, the Board of Ambler Metals approved a 2024 fiscal year budget of $2.5 million for the Ambler Access Project to assist AIDEA with funding costs related to the final Supplemental Environmental Impact Statement (“SEIS”) and completion of cultural resource studies and engineering studies related to bridge crossings along the road route.

For the quarter ended February 29, 2024, Ambler Metals expended $0.4 million to AIDEA compared with the budget of $0.6 million for the quarter.

On March 18, 2024 the BLM filed its 11th status report with the Courts stating that they posted the draft SEIS on its ePlanning website on October 13, 2023 and published notice of availability of the draft SEIS in the Federal Register on October 20, 2023.

The public comment period ended on December 22, 2023.

The BLM conducted several public meetings concerning the draft SEIS, and conducted associated ANILCA Section 810 hearings on subsistence use in communities affected by the project.

The BLM had previously reported that it anticipated publishing a final SEIS in the first quarter of calendar year 2024, but now anticipates publishing a final SEIS in the second quarter of calendar year 2024.

The BLM continues to anticipate publishing a Record of Decision within the second quarter of calendar year 2024.

Trilogy Metals Inc.

For the Quarter Ended August 31, 2023

For the Quarter Ended February 29, 2024

Summary of results

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Three months ended

Nine months ended

August 31, 2023

August 31, 2022

August 31, 2023

August 31, 2022

February 29, 2024

February 28, 2023

Selected expenses

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Basic and diluted loss per common share

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.

For the three-month period ended February 29, 2024, we reported a net loss of $3.6 million compared to a net loss of $5.1 million for the three-month period ended February 28, 2023.

The decrease in comprehensive loss in the first quarter of 2024 compared to the same quarter in 2023 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 corporate wages and in mineral property expenses.

The primary drivers in decrease in mineral property expenses over the comparative quarter in the prior year were from the decrease in project support costs and cost in the Ambler Access Project.

Liquidity and capital resources

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.

We expended $0.6 million on operating activities during the three-month period ending February 29, 2024 with the majority of cash spent on professional fees and American and Canadian securities commission fees related to our annual regulatory filings, annual fees paid to the Toronto Stock Exchange and the NYSE American Exchange and corporate salaries.

As at February 29, 2024, we had cash and cash equivalent of $2.0 million and working capital of $1.7 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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All project related costs are funded by Ambler Metals.

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.

Amber Metals is well funded to advance the UKMP with $61.3 million in cash and cash equivalents and $61.1 million in working capital as at February 29, 2024.

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 of $66.9 million is expended.

Trilogy does not anticipate having to fund the activities of Ambler Metals until the current cash and cash equivalent balance of $61.3 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 debts, 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.

Trilogy Metals Inc.

For the Quarter Ended August 31, 2023

For the Quarter Ended February 29, 2024

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

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

Off-balance sheet arrangements

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Outstanding share data

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.

As at April 3, 2024, we had 160,166,788 common shares issued and outstanding.

As at April 3, 2024, we had 14,354,400 stock options outstanding with a weighted-average exercise price of CDN$1.79, 2,812,190 Deferred Share Units (“DSUs”), and 2,293,339 Restricted Share Units (“RSUs”) outstanding.

As at April 3, 2024 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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Significant judgments are made in assessing the possibility of impairment.

Factors that may be indicative of an impairment include a loss in the value of an investment that is not temporary.

Management considers several factors in considering if an indicator of impairment has occurred, including but not limited to, sustained losses by the investment, the absence of the ability to recover the carrying amount of the investment, significant changes in the legal, business or regulatory environment, significant adverse changes impacting the investee including the status of the Ambler Access Project and internal reporting indicating the economic performance of an investment is, or will be, worse than expected.

Management considers factors that may be indicative of an impairment include a loss in the value of an investment that is not temporary.

Factors consider include but are not limited to, sustained losses by the investment, the absence of the ability to recover the carrying amount of the investment, significant changes in the legal, business or regulatory environment, significant adverse changes impacting the investee and internal reporting indicating the economic performance of an investment is, or will be, worse than expected.

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 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.

When the carrying value of an asset exceeds the related undiscounted cash flows, the asset is written down to its estimated fair value, which is usually determined using discounted future cash flows.

Management’s estimates of mineral prices, mineral resources, foreign exchange rates, production levels operating, capital and reclamation costs are subject to risk and uncertainties that may affect the determination of the recoverability of the long-lived asset.

It is possible that material changes could occur that may adversely affect management’s estimates.

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 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.

Trilogy Metals Inc.

For the Quarter Ended February 29, 2024

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.

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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.sedarplus.ca 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 for the fiscal year ended November 30, 2023, 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.

2 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