What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-10-08 compared with 2024-07-10 · 46 added, 52 removed, 147 unchanged (40% of the section changed)

2 unchanged sentences

Management’s Discussion & Analysis

For the Quarter Ended May 31, 2024

For the Quarter Ended August 31, 2024

(expressed in US dollars)

5 unchanged sentences

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 Metals’ 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.

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, the Company’s cash preservation strategies, the Company’s future funding of Ambler Metals, 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 (the “UKMP”, as defined below), sufficiency of the Ambler Metals’ 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;

● 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, 2024

For the Quarter Ended August 31, 2024

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

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

Trilogy Metals Inc.

For the Quarter Ended August 31, 2024

● commodity price fluctuations;

● uncertainty related to title to our mineral properties;

Trilogy Metals Inc.

For the Quarter Ended May 31, 2024

● our history of losses and expectation of future losses;

17 unchanged sentences

● 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 May 31, 2024

For the Quarter Ended August 31, 2024

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

● adverse federal income tax consequences for U.S.

3 unchanged sentences

● uncertainty as to our ability to maintain the adequacy of internal control over financial reporting as per the requirements of Section 404 of the Sarbanes-Oxley Act;

● 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.

● increased regulatory compliance costs, associated with rules and regulations promulgated by the United States Securities and Exchange Commission, Canadian Securities Administrators, the NYSE American Stock Exchange, 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.

This list is not exhaustive of the factors that may affect any of the Company’s forward-looking statements.

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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 10, 2024 and provides an analysis of our unaudited condensed interim financial results for the quarter ended May 31, 2024 compared to the quarter ended May 31, 2023.

The following information should be read in conjunction with our May 31, 2024 unaudited condensed interim 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 8, 2024 and provides an analysis of our unaudited condensed interim financial results for the quarter ended August 31, 2024 compared to the quarter ended August 31, 2023.

The following information should be read in conjunction with our August 31, 2024 unaudited condensed 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.

8 unchanged sentences

Trilogy Metals Inc.

For the Quarter Ended May 31, 2024

For the Quarter Ended August 31, 2024

Description of business

10 unchanged sentences

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

For the six-month period ended May 31, 2024, we used $1.1 million in operating activities mainly for personnel costs, professional fees, regulatory and office expenses compared with budgeted cash expenditures totaling $1.5 million.

The difference is due to the timing of paying our annual insurance premiums which occurred in June 2024.

Annual General Meeting

The Annual General Meeting of shareholders was held on May 22, 2024.

All directors nominated by the Company were elected by shareholders of the Company, with each director receiving greater than 98% of the votes cast.

The shareholders of the Company also approved the adoption of a new Fixed Deferred Share Unit Plan for non-employee directors to receive up to 1,200,000 common shares of the Company in lieu of cash compensation.

Upon the approval of the new Fixed Deferred Share Unit Plan, the Company terminated the Ambler Metals Equity Plan which had 1,181,519 outstanding common shares available for future grants.

The adoption of the new Fixed Deferred Share Unit Plan along with the termination of the Ambler Metals Equity Plan allows the Company to continue its cash preservation activities without significantly impacting potential dilution.

For the nine-month period ended August 31, 2024, we used $1.9 million in operating activities mainly for personnel costs, professional fees, regulatory and office expenses compared with budgeted cash expenditures totaling $2.1 million.

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 six-month period ended May 31, 2024 Ambler Metals expended $2.4 million on salaries and wages, professional fees, engineering, project support costs and mineral property expenses, excluding Ambler Access Project costs compared with the budget of $2.6 million.

The Board of Ambler Metals also approved a 2024 fiscal year budget totaling $2.5 million to support the Ambler Access Project (“AAP”).

During the six-month period ended May 31, 2024 Ambler Metals funded $1.1 million to the Alaska Industrial Development and Export Authority (“AIDEA”) in support of the AAP compared with the budget of $1.3 million.

During the second quarter of 2024, Trilogy and South32 agreed to return excess cash held by Ambler Metals to the owners for ease of cash management.

The owners also agreed to maintain a minimum cash balance at Ambler Metals of $10 million which will be reviewed on a regular basis.

Ambler Metals returned $25 million to Trilogy and South32 prior to the end of May 2024 and another $25 million during the first half of June 2024.

Trilogy Metals Inc.

For the Quarter Ended May 31, 2024

During the nine-month period ended August 31, 2024, Ambler Metals expended $3.5 million on salaries and wages, professional fees, engineering, project support costs and mineral property expenses, excluding the Ambler Access Project (the “AAP”) costs, compared with the budget of $4.5 million.

The board of Ambler Metals also approved a 2024 fiscal year budget totaling $2.5 million to support the AAP.

During the nine-month period ended August 31, 2024, Ambler Metals funded $1.4 million to the Alaska Industrial Development and Export Authority (“AIDEA”) in support of the AAP compared with the budget of $1.9 million.

During the third quarter of 2024, we received additional cash from Ambler Metals.

In total, Ambler Metals returned $50 million to Trilogy and South32 as at August 31, 2024.

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

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AIDEA’s purpose is to promote, develop, and advance general prosperity and economic welfare of the people of Alaska.

AIDEA strongly objected to both the process used by the BLM to reach a “No Build” decision and the effect of the decision which illegally blocks access to statehood lands, minerals, and federally patented mining claims.

On May 8, 2024 NANA announced its withdrawal from further involvement with the AAP and stated intentions to not renew the surface access permit with AIDEA upon its expiry this year.

On June 28, 2024, the BLM issued the Record of Decision confirming their selection of the No Action Alternative and thus denies AIDEA’s application for a Right-Of-Way grant (“ROW Grant”) across BLM-managed lands and terminates the BLM ROW Grant issued to AIDEA on January 5, 2021.

AIDEA strongly objected to both the process used by the BLM to reach a “No Build” decision and the effect of the decision which AIDEA believes illegally blocks access to statehood lands, minerals, and federally patented mining claims.

On May 8, 2024, NANA announced its withdrawal from further involvement with the AAP and stated its intentions to not renew the surface access permit with AIDEA upon the permit’s expiry this year.

On June 28, 2024, the BLM issued the Record of Decision confirming their selection of the No Action alternative and thus denied AIDEA’s application for a right-of-way grant (“ROW Grant”) across BLM-managed lands which terminated the BLM ROW Grant issued to AIDEA on January 5, 2021.

Trilogy Metals Inc.

For the Quarter Ended August 31, 2024

Summary of results

1 unchanged sentence

Three months ended

Six months ended

Nine months ended

August 31, 2024

August 31, 2023

August 31, 2024

August 31, 2023

Selected expenses

6 unchanged sentences

Basic and diluted loss per common share

For the three-month period ended May 31, 2024, we reported a net loss of $1.8 million compared to a net loss of $2.8 million for the three-month period ended May 31, 2023.

The decrease in comprehensive loss in the second quarter of 2024 compared to the same quarter in 2023 is due to the decrease in general and administrative, professional fees, our share of loss of Ambler Metals, and stock-based compensation and salaries.

For the three-month period ended August 31, 2024, we reported a net loss of $1.6 million compared to a net loss of $4.1 million for the three-month period ended August 31, 2023.

The decrease in comprehensive loss in the third quarter of 2024 compared to the same quarter in 2023 is primarily due to the decrease in our share of loss of Ambler Metals.

The decrease of our share of losses of Ambler Metals is mainly due to the decrease in corporate wages and in mineral property expenses partially offset from the increase in professional fees.

The primary drivers in decrease in mineral property expenses over the comparative quarter in the prior year were from a reduction in activities both at the project level and at the AAP.

For the six-month period ended May 31, 2024, we reported a net loss of $5.4 million compared to a net loss of $7.9 million for the six-month period ended May 31, 2023.

The decrease for the six-month period ended May 31, 2024 when compared to the same period in 2023, is primarily due to the decrease in our share of loss of Ambler Metals, professional fees 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 due to a reduction in staffing and a reduction in mineral property expenses due to a reduction in project activities which was partially offset by the increase in professional consulting fees related to government and external affairs.

Trilogy Metals Inc.

For the Quarter Ended May 31, 2024

For the nine-month period ended August 31, 2024, we reported a net loss of $7.0 million compared to a net loss of $11.9 million for the nine-month period ended August 31, 2023.

The decrease for the nine-month period ended August 31, 2024, when compared to the same period in 2023, is primarily due to the decrease in our share of losses of Ambler Metals, professional fees 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 due to a reduction in staffing and a reduction in mineral property expenses due to a reduction in project activities which was partially offset by the increase in professional fees related to part-time contractors engaged to assist with management of Ambler Metals, along with consultants engaged in government and external affairs.

Liquidity and capital resources

We expended $1.1 million on operating activities during the six-month period ending May 31, 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 May 31, 2024, we had cash and cash equivalents of $14.0 million and working capital of $13.6 million.

At the end of the fiscal quarter, Trilogy received $12.5 million from Ambler Metals as a return of excess cash to the owners.

We expended $1.9 million on operating activities during the nine-month period ending August 31, 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 August 31, 2024, we had cash and cash equivalents and working capital of $25.7 million.

During the nine months ended August 31, 2024, Trilogy received a total of $25.0 million from Ambler Metals as a return of excess cash to the owners.

Although the Company has a strong cash position, 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 continue to take all of their fees in deferred share units in an effort to preserve cash.

The Company’s senior management team is also continuing to take a portion of their base salaries in shares of the Company to preserve cash.

The Company’s senior management team is also continuing to take a portion of their base salaries and all of their short and long term compensation in shares of the Company to preserve cash.

All project related costs are funded by Ambler Metals.

Amber Metals had $35.1 million in cash and cash equivalents and $34.9 million in working capital as at May 31, 2024.

During the first half of June, Ambler Metals retuned $25 million to the owners, resulting in a cash position of approximately $11 million which is sufficient for Ambler Metals to fund this fiscal year’s budget for the UKMP and the Ambler Access Project.

Ambler Metals had $9.8 million in cash and cash equivalents and $8.7 million in working capital as at August 31, 2024.

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

Trilogy Metals Inc.

For the Quarter Ended August 31, 2024

Off-balance sheet arrangements

1 unchanged sentence

Outstanding share data

As at July 10, 2024, we had 160,552,808 common shares issued and outstanding.

As at July 10, 2024, we had 14,316,900 stock options outstanding with a weighted-average exercise price of CDN$1.78, 2,980,377 Deferred Share Units (“DSUs”), and 2,318,339 Restricted Share Units (“RSUs”) outstanding.

As at July 10, 2024 we hold 5,144 NovaGold Resources Inc.

As at October 8, 2024, we had 160,902,814 common shares issued and outstanding.

As at October 8, 2024, we had 14,316,900 stock options outstanding with a weighted-average exercise price of CDN$1.78, 3,133,412 Deferred Share Units (“DSUs”), and 2,818,339 Restricted Share Units (“RSUs”) outstanding.

As at October 8, 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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The most critical accounting estimates upon which our financial status depends are those requiring estimates of the recoverability of our equity method investment in Ambler Metals, income taxes and valuation of stock‐based compensation.

Trilogy Metals Inc.

For the Quarter Ended May 31, 2024

Impairment of Investment in Ambler Metals LLC

10 unchanged sentences

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.

Trilogy Metals Inc.

For the Quarter Ended August 31, 2024

Stock-based compensation

6 unchanged sentences

Not applicable.

Trilogy Metals Inc.

For the Quarter Ended May 31, 2024

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