What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-02-14 compared with 2024-02-09 · 147 added, 121 removed, 455 unchanged (37% of the section changed)

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Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors of Trilogy Metals Inc.

To the Board of Directors and Shareholders of Trilogy Metals Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Trilogy Metals Inc.

and its subsidiaries (together, the Company) as of November 30, 2023 and 2022, and the related consolidated statements of loss and comprehensive loss, changes in shareholders' equity and cash flows for each of the three years in the period ended November 30, 2023, including the related notes (collectively referred to as the consolidated financial statements).

and its subsidiaries (the Company) as of November 30, 2024 and 2023, and the related consolidated statements of loss and comprehensive loss, of changes in shareholders’ equity and of cash flows for each of the three years in the period ended November 30, 2024, including the related notes (collectively referred to as the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of November 30, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended November 30, 2024 in conformity with accounting principles generally accepted in the United States of America.

Substantial Doubt About the Company’s Ability to Continue as a Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.

As discussed in Note 1 to the consolidated financial statements, the Company has no recurring source of operating cash inflows at its current stage and is dependent on its ability to obtain additional financing or to generate future operating cash inflows.

These material uncertainties raise substantial doubt about its ability to continue as a going concern.

Management's plans in regard to these matters are also described in Note 1.

The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

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We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

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The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit

matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Impairment indicator assessment of the Investment in Ambler Metals LLC

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Recoverability of the Investment in Ambler Metals LLC

As described in Notes 2 and 3 to the consolidated financial statements, the Company has an investment in Ambler Metals LLC (Ambler) accounted for using the equity method of accounting.

As of November 30, 2023, the carrying amount of the Company's investment in Ambler was $135.0 million.

Management assesses impairment indicators whenever changes in facts and circumstances indicate there is an other than temporary loss in value of the investment.

Management applies significant judgment in assessing whether facts and circumstances indicate an other than temporary loss in value has occurred that could give rise to the requirement to conduct an impairment test.

Factors such as (i) an absence of the ability to recover the carrying amount of the investment, and (ii) whether there was a deterioration of market conditions are evaluated by management in determining whether there are any indicators of impairment.

The principal considerations for our determination that performing procedures relating to the impairment indicator assessment of the investment in Ambler is a critical audit matter are:

the significant judgment by management when assessing whether indicators of impairment exist, specifically related to assessing:

(i) an absence of the ability to recover the investment in Ambler, and (ii) a deterioration of market conditions.

This in turn led to a high degree of auditor judgment and subjectivity in performing procedures to evaluate audit evidence relating to the significant judgments made by management in their assessment of indicators of impairment related to the investment in Ambler.

The audit effort also involved the use of professionals with specialized skill and knowledge.

As of November 30, 2024, the carrying value of the Company’s investment in Ambler was $107.5 million.

Management assesses whether there has been an other than temporary decrease in the fair value of their investment in Ambler whenever changes in facts and circumstances indicate there might be, including assessing the underlying mineral properties of Ambler.

During the year ended November 30,

2024, management identified facts and circumstances due to adverse changes in the regulatory environment impacting the investee, and therefore, tested the carrying value of the investment in Ambler for recoverability by assessing the underlying mineral properties of Ambler.

Management estimated a range of fair values for the investment in Ambler using a combination of valuation techniques, including the valuation of cohort companies with similar projects and in situ multiples observed in market transactions for comparable mineral properties that take into account, among other things, mineral reserve and resource estimates.

Management applies significant judgment in estimating the fair value of the investment in Ambler.

The mineral reserve and resource estimates are based on information prepared by qualified persons (management’s specialists).

No impairment was recorded as a result of the impairment test.

The principal considerations for our determination that performing procedures relating to the recoverability of the investment in Ambler is a critical audit matter are:

(i) the significant judgment by management, including the use of management’s specialists, in determining the fair value of the investment in Ambler, which in turn led to (ii) a high degree of auditor judgment, subjectivity and effort in performing procedures to evaluate audit evidence relating to the fair value of the investment in Ambler, including assessing the reasonability of the mineral reserve and resource estimates developed by management, developing independent in situ value per pound of copper equivalent for Ambler’s mineral properties, and project-specific characteristics;

and (iii) the audit effort also involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included, among others, evaluating the reasonableness of management's assessment of impairment indicators related to the investment in Ambler, which included (i) with the assistance of professionals with specialized skill and knowledge evaluating whether there was an absence of the ability to recover the carrying amount of the investment by considering the implied in situ value of recent market transactions of comparable mineral properties, and (ii) evaluating whether there was a deterioration of market conditions and assessing the completeness of facts and circumstances that could be considered as impairment indicators of the Investment in Ambler by performing an audit of the financial statements of Ambler as of November 30, 2023.

Performing an audit of the financial statements of Ambler as of November 30, 2023 included (i) evaluating whether there were significant adverse changes in the business climate including significant decreases in copper, zinc, and other metal prices, (ii) evaluating whether there were significant adverse changes in legal factors with respect to mineral property title matters, and (iii) evaluating whether there was an accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of Ambler's mineral properties.

These procedures included, among others (i) developing an independent point estimate of the fair value of the investment in Ambler based on an estimated in situ value per pound of copper equivalent, and (ii) comparing the independent point estimate to management’s estimate to evaluate the reasonableness of management’s estimate.

Professionals with specialized skill and knowledge were used to assist in the determination of the in situ value per pound of copper equivalent of the underlying mineral properties of Ambler based on comparable market transactions taking into account project-specific characteristics.

For project-specific characteristics, we evaluated evidence of actions taken and statements made by legislators in support of mineral resource development in the jurisdiction of the underlying mineral properties.

Professionals with specialized skill and knowledge also assisted in the assessment of the reasonability of the fair value of the investment in Ambler.

The work of management’s specialists was used in performing the procedures to evaluate the reasonableness of the mineral reserve and resource estimates.

As a basis for using this work, the specialists’ qualifications were understood and the Company’s relationship with the specialists was assessed.

The procedures performed also included evaluating the methods and assumptions used by the specialists, testing the data used by the specialists, and evaluating the specialists’ findings.

/s/ PricewaterhouseCoopers LLP

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Contributed surplus

Contributed surplus – options (note 6(b))

Contributed surplus – units (note 6(c))

Contributed surplus – options (note 6(a))

Contributed surplus – units (note 6(b))

Total shareholders' equity

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Exploration expenses

Foreign exchange loss (gain)

Foreign exchange (gain) loss

General and administrative

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Exercise of options

Stock-based compensation

Loss for the year

Balance – 2021

Exercise of options

Exercise of warrants

Restricted share units

Deferred share units

Joint venture contribution

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Balance – 2023

Exercise of options

Restricted share units

Joint venture contribution

Services settled by common shares

Stock-based compensation

Loss for the year

Balance – 2024

(See accompanying notes to the consolidated financial statements)

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Loss for the year

Adjustments to reconcile net loss to cash flows in operating activities

Adjustments to reconcile net loss to cash flows used in operating activities

Unpaid interest earned

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Gain on disposal of mineral property

Loss on equity investment in Ambler Metals LLC (note 3(b))

Unrealized foreign exchange loss (gain)

Loss on equity investment in Ambler Metals LLC (note 3(c))

Unrealized foreign exchange (gain) loss

Stock-based compensation

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Decrease (Increase) in deposits and prepaid amounts

Decrease in accounts payable and accrued liabilities

Increase (Decrease) in accounts payable and accrued liabilities

Total cash flows used in operating activities

Cash flows from financing activities

Issuance of common shares, net of share issue cost (note 6(a))

Issuance of common shares, net of share issue cost

Proceeds from exercise of options

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Cash flows from investing activities

Return of capital from Ambler Metals LLC (note 3(b))

Proceeds from disposition of mineral property

Total cash flows from investing activities

Increase (decrease) in cash

Change in cash

Effect of exchange rate on cash

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Notes to Consolidated Financial Statements

1) Nature of operations and Going Concern

1) Nature of operations

Trilogy Metals Inc.

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

These consolidated financial statements have been prepared on a going concern basis which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business for at least twelve months from the date of approval of these consolidated financial statements.

As at November 30, 2023, the Company had a working capital of $ 2.4 million (2022 - $ 2.4 million) and an accumulated deficit of $ 81.8 million (2022 - $ 66.9 million).

The Company recorded a loss of $ 15.0 million and cash outflow from operations of $ 3.1 million for the year ended November 30, 2023.

The continued operations of the Company are dependent on its ability to obtain additional financing or to generate future cash flows.

The Company has no recurring source of operating cash inflows at its current stage.

The Company intends to finance its future requirements through a combination of debt and equity issuance.

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.

These consolidated financial statements do not include any adjustments to the amounts and classification of assets and liabilities that might be necessary should the Company be unable to continue as a going concern.

Such adjustments could be material.

2) Summary of significant accounting policies

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These financial statements were approved by the Company’s Board of Directors for issue on February 13, 2025.

Cash and cash equivalents

Cash and cash equivalents consist of bank deposits and term deposits that are readily convertible into a known amount of cash.

Cash consists of bank deposits that are held with a single Canadian Financial Institution.

The majority of cash is uninsured as at November 30, 2024.

Investment in affiliates

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The Company’s maximum exposure to loss is its investment in Ambler Metals.

Trilogy Metals Inc.

Notes to Consolidated Financial Statements

Management assesses the possibility of impairment in the carrying value of its equity method investment in Ambler Metals whenever events or circumstances indicate that the carrying amount of the investment may not be recoverable.

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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.

Plant and equipment are recorded at cost and amortization begins when the asset is put into service.

If an indicator of impairment is determined to exist, the fair value of the 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

Trilogy Metals Inc.

Notes to Consolidated Financial Statements

consistent with those used by principal market participants or observed market earnings multiples of comparable companies.

The fair value of the investment is compared to it’s carrying value, if there is impairment the investment is written down to fair value.

Property and equipment are recorded at cost and amortization begins when the asset is put into service.

Amortization is calculated on a straight-line basis over the respective assets’ estimated useful lives.

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The interest rate implicit in lease contracts is typically not readily determinable.

As a result, the Company utilizes its incremental borrowing rate, which reflects the fixed rate at which it could borrow on a collateralized

Trilogy Metals Inc.

Notes to Consolidated Financial Statements

basis the amount of the lease payments in the same currency, for a similar term, in a similar economic environment.

As a result, the Company utilizes its incremental borrowing rate, which reflects the fixed rate at which it could borrow on a collateralized basis the amount of the lease payments in the same currency, for a similar term, in a similar economic environment.

Lease expense for lease payments is recognized on a straight-line basis over the lease term.

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Deferred income tax assets are evaluated and, if realization is not considered more likely than not, a valuation allowance is provided.

Trilogy Metals Inc.

Notes to Consolidated Financial Statements

Uncertainty in income tax positions

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Exchange gains or losses arising on translation are included in income or loss for the period.

The functional currency of the Company and its subsidiary and the Company’s reporting currency is the United States dollar.

The functional currency of the Company and its subsidiaries and the Company’s reporting currency is the United States dollar.

Earnings and loss per share

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Stock-based compensation

Compensation expense for options granted to employees, directors and certain service providers is determined based on estimated fair values of the options at the time of grant using the Black-Scholes option pricing model, which takes into account, as of the grant date, the fair market value of the shares, expected volatility, expected dividend yield, the

Trilogy Metals Inc.

Notes to Consolidated Financial Statements

risk-free interest rate, and the expected life of the option.

The compensation cost is recognized using the graded attribution method over the vesting period of the respective options.

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Units may be settled in either i) cash, and/or ii) shares purchased in the open market, and/or iii) shares issued from treasury, at the Company’s election at the time of vesting.

Trilogy Metals Inc.

Notes to Consolidated Financial Statements

Use of estimates and measurement uncertainties

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GAAP requires management to make estimates and assumptions of future events that affect the reported amount of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements, and the reported amounts of expenditures during the period.

Significant judgments include the assessment of potential indicators of impairment of mineral properties and investments in affiliates where key judgement is the delay on the Ambler Access Project is temporary and the delay was considered when assessing indicators of impairment.

Significant estimates include income taxes, and the valuation of stock-based compensation.

Significant estimates include the measurement of income taxes, and the valuation of stock-based compensation.

Actual results could differ materially from those reported.

Management assesses the possibility of impairment in the carrying value of its equity method investments in Ambler Metals whenever events or circumstances indicate that the carrying amount of the investment may not be recoverable.

Ambler Metals is a non-publicly traded equity investment owning exploration and development projects.

Significant judgments are made in assessing the possibility of impairment.

The Company assesses whether there has been a potential triggering event for other-than-temporary impairment by assessing the underlying assets of Ambler Metals for recoverability and assessing whether there has been a change in the development plan or strategy for the projects.

If the Company concludes there is sufficient evidence for an other-than temporary impairment, an assessment of fair value is performed.

If the underlying assets are not recoverable, the Company will record an impairment charge equal to the difference between the carrying amount of the equity investment and its fair value.

New accounting pronouncements

Updates to Reportable Segment Disclosures

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07 “Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures”.

AUS 2023-7 expands public entities’ segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss and interim disclosures of a reportable segment’s profit or loss and assets.

The standard is effective for the Company’s Annual Report on Form 10-K for the fiscal year ended November 30, 2025, and subsequent interim periods, with early adoption permitted.

The Company will be evaluating the impact of the guidance on the consolidated financial statements or disclosures.

Updates to Income Tax Disclosure

In December 2023, the FASB issued ASU 2023-09 “Income Taxes (Topic 740):

Improvements to Income Tax Disclosures.” ASU 2023-09 enhances the transparency and decision usefulness of income tax disclosures through changes to the rate reconciliation and income taxes paid information.

The standard is effective beginning with the Company’s Annual Report on Form 10-K for the fiscal year ended November 30, 2026, and subsequent interim periods, with early adoption permitted.

The Company will be evaluating the impact of the guidance on the consolidated financial statements.

3) Investment in Ambler Metals LLC

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As part of the formation of the Joint Venture, Trilogy contributed all its assets associated with the UKMP, including the Arctic and Bornite Projects, while South32 contributed $ 145 million, resulting in each party’s subsidiaries directly owning a 50 % interest in Ambler Metals.

Ambler Metals is an independently operated company jointly controlled by Trilogy and South32 through a four -member board, of which two members are currently appointed by Trilogy based on its 50 % equity interest.

Trilogy Metals Inc.

Notes to Consolidated Financial Statements

Ambler Metals is a company jointly controlled by Trilogy and South32 through a four -member board, of which two members are appointed by Trilogy based on its 50 % equity interest.

All significant decisions related to the UKMP require the approval of both companies.

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As we have significant influence over Ambler Metals through our representation on its board, we use the equity method of accounting for our investment in Ambler Metals.

Our maximum exposure to loss in this entity is limited to the carrying amount of our investment in Ambler Metals, which, as of November 30, 2024, totaled $ 107.5 million (2023 - $ 135.0 million).

Carrying value of investment in Ambler Metals

During the year ended November 30, 2023, Trilogy recognized, based on its 50 % ownership interest in Ambler Metals, an equity loss equivalent to its pro rata share of Ambler Metals' net loss of $ 15.7 million for the year ended November

Trilogy Metals Inc.

Notes to Consolidated Financial Statements

30, 2023 (2022 - $ 34.7 million).

Trilogy recognized, based on its 50 % ownership interest in Ambler Metals, an equity loss equivalent to its pro rata share of Ambler Metals’ comprehensive loss of $ 5.3 million for the year ended November 30, 2024 (2023 - $ 15.7 million).

During the year ended November 30, 2024, Trilogy made a $ 112,000 equity contribution to Ambler Metals through the issuance of 143,507 common shares of the Company as part of the long-term incentive compensation for Ambler Metals executives.

Likewise, South32 made an equivalent equity contribution to Ambler Metals for $ 112,000 in cash for their 50 % share.

The carrying value of Trilogy’s 50 % investment in Ambler Metals as at November 30, 2024 is summarized on the following table.

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Joint venture equity contribution

Return of capital

Share of loss on equity investment for the year ending November 30, 2024

November 30, 2024, Investment in Ambler Metals

During the year, the Company assessed whether there had been a decline in the fair value of its investment in Ambler Metals below its carrying value that was other than temporary as of a result of the United States Bureau of Land Management’s (“BLM”) preferred “No Action” alternative published in the BLM’s Final Supplemental Environmental Impact Statement (“SEIS”) for the Ambler Access Project and the BLM’s Record of Decision confirming the no action alternative.

Accordingly, the Company estimated the fair value of the investment based on various techniques including the valuation of cohort companies with similar projects and in situ multiplies observed in market transactions for comparable mineral properties.

No impairment was identified.

Trilogy Metals Inc.

Notes to Consolidated Financial Statements

The following table summarizes Ambler Metals’ Balance Sheet as at November 30, 2024.

2 unchanged sentences

November 30, 2023

Cash and cash equivalents

Mineral properties

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The following table summarizes Ambler Metals’ net loss for the years ended November 30, 2024, November 30, 2023 and November 30, 2022.

in thousands of dollars

For the year ended

November 30, 2024

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Related party transactions

During the fiscal year 2023, the Company received $ 27,000 (2022 - $ nil ) related to operating expenses paid on behalf of Ambler Metals.

During the fiscal year 2022, the Company transferred a mineral claim to Ambler Metals and received net proceeds of approximately $ 140,000 .

Trilogy Metals Inc.

Notes to Consolidated Financial Statements

During the fiscal year 2024, the Company charged $ 63,000 (2023 - $ nil ) related to administration and accounting services in connection with a service agreement between the Company and Ambler Metals.

In addition, the Company received payments of $ 68,000 (2023 - $ 27,000 ) related to operating expenses paid on behalf of Ambler Metals pursuant to the service agreement.

4) Accounts payable and accrued liabilities

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Accounts payable and accrued liabilities

Of the accrued salaries and vacation approximately $ 155,000 was settled, subsequent to the end of the year, on December 1, 2023 through the issuance of common shares of the Company (the “Common Shares”).

Subsequent to the year ended on November 30, 2024, approximately $ 153,000 of accrued salaries was settled through the issuance of common shares of the Company.

Trilogy Metals Inc.

Notes to Consolidated Financial Statements

(a) Right-of-use asset

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Balance as at November 30, 2023

Net amortization

Net amortization for lease ended June 30, 2024

ROU assets recognized for lease commenced July 1, 2024

Net amortization for lease commenced July 1, 2024

Balance as at November 30, 2024

The Company’s previous office lease ended on June 30, 2024.

The Company entered into a new office lease commencing on July 1, 2024, with a 4-year term ending June 20, 2028, with no renewal option.

During the year ending November 30, 2024, the Company recognized a ROU asset of $ 170,000 for the new office lease.

(b) Lease liabilities

The Company’s lease arrangements primarily consist of an operating lease for our office space ending in June 2024.

The Company’s lease arrangement consists of an operating lease of our office space ending on June 30, 2028.

There are no extension options.

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Significant judgment was used in the determination of the incremental borrowing rate which included estimating the Company’s credit rating.

Supplemental cash and non-cash information relating to our leases during the year ended November 30, 2024 are as follows:

● Cash paid for amounts included in the measurement of lease liabilities was $ 57,939 , of which $ 33,159 related to the office lease that expired on June 30, 2024 and $ 24,780 related to the new office lease that commenced on July 1, 2024.

Trilogy Metals Inc.

Notes to Consolidated Financial Statements

Supplemental cash and non-cash information relating to our leases during the year ended November 30, 2023 are as follows:

● Cash paid for amounts included in the measurement of lease liabilities was $ 198,912 .

Future minimum payments relating to the lease recognized in our balance sheet as of November 30, 2024 are as follows:

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November 30, 2023

Private Placement, net of share issue cost

Exercise of options

Restricted Share Units

Deferred Share Units

NovaGold deferred share units conversion

Services settled by common shares

Joint venture equity contribution (note 4(b))

Joint venture equity contribution (note 3(a))

November 30, 2024, issued and outstanding

On April 30, 2012, under the NovaGold Arrangement, Trilogy committed to issue common shares to satisfy holders of NovaGold deferred share units (“NovaGold DSUs”), once vested, on record as of the close of business April 27, 2012.

When vested, Trilogy committed to deliver one common share to the holder for every six shares of NovaGold the holder is entitled to receive, rounded down to the nearest whole number.

As of November 30, 2023, a total of 5,144 NovaGold DSUs remain outstanding representing a right to receive 859 Common Shares in Trilogy, which will settle upon certain directors retiring from NovaGold’s board.

(a) Common shares issuance

On April 25, 2023, the Company completed a non-brokered private placement of 5,854,545 Common Shares at a price of $ 0.55 per Common Share for gross proceeds of $ 3.2 million and net proceeds of $ 3.1 million.

Financing costs consisted of legal and stock exchange fees.

Trilogy Metals Inc.

Notes to Consolidated Financial Statements

(b) Stock options

(a) Stock options

The Company has a stock option plan providing for the issuance of options with a rolling maximum number equal to 10 % of the issued and outstanding Common Shares at any given time.

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During the year ended November 30, 2024, the Company granted 2,775,000 stock options (2023 – 3,230,000 , 2022 – 1,734,500 stock options) at an exercise price of CDN$ 0.59 (2023 - CDN$ 0.78 , 2022 – CDN$ 2.21 ) to employees, consultants and directors exercisable for a period of five years with various vesting terms from immediate vesting to over a two-year period.

The fair value attributable to options granted in 2023 was $ 0.27 (2022 -$ 0.71 , 2021 - $ 0.84 ).

The fair value attributable to options granted in 2024 was CDN$ 0.28 (2023 - CDN$ 0.37 , 2022 - CDN$ 0.96 ).

The fair value of the stock options recognized has been estimated using the Black-Scholes option pricing model.

Trilogy Metals Inc.

Notes to Consolidated Financial Statements

Assumptions used in the pricing model for the year are as provided below.

November 30, 2024

November 30, 2023

Risk-free interest rates

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Balance – beginning of the year

Cancelled/forfeited

( 1,657,500 )

Balance – end of the year

Trilogy Metals Inc.

Notes to Consolidated Financial Statements

There were no stock options exercised during the year ended November 30, 2023.

During the year ended November 30, 2024, the Company issued 136,666 common shares (2023 – nil , 2022 – nil ) of the Company on the exercise of options with a weighted average exercise price of CDN$ 0.75 per share.

The Company also reclassified $ 0.04 million from reserves to share capital on the exercise of these options.

The following table summarizes information about the stock options outstanding at November 30, 2024.

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$ 3.01 to $ 3.02

$ 3.01 to $ 3.41

The aggregate intrinsic value of vested share options (the market value less the exercise price) at November 30, 2023 was $nil (2022 - $nil, 2021 - $ 0.8 million) and the aggregate intrinsic value of exercised options for the year ended November 30, 2023 was $nil (2022 - $ 0.04 million, 2021 - $ 1.4 million).

The aggregate intrinsic value of vested share options (the market value less the exercise price) at November 30, 2024 was $ 2.07 million (2023 - $nil, 2022 - $nil) and the aggregate intrinsic value of exercised options for the year ended November 30, 2023 was $ 0.06 million (2023 - $nil, 2022 - $ 0.04 million).

Trilogy Metals Inc.

Notes to Consolidated Financial Statements

Restricted Share Units and Deferred Share Units

The Company has a Restricted Share Unit Plan (“RSU Plan”) and a Non-Executive Director Deferred Share Unit Plan (“DSU Plan”) to provide long-term incentives to employees, officers and directors.

The RSU Plan and DSU Plan may be settled in cash and/or common shares at the Company’s election with each RSU and DSU entitling the holder to receive one common share of the Company or equivalent value.

The Company has a Restricted Share Unit Plan (“RSU Plan”) to provide long-term incentives to employees and consultants, a Non-Executive Director Deferred Share Unit Plan (“DSU Plan”), and a Non-Executive Directors Fixed Deferred Share Unit Plan (“Fixed DSU Plan”) to offset cash payments for fees to directors.

Awards under the RSU Plan, DSU Plan, and Fixed DSU Plan will be settled in common shares at the Company with each restricted share unit (“RSU”) and deferred share unit (“DSU”) entitling the holder to receive one common share of the Company.

All units are accounted for as equity-settled awards.

There were 4,640,089 RSUs granted during the fiscal year ended November 30, 2023 (2022 – 1,359,349 , 2021 – nil ).

There were 6,061,851 RSUs granted during the fiscal year ended November 30, 2024 (2022 – 4,640,089 , 2022 – 1,359,349 ).

Directors were granted 704,711 DSUs throughout the year ended November 30, 2024 (2023 – 1,283,023 , 2022 – 283,289 ) based on their election to receive 100 % of their annual retainer in DSUs.

A summary of the Company’s RSU and DSU Plan and changes during the year ended November 30, 2023 is as follows:

A summary of the Company’s RSU, DSU and Fixed DSU plans and changes during the year ended November 30, 2024 is as follows:

Number of RSUs

Number of DSUs

Number of Fixed DSUs

Balance – beginning of the year

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The Company’s current capital consists of equity funding through capital markets.

Trilogy Metals Inc.

Notes to Consolidated Financial Statements

As the Company is currently in the exploration phase none of its financial instruments are exposed to commodity price risk;

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The Company’s financial instruments consist of cash, accounts receivable, deposits, and accounts payable and accrued liabilities.

The fair value of the Company’s financial instruments approximates their carrying value due to the short-term nature of their maturity.

The fair value of the Company’s financial instruments approximates their carrying value due to the short-term

Trilogy Metals Inc.

Notes to Consolidated Financial Statements

nature of their maturity.

The Company’s financial instruments initially measured at fair value and then held at amortized cost include cash, accounts receivable, deposits, and accounts payable and accrued liabilities.

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Credit risk is the risk of an unexpected loss if a customer or third party to a financial instrument fails to meet its contractual obligations.

The Company holds cash and cash equivalents with Canadian chartered financial institutions.

The Company’s only significant exposure to credit risk is equal to the balance of cash and cash equivalents as recorded in the financial statements.

The majority of the Company’s cash and cash equivalents held at November 30, 2023 is uninsured.

The Company holds cash with Canadian chartered financial institutions.

The Company’s only significant exposure to credit risk is equal to the balance of cash as recorded in the financial statements.

The majority of the Company’s cash held at November 30, 2024 is uninsured.

The Company does not consider any of its financial assets to be impaired as of November 30, 2024.

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therefore, the Company manages liquidity risk through the management of its capital structure and financial leverage.

Trilogy Metals Inc.

Notes to Consolidated Financial Statements

Contractually obligated cash flow requirements as at November 30, 2024 are as follows.

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The Company is exposed to interest rate risk with respect to interest earned on cash.

Based on balances as at November 30, 2023 a 1 % change in interest rates would result in a negligible change in net loss, assuming all other variables remain constant.

Based on balances as at November 30, 2024 a 1 % change in interest rates would result in a change of approximately $250,000 over a one-year period in net loss, assuming all other variables remain constant.

As we are currently in the exploration phase none of our financial instruments are exposed to commodity price risk;

however, our ability to obtain long-term financing and its economic viability could be affected by commodity price volatility.

Trilogy Metals Inc.

Notes to Consolidated Financial Statements

Fair value accounting

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The Company did no t have any financial assets and liabilities that were measured and recognized at fair value as at November 30, 2024.

Trilogy Metals Inc.

Notes to Consolidated Financial Statements

9) Income taxes

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November 30, 2022

Loss before income taxes

Federal income tax rate

Provincial income tax rate

Statutory income tax rate

Combined federal and provincial statutory tax rate

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Income tax recovery (expense)

Trilogy Metals Inc.

Notes to Consolidated Financial Statements

Deferred income taxes arise from temporary differences in the recognition of income and expenses for financial reporting and tax purposes.

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Prior to the NovaGold Arrangement, the Company undertook a tax reorganization in order to preserve the future deductibility of these losses for the Company, subject to the limitations below.

Deferred tax assets have been recognized to the extent of future taxable income and the future taxable amounts related to taxable

Trilogy Metals Inc.

Notes to Consolidated Financial Statements

temporary differences for which a deferred tax liability is recognized can be offset.

Deferred tax assets have been recognized to the extent of future taxable income and the future taxable amounts related to taxable temporary differences for which a deferred tax liability is recognized can be offset.

A valuation allowance has been provided against deferred income tax assets where it is not more likely than not that the Company will realize those benefits.

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loss carry-forwards is subject to certain limitations under provisions of the Internal Revenue Code including limitations subject to Section 382, which relates to a 50 % change in control over a three-year period and are further dependent upon the Company attaining profitable operations.

An ownership change under Section 382 occurred on January 22, 2009 regarding losses incurred by AGC, of which the attributes of those losses were transferred to Trilogy Metals US with the purchase of the mineral property in October 2011.

An ownership change under Section 382 occurred

Trilogy Metals Inc.

Notes to Consolidated Financial Statements

on January 22, 2009 regarding losses incurred by AGC, of which the attributes of those losses were transferred to Trilogy Metals US with the purchase of the mineral property in October 2011.

Therefore, approximately $ 39.4 million of the U.S.

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11) Subsequent events

On December 1, 2023, senior management and the Board of Directors were granted 358,826 RSUs and 194,819 DSUs, respectively in settlement of approximately $ 155,000 for management salaries and $ 82,750 for director fees.

On December 2, 2024, pursuant to previous elections, the Board of Directors were granted 72,943 DSUs in settlement of approximately $ 85,750 of director fees and senior management were granted 210,744 RSUs in lieu of cash salaries of approximately $ 151,000 , all vesting immediately.

The grants were in support of continued cash preservation efforts.

On December 9, 2024, the Company granted 652,200 RSUs for short term incentives to executive and employees, all vesting immediately.

Directors received an annual grant of 600,000 RSUs and 300,000 stock options, all vesting immediately.

Directors received an annual grant of 180,000 DSUs and 475,000 stock options, all vesting immediately.

Employees and consultants received an annual grant of 1,650,000 stock options and 790,000 RSUs with a vesting schedule of one-third vesting immediately on the grant date, one-third to vest on the one year anniversary of the grant date and one-third to vest on the second year anniversary of the grand date.

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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-K

Item 8. Financial Statements and Supplementary Data