Item 2. Management’s Discussion and Analysis
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Trilogy Metals Inc.
Management’s Discussion & Analysis
For the Quarter Ended May 31, 2025
(expressed in US dollars)
Cautionary notes
Forward-looking statements
This Management’s Discussion and Analysis (“MD&A”) contains “forward-looking information” and “forward-looking statements” within the meaning of Section 27A of the U.S. Securities Act of 1933, as amended, Section 21E of the U.S. 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; the aggregate value of common shares that may be issued pursuant to the at-the-market equity offering program and the anticipated use of net proceeds; perceived merit of properties, exploration results and budgets, 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 (the “UKMP”, as defined below), sufficiency of the Ambler Metals’ cash to fund the UKMP, market prices for precious and base metals, statements regarding the Ambler Access Project ( also known as the Ambler Mining District Industrial Access Project, “AMDIAP”) , 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. Statements concerning mineral resource estimates may also be deemed to constitute “forward-looking statements” to the extent that they involve estimates of the mineralization that will be encountered if the property is developed.
Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance (often, but not always, identified by words or phrases such as “expects”, “is expected”, “anticipates”, “believes”, “plans”, “projects”, “estimates”, “assumes”, “intends”, “strategy”, “goals”, “objectives”, “potential”, “possible” or variations thereof or stating that certain actions, events, conditions or results “may”, “could”, “would”, “should”, “might” or “will” be taken, occur or be achieved, or the negative of any of these terms and similar expressions) are not statements of historical fact and may be forward-looking statements.
Forward-looking statements are based on the beliefs, expectations and opinions of management on the date the statements are made, as well as on a number of material assumptions, which could prove to be significantly incorrect, including about:
● our ability to achieve production at the UKMP;
● the accuracy of our mineral resource and reserve estimates;
● the results, costs and timing of future exploration drilling and engineering;
● timing and receipt of approvals, consents and permits under applicable legislation;
● 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;
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● our expected ability to develop adequate infrastructure and that the cost of doing so will be reasonable;
● continued good relationships with South32, our joint venture partner, as well as local communities and other stakeholders;
● there being no significant disruptions affecting operations, whether relating to labor, supply, power damage to equipment or other matters;
● expected trends and specific assumptions regarding metal prices and currency exchange rates; and
● prices for and availability of fuel, electricity, parts and equipment and other key supplies remaining consistent with current levels.
We have also assumed that no significant events will occur outside of our normal course of business. Although we have attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. We believe that the assumptions inherent in the forward-looking statements are reasonable as of the date of this MD&A. However, forward-looking statements are not guarantees of future performance and, accordingly, undue reliance should not be put on such statements due to the inherent uncertainty therein.
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 inability to define proven and probable reserves;
● risks related to our ability to finance the development of our mineral properties through external financing, strategic alliances, the sale of property interests or otherwise;
● uncertainty as to whether there will ever be production at the Company’s mineral exploration and development properties;
● risks related to our ability to commence production and generate material revenues or obtain adequate financing for our planned exploration and development activities;
● risks related to lack of infrastructure including but not limited to the risk whether or not the Ambler Mining District Industrial Access Project, or AMDIAP, will receive the requisite permits and, if it does, whether the Alaska Industrial Development and Export Authority will build the AMDIAP;
● risks related to inclement weather which may delay or hinder exploration activities at our mineral properties;
● risks related to our dependence on a third party for the development of our projects;
● none of the Company’s mineral properties are in production or are under development;
● commodity price fluctuations;
● uncertainty related to title to our mineral properties;
● our history of losses and expectation of future losses;
● risks related to increases in demand for equipment, skilled labor and services needed for exploration and development of mineral properties, and related cost increases;
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● uncertainties relating to the assumptions underlying our resource estimates, such as metal pricing, metallurgy, mineability, marketability and operating and capital costs;
● uncertainty related to inferred, indicated and measured mineral resources;
● mining and development risks, including risks related to infrastructure, accidents, equipment breakdowns, labor disputes or other unanticipated difficulties with or interruptions in development, construction or production;
● uncertainty related to successfully acquiring commercially mineable mineral rights;
● risks and uncertainties relating to the interpretation of drill results, the geology, grade and continuity of our mineral deposits;
● risks related to governmental regulation and permits, including environmental regulation, including the risk that more stringent requirements or standards may be adopted or applied due to circumstances unrelated to the Company and outside of our control;
● the risk that permits and governmental approvals necessary to develop and operate mines at our mineral properties will not be available on a timely basis or at all;
● risks related to the need for reclamation activities on our properties and uncertainty of cost estimates related thereto;
● risks related to the acquisition and integration of operations or projects;
● risks related to industry competition in the acquisition of exploration properties and the recruitment and retention of qualified personnel;
● our need to attract and retain qualified management and technical personnel;
● risks related to conflicts of interests of some of our directors and officers;
● risks related to potential future litigation;
● risks related to market events and general economic conditions;
● risks related to future sales or issuances of equity securities decreasing the value of existing Trilogy common shares, diluting voting power and reducing future earnings per share;
● risks related to the voting power of our major shareholders and the impact that a sale by such shareholders may have on our share price;
● uncertainty as to the volatility in the price of the Company’s common shares;
● the Company’s expectation of not paying cash dividends;
● adverse federal income tax consequences for U.S. shareholders should the Company be a passive foreign investment company;
● risks related to global climate change;
● risks related to adverse publicity from non-governmental organizations;
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● changes in U.S. laws and policies regulating international trade, including currently imposed and any future potential tariffs;
● 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 Stock Exchange (“NYSE American”), the Toronto Stock Exchange (“TSX”), and the Financial Accounting Standards Boards(“FASB”), and more specifically, our efforts to comply with the Dodd-Frank Wall Street Reform and Consumer Protection Act;
● the need for future financing;
● risks related to the sales by existing shareholders;
● risks related to the possible utilization of the ATM Program;
● loss of the entire investment;
● risks related to the Company’s use of proceeds from the sale of its securities;
● risks associated with negative operating cash flow;
● the uncertainty of maintaining a liquid trading market for the common shares; and
● the absence of a public market for certain of the securities.
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 for the fiscal year ended November 30, 2024, filed with the Canadian securities regulatory authorities and the SEC on February 14, 2025, 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. For the reasons set forth above, investors should not place undue reliance on forward-looking statements.
General
This Management’s Discussion and Analysis (“MD&A”) of Trilogy Metals Inc. (“Trilogy”, “Trilogy Metals”, “the Company” or “we”) is dated July 10, 2025 and provides an analysis of our unaudited condensed interim consolidated financial results for the quarter ended May 31, 2025 compared to the quarter ended May 31, 2024.
The following information should be read in conjunction with our May 31, 2025 unaudited condensed interim consolidated financial statements and related notes which were prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”). The MD&A should also be read in conjunction with our audited consolidated financial statements and related notes for the year ended November 30, 2024. A summary of the U.S. GAAP accounting policies is outlined in note 2 of the audited consolidated financial statements. All amounts are in United
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States dollars unless otherwise stated. References to “Canadian dollars” and “CDN$” are to the currency of Canada and references to “U.S. dollars”, “$” or “US$” are to the currency of the United States.
Richard Gosse, P.Geo., Vice President, Exploration of the Company, is a Qualified Person under National Instrument 43-101 - Standards of Disclosure for Mineral Projects (“NI 43-101”) and S-K 1300, and has approved the scientific and technical information in this MD&A.
Trilogy’s shares are listed on the TSX and the NYSE American under the symbol “TMQ”. Additional information related to Trilogy, including our annual report on Form 10-K for the fiscal year ended November 30, 2024, is available on SEDAR+ at www.sedarplus.ca and on EDGAR at www.sec.gov.
Description of business
We are a base metals exploration company focused on the exploration and development of mineral properties, through our equity investee, in the Ambler mining district located in Alaska, U.S.A. We conduct our operations through a wholly owned subsidiary, NovaCopper US Inc., which is doing business as Trilogy Metals US (“Trilogy Metals US”). The UKMP were contributed into a 50/50 joint venture named Ambler Metals LLC (“Ambler Metals”) between Trilogy and South32 Limited (“South32”) on February 11, 2020 (see below). The projects contributed to Ambler Metals consist of: i) the Ambler lands which host the Arctic copper-zinc-lead-gold-silver project (the “Arctic Project”); and ii) the Bornite lands being explored under a collaborative long-term agreement with NANA Regional Corporation, Inc., a regional Alaska Native Corporation, which hosts the Bornite carbonate-hosted copper project (the “Bornite Project”) and related assets. The Company may also conduct early-stage exploration through a wholly owned subsidiary, 995 Exploration Inc.
Corporate and project activities
Annual General Meeting
The Annual General Meeting of shareholders was held on May 13, 2025. All directors nominated by the Company were elected by shareholders of the Company, with each director receiving greater than 94% of the votes cast. The shareholders also voted in favour of all other items of business including the continuation of the Company’s Restricted Share Unit Plan and Deferred Share Unit Plan.
Base Shelf Prospectus
The Company filed a final short form base shelf prospectus base shelf prospectus with the securities commissions in each of the provinces and territories of Canada (the “Canadian Base Shelf Prospectus”), and a corresponding shelf registration statement on Form S-3 (the “Registration Statement” together with the Canadian Base Shelf Prospectus, the “Base Shelf Prospectus”) with the United States Securities and Exchange Commission (“SEC”) allowing for the future issuance, from time to time, of up to US$50 million in common shares of the Company (the “Common Shares”), warrants to purchase Common Shares, share purchase contracts of the Company, subscription receipts and units comprised of some or all of the foregoing securities (collectively, the “Securities”). Any amounts, prices and terms will be determined based on market conditions at the time of an offering and will be set out in an accompanying prospectus supplement. The final Base Shelf Prospectus became effective on April 14, 2025. The Canadian Base Shelf Prospectus will remain effective for 25 months, while the Registration Statement will remain effective for three years.
At-The-Market Offering
On May 27, 2025, the Company entered into an equity distribution agreement (the “Distribution Agreement”) with BMO Nesbitt Burns Inc., Cantor Fitzgerald Canada Corporation (the “Canadian Agents”), BMO Capital Markets Corp. and Cantor Fitzgerald & Co. (the “U.S. Agents” together with the Canadian Agents, the “Agents”) for an at-the-market equity program (“ATM Program”). On the same date, the Company filed a prospectus supplement (the “Prospectus Supplement”) to the Canadian Base Shelf Prospectus and the US shelf registration statement on Form S-3 qualifying the distribution of the
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Common Shares under the ATM Program. Under the ATM Program and pursuant to the Distribution Agreement and the Prospectus Supplement, the Company may sell up to US$25 million of Common Shares. The Common Shares sold under the ATM Program, if any, will be sold at the prevailing market price at the time of sale. The net proceeds of any such sales under the ATM Program are anticipated to be used for continued development of the UKMP and for general corporate purposes.
Bornite Preliminary Economic Assessment
On January 15, 2025, the Company announced the positive results of its Preliminary Economic Assessment Study (“Bornite PEA”) for the Bornite copper project. Highlights of the Bornite PEA include the following:
● 1.9 billion pounds of copper over 17-year mine life;
● Potential to extend mine activity for the Upper Kobuk Mineral Projects to over 30 years;
● Pre-tax net present value (“NPV”) 8% of $552.0 million and an internal rate of return (“IRR”) of 23.6%; and
● After-tax NPV 8% of $394.0 million and after-tax IRR of 20.0%.
The Bornite PEA describes the technical and economic viability of establishing an underground mining operation for a 6,000 tonne-per-day operation with a 17-year mine life. The Bornite PEA assumes re-purposing the infrastructure described in the Company’s current Feasibility Study for the Arctic Project for the use with the Bornite Project once the Arctic deposit has been depleted. More information on the Arctic Feasibility Study and the Bornite PEA can be accessed on the Company’s website at www.trilogymetals.com.
Budget -Trilogy
The Company has a 2025 fiscal year cash budget totaling $3.1 million. For the three-month period ended May 31, 2025, we spent $1.2 million compared to budgeted cash expenditures of $1.0 million. We incurred unplanned expenditures during the second quarter of $0.7 million for the Base Shelf Prospectus and ATM program, offset by the timing of our annual insurance payment of $0.5 million which we fully paid after the quarter ended, in June 2025. For the six-month period ended May 31, 2025, we spent $2.0 million primarily for personnel costs, professional fees, regulatory and office expenses comparable with budgeted cash expenditures totaling $2.0 million. Our overall corporate expenditures are tracking as planned except for the costs associated with the establishment of the Base Shelf Prospectus and ATM program.
Budget - Ambler Metals LLC
The board of Ambler Metals approved a 2025 fiscal year budget totaling $5.8 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. For the six-month period ended May 31, 2025, Ambler Metals spent $1.9 million in expenses primarily related to salaries and wages, professional fees, engineering, and project support. This compared to a budget amount of $2.2 million, resulting in expenditures being under budget by $0.3 million. The variance was mainly due to delayed hiring and lower than expected general administrative expenses.
In addition, the board of Ambler Metals approved a supplemental budget of $0.6 million to support the Ambler Access Project for the same six-month period ended May 31, 2025. For the six-month ended May 31, 2025, Ambler Metals incurred $0.4 million related to the Ambler Access Project costs, primarily consisting of subsistence committee meetings and community relations activities.
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Summary of results
in thousands of US dollars, except share and per share amounts
Three months ended
Six months ended
May 31, 2025
May 31, 2024
May 31, 2025
May 31, 2024
$
$
$
$
General and administrative
353
319
696
734
Investor relations
18
19
34
31
Professional fees
612
192
1,059
392
Salaries
316
178
523
369
Salaries and directors expense – stock-based compensation
367
509
2,597
2,508
Share of loss on equity investment
764
602
1,345
1,395
Comprehensive loss for the year
(2,177)
(1,759)
(5,800)
(5,360)
Basic and diluted loss per common share
(0.01)
(0.01)
(0.04)
(0.03)
For the three-month period ended May 31, 2025, we reported a net loss of $2.2 million compared to a net loss of $1.8 million for the three-month period ended May 31, 2024. The increase in comprehensive loss in the second quarter of 2025, compared to the same quarter in 2024, was primarily driven by higher regulatory expenses and legal fees related to the Company’s Base Shelf Prospectus and ATM Program. For the three-month period ended May 31, 2025, salaries increased due to executives receiving 100% of their base compensation in cash starting on March 1, 2025. In comparison, during the same period in 2024, all of the base salary for the Company’s Chief Executive Officer and one-third of the base salaries for the other executives was paid in Restricted Share Units (“RSUs”) as part of a multi-year cash conservation initiative, which was recorded in stock-based compensation. The increase in salaries was offset by a corresponding decrease in salaries and directors expense - stock-based compensation. The increase in our share of loss of Ambler Metals was primarily driven by higher professional consulting fees related to engineering activities incurred during the second quarter and partially offset by a reduction in overall activities at the Ambler Access Project.
For the six-month period ended May 31, 2025, we reported a net loss of $5.8 million, compared to a net loss of $5.4 million for the same period in 2024. The increase was primarily driven by higher regulatory expenses and legal fees related to the Company’s Base Shelf Prospectus and ATM Program of $0.7 million, as well as fees related to the preparation of the Bornite preliminary economic assessment study (the “Bornite PEA”) of $0.2 million. Salaries increased due to executives receiving 100% of their base compensation in cash starting on March 1, 2025. In comparison, during the same period in 2024, a portion of executive compensation was paid in RSUs. Our share of losses from Ambler Metals for the six-month period ended May 31, 2025 remained comparable to the same period in 2024. Additionally, overall corporate costs were partially offset by $0.4 million in interest income earned.
Liquidity and capital resources
During the six-month period ending May 31, 2025, we used $1.4 million in operating activities. The majority of these funds was spent on corporate salaries, professional fees to complete the Bornite PEA, and the establishment of the Shelf Base Prospectus and ATM Program along with related regulatory filing fees with the United States and Canadian securities commissions. In addition, the Company incurred annual listing fees for the NYSE American Exchange and the Toronto Stock Exchange during the first fiscal quarter. These outflows were partially offset by $0.4 million in interest income earned .
As at May 31, 2025, we had $24.6 million in cash and cash equivalents and working capital, which we define as current assets less current liabilities, of $23.8 million. There is sufficient cash on hand to fund the approved fiscal 2025 cash budget of $3.1 million.
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To ensure sufficient liquidity in the future to support our operations, administration expenses and contributions for our share of Ambler Metals, we have an effective Base Shelf Prospectus that allows for the future issuance, from time to time, up to US$50.0 million in Securities. We have also established an ATM Program whereby we may, from time to time and at our discretion, offer and sell the Common Shares having an aggregate gross sales price of up to US$25.0 million under the ATM Program, through the Agents, at the prevailing market price at the time of sale. As at July 10, 2025, we have not utilized the ATM program.
We believe our current cash position is sufficient to meet our working capital requirement for the next 12 months. Additionally, we have access to capital markets to support any future funding needs related to joint venture contributions.
Off-balance sheet arrangements
We have no material off-balance sheet arrangements.
Outstanding share data
As at July 10, 2025, we had 164,241,410 common shares issued and outstanding. As at July 10, 2025, we had 12,015,234 stock options outstanding with a weighted-average exercise price of CDN$1.48, 3,206,355 DSUs, 304,605 Fixed DSUs and 1,798,338 RSUs outstanding. As at July 10, 2025 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. A total of 859 common shares will be issued upon redemption of the NovaGold DSUs. Upon the exercise of all the foregoing convertible securities, the Company would be required to issue an aggregate of 17,325,391 common shares.
New accounting pronouncements
Updates to Reportable Segment Disclosures
In November 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-07 “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures”. ASU 2023-07 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 is 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 is evaluating the impact of the guidance on the consolidated financial statements.
Critical accounting estimates
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.
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Impairment of Investment in Ambler Metals LLC
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. 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. This assessment is subjective and requires consideration at each period end.
Income taxes
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 and is based on factors such as changes in facts or circumstances, changes in tax law, new audit activity, and 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.
Stock-based compensation
Compensation expense for stock options granted to employees, directors and certain service providers is determined based on estimated fair values of the stock 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 life, expected forfeiture rate, expected dividend yield and the risk-free interest rate over the expected life of the option. The use of the Black-Scholes option pricing model requires input estimation of the expected life of the option, volatility, and forfeiture rate which can have a significant impact on the valuation model, and resulting expense recorded.
Additional information
Additional information regarding the Company, including our annual report on Form 10-K for the fiscal year ended November 30, 2024, 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.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Not applicable.
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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.