UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☒
☐
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
1
For the Fiscal Year Ended November 30, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from to
Commission File Number: 1-35447
TRILOGY METALS INC.
(Exact Name of Registrant as Specified in Its Charter)
British Columbia
(State or Other Jurisdiction of
Incorporation or Organization)
Suite 1150, 609 Granville Street
Vancouver, British Columbia
Canada
(Address of Principal Executive Offices)
98-1006991
(I.R.S. Employer
Identification No.)
V7Y 1G5
(Zip Code)
(604) 638-8088
(Registrant’s Telephone Number, Including Area Code)
Title of Each Class
Common Shares, no par value
Trading Symbol
TMQ
Name of Each Exchange on Which Registered
NYSE AMERICAN
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-
T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth
company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange
Act.
Large Accelerated Filer ☐
Accelerated Filer ☐
Non-accelerated Filer ☒
Smaller reporting company ☒
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised
financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over
financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As at May 31, 2021, the aggregate market value of the registrant’s Common Shares held by non-affiliates was approximately $173 million. As of February 11, 2022, the
registrant had 145,464,286 Common Shares, no par value, outstanding.
Certain portions of the registrant's definitive proxy statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A not later than
March 30, 2022, in connection with the registrant’s 2022 annual meeting of shareholders, are incorporated herein by reference into Part III of this Annual Report on Form
10-K.
DOCUMENTS INCORPORATED BY REFERENCE
TRILOGY METALS INC.
TABLE OF CONTENTS
CURRENCY
FORWARD-LOOKING STATEMENTS
CAUTIONARY NOTE TO UNITED STATES INVESTORS
GLOSSARY
PART I
BUSINESS
Item 1.
Item 1A. RISK FACTORS
Item 1B. UNRESOLVED STAFF COMMENTS
Item 2.
Item 3.
Item 4. MINE SAFETY DISCLOSURES
PROPERTIES
LEGAL PROCEEDINGS
PART II
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
SELECTED FINANCIAL DATA
Item 6.
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Item 8.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
Item 9A. CONTROLS AND PROCEDURES
Item 9B. OTHER INFORMATION
PART III
Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Item 11. EXECUTIVE COMPENSATION
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
PART IV
Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
Item 16. FORM 10-K SUMMARY
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Unless the context otherwise requires, the words “we,” “us,” “our,” the “Company” and “Trilogy” refer to Trilogy Metals
Inc., formerly NovaCopper Inc. (“Trilogy” or “Trilogy Metals”), a British Columbia corporation, either alone or together
with its subsidiaries as the context requires, as of November 30, 2021.
CURRENCY
All dollar amounts are in United States currency unless otherwise stated. References to C$ or CDN$ refer to Canadian
currency, and $ or US$ to United States currency.
FORWARD-LOOKING STATEMENTS
The information discussed in this Annual Report on Form 10-K includes “forward-looking information” and “forward-
looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”), and
applicable Canadian securities laws. These forward-looking statements may include statements regarding perceived
merit of properties, exploration results and budgets, 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 relating anticipated activity with respect to the
Ambler Mining District Industrial Access Project (“AMDIAP”), the Company’s plans and expectations relating to the Upper
Kobuk Mineral Projects (as defined herein), completion of transactions, market prices for precious and base metals, the
results of the Arctic FS (as defined herein) 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 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:
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risks related to the COVID-19 pandemic;
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 AMDIAP will receive
the requisite permits and, if it does, whether the Alaska Industrial Development and Export Authority (“AIDEA”)
will build the AMDIAP;
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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;
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;
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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 (“Common Shares”), diluting voting power and reducing future earnings per share;
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risks related to the voting power of our major shareholders and the impact that a sale by such shareholders may
have on our share price;
uncertainty as to the volatility in the price of the Company’s Common Shares;
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;
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 (“SOX”); and
increased regulatory compliance costs, associated with rules and regulations promulgated by the United States
Securities and Exchange Commission (“SEC”), Canadian Securities Administrators, the NYSE American, the
Toronto Stock Exchange (“TSX”), and the Financial Accounting Standards Boards, and more specifically, our
efforts to comply with the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”).
This list is not exhaustive of the factors that may affect any of our forward-looking statements. Forward-looking
statements are statements about the future and are inherently uncertain, and our actual achievements 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 this report under the heading
“Risk Factors” and elsewhere.
Our forward-looking statements are based on the beliefs, expectations and opinions of management on the date the
statements are made. In connection with the forward-looking statements contained herein, we have made certain
assumptions about our business, including about:
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our ability to achieve production at our Arctic and Bornite Projects (as defined herein);
the accuracy of our mineral resource 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;
our expected ability to develop adequate infrastructure and that the cost of doing so will be reasonable;
continued good relationships with South32 (as defined below), 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
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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 hereof. 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. We do 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. All forward-looking statements contained herein are qualified by these
cautionary statements.
CAUTIONARY NOTE TO UNITED STATES INVESTORS
Unless otherwise indicated, all resource estimates, and any reserve estimates, included or incorporated by reference in
this Annual Report on Form 10-K have been, and will be, prepared in accordance with Canadian National Instrument 43-
101 Standards of Disclosure for Mineral Projects (“NI 43-101”) and the Canadian Institute of Mining, Metallurgy and
Petroleum Definition Standards for Mineral Resources and Mineral Reserves (“CIM Definition Standards”). NI 43-101 is
a rule developed by the Canadian Securities Administrators which establishes standards for all public disclosure an issuer
makes of scientific and technical information concerning mineral projects. NI 43-101 permits the disclosure of an
historical estimate made prior to the adoption of NI 43-101 that does not comply with NI 43-101 to be disclosed using
the historical terminology if the disclosure: (a) identifies the source and date of the historical estimate; (b) comments on
the relevance and reliability of the historical estimate; (c) to the extent known, provides the key assumptions, parameters
and methods used to prepare the historical estimate; (d) states whether the historical estimate uses categories other
than those prescribed by NI 43-101; and (e) includes any more recent estimates or data available.
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Canadian standards, including NI 43-101, differ significantly from the requirements of the SEC, and reserve and resource
information contained or incorporated by reference into this Annual Report on Form 10-K may not be comparable to
similar information disclosed by U.S. companies. In particular, and without limiting the generality of the foregoing, the
term “resource” does not equate to the term “reserves”. Under SEC Industry Guide 7, mineralization may not be
classified as a “reserve” unless the determination has been made that the mineralization could be economically and
legally produced or extracted at the time the reserve determination is made. SEC Industry Guide 7 does not define and
the SEC’s disclosure standards normally do not permit the inclusion of information concerning “measured mineral
resources”, “indicated mineral resources” or “inferred mineral resources” or other descriptions of the amount of
mineralization in mineral deposits that do not constitute “reserves” by U.S. standards in documents filed with the SEC.
U.S. investors should also understand that “inferred mineral resources” have a great amount of uncertainty as to their
economic and legal feasibility. Under Canadian rules, subject to certain exceptions, estimated “inferred mineral
resources” may not form the basis of feasibility or pre-feasibility studies. Investors are cautioned not to assume that all
or any part of an “inferred mineral resource” exists or is economically or legally mineable. Disclosure of “contained
ounces” in a resource is permitted disclosure under Canadian regulations; however, the SEC normally only permits issuers
to report mineralization that does not constitute “reserves” by SEC standards as in-place tonnage and grade without
reference to unit measures. The requirements of NI 43-101 for identification of “reserves” are also not the same as those
of the SEC, and any reserves reported by us in compliance with NI 43-101 may not qualify as “reserves” under SEC
standards. We have no known reserves as defined in SEC Industry Guide 7. Accordingly, information concerning mineral
deposits set forth herein may not be comparable to similar information made public by United States companies subject
to reporting and disclosure requirements under United States federal securities laws and the rules and regulations
thereunder.
The SEC adopted new mining property disclosure rules ("SK 1300") that will replace SEC Industry Guide 7. SK 1300 will
apply to companies beginning with a company's first fiscal year beginning on or after January 1, 2021, which for us would
be the fiscal year beginning December 1, 2021. While allowed to comply with SK 1300 early, we have not chosen to do
so.
GLOSSARY
We estimate and report our resources and reserves according to the definitions set forth in NI 43-101. We will modify
and reconcile the reserves as appropriate to conform to SEC Industry Guide 7 for reporting in the U.S. The definitions for
each reporting standard are presented below with supplementary explanation and descriptions of the parallels and
differences.
For a glossary of certain technical terms used throughout this Form 10-K, see Item 2 Properties, Glossary of Technical
Terms.
7
CIM Definition Standards, adopted by CIM Council on May 10, 2014:
“feasibility study” means a comprehensive technical and economic study of the selected development option for a
mineral project that includes appropriately detailed assessments of applicable modifying factors together with
any other relevant operational factors and detailed financial analysis that are necessary to demonstrate, at the
time of reporting, that the extraction is reasonably justified (economically mineable). The results of the study
may reasonably serve as the basis for a final decision by a proponent or financial institution to proceed with, or
finance, the development of the project. The confidence level of the study will be higher than that of a pre-
feasibility study.
“indicated mineral resource” means that part of a mineral resource for which quantity, grade or quality, densities, shape
and physical characteristics are estimated with sufficient confidence to allow the application of modifying
factors in sufficient detail to support mine planning and evaluation of the economic viability of the deposit.
Geological evidence is derived from adequately detailed and reliable exploration, sampling and testing and is
sufficient to assume geological and grade or quality continuity between points of observation. An indicated
mineral resource has a lower level of confidence than that applying to a measured mineral resource and may
only be converted to a probable mineral reserve.
“inferred mineral resource” means that part of a mineral resource for which quantity and grade or quality are estimated
on the basis of limited geological evidence and sampling. Geological evidence is sufficient to imply but not verify
geological and grade or quality continuity. An inferred mineral resource has a lower level of confidence than
that applied to an indicated mineral resource and must not be converted to a mineral reserve. It is reasonably
expected that the majority of inferred mineral resources could be upgraded to indicated mineral resources with
continued exploration.
“measured mineral resource” means that part of a mineral resource for which quantity, grade or quality, densities, shape
and physical characteristics are estimated with confidence sufficient to allow the application of modifying
factors to support detailed mine planning and final evaluation of the economic viability of the deposit.
Geological evidence is derived from detailed and reliable exploration, sampling and testing and is sufficient to
confirm geological and grade or quality continuity between points of observation. A measured mineral resource
has a higher level of confidence than that applying to either an indicated mineral resource or an inferred mineral
resource. It may be converted to a proven mineral reserve or to a probable mineral reserve.
“mineral reserve” means the economically mineable part of a measured and/or indicated mineral resource. It includes
diluting materials and allowances for losses, which may occur when the material is mined or extracted and is
defined by studies at pre-feasibility or feasibility level as appropriate that include application of modifying
factors. Such studies demonstrate that, at the time of reporting, extraction could reasonably be justified. The
reference point at which mineral reserves are defined, usually the point where the ore is delivered to the
processing plant, must be stated. It is important that, in all situations where the reference point is different,
such as for a saleable product, a clarifying statement is included to ensure that the reader is fully informed as
to what is being reported. The public disclosure of a mineral reserve must be demonstrated by a pre-feasibility
or feasibility study.
“mineral resource” means a concentration or occurrence of solid material of economic interest in or on the Earth’s crust
in such form, grade or quality and quantity that there are reasonable prospects for eventual economic
extraction. The location, quantity, grade or quality, continuity and other geologic characteristics of a mineral
resource are known, estimated or interpreted from specific geological evidence and knowledge, including
sampling.
“modifying factors” means the considerations used to convert mineral resources to mineral reserves. These include, but
legal,
infrastructure, economic, marketing,
are not restricted to, mining, processing, metallurgical,
environmental, social and governmental factors.
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“pre-feasibility study (preliminary feasibility study)” means a comprehensive study or a range of options for the
technical and economic viability of a mineral project that has advanced to a stage where a preferred mining
method, in the case of underground mining, or the pit configuration, in the case of an open pit, is established
and an effective method of mineral processing is determined. It includes a financial analysis based on reasonable
assumptions on the modifying factors and the evaluation of any other relevant factors which are sufficient for
a Qualified Person, acting reasonably, to determine if all or part of the mineral resource many be converted to
a mineral reserve at the time of reporting. A pre-feasibility study is at a lower confidence level than a feasibility
study.
“probable mineral reserve” means the economically mineable part of an indicated, and in some circumstances, a
measured mineral resource. The confidence in the modifying factors applying to a probable mineral reserve is
lower than that applying to a proven mineral reserve.
“proven mineral reserve” means the economically mineable part of a measured mineral resource. A proven mineral
reserve implies a high degree of confidence in the modifying factors.
SEC Industry Guide 7 Definitions:
“exploration stage” deposit is one which is not in either the development or production stage.
“development stage” project is one which is undergoing preparation of an established commercially mineable deposit
for its extraction but which is not yet in production. This stage occurs after completion of a feasibility study.
“mineralized material” refers to material that is not included in the reserve as it does not meet all of the criteria for
adequate demonstration for economic or legal extraction.
“probable reserve” refers to reserves for which quantity and grade and/or quality are computed from information similar
to that used for proven (measured) reserves, but the sites for inspection, sampling, and measurement are
farther apart or are otherwise less adequately spaced. The degree of assurance, although lower than that for
proven reserves, is high enough to assume continuity between points of observation.
“production stage” project is actively engaged in the process of extraction and beneficiation of mineral reserves to
produce a marketable metal or mineral product.
“proven reserve” refers to reserves for which (a) quantity is computed from dimensions revealed in outcrops, trenches,
workings or drill holes; grade and/or quality are computed from the results of detailed sampling and (b) the
sites for inspection, sampling and measurement are spaced so closely and the geologic character is so well
defined that size, shape, depth and mineral content of reserves are well-established.
“reserve” refers to that part of a mineral deposit which could be economically and legally extracted or produced at the
time of the reserve determination. Reserves must be supported by a feasibility study done to bankable
standards that demonstrates the economic extraction. (“Bankable standards” implies that the confidence
attached to the costs and achievements developed in the study is sufficient for the project to be eligible for
external debt financing.) A reserve includes adjustments to the in-situ tonnes and grade to include diluting
materials and allowances for losses that might occur when the material is mined.
TECHNICAL INFORMATION
Richard Gosse, a Qualified Person under NI 43-101 and an employee and Vice President Exploration of the Company has
reviewed and approved the scientific and technical information contained in this Annual Report on Form 10-K.
9
Item 1. BUSINESS
PART I
Our principal business is the exploration and development of the Upper Kobuk Mineral Projects (“Upper Kobuk Mineral
Projects” or “UKMP” or “UKMP Projects”) located in the Ambler mining district in Northwest Alaska, United States. The
Upper Kobuk Mineral Projects are held by Ambler Metals LLC (“Ambler Metals”), a limited liability company owned
equally by Trilogy and South32 Limited (“South32”) (as defined below), and is comprised of the (i) Arctic Project, which
contains a high-grade polymetallic volcanogenic massive sulfide (“VMS”) deposit (“Arctic Project”); and (ii) Bornite
Project, which contains a carbonate-hosted copper - cobalt deposit (“Bornite Project”). Our goals include expanding
mineral resources and advancing the UKMP Projects through technical, engineering and feasibility studies so that
production decisions can be made on those projects. Our interest in Ambler Metals is held by a wholly-owned subsidiary,
NovaCopper US Inc. (dba Trilogy Metals US) (“Trilogy Metals US”), registered to do business in the State of Alaska. We
also conduct early-stage exploration through a wholly owned subsidiary, 995 Exploration Inc.
Name, Address and Incorporation
Trilogy Metals Inc. was incorporated on April 27, 2011 under the name NovaCopper Inc. pursuant to the terms of
the Business Corporations Act (British Columbia). NovaCopper Inc. changed its name to Trilogy Metals Inc. on
September 1, 2016 to better reflect its diversified metals resource base. Our registered office is located at Suite 2600,
Three Bentall Centre, 595 Burrard Street, Vancouver, British Columbia, Canada, and our executive office is located at
Suite 1150, 609 Granville Street, Vancouver, British Columbia, Canada.
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Corporate Organization Chart
The following chart depicts our corporate structure together with the jurisdiction of incorporation of our subsidiaries at
November 30, 2021. All ownership is 100% unless otherwise stated.
On February 11, 2020, the Company’s Upper Kobuk Mineral Projects were transferred to Ambler Metals, a newly
incorporated limited liability company incorporated under the laws of Delaware. Each of Trilogy and South32 hold a 50%
interest in Ambler Metals. All mineral resources and mineral reserve estimates with respect to the Arctic Project and
Bornite Project that are disclosed in this Annual Report on Form 10-K are reported on a 100% basis. See “Significant
Developments in 2020”.
Business Cycle
Our business, at its current exploration phase, is cyclical. Exploration activities are conducted primarily during snow-free
months in Alaska. The optimum field season at the Upper Kobuk Mineral Projects is from late May to late September.
The length of the snow-free season at the Upper Kobuk Mineral Projects varies from about May through November at
lower elevations and from July through September at higher elevations.
Trilogy’s Strategy
Our business strategy is focused on creating value for stakeholders through our ownership and advancement of the
Arctic Project and exploration and advancement of the Bornite Project with our joint venture partner, South32, and
through the pursuit of similarly attractive mining projects. We plan to:
•
advance the Arctic Project towards development with key activities including increased definition of the NI 43-
101 mineral resources and reserves contained in the Arctic FS (as defined below), additional metallurgical and
geotechnical studies and the advancement of baseline environmental studies;
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advance exploration in the Ambler mining district and, in particular, at the Bornite Project, pursuant to the
NANA Agreement (as more particularly described under “History of Trilogy – Agreement with NANA Regional
Corporation”) through resource development and initial technical studies; and
pursue project level or corporate transactions that are value accretive.
Significant Developments in 2021
• On January 6, 2021, the United States Bureau of Land Management (“BLM”), the National Park Service (“NPS”)
and the AIDEA signed Right-of-Way agreements giving AIDEA the ability to cross federally owned and managed
lands along the route for the Ambler Road Project approved in the Joint Record of Decision. The agreements
grant a 50-year right-of-way on federally owned and managed land by the federal agencies for the future
development of the Ambler Mining District Industrial Access Road. The authorizing documents with the two
agencies are the final federal permits required for the Ambler Road Project.
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In a press release dated February 11, 2021, the Company announced its approval for Ambler Metals to enter
into an Ambler Access Development Agreement (the “Development Agreement”) with AIDEA. The Development
Agreement defines how AIDEA and Ambler Metals will work cooperatively together on the pre-development
work for the Ambler Access Project to address funding and oversight of the project’s feasibility and permitting
activities until the parties reach a decision on the construction of the project. The cost of the pre-development
work and activities will be paid 50% by AIDEA and 50% by Ambler Metals based on an annually agreed program
and budget. Under the Development Agreement, Ambler Metals and AIDEA agree to contribute up to $35
million each for pre-development costs of the Ambler Access Project through December 31, 2024.
In a press release dated April 19, 2021, the Company announced that the AIDEA had formally approved the
proposed plan and budget for the 2021 summer field season activities and services of up to $13 million for the
Ambler Access Project (“AAP”). The cost was to be shared 50/50 by AIDEA and Ambler Metals. The Board of
AIDEA authorized up to $6.5 million for field season activities. These funds were to be matched by up to another
$6.5 million from Ambler Metals under the terms of the Ambler Access Development Agreement that was
approved by the AIDEA Board on February 10, 2021 and subsequently executed by both parties, resulting in a
total budget for 2021 of up to $13 million. The AAP is a proposed 211-mile, east-west running controlled
industrial access road that would provide industrial access to the Ambler Mining District in northwestern Alaska.
In a press release dated May 17, 2021, the Company announced that Ambler Metals had finalized the details of
the 2021 exploration field program at the UKMP for the previously approved $27 million exploration budget.
The exploration program was aligned with a strategy developed by the Company and South32 which prioritizes
the exploration budget within the UKMP. The strategy defines a program that advances the highest priority
projects and exploration targets, both VMS and Carbonate-Hosted Copper (“CHC”), ranging from early-stage
geophysical anomalies that were identified during the 2019 airborne Versatile Time Domain Electromagnetic
(“VTEM”) survey to advanced VMS and CHC prospects with historical resources. The site camp opened on June
1, 2021.
Significant Developments in 2020
• On April 10, 2017, we entered into an option agreement, as amended (the “South32 Option Agreement”) with
South32 Group Operations Pty Ltd (“South32 Operations”), a wholly-owned subsidiary of South32 Limited,
which agreement was later assigned by South32 Operations to its affiliate, South32 USA Exploration Inc.
(together with South32 Operations, “South32”). The South32 Option Agreement granted to South32 a three-
year option to form a 50/50 joint venture with respect to Trilogy’s Alaskan assets which includes the Upper
Kobuk Mineral Projects. South32 was required to contribute a minimum of $10 million each year, for a maximum
of three years, to keep the option in good standing (the “Initial Funding”). If South32 elected to exercise the
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option, the subscription price less certain deductions for Initial Funding was to be paid in one tranche within 45
business days. Had South32 not made its annual minimum payment or elected to withdraw, the option would
lapse and South32 would have no claim to ownership or to the funds it had already spent. In order to exercise
its option to form the Joint Venture, South32 was required to contribute a minimum of $150 million, plus (i) any
amounts Trilogy spent on matched parallel funding to a maximum of $16 million over the three year period and
(ii) $10 million, less the amount of the Initial Funding contributed by South32. On December 19, 2019, we
announced in a press release that South32 had exercised its option to acquire a 50% interest in a joint venture
company to be named “Ambler Metals LLC” which now owns the UKMP Projects.
• On February 11, 2020, we announced that the formation of Ambler Metals had completed, with the Company
contributing its assets associated with the UKMP Projects, and South32 contributing a subscription price
payment of US$145 million, to the joint venture.
•
•
In a press release dated February 26, 2020, the Company announced that Ambler Metals had approved a 2020
program budget of $22.8 million for the advancement of the UKMP Projects. The budget was to be 100% funded
by Ambler Metals. The 2020 program budget included 10,000 meters of drilling at the Arctic Project, 2,500
meters of drilling within the Ambler VMS belt and geological mapping and geochemical soil sampling at the
Bornite Project.
Subsequent to the approval of the 2020 program budget, the Company and its joint venture partner, South32,
decided not to proceed with the 2020 exploration program after assessing the coronavirus (COVID-19)
environment. Ambler Metals gave due consideration to the merits of carrying out an abridged work program at
the UKMP Projects. However, given the continued uncertainty resulting from COVID-19, ongoing safety
concerns (despite added safety protocols including physical distancing, protective equipment and testing) and
the fact that, due to COVID-19, the planned field season had already been delayed to the point at which any
field season would provide limited critical path benefits, the decision was made not to proceed with a 2020 field
season.
• On April 20, 2020, we issued a press release announcing the appointment of Tony Giardini as President and
Chief Executive Officer effective June 1, 2020. Mr. Giardini has been a director of the Company since 2012 when
the Company was formed and will continue to be an executive director. James (Jim) Gowans, the Interim
President and Chief Executive Officer, remained in his role as a director of the Company.
•
•
In a press release dated July 23, 2020, the Company, along with our joint venture partner, South32, announced
the signing of the Record of Decision by BLM for the Ambler Mining District Industrial Access Project. The Record
of Decision approves the development of the northern route, which is to be a 211-mile private gravel access
road in the southern Brooks Range foothills to provide industrial access to the Ambler Mining District.
In a press release dated August 20, 2020, the Company announced the positive results of its feasibility study for
the Arctic Project (the “Arctic FS”). The Arctic FS was prepared on a 100% ownership basis, of which Trilogy’s
share is 50%. The Arctic FS describes the technical and economic viability of establishing a conventional open-
pit copper-zinc-lead-silver-gold mine and mill complex for a 10,000 tonne per day operation for a minimum 12-
year mine life. See the 2020 Arctic Report (as defined below) and “Properties” for additional information.
• On August 25, 2020, we issued a press release to announce that the board of Ambler Metals had appointed
Ramzi Fawaz as President and Chief Executive Officer of Ambler Metals effective as of September 1, 2020. Mr
Fawaz joined Ambler Metals from Newmont Corporation where he was Senior Vice President Projects from
February 2011 to October 2019, with responsibility for the development and execution of Newmont’s major
gold and copper projects globally.
• On September 3, 2020, we issued a press release announcing that the Company had hired Richard Gosse as Vice
President Exploration of the Company with immediate effect.
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• On October 2, 2020, we filed the technical report for the Company’s Arctic Project entitled “Arctic Feasibility
Study Alaska, USA NI 43-101 Technical Report" with an effective date of August 20, 2020, prepared by Ausenco
Engineering Canada Inc., Wood Canada Limited and SRK Consulting (Canada) Inc. (the “2020 Arctic Report”).
The technical report describes the Arctic FS on the Arctic Project as discussed above. The 2020 Arctic Report
supersedes the Company’s 2018 Arctic Report (as defined below).
• On November 19, 2020, we issued a press release announcing that Ambler Metals had approved the 2021
program and budget of approximately $27 million for the advancement of the UKMP Projects. The budget will
be 100% funded by Ambler Metals.
Significant Developments in 2019
• On March 5, 2019, we issued a press release to announce additional copper and cobalt metallurgical results for
the Bornite Project. Nine metallurgical composite samples were prepared from materials obtained from drilling
at the Bornite Project during 2017 and 2018. Each of these test samples were approximately 60 to 120 kilograms
in mass and represented approximately 30 to 100 meters of drill core. Mineralogical analysis of each of the nine
composites was completed, indicating that a majority of the copper mineralization occurred as chalcopyrite,
with minor amounts of bornite and variable pyrite levels within the test samples.
• On June 28, 2019, we issued a press release to announce that all the Company’s outstanding warrants had been
exercised in advance of the expiry date. Three of the Company’s largest shareholders exercised 6,521,740 in
outstanding warrants. As a result of this warrant exercise, we issued a total of 6,521,740 common shares of the
Company and received cash proceeds of approximately $9.9 million.
• On August 26, 2019, we issued a press release reporting the public release of the Draft Environmental Impact
Statement (“EIS”) Statement by the BLM for the AMDIAP and the Environmental and Economic Analysis by the
NPS for that portion of AMDIAP that traverses the Gates of the Arctic National Park and Preserve. The public
comment period of 45 days had commenced with comments on the Draft EIS being accepted through October
15, 2019. On March 27, 2020, we issued a press release announcing that the Final EIS had been publicly released.
• On September 5, 2019, we issued a press release announcing the resignation of Rick Van Nieuwenhuyse as CEO,
President and director of Trilogy Metals. James Gowans was appointed CEO and President on an interim basis.
Mr. Van Nieuwenhuyse remained a consultant to the Company until February 29, 2020 to assist with transitional
matters and with advancing our interests in Alaska.
• On October 31, 2019, we filed a final short form base shelf prospectus with the securities commissions in each
of the provinces of Canada, other than Québec, and a corresponding registration statement on Form S-3 with
the SEC allowing for the future issuance, from time to time, of up to $100,000,000 in common shares, warrants
to purchase common shares, share purchase contracts of the Company, subscription receipts, units or a
combination of those securities. The intention of the base shelf prospectus and shelf registration statement is
to allow the Company to more quickly access capital when the capital is needed and as market opportunities
permit.
History of Trilogy
Spin-Out
We were formerly a wholly-owned subsidiary of NovaGold Resources Inc. (“NovaGold”). In April 2012, Trilogy Common
Shares were distributed to NovaGold shareholders pursuant to a Plan of Arrangement under the Companies Act (Nova
Scotia) and were listed and posted for trading on the TSX and on the NYSE American.
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Name Change
We changed our corporate name to Trilogy Metals Inc. from NovaCopper Inc. in 2016 to better reflect the diversity of
minerals at our UKMP Projects. On September 8, 2016, upon the opening of the markets our shares began trading on
the TSX and the NYSE American under the symbol “TMQ”.
Agreement with NANA Regional Corporation
On October 19, 2011, NANA Regional Corporation, Inc. (“NANA”), an Alaska Native Corporation headquartered in
Kotzebue, Alaska, and Trilogy Metals US entered an Exploration Agreement and Option Agreement (as amended, the
“NANA Agreement”) for the cooperative development of NANA’s respective resource interests in the Ambler mining
district of Northwest Alaska. Upon the formation of Ambler Metals, the Company assigned its rights and obligations
under the NANA Agreement to Ambler Metals. The NANA Agreement consolidates Ambler Metals’ and NANA’s land
holdings into an approximately 142,831-hectare land package and provides a framework for the exploration and any
future development of this high-grade and prospective poly-metallic belt.
The NANA Agreement grants Ambler Metals the nonexclusive right to enter on, and the exclusive right to explore, the
Bornite lands and the Alaska Native Claims Settlement Act (“ANCSA”) lands (each as defined in the NANA Agreement)
and in connection therewith, to construct and utilize temporary access roads, camps, airstrips and other incidental works.
In consideration for this right, Trilogy Metals US previously paid to NANA $4 million in cash. Ambler Metals is also
required to make payments to NANA for scholarship purposes in accordance with the terms of the NANA Agreement.
Ambler Metals has further agreed to use reasonable commercial efforts to train and employ NANA shareholders to
perform work for Ambler Metals in connection with its operations on the Bornite lands, ANCSA lands and Ambler lands
(as defined in the NANA Agreement) (collectively, the “Lands”). The NANA Agreement has a term of 20 years, with an
option in favour of Ambler Metals to extend the term for an additional 10 years. The NANA Agreement may be
terminated by mutual agreement of the parties or by NANA if Ambler Metals does not meet certain expenditure
requirements on the Bornite lands and ANCSA lands.
If, following receipt of a feasibility study and the release for public comment of a related draft environmental impact
statement, Ambler Metals decides to proceed with construction of a mine on the Lands, Ambler Metals will notify NANA
in writing and NANA will have 120 days to elect to either (a) exercise a non-transferrable back-in-right to acquire an
undivided ownership interest between 16% and 25% (as specified by NANA) of that specific project; or (b) not exercise
its back-in-right, and instead receive a net proceeds royalty equal to 15% of the net proceeds realized by Ambler Metals
from such project (following the recoupment by Ambler Metals of all costs incurred, including operating, capital and
carrying costs). The cost to exercise such back-in-right is equal to the percentage interest in the project multiplied by the
difference between (i) all costs incurred by Ambler Metals or its affiliates on the project, including historical costs
incurred prior to the date of the NANA Agreement together with interest on the costs; and (ii) $40 million (subject to
exceptions). This amount will be payable by NANA to Ambler Metals in cash at the time the parties enter into a joint
venture agreement and in no event will the amount be less than zero.
In the event that NANA elects to exercise its back-in-right, the parties will as soon as reasonably practicable form a joint
venture, with NANA’s interest being between 16% to 25% and Ambler Metals owning the balance of the interest in the
joint venture. Upon formation of the joint venture, the joint venture will assume all of the obligations of Ambler Metals
and be entitled to all the benefits of Ambler Metals under the NANA Agreement in connection with the mine to be
developed and the related Lands. A party’s failure to pay its proportionate share of costs in connection with the joint
venture will result in dilution of its interest. Each party will have a right of first refusal over any proposed transfer of the
other party’s interest in the joint venture other than to an affiliate or for the purposes of granting security. A transfer
by either party of any net proceeds royalty interest in a project other than for financing purposes will also be subject to
a first right of refusal. A transfer of NANA’s net smelter return on the Lands is subject to a first right of refusal by Ambler
Metals.
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In connection with possible development of a mine on the Bornite lands or ANCSA lands, Ambler Metals and NANA will
execute a mining lease to allow Ambler Metals or the joint venture to construct and operate a mine on the Bornite lands
or ANCSA lands. These leases will provide NANA a 2% net smelter royalty as to production from the Bornite lands and a
2.5% net smelter royalty as to production from the ANCSA lands. If Ambler Metals decides to proceed with construction
of a mine on the Ambler lands, NANA will enter into a surface use agreement with Ambler Metals which will afford
Ambler Metals access to the Ambler lands along routes approved by NANA on the Bornite lands or ANCSA lands. In
consideration for the grant of such surface use rights, Ambler Metals will grant NANA a 1% net smelter royalty on
production and an annual payment of $755 per acre (as adjusted for inflation each year beginning with the second
anniversary of the effective date of the NANA Agreement and for each of the first 400 acres (and $100 for each additional
acre) of the lands owned by NANA and used for access which are disturbed and not reclaimed.
Ambler Metals has formed an oversight committee with NANA, which consists of four representatives from each of
Ambler Metals and NANA (the “Oversight Committee”). The Oversight Committee is responsible for certain planning and
oversight matters carried out by us under the NANA Agreement. The planning and oversight matters that are the subject
of the NANA Agreement will be determined by majority vote. The representatives of each of Ambler Metals and NANA
attending a meeting will have one vote in the aggregate and in the event of a tie, the Ambler Metals representatives
jointly shall have a deciding vote on all matters other than Subsistence Matters, as that term is defined in the NANA
Agreement. There shall be no deciding vote on Subsistence Matters and Ambler Metals may not proceed with such
matters unless approved by majority vote of the Oversight Committee or with the consent of NANA, such consent not
to be unreasonably withheld or delayed.
Principal Markets
We do not currently have a principal market. Our principal objective is to become a producer of copper.
Specialized Skill and Knowledge
All aspects of our business require specialized skills and knowledge. Such skills and knowledge include the areas of
geology, mining and accounting. See “Executive Officers of Trilogy” for details as to the specific skills and knowledge of
our directors and management.
Environmental Protection
Mining is an extractive industry that impacts the environment. Along with our joint venture partner, South32, our goal
is to evaluate ways to minimize that impact and to develop safe, responsible and profitable operations by developing
natural resources for the benefit of our employees, shareholders and communities and maintain high standards for
environmental performance at the UKMP Projects. We strive to meet or exceed environmental standards at the UKMP
Projects. One way Ambler Metals does this is through collaborations with local communities in Alaska, including Native
Alaskan groups. Ambler Metals’ environmental performance will be overseen at the Ambler-board and Trilogy-board
level and environmental performance is the responsibility of the project manager. All new activities and operations will
be managed for compliance with applicable laws and regulations. In the absence of regulation, best management
practices will be applied to manage environmental risk. Furthermore, we will strive to limit releases to the air, land or
water and appropriately treat and dispose of waste.
For a more detailed discussion of the various government laws and regulations applicable to our operations and potential
negative effects of these laws and regulations, see Item 1A. Risk Factors, and Item 2 Properties, Environmental,
Permitting, Social and Closure Considerations below.
Employees
As of November 30, 2021, we had 7 full-time employees, all of whom were employed at our executive office in
Vancouver, BC. We have entered into executive employment agreements with the CEO and CFO (each as defined herein).
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In the past, the number of individuals we employed fluctuated throughout the year depending on the season; however,
during 2020, we contributed the UKMP Projects to Ambler Metals and no longer directly employ any seasonal staff.
Information About Our Executive Officers
As of November 30, 2021, we had two executive officers, namely Tony Giardini and Elaine Sanders. The following
information is presented as of November 30, 2021.
Age Held Office Since
June 1, 2020(1)
62
52
January 30, 2012(2)
Name and Residence
Tony Giardini
British Columbia,
Canada
Director, President and
Chief Executive Officer
Elaine Sanders
British Columbia,
Canada
VP, Chief Financial
Officer and Corporate
Secretary
Business Experience During Past Five Years
Chief Executive Officer of Trilogy (2020
– present); President of Ivanhoe Mines
Ltd. (May 2019 – March 2020); Chief
Financial Officer of Kinross Gold
Corporation (December 2012 - April
2019)
Vice President and Chief Financial
Officer of Trilogy (2012 – present);
Corporate Secretary of Trilogy (2011 –
present)
(1) Mr. Giardini was appointed President and Chief Executive Officer on June 1, 2020.
(2) Ms. Sanders was appointed Chief Financial Officer on January 30, 2012. She became a full-time employee of the
Company on November 13, 2012.
Competitive Conditions
The mineral exploration and development industry is competitive in all phases of exploration, development and
production. There is a high degree of competition faced by us in Alaska and elsewhere for skilled management
employees, suitable contractors for drilling operations, technical and engineering resources, and necessary exploration
and mining equipment, and many of these competitor companies have greater financial resources, operational expertise,
and/or more advanced properties than us. Additionally, our operations are in a remote location where skilled resources
and support services are limited. We have in place experienced management personnel and continue to evaluate the
required expertise and skills to carry out our operations. As a result of this competition, we may be unable to achieve
our exploration and development in the future on terms we consider acceptable or at all. See “Item 1A. Risk Factors.”
Available Information
We make available, free of charge, on or through our website, at www.trilogymetals.com our Annual Report on Form 10-
K, which includes our audited financial statements, our Quarterly Reports on Form 10-Q, and our Current Reports on
Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act.
The SEC maintains a website that contains reports, proxy and information statements, and other information at
www.sec.gov. Our website and the information contained therein or connected thereto are not intended to be, and are
not incorporated into this Annual Report on Form 10-K.
Item 1A. RISK FACTORS
Investing in our securities is speculative and involves a high degree of risk due to the nature of our business and the
present stage of exploration of our mineral properties. The following risk factors, as well as risks currently unknown to
us, could materially adversely affect our future business, operations and financial condition and could cause them to
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differ materially from the estimates described in forward-looking information relating to Trilogy, or our business,
property or financial results, each of which could cause purchasers of securities to lose all or part of their investments.
Risks Related to the COVID Pandemic
The outbreak of the coronavirus (COVID-19) may affect our operations.
The Company faces risks related to health epidemics and other outbreaks of communicable diseases, which could
significantly disrupt its operations and may materially and adversely affect its business and financial conditions.
The Company’s business could be adversely impacted by the effects of the coronavirus or other epidemics. In December
2019, a novel strain of the coronavirus (COVID-19) emerged in China and the virus has now spread around the world,
including Canada and the U.S. The extent to which COVID-19 impacts the Company’s business, including exploration and
development activities at Ambler Metals and the market for its securities, will depend on future developments, which
are uncertain and cannot be predicted at this time, and include the duration, severity and scope of the outbreak and the
actions taken to contain or treat the coronavirus outbreak. In particular, the continued spread of the coronavirus and
travel and other restrictions established to curb the spread of the COVID-19, has and could continue to materially and
adversely impact the Company’s business including without limitation, the planned exploration programs at Ambler
Metals (see “Significant Developments in 2020” above), employee health, workforce productivity, increased insurance
premiums, limitations on travel, the availability of industry experts and personnel, the timing to process drill and other
metallurgical testing, interruption of supplies from third parties upon which the Company relies and other factors that
will depend on future developments beyond the Company’s control, which may have a material and adverse effect on
the its business, financial condition and results of operations.
There can be no assurance that the Company's personnel will not be impacted by these pandemic diseases and ultimately
see its workforce productivity reduced or incur increased medical costs or insurance premiums as a result of these health
risks.
Risks Related to the Company’s Mineral Properties
None of our mineral properties are in production or under development.
We have no history of commercially producing precious or base metals and all of our properties are in the exploration
stage. There are no proven or probable reserves on the Upper Kobuk Mineral Projects, as defined in SEC Industry Guide
7. Mineral exploration involves significant risk, since few properties that are explored contain bodies of ore that would
be commercially economic to develop into producing mines. We cannot assure you that we will establish the presence
of any measured resources or proven or probable reserves at the Upper Kobuk Mineral Projects, or any other of our
properties. The failure to establish proven or probable reserves would severely restrict our ability to implement our
strategies for long-term growth. See “Cautionary Note to United States Investors”.
We may not have sufficient funds to develop our mineral projects or to complete further exploration programs.
We have limited financial resources. We currently generate no mining operating revenue and must primarily finance
exploration activity and the development of mineral projects by other means. Although South32 funded Ambler Metals
in the amount of US$145 million upon formation of the joint venture as discussed above, in the future, once our share
of such amount has been expended or we wish to acquire any other properties outside of Ambler Metals, our ability to
continue exploration, development and production activities, if any, will depend on our ability to obtain additional
external financing. Any unexpected costs, problems or delays could severely impact our ability to continue exploration
and development activities. The failure to meet ongoing obligations on a timely basis could result in a loss or a substantial
dilution of our interests in projects.
The sources of external financing that we may use for these purposes include project or bank financing or public or
private offerings of equity and debt. In addition, we may enter into one or more strategic alliances or joint ventures, in
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addition to our joint venture with South32, sell marketable securities held by the Company, decide to sell certain
property interests, or utilize one or a combination of all of these alternatives. The financing alternative we choose may
not be available on acceptable terms, or at all. If additional financing is not available, we may have to postpone further
exploration or development of, or sell our interest in, one or more of our principal properties.
Even if one of our mineral projects is determined to be economically viable to develop into a mine, such development may
not be successful.
If the development of one of our projects is found to be economically feasible and approved by our Board and in the
case of the UKMP Projects, by our joint venture partner, South32, such development will require obtaining permits and
financing, the construction and operation of mines, processing plants and related infrastructure, including road access.
As a result, we are and will continue to be subject to all of the risks associated with establishing new mining operations,
including:
•
•
•
•
•
•
•
the timing and cost, which can be considerable, of the construction of mining and processing facilities and
related infrastructure;
the availability and cost of skilled labor and mining equipment;
the availability and cost of appropriate smelting and refining arrangements;
the need to obtain necessary environmental and other governmental approvals and permits and the timing of
the receipt of those approvals and permits;
the availability of funds to finance construction and development activities;
potential opposition from non-governmental organizations, environmental groups or local groups which may
delay or prevent development activities; and
potential increases in construction and operating costs due to changes in the cost of fuel, power, materials and
supplies.
The costs, timing and complexities of developing our projects may be greater than anticipated because our property
interests are not located in developed areas, and, as a result, our property interests are not currently served by
appropriate road access, water and power supply and other support infrastructure. Cost estimates may increase
significantly as more detailed engineering work is completed on a project. It is common in new mining operations to
experience unexpected costs, problems and delays during construction, development and mine start-up. In addition,
delays in the early stages of mineral production often occur. Accordingly, we cannot provide assurance that we will ever
achieve, or that our activities will result in, profitable mining operations at the UKMP Projects or any other property that
we may acquire.
In addition, there can be no assurance that our mineral exploration activities will result in any discoveries of new
mineralization. If further mineralization is discovered there is also no assurance that the mineralization would be
economical for commercial production. Discovery of mineral deposits is dependent upon a number of factors and
significantly influenced by the technical skill of the exploration personnel involved. The commercial viability of a mineral
deposit is also dependent upon a number of factors which are beyond our control, including the attributes of the deposit,
commodity prices, government policies and regulation and environmental protection.
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The Upper Kobuk Mineral Projects are located in a remote area of Alaska, and access to them is limited. Exploration and
any future development or production activities may be limited and delayed by infrastructure challenges, inclement
weather and a shortened exploration season.
We cannot provide assurances that the proposed AMDIAP that would provide access to the Ambler mining district will
be built, that it will be built in a timely manner, that the cost of accessing the proposed road will be reasonable, that it
will be built in the manner contemplated, or that it will sufficiently satisfy the requirements of the Upper Kobuk Mineral
Projects. The proposed AMDIAP requires significant permitting and approvals, and the JROD issued in 2020 is currently
subject to lawsuits which could delay or prevent the project. Further, changes in the U.S. federal administration may
result in changes in interpretations or priorties which may further delay or prevent the proposed AMDIAP.
In addition, successful development of the Upper Kobuk Mineral Projects will require the development of the necessary
infrastructure. If adequate infrastructure is not available in a timely manner, there can be no assurance that:
•
•
•
the development of the Upper Kobuk Mineral Projects will be commenced or completed on a timely basis, if at
all;
the resulting operations will achieve the anticipated production volume; or
the construction costs and operating costs associated with the development of the Upper Kobuk Mineral
Projects will not be higher than anticipated.
As the Upper Kobuk Mineral Projects are located in a remote area, exploration, development and production activities
may be limited and delayed by inclement weather and a shortened exploration season. The exploration of the UKMP
Projects has also been impacted by COVID-19. See “Risks Related to COVID-19” above.
We are dependent on a third party that participates in exploration and development of our Upper Kobuk Mineral Projects.
In December 2019, South32 exercised its option to acquire a 50% interest in Ambler Metals. The formation of Ambler
Metals was completed in February 2020 and Ambler Metals now owns the Upper Kobuk Mineral Projects. Our success
with respect to the Upper Kobuk Mineral Projects depends on the efforts and expertise of South32 with whom we have
contracted; we hold a 50% interest and the remaining 50% interest is held by South32, who is not under our control or
direction. We are dependent on them for the progress and development of the Upper Kobuk Mineral Projects. South32
may also have different priorities which could impact the timing and cost of development of the Upper Kobuk Mineral
Projects. The third party may also be in default of its agreement with us, without our knowledge, which may put the
mineral property and related assets at risk. The existence or occurrence of one or more of the following circumstances
and events could have a material adverse impact on our ability to achieve our business plan, profitability, or the viability
of our interests held with the third party, which could have a material adverse impact on our business, future cash flows,
earnings, results of operations and financial condition: (i) disagreement with our business partner on how to develop
and operate the Upper Kobuk Mineral Projects efficiently; (ii) inability to exert influence over certain strategic decisions
made in respect of the jointly-held Upper Kobuk Mineral Projects; (iii) inability of our business partner to meet its
obligations to the joint business or third parties; and (iv) litigation with our business partner regarding joint business
matters.
We have no history of production and no revenue from mining operations.
We have a very limited history of operations and to date have generated no revenue from mining operations. As such,
we are subject to many risks common to such enterprises, including under-capitalization, cash shortages, limitations with
respect to personnel, financial and other resources and lack of significant revenues. There is no assurance that the Upper
Kobuk Mineral Projects, or any other future projects will be commercially mineable, and we may never generate
revenues from our mining operations.
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Changes in the market price of copper, zinc and other metals, which in the past have fluctuated widely, will affect our
ability to finance continued exploration and development of our projects and affect our operations and financial
condition.
Our long-term viability will depend, in large part, on the market price of copper, zinc and other metals. The market prices
for these metals are volatile and are affected by numerous factors beyond our control, including:
•
•
•
•
•
•
global or regional consumption patterns;
the supply of, and demand for, these metals;
speculative activities;
the availability and costs of metal substitutes;
expectations for inflation; and
political and economic conditions, including interest rates and currency values.
We cannot predict the effect of these factors on metal prices. A decrease in the market price of copper, zinc and other
metals could affect our ability to raise funds to finance the exploration and development of any of our mineral projects,
which would have a material adverse effect on our financial condition and results of operations. The market price of
copper, zinc and other metals may not remain at current levels. In particular, an increase in worldwide supply, and
consequent downward pressure on prices, may result over the longer term from increased copper production from
mines developed or expanded as a result of current metal price levels. There is no assurance that a profitable market
may exist or continue to exist.
Title and other rights to our properties may be subject to challenge.
We cannot provide assurance that title to our properties will not be challenged. We (through our interest in Ambler
Metals) indirectly own mineral claims which constitute our property holdings. We may not have, or may not be able to
obtain, all necessary surface rights to develop a property. Title insurance is generally not available for mineral properties
and our ability to ensure that we have obtained a secure claim to individual mining properties may be severely
constrained. Our mineral properties may be subject to prior unregistered agreements, transfers or claims, and title may
be affected by, among other things, undetected defects. We have not conducted surveys of all of the claims in which we
hold direct or indirect interests. A successful claim contesting our title to a property will cause us to lose our rights to
explore and, if warranted, develop that property or undertake or continue production thereon. This could result in our
not being compensated for our prior expenditures relating to the property. In addition, our ability to continue to explore
and develop the property may be subject to agreements with other third parties including agreements with native
corporations and first nations groups, for instance, the lands at the Upper Kobuk Mineral Projects are subject to the
NANA Agreement (as more particularly described under "History of Trilogy - Agreement with NANA Regional
Corporation").
We will incur losses for the foreseeable future.
We expect to incur losses unless and until such time as our mineral projects generate sufficient revenues to fund
continuing operations. The exploration and development of our mineral properties will require the commitment of
substantial financial resources that may not be available.
The amount and timing of expenditures will depend on a number of factors, including the progress of ongoing exploration
and development, the results of consultants’ analyses and recommendations, the rate at which operating losses are
incurred, the execution of any joint venture agreements with strategic partners and the acquisition of additional property
interests, some of which are beyond our control. We cannot provide assurance that we will ever achieve profitability.
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High metal prices in past years have encouraged increased mining exploration, development and construction activity,
which has increased demand for, and cost of, exploration, development and construction services and equipment.
The relative strength of metal prices in past years has encouraged increases in mining exploration, development and
construction activities around the world, which has resulted in increased demand for, and cost of, exploration,
development and construction services and equipment. Increased demand for and cost of services and equipment could
result in delays if services or equipment cannot be obtained in a timely manner due to inadequate availability and may
cause scheduling difficulties due to the need to coordinate the availability of services or equipment, any of which could
materially increase project exploration, development and/or construction costs.
Risks Relating to the Mining Industry and Mineral Reserves
Mineral resource and reserve calculations are only estimates.
Any figures presented for mineral resources or reserves in this Form 10-K and in our other filings with securities
regulatory authorities and those which may be presented in the future are and will only be estimates. There is a degree
of uncertainty attributable to the calculation of mineral reserves and mineral resources. Until mineral reserves or mineral
resources are actually mined and processed, the quantity of metal and grades must be considered as estimates only and
no assurances can be given that the indicated levels of metals will be produced. In making determinations about whether
to advance any of our projects to development, we must rely upon estimated calculations as to the mineral resources or
reserves and grades of mineralization on our properties.
The estimating of mineral reserves and mineral resources is a subjective process that relies on the judgment of the
persons preparing the estimates. The process relies on the quantity and quality of available data and is based on
knowledge, mining experience, analysis of drilling results and industry practices. Valid estimates made at a given time
may significantly change when new information becomes available. While we believe that the mineral resource
estimates included in this Form 10-K for the Upper Kobuk Mineral Projects are well-established and reflect
management’s best estimates, by their nature mineral resource estimates are imprecise and depend, to a certain extent,
upon analysis of drilling results and statistical inferences that may ultimately prove to be inaccurate. There can be no
assurances that actual results will meet the estimates contained in feasibility studies or pre-feasibility studies. As well,
further studies are required.
Estimated mineral reserves or mineral resources may have to be recalculated based on changes in metal prices, further
exploration or development activity or actual production experience. This could materially and adversely affect estimates
of the volume or grade of mineralization, estimated recovery rates or other important factors that influence mineral
reserve or mineral resource estimates. The extent to which mineral resources may ultimately be reclassified as mineral
reserves is dependent upon the demonstration of their profitable recovery. Any material changes in mineral resource
estimates and grades of mineralization will affect the economic viability of placing a property into production and a
property’s return on capital. We cannot provide assurance that mineralization can be mined or processed profitably.
Our mineral resource estimates have been determined and valued based on assumed future metal prices, cut-off grades
and operating costs that may prove to be inaccurate. Extended declines in market prices for copper, zinc, lead, gold and
silver may render portions of our mineralization uneconomic and result in reduced reported mineral resources, which in
turn could have a material adverse effect on our results of operations or financial condition. We cannot provide
assurance that mineral recovery rates achieved in small scale tests will be duplicated in large scale tests under on-site
conditions or in production scale.
A reduction in any mineral reserves that may be estimated by us could have an adverse impact on our future cash flows,
earnings, results of operations and financial condition. No assurances can be given that any mineral resource estimates
for the Upper Kobuk Mineral Projects will ultimately be reclassified as mineral reserves. See “Cautionary Note to United
States Investors.”
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Significant uncertainty exists related to inferred mineral resources.
There is a risk that inferred mineral resources referred to in this Form 10-K cannot be converted into measured or
indicated mineral resources as there may be limited ability to assess geological continuity. It is reasonably expected that
the majority of inferred mineral resources could be upgraded to indicated mineral resources with continued exploration.
See “Cautionary Note to United States Investors.”
Mining is inherently risky and subject to conditions or events beyond our control.
The development and operation of a mine is inherently dangerous and involves many risks that even a combination of
experience, knowledge and careful evaluation may not be able to overcome, including:
•
unusual or unexpected geological formations;
• metallurgical and other processing problems;
• metal losses;
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environmental hazards;
power outages;
labor disruptions;
industrial accidents;
periodic interruptions due to inclement or hazardous weather conditions;
flooding, explosions, fire, rockbursts, cave-ins and landslides;
• mechanical equipment and facility performance problems; and
•
the availability of materials and equipment.
These risks could result in damage to, or destruction of, mineral properties, production facilities or other properties,
personal injury or death, including to our employees, environmental damage, delays in mining, increased production
costs, asset write downs, monetary losses and possible legal liability. We may not be able to obtain insurance to cover
these risks at economically feasible premiums, or at all. The Company's insurance premiums have increased in recent
years and in other circumstances the scope of insurance coverage has been reduced. The Company also expects
insurance premiums to increase due to the impacts of COVID-19. Insurance against certain environmental risks, including
potential liability for pollution and other hazards associated with mineral exploration and production, is not generally
available to companies within the mining industry. We may suffer a material adverse effect on our business if we incur
losses related to any significant events that are not covered by our insurance policies.
We cannot provide assurance that we will successfully acquire commercially mineable mineral rights.
Exploration for and development of copper properties involves significant financial risks which even a combination of
careful evaluation, experience and knowledge may not eliminate. While the discovery of an ore body may result in
substantial rewards, few properties which are explored are ultimately developed into producing mines. Major expenses
may be required to establish reserves by drilling, constructing mining and processing facilities at a site, developing
metallurgical processes and extracting metals from ore. We cannot ensure that our current exploration and development
programs will result in profitable commercial mining operations.
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The economic feasibility of development projects is based upon many factors, including the accuracy of mineral resource
estimates; metallurgical recoveries; capital and operating costs; government regulations relating to prices, taxes,
royalties, land tenure, land use, importing and exporting and environmental protection; and metal prices, which are
highly volatile. Development projects are also subject to the successful completion of feasibility studies, issuance of
necessary governmental permits and availability of adequate financing.
Most exploration projects do not result in the discovery of commercially mineable ore deposits, and no assurance can
be given that any anticipated level of recovery of ore reserves, if any, will be realized or that any identified mineral
deposit will ever qualify as a commercially mineable (or viable) ore body which can be legally and economically exploited.
Estimates of mineral reserves, mineral resources, mineral deposits and production costs can also be affected by such
factors as environmental permitting regulations and requirements, weather, environmental factors, unforeseen
technical difficulties, the metallurgy of the mineralization forming the mineral deposit, unusual or unexpected geological
formations and work interruptions. If current exploration programs do not result in the discovery of commercial ore, we
may need to write-off part or all of our investment in our existing exploration stage properties and may need to acquire
additional properties.
Material changes in mineral reserves, if any, grades, stripping ratios or recovery rates may affect the economic viability
of any project. Our future growth and productivity will depend, in part, on our ability to develop commercially mineable
mineral rights at our existing properties or identify and acquire other commercially mineable mineral rights, and on the
costs and results of continued exploration and potential development programs. Mineral exploration is highly speculative
in nature and is frequently non-productive. Substantial expenditures are required to:
•
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establish mineral resources and reserves through drilling and metallurgical and other testing techniques;
determine metal content and metallurgical recovery processes to extract metal from the ore; and
construct, renovate or expand mining and processing facilities.
In addition, if we discover ore, it would take several years from the initial phases of exploration until production is
possible. During this time, the economic feasibility of production may change. As a result of these uncertainties, there
can be no assurance that we will successfully acquire commercially mineable (or viable) mineral rights.
Risks Relating to Government Regulation
We are subject to significant governmental regulations.
Our exploration activities are subject to extensive federal, state, provincial and local laws and regulations governing
various matters, including:
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environmental protection;
the management and use of toxic substances and explosives;
the management of natural resources;
the exploration and development of mineral properties, including reclamation;
exports;
price controls;
taxation and mining royalties;
• management of tailing and other waste generated by operations;
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labor standards and occupational health and safety, including mine safety;
historic and cultural preservation; and
transportation.
Failure to comply with applicable laws and regulations may result in civil or criminal fines or penalties or enforcement
actions, including orders issued by regulatory or judicial authorities enjoining, curtailing or closing operations or requiring
corrective measures, installation of additional equipment or remedial actions, any of which could result in significant
expenditures. We may also be required to compensate private parties suffering loss or damage by reason of a breach of
such laws, regulations or permitting requirements. It is also possible that future laws and regulations, or more stringent
enforcement of current laws and regulations by governmental authorities, could cause us to incur additional expense or
capital expenditure restrictions, suspensions or closing of our activities and delays in the exploration and development
of our properties.
We require further permits in order to conduct current and anticipated future operations, and delays in obtaining or
failure to obtain such permits, or a failure to comply with the terms of any such permits that we have obtained, would
adversely affect our business.
Our current and anticipated future operations, including further exploration, development and commencement of
production on our mineral properties, require permits from various governmental authorities. Obtaining or renewing
governmental permits is a complex and time-consuming process. The duration and success of efforts to obtain and renew
permits are contingent upon many variables not within our control. Due to the preliminary stages of the Upper Kobuk
Mineral Projects, it is difficult to assess what specific permitting requirements will ultimately apply.
Shortage of qualified and experienced personnel in the U.S. federal and Alaskan State agencies to coordinate a federally
led joint environmental impact statement process could result in delays or inefficiencies. Backlog within the permitting
agencies could affect the permitting timeline or potential of the Upper Kobuk Mineral Projects, as may negative public
perception of mining projects in general due to circumstances unrelated to the Company and outside of its control. Other
factors that could affect the permitting timeline include (i) the number of other large-scale projects currently in a more
advanced stage of development which could slow down the review process for the Upper Kobuk Mineral Projects and
(ii) significant public response regarding the Upper Kobuk Mineral Projects.
We cannot provide assurance that all permits that we require for our operations, including any for construction of mining
facilities or conduct of mining, will be obtainable or renewable on reasonable terms, or at all. Delays or a failure to obtain
such required permits, or the expiry, revocation or failure to comply with the terms of any such permits that we have
obtained, would adversely affect our business.
Our activities are subject to environmental laws and regulations that may increase our costs and restrict our operations.
All of our exploration, potential development and production activities are subject to regulation by governmental
agencies under various environmental laws. These laws address emissions into the air, discharges into water,
management of waste, management of hazardous substances, protection of natural resources, antiquities and
endangered species and reclamation of lands disturbed by mining operations. Environmental legislation is evolving, and
the general trend has been towards stricter standards and enforcement, increased fines and penalties for
noncompliance, more stringent environmental assessments of proposed projects and increasing responsibility for
companies and their officers, directors and employees. Compliance with environmental laws and regulations may require
significant capital outlays on our behalf and may cause material changes or delays in our intended activities.
Several regulatory initiatives are currently ongoing within the State of Alaska that have the potential to influence the
permitting process for the Upper Kobuk Mineral Projects. These include revisions to Alaska's Water Quality Standards
regarding mixing zones regulations, which are currently under Environmental Protection Agency review, and which
revisions may be required in order to authorize a mixing zone for discharge in Subarctic Creek. Future changes in these
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laws or regulations could have a significant adverse impact on some portion of our business, requiring us to re-evaluate
those activities at that time.
Environmental hazards may exist on our properties that are unknown to us at the present time and that have been
caused by previous owners or operators or that may have occurred naturally. We may be liable for remediating such
damage.
Failure to comply with applicable environmental laws, regulations and permitting requirements may result in
enforcement actions thereunder, including orders issued by regulatory or judicial authorities, causing operations to cease
or to be curtailed, and may include corrective measures requiring capital expenditures, installation of additional
equipment or remedial actions.
Land reclamation requirements for our exploration properties may be burdensome.
Land reclamation requirements are generally imposed on mineral exploration companies (as well as companies with
mining operations) in order to minimize long term effects of land disturbance. Reclamation may include requirements
to:
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treat ground and surface water to applicable water quality standards;
control dispersion of potentially deleterious effluents; and
reasonably re-establish pre-disturbance landforms and vegetation.
In order to carry out reclamation obligations imposed on us in connection with exploration, potential development and
production activities, we must allocate financial resources that might otherwise be spent on further exploration and
development programs. In addition, regulatory changes could increase our obligations to perform reclamation and mine
closing activities. If we are required to carry out unanticipated reclamation work, our financial position could be adversely
affected.
Risks Related to the Acquisition of New Projects
Risks inherent in acquisitions of new properties.
We may actively pursue the acquisition of exploration, development and production assets consistent with our
acquisition and growth strategy. From time to time, we may also acquire securities of or other interests in companies
with respect to which we may enter into acquisitions or other transactions. Acquisition transactions involve inherent
risks, including but not limited to:
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accurately assessing the value, strengths, weaknesses, contingent and other liabilities and potential profitability
of acquisition candidates;
ability to achieve identified and anticipated operating and financial synergies;
unanticipated costs;
diversion of management attention from existing business;
potential loss of our key employees or key employees of any business acquired;
unanticipated changes in business, industry or general economic conditions that affect the assumptions
underlying the acquisition;
decline in the value of acquired properties, companies or securities;
26
•
assimilating the operations of an acquired business or property in a timely and efficient manner;
• maintaining our financial and strategic focus while integrating the acquired business or property;
•
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implementing uniform standards, controls, procedures and policies at the acquired business, as appropriate;
and
to the extent that we make an acquisition outside of markets in which it has previously operated, conducting
and managing operations in a new operating environment.
Acquiring additional businesses or properties could place increased pressure on our cash flow if such acquisitions involve
a cash consideration. The integration of our existing operations with any acquired business will require significant
expenditures of time, attention and funds. Achievement of the benefits expected from consolidation would require us
to incur significant costs in connection with, among other things, implementing financial and planning systems. We may
not be able to integrate the operations of a recently acquired business or restructure our previously existing business
operations without encountering difficulties and delays. In addition, this integration may require significant attention
from our management team, which may detract attention from our day-to-day operations. Over the short-term,
difficulties associated with integration could have a material adverse effect on our business, operating results, financial
condition and the price of our Common Shares. In addition, the acquisition of mineral properties may subject us to
unforeseen liabilities, including environmental liabilities, which could have a material adverse effect on us. There can be
no assurance that any future acquisitions will be successfully integrated into our existing operations.
Any one or more of these factors or other risks could cause us not to realize the anticipated benefits of an acquisition of
properties or companies and could have a material adverse effect on our financial condition.
We face industry competition in the acquisition of exploration properties and the recruitment and retention of qualified
personnel.
We compete with other exploration and producing companies, many of which are better capitalized, have greater
financial resources, operational experience and technical capabilities or are further advanced in their development or
are significantly larger and have access to greater mineral reserves, for the acquisition of mineral claims, leases and other
mineral interests as well as for the recruitment and retention of qualified employees and other personnel. If we require
and are unsuccessful in acquiring additional mineral properties or in recruiting and retaining qualified personnel, we will
not be able to grow at the rate we desire, or at all.
Risks Related to the Company’s Executive Officers and Board of Directors
We may experience difficulty attracting and retaining qualified management and technical personnel to grow our
business.
We are dependent on the services of key executives and other highly skilled and experienced personnel to advance our
corporate objectives as well as the identification of new opportunities for growth and funding. Mr. Giardini and
Ms. Sanders are currently our only executive officers. It will be necessary for us to recruit additional skilled and
experienced executives. Our inability to do so, or the loss of any of these persons or our inability to attract and retain
suitable replacements for them, or additional highly skilled employees required for our activities, would have a material
adverse effect on our business and financial condition.
Some of our directors and officers have conflicts of interest as a result of their involvement with other natural resource
companies.
Certain of our directors and officers also serve as directors or officers, in other companies involved in natural resource
exploration and development or mining-related activities, including, in particular, NovaGold. To the extent that such
other companies may participate in ventures in which we may participate in, or in ventures which we may seek to
27
participate in, our directors and officers may have a conflict of interest in negotiating and concluding terms respecting
the extent of such participation. In all cases where our directors and officers have an interest in other companies, such
other companies may also compete with us for the acquisition of mineral property investments. Any decision made by
any of these directors and officers involving Trilogy will be made in accordance with their duties and obligations to deal
fairly and in good faith with a view to the best interests of Trilogy and its shareholders. In addition, each of the directors
is required to declare and refrain from voting on any matter in which these directors may have a conflict of interest in
accordance with the procedures set forth in the Business Corporations Act (British Columbia) and other applicable laws.
In appropriate cases, the Company will establish a special committee of independent directors to review a matter in
which several directors, or management, may have a conflict. Nonetheless, as a result of these conflicts of interest, the
Company may not have an opportunity to participate in certain transactions, which may have a material adverse effect
on the Company’s business, financial condition, results of operation and prospects.
In the future, we may be subject to legal proceedings.
Due to the nature of our business, we may be subject to numerous regulatory investigations, claims, lawsuits and other
proceedings in the ordinary course of our business. The results of these legal proceedings cannot be predicted with
certainty due to the uncertainty inherent in litigation, including the effects of discovery of new evidence or advancement
of new legal theories, the difficulty of predicting decisions of judges and juries and the possibility that decisions may be
reversed on appeal. There can be no assurances that these matters will not have a material adverse effect on our
business.
General Risk Factors
General economic conditions may adversely affect our growth, future profitability and ability to finance.
The unprecedented events in global financial markets in the past several years and the current impact of COVID-19 have
had a profound impact on the global economy. Many industries, including the copper mining industry, are impacted by
these market conditions. Some of the key impacts of the current financial market turmoil include contraction in credit
markets resulting in a widening of credit risk, devaluations, high volatility in global equity, commodity, foreign exchange
and precious metal markets and a lack of market liquidity. A worsening or slowdown in the financial markets or other
economic conditions, including but not limited to, consumer spending, employment rates, business conditions, inflation,
fuel and energy costs, consumer debt levels, lack of available credit, the state of the financial markets, interest rates and
tax rates, may adversely affect our growth and ability to finance. Specifically:
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the volatility of copper, zinc, lead and other metal prices would impact our estimates of mineral resources,
revenues, profits, losses and cash flow, and the feasibility of our projects;
negative economic pressures could adversely impact demand for our future production, if any;
construction related costs could increase and adversely affect the economics of any project;
volatile energy, commodity and consumables prices and currency exchange rates could impact our estimated
production costs; and
the devaluation and volatility of global stock markets would impact the valuation of our equity and other
securities.
Future sales or issuances of equity securities could decrease the value of any existing Common Shares, dilute investors’
voting power and reduce our earnings per share.
We may sell additional equity securities (including through the sale of securities convertible into Common Shares) and
may issue additional equity securities to finance our operations, exploration, development, acquisitions or other
projects. We are authorized to issue an unlimited number of Common Shares. We cannot predict the size of future sales
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and issuances of equity securities or the effect, if any, that future sales and issuances of equity securities will have on
the market price of the Common Shares. Sales or issuances of a substantial number of equity securities, or the perception
that such sales could occur, may adversely affect prevailing market prices for the Common Shares. With any additional
sale or issuance of equity securities, investors will suffer dilution of their voting power and may experience dilution in
our earnings per share.
Our largest shareholder has significant influence on us and may also affect the market price and liquidity of the securities.
Electrum Strategic Opportunities Fund L.P. (“Electrum”) is our single largest shareholder, controlling approximately 20%
of the outstanding voting securities. Accordingly, Electrum will have significant influence in determining the outcome of
any corporate transaction or other matter submitted to the shareholders for approval, including mergers, consolidations
and the sale of all or substantially all of our assets and other significant corporate actions. Unless significant participation
of other shareholders takes place in such shareholder meetings, Electrum may be able to approve such matters itself.
The concentration of ownership of the shares by Electrum may: (i) delay or deter a change of control of the Company;
(ii) deprive shareholders of an opportunity to receive a premium for their shares as part of a sale of the Company; and
(iii) affect the market price and liquidity of the shares. Without the consent of Electrum, we could be prevented from
entering into transactions that are otherwise beneficial to us. The interests of Electrum may differ from or be adverse to
the interests of our other shareholders. The effect of these rights and Electrum’s influence may impact the price that
investors are willing to pay for securities. If Electrum sells a substantial number of shares in the public market, the market
price of the shares could fall. The perception among the public that these sales will occur could also contribute to a
decline in the market price of the shares.
Our Common Shares are subject to various factors that have historically made share prices volatile.
The market price of our Common Shares may be subject to large fluctuations, which may result in losses to investors.
The market price of the Common Shares may increase or decrease in response to a number of events and factors,
including: our operating performance and the performance of competitors and other similar companies; volatility in
metal prices; the arrival or departure of key personnel; the number of Common Shares to be publicly traded after an
offering; the public’s reaction to our press releases, material change reports, other public announcements and our filings
with the various securities regulatory authorities; changes in earnings estimates or recommendations by research
analysts who track the Common Shares or the shares of other companies in the resource sector; changes in general
economic and/or political conditions; acquisitions, strategic alliances or joint ventures involving us or our competitors;
and the factors listed under the heading “Cautionary Statement Regarding Forward-Looking Information.”
The market price of the Common Shares may be affected by many other variables which are not directly related to our
success and are, therefore, not within our control, including other developments that affect the market for all resource
sector securities, the breadth of the public market for the Common Shares and the attractiveness of alternative
investments.
We do not intend to pay any cash dividends in the foreseeable future.
We have not declared or paid any dividends on our Common Shares. Our current business plan requires that for the
foreseeable future, any future earnings be reinvested to finance the growth and development of our business. We do
not intend to pay cash dividends on the Common Shares in the foreseeable future. We will not declare or pay any
dividends until such time as our cash flow exceeds our capital requirements and will depend upon, among other things,
conditions then existing including earnings, financial condition, restrictions in financing arrangements, business
opportunities and conditions and other factors, or our Board determines that our shareholders could make better use
of the cash.
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We may be a “passive foreign investment company” in future periods, which may have adverse U.S. federal income tax
consequences for U.S. shareholders.
U.S. investors in the Company should be aware that we believe we were not a passive foreign investment company
(“PFIC”) for the years ending November 30, 2015, 2016, 2017, 2020 and 2021 but we believe we were a PFIC for the
years ending November 30, 2018 and 2019 and may be a PFIC in future tax years. If we are a PFIC for any year during a
U.S. Holder’s (as defined below under Certain U.S. Federal Income Tax Considerations – U.S. Holders”) holding period,
then such U.S. Holder generally will be required to treat any gain realized upon a disposition of Common Shares and any
so-called “excess distribution” received on its Common Shares as ordinary income, and to pay an interest charge on a
portion of such gain or distributions, unless the shareholder makes a timely and effective “QEF Election” or a “Mark-to-
Market Election” (each as defined below under “Certain U.S. Federal Income Tax Considerations – Default PFIC Rules
under Section 1291 of the Code”). A U.S. Holder who makes a QEF Election generally must report on a current basis its
share of our net capital gain and ordinary earnings for any year in which we are a PFIC, whether or not we distribute any
amounts to our shareholders. A U.S. Holder who makes the Mark-to-Market Election generally must include as ordinary
income each year the excess of the fair market value of the Common Shares over the U.S. Holder’s tax basis therein. This
paragraph is qualified in its entirety by the discussion below the heading “Certain U.S. Federal Income Tax
Considerations.” Each U.S. shareholder should consult its own tax advisor regarding the PFIC rules and the U.S. federal
income tax consequences of the acquisition, ownership, and disposition of Common Shares.
Global climate change is an international concern and could impact our ability to conduct future operations.
Global climate change is an international issue and receives an enormous amount of publicity. We would expect that the
imposition of international treaties or U.S. or Canadian federal, state, provincial or local laws or regulations pertaining
to mandatory reductions in energy consumption or emissions of greenhouse gasses could affect the feasibility of our
mining projects and increase our operating costs.
Adverse publicity from non-governmental organizations could have a material adverse effect on us.
There is an increasing level of public concern relating to the effect of mining production on our surroundings,
communities and environment. Non-governmental organizations (“NGOs”), some of which oppose resource
development, are often vocal critics of the mining industry. While we seek to operate in a socially responsible manner,
adverse publicity generated by such NGOs related to extractive industries, or our operations specifically, could have an
adverse effect on our reputation and financial condition or our relationship with the communities in which we operate.
We may fail to achieve and maintain the adequacy of our internal control over financial reporting as per the requirements
of the Sarbanes-Oxley Act.
We are required to document and test our internal control procedures in order to satisfy the requirements of Section 404
of SOX. It requires an annual assessment by management of the effectiveness of our internal control over financial
reporting. We may in the future fail to achieve and maintain the adequacy of our internal control over financial reporting,
as such standards are modified, supplemented or amended from time to time, and we may not be able to ensure that
we can conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with
Section 404 of SOX. Our failure to satisfy the requirements of Section 404 of SOX on an ongoing, timely basis could result
in the loss of investor confidence in the reliability of our financial statements, which in turn could harm our business and
negatively impact the trading price of our Common Shares. In addition, any failure to implement required new or
improved controls, or difficulties encountered in their implementation, could harm our operating results or cause us to
fail to meet our reporting obligations. Future acquisitions of companies may provide us with challenges in implementing
the required processes, procedures and controls in our acquired operations. Acquired companies may not have
disclosure control and procedures or internal control over financial reporting that are as thorough or effective as those
required by securities laws currently applicable to us.
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Our business is subject to evolving corporate governance and public disclosure regulations that have increased both our
compliance costs and the risk of noncompliance, which could have an adverse effect on our stock price.
We are subject to changing rules and regulations promulgated by a number of United States and Canadian governmental
and self-regulated organizations, including the SEC, the Canadian Securities Administrators, the NYSE American, the TSX,
and the Financial Accounting Standards Board. These rules and regulations continue to evolve in scope and complexity
and many new requirements have been created in response to laws enacted by the United States Congress, making
compliance more difficult and uncertain. Our efforts to comply with new rules and regulations, including those
promulgated under Dodd-Frank, have resulted in, and are likely to continue to result in, increased general and
administrative expenses and a diversion of management time and attention from revenue-generating activities to
compliance activities.
Item 1B. UNRESOLVED STAFF COMMENTS
None.
Item 2. PROPERTIES
The following descriptions summarize selected information about the Upper Kobuk Mineral Projects, which are located
in the Ambler mining district of Alaska and include the Arctic Project and the Bornite Project. The Arctic Project and the
Bornite Project are held by Ambler Metals, of which Trilogy holds a 50% interest. All mineral resources and mineral
reserve estimates with respect to the Arctic Project and Bornite Project that are disclosed in this Annual Report on Form
10-K are reported on a 100% basis. All of the UKMP Projects are without known reserves, as defined under SEC Industry
Guide 7, and all proposed programs for the properties are exploratory in nature. Please also see “Management’s
Discussion and Analysis—Project Activities” for more information on the development and nature of our interest in the
Upper Kobuk Mineral Projects.
Arctic Project
Except as otherwise stated, the scientific and technical information relating to the Arctic Project contained in this Form
10-K is derived from the 2020 Arctic Report titled “Arctic Feasibility Study Alaska, USA NI 43-101 Technical Report” with
an effective date of August 20, 2020, prepared for Trilogy by Ausenco Engineering Canada Inc., Wood Canada Limited
and SRK Consulting (Canada) Inc. The information regarding the Arctic Project is based on assumptions, qualifications
and procedures which are not fully described herein. Reference should be made to the full text of the 2020 Arctic Report
which has been filed with certain Canadian securities regulatory authorities pursuant to NI 43-101 and is available for
review on SEDAR at www.sedar.com and on EDGAR at www.sec.gov.
Arctic Project Description, Location and Access
Project Description
NovaGold acquired the Arctic Project from Kennecott Exploration Company and Kennecott Arctic Company (collectively,
“Kennecott”) in 2004. In 2011, NovaGold transferred all copper projects to NovaCopper Inc. and spun-out NovaCopper
to its then existing shareholders in 2012. NovaCopper Inc. subsequently underwent a name change to Trilogy Metals Inc.
in 2016. Under the Kennecott Purchase and Termination Agreement, Kennecott retained a 1% net smelter return (NSR)
royalty that was subsequently sold by Kennecott. The 1% NSR runs with the lands and is purchasable at any time from
the royalty holder for a one-time payment of $10 million.
The Arctic Project is directly held by Ambler Metals, a 50/50 joint venture formed between South32 and Trilogy in
February 2020. Upon the formation of the joint venture, Trilogy contributed all of its Alaskan assets, including the Arctic
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Project and the NANA Agreement, to Ambler Metals in exchange for a 50% membership interest and at the same time,
South32 contributed $145 million in cash for a 50% membership interest.
The Arctic Project land tenure consists of 1,988 contiguous State mining claims, including 905 40-acre claims, 1,083 160-
acre claims, and 18 Federal patented claims comprising 271.9 acres (110 ha) held in the name of Ambler Metals.
Surface use of the private land held as Federal patented claims is limited only by reservations in the patents and by
generally-applicable environmental laws. Surface use of State claims allows the owner of the mining claim to make such
use of the surface as is “necessary for prospecting for, extraction of, or basic processing of minerals.”
NANA controls lands granted under the Alaska Native Claims Settlement Act to the south of the Arctic Project boundary.
Ambler Metals and NANA are parties to the NANA Agreement that consolidates the parties’ land holdings into an
approximately 172,675 ha land package and provides a framework for the exploration and development of the area. The
NANA Agreement has a term of 20 years, with an option in favour of Ambler Metals to extend the term for an additional
10 years. If, following receipt of a feasibility study and the release for public comment of a related draft environmental
impact statement, a decision is made to proceed with construction of a mine on the lands subject to the NANA
Agreement, NANA will have 120 days to elect to either (a) exercise a non-transferrable back-in-right to acquire between
16% and 25% (as specified by NANA) of that specific project; or (b) not exercise its back-in-right, and instead receive a
net proceeds royalty equal to 15% of the net proceeds realized from such project. In the event that NANA elects to
exercise its back-in-right, the parties will, as soon as reasonably practicable, form a joint venture with NANA electing to
participate between 16% to 25%, and Ambler Metals owning the balance of the interest in the joint venture. If Ambler
Metals decides to proceed with construction of a mine on its own lands subject to the NANA Agreement, NANA will enter
into a surface use agreement which will afford Ambler Metals access to the Arctic Project along routes approved by
NANA. In consideration for the grant of such surface use rights, NANA will receive a 1% net smelter royalty on production
and provide an annual payment on a per acre basis.
Location and Access
The Arctic Project is located in the Ambler mining district of the southern Brooks Range, in the Northwest Arctic Borough
(NWAB) of Alaska. The Property is geographically isolated with no current road access or nearby power infrastructure.
The Arctic Project is located 270 km east of the town of Kotzebue, 37 km north of the village of Kobuk, and 260 km west
of the Dalton Highway, an all-weather state-maintained highway.
Primary access to the Arctic Project is by air, using both fixed wing aircraft and helicopters. There are four well-
maintained, approximately 1,500 m-long gravel airstrips located near the Arctic Project, capable of accommodating
charter fixed wing aircraft. These airstrips are located 64 km west at Ambler, 46 km southwest at Shungnak, 37 km
southwest at Kobuk, and 34 km southwest at Dahl Creek. There is daily commercial air service from Kotzebue to the
village of Kobuk, the closest community to the Arctic Project. During the summer months, the Dahl Creek Camp airstrip
is suitable for larger aircraft, such as a C-130 and DC-6.
In addition to the four 1,500 m airstrips, there is a 700 m airstrip located at the Bornite Camp. The airstrip at Bornite is
suited to smaller aircraft, which support the Bornite Camp with personnel and supplies. There is also a 450 m airstrip
(Arctic airstrip) located at the base of Arctic Ridge that can support smaller aircraft.
A winter trail and a one-lane dirt track suitable for high-clearance vehicles or construction equipment links the Arctic
Project’s main camp located at Bornite to the Dahl Creek airstrip southwest of the Arctic deposit. An unimproved gravel
track connects the Arctic airstrip with the Arctic deposit.
History
Prospectors first arrived in the Ambler Mining District around 1900, shortly after the discovery of the Nome and Fairbanks
gold districts. Several years later, small gold placer deposits were located in the southern Cosmos Hills south of the Arctic
deposit and worked intermittently over ensuing decades for gold and nephrite. During this time copper mineralization
32
was observed at Ruby Creek in the northern Cosmos Hills; however, no exploration was undertaken until 1947 when
local prospector Rhinehart “Rhiny” Berg located outcropping copper mineralization along Ruby Creek. Berg subsequently
staked claims over the Ruby Creek showings and constructed an airstrip for access (alaskamininghalloffame.org 2012).
Bear Creek Mining Company (“BCMC”), an exploration subsidiary of Kennecott, optioned the property from Berg in 1957.
The prospect became known as Bornite and Kennecott conducted extensive exploration over the next decade,
culminating in the discovery of the high-grade No. 1 zone and the sinking of an exploration shaft to conduct underground
drilling.
In conjunction with the discovery of the Bornite deposit, BCMC greatly expanded their regional reconnaissance
exploration in the Cosmos Hills and the southern Brooks Range. Stream silt sampling in 1965 revealed a significant copper
anomaly in Subarctic Creek roughly 27 km northeast of Bornite. The area was subsequently staked and, in 1967, eight
core holes were drilled at the Arctic deposit yielding massive sulphide intercepts over an almost 500-m strike length.
BCMC conducted intensive exploration on the property until 1977 and then intermittently through 1998. No drilling or
additional exploration was conducted on the Arctic Project between 1999 and 2003.
In addition to drilling and exploration at the Arctic deposit, BCMC also conducted exploration at numerous other
prospects in the Ambler Mining District (most notably Dead Creek, Sunshine, Cliff, and Horse). The abundance of VMS
prospects in the district resulted in a series of competing companies in the area, including Sunshine Mining Company,
Anaconda Company, Noranda Exploration Company, GCO Minerals Company, Cominco American Resource Inc.
(Cominco), Teck Cominco, Resource Associates of Alaska, Watts, Griffis and McOuat Ltd., and Houston Oil and Minerals
Company, culminating into a claim staking war in the district in 1973. Falconbridge and Union Carbide also conducted
work later in the district.
District exploration by Sunshine Mining Company and Anaconda resulted in two additional significant discoveries in the
district; the Sun deposit located 60 km east of the Arctic deposit, and the Smucker deposit located 36 km west of the
Arctic deposit. These two deposits are outside the current Arctic Project area.
District exploration continued until the early 1980s on the four larger deposits in the district (Arctic, Bornite, Smucker
and Sun) when the district fell into a hiatus due to depressed metal prices.
In 1987, Cominco acquired the claims covering the Sun and Smucker deposits from Anaconda. Teck Resources Limited,
as Cominco’s successor company, continues to hold the Smucker deposit. In 2007, Andover Mining Corporation
purchased a 100% interest in the Sun deposit for US$13 million and explored the property through 2013. The Sun deposit
and adjacent lands were acquired by Valhalla Metals Inc., a private company, which staked over the Sun deposit in 2017
after the creditors for the bankrupt Andover Mining Corporation failed to pay the annual rent of the state claims and
submit the Annual Labour Statement.
In 1981 and 1983, Kennecott received three US Mineral Survey patents (MS2245 totaling 240 acres over the Arctic
deposit – later amended to include another 32 acres; and MS2233 and MS2234 for 25 claims totaling 516.5 acres at
Bornite). The Bornite patented claims and surface development were subsequently sold to NANA Regional Corporation,
Inc. in 1986.
No production has occurred at the Arctic deposit or at any of the other deposits within the Ambler Mining District.
Prior Ownership and Ownership Changes – Arctic Deposit and the Ambler Lands
BCMC initially staked federal mining claims covering the Arctic deposit area beginning in 1966. The success of the 1960’s
drill programs defined a significant high-grade polymetallic resource at the Arctic deposit and, in the early 1970s,
Kennecott began the patent process to obtain complete legal title to the Arctic deposit. In 1981, Kennecott received US
Mineral Survey patent M2245 covering 16 mining claims totaling 240.018 acres. In 1983, US Mineral Survey patent
M2245 was amended to include two additional claims totaling 31.91 acres.
33
With the passage of the Alaska National Interest Lands Conservation Act in 1980, which expedited native land claims
outlined in the ANSCA and State lands claims under the Alaska Statehood Act, both the State of Alaska and NANA selected
significant areas of land within the Ambler Mining District. State selections covered much of the Ambler schist belt, host
to the volcanogenic massive sulphide deposits including the Arctic deposit, while NANA selected significant portions of
the Ambler Lowlands to the immediate south of the Arctic deposit as well as much of the Cosmos Hills including the area
immediately around Bornite.
In 1995, Kennecott renewed exploration in the Ambler schist belt containing the Arctic deposit patented claims by staking
an additional 48 state claims at Nora and 15 state claims at Sunshine Creek. In the fall of 1997, Kennecott staked 2,035
state claims in the belt consolidating their entire land position and acquiring the majority of the remaining prospective
terrain in the VMS belt. Five more claims were subsequently added in 1998. After a short period of exploration which
focused on geophysics and geochemistry combined with limited drilling, exploration work on the Arctic Project again
entered a hiatus.
On March 22, 2004, Alaska Gold Company, a wholly-owned subsidiary of NovaGold completed an Exploration and Option
Agreement with Kennecott to earn an interest in the Ambler land holdings.
Previous Exploration and Development Results – Arctic Deposit
Kennecott’s ownership of the Arctic Project saw two periods of intensive work from 1965 to 1985 and from 1993 to 1998,
before optioning the property to NovaGold in 2004.
Though reports, memos, and files exist in Kennecott’s Salt Lake City office, only limited digital compilation of the data
exists for the earliest generation of exploration at the Arctic deposit and within the VMS belt. Beginning in 1993,
Kennecott initiated a re-evaluation of the Arctic deposit and assembled a computer database of previous work at the
Arctic deposit and in the district. A computer-generated block model was constructed in 1995 and an updated resource
estimate was performed using the block model. Subsequently, Kennecott staked a total of 2,035 State of Alaska claims
in 1997 and, in 1998 undertook the first field program since 1985.
Due to the number of companies and the patchwork exploration that occurred as a result of the 1973 staking war, much
of the earliest exploration work on what now constitutes the Ambler Schist belt was lost during the post-1980 hiatus in
district exploration. The following subsections outline the best documented data at the Arctic deposit as summarized in
the 1998 Kennecott exploration report, including the assembled computer database; however, this outline is not
considered to be either exhaustive or in-depth.
In 1982, geologists with Kennecott, Anaconda and the State of Alaska published the definitive geologic map of the Ambler
schist belt (Hitzman et al. 1982).
Table 6-1 of the 2020 Arctic Report lists known exploration mapping, geochemical, and geophysical programs
conducted for VMS targets in the Ambler Mining District.
Geological Setting, Mineralization and Deposit Types
Regional Geology – Southern Brooks Range
The Ambler Mining District occurs along the southern margin of the Brooks Range within an east-west trending zone of
Devonian to Jurassic age submarine volcanic and sedimentary rocks (Hitzman et al., 1986). The district covers both: 1)
VMS-like deposits and prospects hosted in the Devonian age Ambler Sequence (or Ambler Schist belt), a group of
interbedded tuffaceous, graphitic and calcareous volcaniclastic
metamorphosed bimodal volcanic rocks with
metasediments; and 2) epigenetic carbonate-hosted copper deposits occurring in Silurian to Devonian age carbonate
and phyllitic rocks of the Bornite Carbonate Sequence. The Ambler Sequence occurs in the upper part of the Anirak
Schist, the thickest member of the Schist belt or Coldfoot subterrane (Moore et al., 1994). VMS-like stratabound
mineralization can be found along the entire 110 km strike length of the district. Immediately south of the Schist belt, in
34
the Cosmos Hills, a time equivalent section of the Anirak Schist that includes the approximately 1 km thick Bornite
Carbonate Sequence. Mineralization of both the VMS-like deposits of the Schist belt and the carbonate-hosted deposits
of the Cosmos Hills has been dated at 375 to 387 Ma (Selby et al., 2009; McClelland et al., 2006).
In addition, the Ambler Mining District is characterized by increasing metamorphic grade north perpendicular to the
strike of the east-west trending units. The district shows isoclinal folding in the northern portion and thrust faulting to
south (Schmidt, 1983). The Devonian to Late Jurassic age Angayucham basalt and the Triassic to Jurassic age mafic
volcanic rocks are in low-angle over thrust contact with various units of the Ambler Schist belt and Bornite Carbonate
Sequence along the northern edge of the Ambler Lowlands.
Ambler Sequence Geology
Rocks that form the Ambler Sequence consist of a lithologically diverse sequence of lower Devonian age carbonate and
siliciclastic strata with interlayered mafic lava flows and sills. The clastic strata, derived from terrigenous continental and
volcanic sources, were deposited primarily by mass-gravity flow into the sub-wavebase environment of an extending
marginal basin.
The Ambler Sequence underwent two periods of intense, penetrative deformation. Sustained upper greenschist-facies
metamorphism with coincident formation of a penetrative schistosity and isoclinal transposition of bedding marks the
first deformation period. Pervasive similar-style folds on all scales deform the transposed bedding and schistosity,
defining the subsequent event. At least two later non-penetrative compressional events deform these earlier fabrics.
Observations of the structural and metamorphic history of the Ambler Mining District are consistent with current
tectonic evolution models for the Schist belt, based on the work of others elsewhere in the southern Brooks Range
(Gottschalk and Oldow, 1988; Till et al., 1988; Vogl et al., 2002).
Arctic Deposit Geology
Previous workers at the Arctic deposit (Russell 1995 and Schmidt 1983) describe three mineralized horizons: the Main
Sulphide Horizon, the Upper South Horizon and the Warm Springs Horizon. The Main Sulphide Horizon was further
subdivided into three zones: the southeast zone, the central zone and the northwest zone. Previous deposit modelling
was grade-based resulting in numerous individual mineralized zones representing relatively thin sulphide horizons.
Recent work by Trilogy defines the Arctic deposit as two or more discrete horizons of sulphide mineralization contained
in a complexly deformed isoclinal fold with an upright upper limb and an overturned lower limb hosting the main
mineralization. Nearby drilling suggests that a third upright lower limb, likely occurs beneath the currently explored
stratigraphy.
Mineralization
Mineralization occurs as stratiform semi-massive sulphide (“SMS”) to massive sulphide (“MS”) beds within primarily
graphitic schists and fine-grained quartz mica schists. The sulphide beds average 4 m in thickness but vary from less than
1 m up to as much as 18 m in thickness. The sulphide mineralization occurs within eight modelled zones lying along the
upper and lower limbs of the Arctic isoclinal anticline. The zones are all within an area of roughly 1 km2 with
mineralization extending to a depth of approximately 250 m below the surface. There are five zones of MS and SMS that
occur at specific pseudo-stratigraphic levels which make up the bulk of the Mineral Resource estimate. The other three
zones also occur at specific pseudo-stratigraphic levels, but are too discontinuous.
Unlike more typical VMS deposits, mineralization is not characterized by steep metal zonation or massive pyritic zones.
Mineralization dominantly consists of sheet-like zones of base metal sulphides with variable pyrite and only minor
zonation, usually on a small scale.
Mineralization is predominately coarse-grained sulphides comprising chalcopyrite, sphalerite, galena, tetrahedrite-
tennantite, pyrite, arsenopyrite, and pyrrhotite. Sulphides occur as disseminated (<30%), semi-massive (30 to 50%
35
sulphide) to massive (greater than 50% sulphide) layers. Trace amounts of electrum are also present. Gangue minerals
associated with the mineralized horizons include quartz, barite, white mica, chlorite, stilpnomelane, talc, calcite,
dolomite and cymrite.
Deposit Types
The mineralization at the Arctic deposit and at several other known occurrences within the Ambler Sequence stratigraphy
of the Ambler Mining District consists of Devonian age, polymetallic (zinc-copper-lead-silver-gold) VMS-like occurrences.
VMS deposits are formed by and associated with sub-marine volcanic-related hydrothermal events. These events are
related to spreading centres such as fore arc, back arc or mid-ocean ridges. VMS deposits are often stratiform
accumulations of sulphide minerals that precipitate from hydrothermal fluids on or below the seafloor. These deposits
are found in association with volcanic, volcaniclastic and/or siliciclastic rocks. They are classified by their depositional
environment and associated proportions of mafic and/or felsic igneous rocks to sedimentary rocks. There are five general
classifications (Franklin et al., 2005) based on rock type and depositional environment:
• Mafic rock dominated often with ophiolite sequences, often called Cyprus type.
• Bimodal-mafic type with up to 25% felsic volcanic rocks.
• Mafic-siliciclastic type with approximately equal parts mafic and siliciclastic rocks, which can have minor felsic
rocks and are often called Besshi type.
•
Felsic-siliciclastic type with abundant felsic rocks, less than 10% mafic rocks and shale rich.
• Bimodal-felsic type where felsic rocks are more abundant than mafic rocks with minor sedimentary rocks also
referred to as Kuroko type.
Prior to any subsequent deformation and/or metamorphism, these deposits are often bowl or mound-shaped with
stockworks and stringers of sulphide minerals found near vent zones. These types of deposit exhibit an idealized zoning
pattern as follows:
•
Pyrite and chalcopyrite near vents.
• A halo around the vents consisting of chalcopyrite, sphalerite and pyrite.
• A more distal zone of sphalerite and galena and metals such as manganese.
•
Increasing manganese with oxides such as hematite and chert more distal to the vent.
Alteration halos associated with VMS deposits often contain sericite, ankerite, chlorite, hematite and magnetite close to
the VMS with weak sericite, carbonate, zeolite, prehnite and chert more distal. These alteration assemblages and
relationships are dependent on the degree of post deposition deformation and metamorphism. A modern analogue of
this type of deposit is found around fumaroles or black smokers in association with rift zones.
In the Ambler Mining District, VMS-like mineralization occurs in the Ambler Sequence schists over a strike length of
approximately 110 km. These deposits are hosted in volcaniclastic, siliciclastic and calcareous metasedimentary rocks
interlayered with mafic and felsic metavolcanic rocks. Sulphide mineralization occurs above the mafic metavolcanic rocks
but below the Button schist, a distinctive district wide felsic unit characterized by large K-feldspar porphyroblasts after
relic phenocrysts. The presence of the mafic and felsic metavolcanic units is used as evidence to suggest formation in a
rift-related environment, possibly proximal to a continental margin. Based on these characteristics, the Arctic deposit is
similar to Kuroko-type VMS deposits.
36
Historic interpretation of the genesis of the Ambler Schist belt deposits has called for a syngenetic VMS origin with steep
thermal gradients in and around seafloor hydrothermal vents resulting in metal deposition due to the rapid cooling of
chloride-complexed base metals. A variety of VMS types have been well documented in the literature (Franklin et al.,
2005) with the Ambler Schist belt deposits most similar to deposits associated with bimodal felsic dominant volcanism
related to incipient rifting.
The majority of field observations broadly support such a scenario at the Arctic deposit and include: 1) the tectonic
setting with Devonian volcanism in an evolving continental rift; 2) the geologic setting with bimodal volcanic rocks
including pillow basalts and felsic volcanic tuffs; 3) an alteration assemblage with well-defined magnesium-rich footwall
alteration and sodium-rich hanging wall alteration; and 4) typical polymetallic base-metal mineralization with massive
and semi-massive sulphides.
A preserved sulphide-smoker occurrence has been tentatively identified near Dead Creek, northwest of the Arctic
deposit and suggests local hydrothermal venting during deposition. However, the lack of stockworks and stringer-type
mineralization at the Arctic deposit suggest that the deposit may not be a proximal vent-type VMS. Although the deposit
is stratiform in nature, it exhibits characteristics and textures common to replacement-style mineralization. At least some
of the mineralization may have formed as a diagenetic replacement.
A VMS model is considered applicable for use in exploration targeting in the Arctic Project area.
Exploration
Table 1 summarizes the exploration work conducted by NovaGold and Trilogy from 2004 to the present. Field exploration
was largely conducted during the period between 2004 to 2007 with associated engineering and characterization studies
between 2008 and 2019.
37
Table 1 - Summary of Overall Exploration Activities Targeting VMS Style Mineralization in the Ambler Sequence
Stratigraphy and the Arctic Deposit
Work Completed
Geological Mapping
-
-
-
-
-
Geophysical Surveys
SWIR Spectrometry
TDEM
Downhole EM
Collar
Photography/Topography
LiDAR Survey
Technical Studies
Geotechnical
ML/ARD
Metallurgy
Geotechnical and Hydrology
VTEM Plus (Versatile Time Domain Electromagnetic) airborne
helicopter geophysical
ZTEM (Z-Axis Tipper Electromagnetic) airborne helicopter geophysical 2019
Geochemistry
-
-
-
-
Survey
2005
2006
2007
Year
Details
Focus
2004
-
Arctic deposit surface geology
2005
2006
2015,
2016
2016
-
-
SRK
-
Ambler Sequence west of the Arctic
deposit
COU, Dead Creek, Sunshine, Red
Geotechnical Structural Mapping
Arctic deposit surface geology
2004
2005
2006
2007
2007
2019
2004 to
2011,
2018,
2019
2004,
2008
2010
2015,
2016
2004 drill
holes
Alteration characterization
Follow-up of Kennecott DIGHEM
EM survey
District targets
Arctic extensions
2 loops
13 loops
6 loops
4 drill holes Arctic deposit
400m line
spacing with
200m infill
with tie
lines 4000m
spacing
400m line
spacing with
tie lines
4000m
spacing
Ambler Mining District and Cosmos
Hills with infill over Arctic, Sunshine
and Horse-Cliff
Ambler Mining District and Cosmos
Hills with infill over Arctic, Sunshine
and Horse-Cliff
Stream silts – core area prospects
Soils – core area prospects
Stream silts – core area prospects
Soils – Arctic deposit area
-
-
-
-
DGPS
All 2004 to 2019 NovaCopper drill
holes
Resurveys
-
Historical Kennecott drill holes
Photography/topography
-
LiDAR over Arctic Deposit
2010
2011
BGC
SRK
2012
SGS
2012
BGC
Preliminary geotechnical and
hazards
Preliminary ML and ARD
Preliminary mineralogy and
metallurgy
Preliminary rock mechanics and
hydrology
38
Note: SWIR = short wave infrared; LiDAR = light detection and ranging; ML = metal leaching; BGC = BGC Engineering Inc.;
SGS = SGS Canada; ALS = ALS Metallurgy
Drilling
Drilling at the Arctic deposit and within the Ambler Mining District has been ongoing since its initial discovery in 1967.
Approximately 60,857 m of drilling was completed within the Ambler Mining District, including 42,571 m of drilling in
207 drill holes at the Arctic deposit or on potential extensions in 29 campaigns spanning 52 years. Drill programs were
completed by Kennecott and its subsidiaries, Anaconda, and Trilogy and its predecessor companies.
Core recoveries are acceptable. Geological and geotechnical logging is in line with industry generally-accepted practices.
Drill collar and downhole survey data were collected using industry-recognized instrumentation and methods at the time
the data were collected.
Between 2004 and 2005, NovaGold conducted a systematic drill core re-logging and re-sampling campaign of Kennecott
and BCMC era drill holes. NovaGold either took 1 m to 2 m samples every 10 m, or sampled entire lengths of previously
un-sampled core within a minimum of 1 m and a maximum of 3 m intervals. During the Trilogy campaigns, sample
intervals were determined by the geological relationships observed in the core and limited to a 2.5 m to 3 m maximum
length and 0.3 m minimum length. An attempt was made to terminate sample intervals at lithological and mineralization
boundaries. Sampling was generally continuous from the top to the bottom of the drill hole. When the hole was in un-
mineralized rock, the sample length was generally 3 m, whereas in mineralized units, the sample length was shortened
to 1 m to 2 m with a maximum of 2.5 m.
Gold assays were conducted using fire assay fusion followed by an atomic absorption spectroscopy finish. An additional
49-element suite was assayed by inductively coupled plasma-mass spectroscopy (ICP-MS) methodology, following a four
acid (hydrochloric, nitric, hydrofluoric, and perchloric) digestion. The copper, zinc, lead, and silver analyses were
completed by AA, following a triple acid digest, in 2004 and 2005, and by inductively coupled plasma-atomic emission
spectroscopy following a triple acid digestion from 2006 to 2019, when overlimits occurred with the ICP-MS
methodology.
Standard reference materials, blanks, duplicates, and check samples have been regularly submitted at a combined level
of 20% of sampling submissions for all NovaGold/NovaCopper/Trilogy era campaigns. BD Resource Consulting, Inc.
reviewed the QA/QC dataset and reports and found the sample insertion rate and the timeliness of results received and
reviewed meets or exceeds industry best practices.
SG measurements were conducted on 4,708 samples in the database and range from a minimum of 1.49 to a maximum
of 5.35 and average 3.04. The distribution of SG data is considered sufficient to support estimation in the resource model.
Current Mineral Resource estimates and geologic models use topography completed in 2010 by PhotoSat Inc. The
resolution of the satellite imagery used was at 0.5 m, and a 1 m contour map and digital elevation model were generated.
An aerial LiDAR survey was completed to support feasibility level resource estimation, engineering design, environmental
studies, and infrastructure layout evaluations. Agreement between surveyed drill hole collar elevations and a LiDAR
topographic surface verifies the correctness of the digital topography for use in estimation.
It was concluded that the drill database and topographic surface for the Arctic deposit is reliable and sufficient to support
the current estimate of mineral resources.
39
Sampling, Analysis and Data Verification
Sampling and Analysis
The data for the Arctic deposit were generated over three primary drilling campaigns: 1966 to 1986 when BCMC, a
subsidiary of Kennecott was the primary operator, 1998 when Kennecott resumed work after a long hiatus, and 2004 to
present under NovaGold, NovaCopper, and Trilogy.
Between 2004 and 2005, NovaGold conducted a systematic drill core re-logging and re-sampling campaign of Kennecott
and BCMC era drill holes AR-09 to AR-74. NovaGold either took 1 to 2 m samples every 10 m, or sampled entire lengths
of previously unsampled core within a minimum of 1 m and a maximum or 3 m intervals. The objective of the sampling
was to generate a full ICP geochemistry dataset for the Arctic deposit and ensure continuous sampling throughout the
deposit.
During NovaGold, NovaCopper, and Trilogy eras, samples were selected based on lithologic contacts, significant
mineralization and alteration. Drill core was sampled at no less than 30 cm and no more than 2.5 m when in un-
mineralized material, and 2 m maximum intervals when in mineralized material. All samples processed at the logging
facility at the Bornite Camp were sawn in half with one half being sent to ALS Minerals in Vancouver, BC for analysis and
the other half stored on site at the Bornite Camp. Shipment of core samples from the site occurred on a drill hole by drill
hole basis. Rice bags, containing two to four poly-bagged core samples each, were marked and labelled with the ALS
Minerals address, project and hole number, bag number, and sample numbers enclosed. Rice bags were secured with a
pre-numbered plastic security tie and a twist wire tie and then assembled into standard fish totes for transport by
chartered flights on a commercial airline to Fairbanks, where they were met by a contracted expeditor for delivery
directly to the ALS Minerals preparation facility in Fairbanks. In addition to the core, control samples are inserted into
the shipments at the approximate rate of one standard, one blank and one duplicate per 17 core samples.
Samples were logged into a tracking system on arrival at ALS Minerals, and weighed. Samples were then crushed, dried,
and a 250 g split pulverized to greater than 85% passing 75 μm.
Gold assays were determined using fire assay fusion followed by an atomic absorption spectroscopy finish. The lower
detection limit was 0.005 ppm gold; the upper limit was 1,000 ppm gold. An additional 49-element suite was assayed by
ICP-MS, following a 4-acid digestion. The copper, zinc, lead, and silver analyses were completed by AA, following a triple
acid digest, when over limit results occurred using the ICP-MS assay method.
Data Verification
Drill hole collars, topography, core logging, and database verification were completed by third party independent
contractors. Quality assurance and quality control measures have been in place on an annual basis since 2011 with full
data audits of the NovaGold era assay database including retaining independent consultant Caroline Vallat, P.Geo. of
GeoSpark Consulting Inc. (“GeoSpark”) to: 1) re-load 100% of the historical assay certificates, 2) conduct a QA/QC review
of paired historical assays and NovaGold era re-assays; 3) monitor an independent check assay program for the 2004 to
2008 and 2011-2019 drill campaigns; and 4) generate QA/QC reports for the NovaGold era 2004 to 2008 and
NovaCopper/Trilogy era 2011, 2015, 2016, 2017 and 2019 drill campaigns.
BDRC reviewed the QA/QC dataset and reports and found the sample insertion rate and the timeliness of results analysis
met or exceeded industry best practices. The QA/QC results indicate that the assay results collected by Trilogy, and
previously by NovaGold and NovaCopper, are reliable and suitable for use in the Arctic FS.
Mineral Processing and Metallurgical Testing
Since 1970, metallurgical testwork has been conducted to evaluate the ability of the Arctic deposit to produce copper,
lead and zinc concentrates. In-general, the samples tested produced similar metallurgical performances and the Arctic
Project has seen the development of a robust metal recovery process to support the current operational plans. Work
40
conducted included mineralogy and flotation testing, locked cycle tests, comminution tests, copper/lead separation
testwork, talc optimization testwork, and thickening and filtration testing.
Testwork can be broken into three key time periods:
1. Historical testwork completed prior to 2012, primarily by Kennecott Research Center in Utah, and Lakefield
Research Ltd., Lakefield, Ontario;
2. Preliminary Trilogy test work conducted at SGS Mineral Services, Vancouver (“SGS Vancouver”), in 2012 to 2015;
and
3. Detailed Trilogy test work conducted at ALS Metallurgy in Kamloops, BC (“ALS Metallurgy”) in 2015 to 2019.
In 2012, SGS Vancouver conducted a metallurgical test program to further study metallurgical responses of the samples
produced from Zones 1, 2, 3, and 5 of the Arctic deposit. The flotation test procedures used talc pre-flotation,
conventional copper-lead bulk flotation and zinc flotation, followed by copper and lead separation. In general, the 2012-
2015 test results indicated that the samples responded well to the flowsheet tested. The average results of the locked
cycle tests (without copper and lead separation) were as follows:
•
The copper recoveries to the bulk copper-lead concentrates ranged from 89 to 93% excluding the Zone 1 & 2
composite which produced a copper recovery of approximately 84%; the copper grades of the bulk concentrates
were 24 to 28%.
• Approximately 92 to 94% of the lead was recovered to the bulk copper-lead concentrates containing 9 to 13%
lead.
•
The zinc recovery was 84.2% from Composite Zone 1 & 2, 93.0% from Composite Zone 3 and 90.5% from
Composite Zone 5. On average, the zinc grades of the concentrates produced were higher than 55%, excluding
the concentrate generated from Composite Zone 1 & 2, which contained only 44.5% zinc.
• Gold and silver were predominantly recovered into the bulk copper-lead concentrates. Gold recoveries to this
concentrate ranged from 65 to 80%, and silver recoveries ranged from 80 to 86%.
Using an open circuit procedure, the copper and lead separation tests on the bulk copper–lead concentrate produced
from the locked cycle tests generated reasonable copper and lead separation. The copper concentrates produced
contained approximately 28 to 31% copper, while the grades of the lead concentrates were in the range of 41% to 67%
lead. In this testwork program, it appeared that most of the gold reported to the copper concentrate and on average the
silver was equally recovered into the copper and lead concentrates. Subsequent testwork to better define the copper
and lead separation process was conducted in 2017, including a more detailed evaluation of the precious metal
deportment in the copper and lead separation process.
Grindability testing was completed during both the SGS Vancouver and ALS Metallurgy testwork programs to support
the design and economics of efficient grinding of the Arctic materials. SAG mill test results included a single JKTech drop-
weight test and 19 SAG media competency tests using variability samples. Test results show the material is amenable to
SAG milling and is relatively soft, with a reported breakage (axb) average value of 189.7. Bond ball mill work index (BWi)
tests were completed on 44 samples and values ranged from 5.4 to 13.1 kWhr/t with an average BWi of 8.82 kWhr/t.
Abrasion index (Ai) tests were completed on five samples and values fluctuated from 0.017 to 0.072 g for the measured
samples. The data indicate that the samples are neither resistant nor abrasive to ball mill grinding. The materials are
considered to be soft or very soft in terms of grinding requirements. The grinding testwork was used to support detailed
grinding circuit design.
In 2017, ALS Metallurgy conducted detailed copper and lead separation flotation testwork using a bulk sample of copper–
lead concentrate produced from the operation of a pilot plant. This testwork confirmed high lead recoveries in locked
41
cycle testing of the copper–lead separation process and confirmed precious metal recoveries into the representative
copper and lead concentrates. This testwork indicated a clear tendency of the gold values to follow the lead concentrate,
giving it a significant gold grade and value. Detailed mineralogical analysis showed that a majority of gold values were
occurring as liberated fine-grained gold particles.
The conclusions of testwork conducted both in 2012 and 2017 indicate that the Arctic materials are well-suited to the
production of high-quality copper and zinc concentrates using flotation techniques which are industry standard. Copper
and zinc recovery data were reported in the range of 88 to 92%, which reflected the high-grade nature of the deposit as
well as the coarse-grained nature of these minerals. Grade variations within the deposit will be observed as indicated by
the grade variations observed in variability samples, however mill feed variability is expected to be limited and readily
manageable with good plant operational practices. Lead concentrates have the potential to be of good quality and can
also be impacted by zones of very high talc. Considerable care will be required to ensure maximum talc recovery to
remove talc, which has the potential to dilute lead concentrate grades. The lead concentrate is also shown to be rich in
precious metals, which has some advantages in terms of marketability of this material.
An overall metallurgical balance for the Arctic Project is summarized in Table 2. The projected metallurgical recoveries
are based on an expected average recovery over the life-of-mine (LOM), and results of metallurgical testwork conducted
in 2012 and 2017–2019.
Table 2 - Summary of Overall Metal Recovery – Arctic Project
Process stream
Process Feed
Copper Conc
Lead Conc
Zinc Conc
Process Tailings
Mass
%
Cu
%
Concentrate Grade
Zn
%
Au
g/t
Pb
%
Ag
g/t
Cu
%
Metal Recoveries
Zn
%
Au
%
Pb
%
Ag
%
100.0 2.24 0.54 3.12 0.47 34.69
6.65 30.3 0.66
6.9 55.0
0.78
4.78
1.3 0.25 59.2 0.53
87.8 0.13 0.07 0.20 0.12
—
—
—
3.4 10.9 26.4
1.6 0.76
0.4 62.1 63.1
1.8 37.3 2,806
24.5
3.4
5.4
2.81 4.95 10.7 5.56 21.6 7.11
—
8.1
2.4 79.0
2.7
—
138 89.9
2.2 90.6
Ancillary testwork was completed by third party consultants on representative concentrate samples, to provide
thickening and filtration data for the various concentrates. Settling and filtration rates were observed to be typical for
sulphide concentrates and moisture contents in final filter cakes were observed to be lower than expected.
Metallurgical testwork was completed to provide representative tailings samples for use in detailed solids settling and
compaction testwork to provide data for tailings design studies.
A detailed study of water treatment chemistry was undertaken to evaluate and confirm the option of destroying cyanide
contained in solutions from the proposed copper–lead separation process. The use of an SO2/air process in a small-scale
pilot plant demonstrated removal of 99% of the contained cyanide and supported the concept of maintaining low cyanide
concentrations within the proposed tailings pond solutions.
Mineral Resource and Mineral Reserve Estimates
Mineral Resource Estimate
Mineral resource estimates are estimated from a 3D block model based on geostatistical applications using commercial
mine planning software (MineSight v11.60-2). The block model has a nominal block size measuring 10 x 10 x 5 m and
uses data derived from 152 drill holes in the vicinity of the Arctic deposit. The resource estimate was generated using
drill hole sample assay results and the interpretation of a geological model which relates to the spatial distribution of
copper, lead, zinc, gold and silver. Interpolation characteristics were defined based on the geology, drill hole spacing,
and geostatistical analysis of the data. The effects of potentially anomalous high-grade sample data, composited to two
meter intervals, are controlled by limiting the distance of influence during block grade interpolation. The grade models
42
have been validated using a combination of visual and statistical methods. The resources were classified according to
their proximity to the sample data locations and are reported using the 2014 CIM Definition Standards. Model blocks
estimated by three or more drill holes spaced at a maximum distance of 100 m are included in the Indicated category.
Inferred blocks are within a maximum distance of 150 m from a drill hole.
The estimate of Indicated and Inferred Mineral Resources is constrained within a conceptual pit shell derived using the
projected technical and economic parameters in Table 3.
Table 3 - Parameters Used to Generate a Resource-Limiting Pit Shell
Optimization Parameters
Open Pit Mining Cost
Milling + General and Administrative (G&A) Costs
Pit Slope
Copper Price
Lead Price
Zinc Price
Gold Price
Silver Price
Metallurgical Recovery: Copper
Lead
Zinc
Gold
Silver
Note: no adjustments for mining recovery or dilution.
US$3/t
US$35/t
43 degrees
US$3.00/lb
US$0.90/lb
US$1.00/lb
US$1,300/oz
US$18/oz
92%
77%
88%
63%
56%
The pit shell was generated about copper equivalent (CuEq) grades that incorporate contributions of the five different
metals present in the deposit. The formula used to calculate copper equivalent grades is:
CuEq%= (Cu% x 0.92) + (Zn% x 0.290) + (Pb% x 0.231) + (Au g/t x 0.398) + (Ag g/t x 0.005)
The Mineral Resource estimate is listed in Table 4. Mineral Resources are reported inclusive of those Mineral Resources
that were converted to Mineral Reserves. Mineral Resources that are not Mineral Reserves do not have demonstrated
economic viability.
Table 4 - Mineral Resource Estimate for the Arctic Deposit
M
Average Grade:
tonnes Cu %
Zn%
36.0 3.07 0.73 4.23 0.63 47.6 2,441
131
3.5 1.71 0.60 2.72 0.36 28.7
Cu Mlbs
Au g/t
Ag g/t
Pb%
Pb Mlbs
Zn Mlbs
581 3,356
210
47
Contained metal:
Au koz
728
40
Ag Moz
55
3
Class
Indicated
Inferred
Notes:
(1) The Qualified Persons for the estimate are employees of SIM and BDRC. The estimate is reported using the 2014
CIM Definition Standards. The effective date of the Mineral Resource estimate is April 25, 2017. The results of
the 2019 drilling supports the current estimate of mineral resources and the inclusion of these nine new drill
holes would have no material impact on the estimate of mineral resources for the Arctic Project.
(2) Mineral Resources stated are contained within a conceptual pit shell developed using metal prices of US$3.00/lb
Cu, US$0.90/lb Pb, US$1.00/lb Zn, US$1,300/oz Au and US$18/oz Ag and metallurgical recoveries of 92% Cu,
43
77% Pb, 88% Zn, 63% Au and 56% Ag and operating costs of US$3/t mining and US$35/t process and general
and administrative costs. The assumed average pit slope angle is 43º.
(3) The base case cut-off grade is 0.5% copper equivalent: CuEq = (Cu% x 0.92) + (Zn% x 0.290) + (Pb% x 0.231) +
(Au g/t x 0.398) + (Ag g/t x 0.005).
(4) The Mineral Resource estimate is reported on a 100% basis without adjustments for metallurgical recoveries.
Trilogy holds 50% of Ambler Metals.
(5) The Mineral Resource estimate is reported inclusive of those Mineral Resources that were converted to Mineral
Reserves. Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability. An
inferred mineral resource has a lower level of confidence than that applied to an indicated mineral resource
and must not be converted to a mineral reserve.
Mineral Resources have been rounded.
Factors that may affect the Mineral Resource estimates include:
• Metal price and exchange rate assumptions.
•
•
•
Changes to the assumptions used to generate the CuEq cut-off grade.
Changes in local interpretations of mineralization geometry and continuity of mineralized zones.
Changes to geological and mineralization shapes, and geological and grade continuity assumptions.
• Density and domain assignments.
•
•
Changes to geotechnical, mining and metallurgical recovery assumptions.
Change to the input and design parameter assumptions that pertain to the conceptual pit constraining the
estimates.
• Assumptions as to concentrate marketability, payability and penalty terms.
• Assumptions as to the continued ability to access the site, retain mineral and obtain surface rights titles, obtain
environment and other regulatory permits, and maintain the social license to operate.
• Assumptions as to future site access.
There are no known factors related to environmental, permitting, legal, title, taxation, socioeconomic, marketing, or
political issues which could materially affect the Mineral Resource estimate that are not discussed in the 2020 Arctic
Report.
Mineral Reserve Estimates
Mineral Reserves were classified in accordance with the CIM Definition Standards for Mineral Resources and Mineral
Reserves (May 10, 2014). Only Mineral Resources that were classified as Measured and Indicated were given economic
attributes in the mine design and when demonstrating economic viability. Mineral Reserves for the Arctic deposit
incorporate appropriate mining dilution and mining recovery estimations for the open pit mining method.
44
Parameter
Metal Prices
Copper
Lead
Zinc
Gold
Silver
Discount Rate
Slope Angles
Sector 1 (2L-E)
Sector 2 (2L-W)
Sector 3 (2U)
Sector 4 (3)
Sector 5 (4L)
Sector 6 (4U)
Dilution
Mine Losses
Mining Cost
Base Elevation
Base Cost
Incremental Mining Cost
Uphill
Downhill
Process Costs
Operating Cost
G&A
Process Sustaining Capital
Road Toll Cost
Closure
Processing Rate
Process Recovery
Copper
Lead
Zinc
Gold
Silver
Treatment & Refining Cost
Royalties
NANA Surface Use
NANA1
Note:
Table 5 – Optimization Inputs
Unit
$/lb
$/lb
$/lb
$/oz
$/oz
%
degrees
degrees
degrees
degrees
degrees
degrees
%
%
m
$/t
$/t/5m
$/t/5m
$/t milled
$/t milled
$/t milled
$/t milled
$/t milled
Kt/d
%
%
%
%
%
—
%NSR
%NP
Value
3.00
1.00
1.10
1,300.00
18.00
8
26
40
42
30
38
43
Estimated in a block-by-
block basis
Taken into account by
block
730
2.78
0.020
0.015
15.09
6.55
1.53
4.70
1.52
10
91.2
80.0
91.0
58.9
34.9
Variable by concentrate
type/ metal
1.00
0.00
(1) NANA may elect to either (a) exercise a non-transferrable back-in-right to acquire between 16% and 25% (as
specified by NANA) of the Arctic Project; or (b) not exercise its back-in-right, and instead receive a net proceeds
royalty equal to 15% of the net proceeds realized by Ambler Metals. Upon the direction of Trilogy, the Arctic FS
45
was evaluated on a 100% basis, of which Trilogy’s share is 50%, and does not include the impact on Ambler
Metals of the NANA options, either purchasing an interest in the Arctic Project or receiving a royalty payment.
Dilution was applied to the resource model in two steps: planned dilution and contact dilution.
As the mining cost varies with depth individual blocks captured within the final pit design were tagged as either ore or
waste by applying the parameters shown in Table 5. Using the partial block percentages within the final pit design the
ore tonnage and average grades were calculated.
The Mineral Reserve estimates are shown in Table 6. Only Probable Mineral Reserves have been classified.
Table 6 – Mineral Reserve Statement
Class
Proven Mineral Reserves
Probable Mineral Reserves
Proven & Probable Mineral Reserves
Notes:
Grades
Tonnage
t x 1000 Cu (%) Zn (%) Pb (%) Au (g/t) Ag (g/t)
—
—
43,443 2.24 3.12 0.54 0.47 34.7
43,443 2.24 3.12 0.54 0.47 34.7
—
—
—
—
(1) The Qualified Person for the Mineral Reserves estimates is an employee of Wood. Mineral Reserves have an
effective date of January 31, 2020. Mineral Reserves are reported on a 100% basis. Trilogy has a 50% interest in
Ambler Metals.
(2) Mineral Reserves estimated assuming open pit mining methods and include a combination of planned and
contact dilution. Total dilution is expected to be between 30% and 35%. Pit slopes vary by sector and range from
26° to 43°. Cut-off grade is variable and ranges from US$32.83/t NSR to US$33.96/t NSR. Commodity prices used
were US$3.00/lb Cu, US$1.00/lb Pb, US$1.10/lb Zn, US$1,300/oz Au and US$18/oz Ag. Fixed process recoveries
were assumed to be 91.2% Cu, 80.0% Pb, 91.0% Zn, 58.9% Au and 80.0% Ag. Mining costs were estimated at
US$2.78/t incremented at US$0.02/t/5 m and US$0.015/t/5 m below and above 730 m elevation respectively.
Processing costs were estimated at US$29.39/t, which includes a process operating cost of US$15.09/t, general
and administrative cost of US$6.55/t, sustaining capital cost of US$1.53/t. Closure cost of US$1.52/t, and a road
toll cost of US$4.70/t. Treatment costs include US$80/t Cu concentrate, US$180/t Pb concentrate and US$200/t
Zn concentrate. Refining costs were estimated at US$0.08/lb Cu, US$10/oz Au, US$0.80/oz Ag. Transport costs
were included as US$270.38/t concentrate. There is a fixed royalty percentage of 1%.
Risks that may affect the Mineral Reserve estimates include: commodity price and exchange rate assumptions; changes
to the assumptions used to generate the NSR cut-off grades that constrains the estimate; changes in local interpretations
of mineralization geometry and continuity of mineralized zones; changes to geological and mineralization shapes, and
geological and grade continuity assumptions; density and domain assignments; changes to geotechnical and hydrological
assumptions, changes to mining and metallurgical recovery assumptions; changes to the input and design parameter
assumptions that pertain to the conceptual pit constraining the estimates; assumptions as to concentrate marketability,
payability and penalty terms; assumptions as to the continued ability to access the site, retain mineral and obtain surface
rights titles, obtain environment and other regulatory permits, and maintain the social license to operate.
There is a risk to the estimate if the Ambler Mining District Industrial Access Project road is not constructed as envisaged,
or in the time frame envisaged, or that the toll charges assumed in the 2020 Arctic Report are not the final charges levied.
Other risks include: proper management of groundwater will be important to maintaining pit slope stability; the east
wall is highly sensitive to several geotechnical parameters, and talc horizons that may not have been included in the
geological model might also affect its stability; the presence of talc layers in the rock could affect recoveries in the process
plant and therefore could be a risk to the Mineral Reserves.
46
Mining Operations
The Arctic Project is designed as a conventional truck–shovel operation assuming 144 t trucks, and 15 m3 shovels. The
pit design includes three nested phases to balance stripping requirements while satisfying the concentrator
requirements.
The design parameters include a ramp width of 28.5 m, maximum road grades of 10%, bench height of 5 m, targeted
mining width of between 70 and 100 m, berm interval variable by sector, variable slope angles by sector and a minimum
mining width of 30 m.
The smoothed final pit design contains approximately 43.4 Mt of ore and 298.3 Mt of waste for a resulting stripping ratio
of 6.9:1. Within the 43.4 Mt of ore, the average grades are forecast to be 2.24% Cu, 3.12% Zn, 0.54% Pb, 0.47 g/t Au and
34.7 g/t Ag.
The scheduling constraints set the maximum mining capacity at 36 Mt/a and the maximum process capacity at 10 kt/d.
The production schedule results in a LOM of 12 years. The mine will require three years of pre-production before the
start of operations in the processing plant.
Processing and Recovery Operations
The 10,000 t/d process plant design is conventional for the industry and will operate two 12-hour shifts per day, 365 d/a
with an overall plant availability of 92%. The process plant will produce three concentrates: 1) copper concentrate, 2)
zinc concentrate, and 3) lead concentrate. Gold and silver are expected to be payable at a smelter; silver is expected to
be payable in the copper and lead concentrates, with gold expected to be payable in the lead concentrate only.
There are several deleterious elements reporting to the concentrates at levels which would incur penalties; however,
there are no special processing provisions required to make a readily saleable concentrate.
The mill feed will be hauled from the open pit to a primary crushing facility where the material will be crushed by a jaw
crusher to a particle size of 80% passing 80 mm.
The crushed material will be ground by two stages of grinding, consisting of one SAG mill and one ball mill in closed
circuit with hydrocyclones (SAB circuit). The hydrocyclone overflow with a grind size of approximately 80% passing 70
μm will first undergo talc pre-flotation, and then be processed by conventional bulk flotation (to recover copper, lead,
and associated gold and silver), followed by zinc flotation. The bulk rougher concentrate will be cleaned and followed by
copper and lead separation to produce a lead concentrate and a copper concentrate. The final tailings from the zinc
flotation circuit will be pumped to a TMF. Copper, lead, and zinc concentrates will be thickened and pressure-filtered
before being transported by truck to a port and shipped to smelters.
Based on the mine plan developed for the Arctic FS and metallurgical testwork results, the LOM average metal recoveries
and concentrate grades will be:
•
Copper concentrate:
• Recovery: 89.9% copper; 10.9% gold; 26.4% silver
•
Copper grade: 30.3%
•
Lead concentrate:
• Recovery: 79.0% lead; 62.1% gold; 63.1% silver
•
Lead grade: 55.0%
47
•
Zinc concentrate:
• Recovery: 90.6% zinc
•
Zinc grade: 59.2%
The average annual dry concentrate production is estimated as:
•
•
•
Copper concentrate: 241,024 t/a
Lead concentrate: 28,234 t/a
Zinc concentrate 173,093 t/a
The recovery plan includes provision for reagents, and water and power requirements
Infrastructure, Permitting and Compliance Activities
Infrastructure
The Arctic Project site is a remote, greenfields site that is remote from existing infrastructure. Infrastructure that will be
required for the mining and processing operations will include:
• Open pit mine
•
•
Stockpiles and WRF
Truck workshop, truck wash, mine offices, mine dry facility and warehouse
• Administration building
• Mill dry facility
•
•
•
•
•
Plant workshop and warehouse
Primary crushing building
Fine ore stockpile building
Process plant and laboratory
Concentrate loadout building
• Reagent storage and handling building
• Raw water supply building
•
•
Tailings management facility
Surface water diversion and collection channels, culverts, and containment structures
• WRCP
• WTPs.
48
Access
The Arctic Project site will be accessed through a combination of State of Alaska-owned highways (existing), an Alaska
Industrial Development and Export Authority-owned private road (proposed) and Trilogy-owned access roads
(proposed). The AMDIAP road is proposed by AIDEA to connect the Ambler mining district to the Dalton Highway. The
AMDIAP road expected to be permitted as a private road with restricted access for industrial use. To connect the Arctic
Project site and the existing exploration camp to the proposed AMDIAP road, a 30.7 km access road (the Arctic access
road) will need to be built.
The State of Alaska-owned, public Dahl Creek airport will require upgrades to support the planned regular transportation
of crews to and from Fairbanks. The cost of these upgrades has been included in the capital cost estimate.
Power
Power generation will be by five diesel generators, producing a supply voltage of 13.8 kV. The total connected load will
be 27.1 MW with a normal running load of 16.0 MW. Diesel will be supplied via existing fuel supply networks in the
region and shipped along the AMDIAP road.
Accommodation
The Arctic Project will require three different self-contained camps, equipped with their own power and heat generation
capabilities, water treatment plant, sewage treatment plant, and garbage incinerator. The existing 90-person exploration
camp will be used to start the construction of the Arctic access road. A 185-person construction camp will be constructed
at the intersection of the AMDIAP road and Arctic access road and will be decommissioned once construction is
complete. The permanent camp will be constructed along the Arctic access road, closer to the planned processing facility.
The 400-person permanent camp will be constructed ahead of operations to support the peak accommodation
requirements during construction.
Waste Rock Facility
A large WRF will be developed north of the Arctic pit in the upper part of the Subarctic Creek valley. The WRF is be
designed to store waste rock as well as provide a buttress for the tailings containment in the adjacent footprint. The total
volume of waste rock is expected to be 146 Mm3 (298 Mt); however, there is potential for expanded volume in the waste
if placement density is <2.0 t/m3. The WRF will have a final height of 280 m to an elevation of 930 masl and is planned to
be constructed in lifts of either 5, 10 or 20 m height with catch benches every 20 m to achieve an overall slope angle of
2.7H:1V.
Most of the waste rock is anticipated to be potentially acid-generating and there will be no separation of waste based
on acid generation potential. Rather, seepage from the WRF will be collected and treated.
Overburden Stockpiles
There will also be two small overburden stockpiles to store the stripped topsoil and overburden from the TMF footprint.
The topsoil stockpile will be placed between the haul roads with capacity to store up to 325,000 m3 of material while the
overburden stockpile will be located below the lower haul road between the pit and the mill site with capacity to store
up to 2,200,000 m3.
Tailings Management Facility
The TMF will be located at the headwaters of Subarctic Creek, in the upper-most portion of the creek valley. The 58.6 ha
footprint of the TMF will be fully lined with an impermeable liner. Tailings containment will be provided by the natural
topography on the valley sides and an engineered cross valley dam that will be buttressed by the WRF constructed
immediately downstream of the TMF. A starter dam will be constructed to elevation 830 m. Three subsequent raises will
49
bring the final dam crest elevation to 890 m, which is 40 m lower than the final elevation of the WRF. The TMF is designed
to store approximately 34.5 Mm3 (37.8 Mt) of tailings plus 4.5 Mm3 of water produced over the 12-year mine life and
still provide capacity for the probable maximum flood with 2.5 m of freeboard.
Water Management
The proposed mine development is located in the valley of Subarctic Creek, a tributary to the Shungnak River. A surface
water management system will be constructed to segregate contact and non-contact water. Non-contact water will be
diverted around mine infrastructure to Subarctic Creek. A groundwater seepage monitoring and collection system will
be located down gradient of the WRF and seepage collection pond. Contact water will be conveyed to treatment facilities
prior to discharge to the receiving environment.
A collection pond (WRCP) will be located directly below the toe of the WRF and will be used to collect seepage from the
WRF, runoff from the WRF and haul road corridor area, and water pumped from the open pit.
The Arctic Project water and load balance indicates that during operations excess water from the WRCP will need to be
treated prior to discharge to the receiving environment. In the last year of operations and during closure, water from
the dewatering of the TMF will also need to be treated prior to discharge to the receiving environment.
Water Treatment Plants
A HDS lime-based neutralization and precipitation process will be used to treat effluent from the WRCP. The HDS WTP
will operate during the open water season from May through October, during operations through to post-closure.
Treated effluent will be discharged via a 12 km pipeline to the Shungnak River. Long-term water treatment at the HDS
WTP will be required in perpetuity.
A Selenium water treatment plant (SeWTP) will treat excess water in the TMF that is predicted to have elevated selenium
concentrations. The SeWTP is anticipated to commence treatment during operation in mine year 12. A portion of the
treated effluent from the HDS WTP will be combined with excess water from the TMF, and treated for selenium such
that the selenium water quality standard is met after a mixing zone in the Shungnak River. The SeWTP will cease once
the TMF is dewatered (by approximately year 15 of closure). Studies are being conducted to evaluate alternative water
management strategies and treatment methods that will not require a mixing zone in the Shugnak River.
Market Studies
Metal pricing was based on combination of two year trailing actual metal prices, market research and bank analyst
forward price projections, prepared in July 2020 by Jim Vice of StoneHouse Consulting Inc., who was retained by Trilogy.
The long-term consensus metal price assumptions selected for the Arctic FS were:
•
•
•
Copper: $3.00/lb
Zinc: $1.10/lb
Lead: $1.00/lb
• Gold: $1,300/oz
•
Silver: $18.00/oz
Smelter terms were applied for the delivery of copper, zinc and lead concentrate. It was assumed that delivery of all
concentrates would be to an East Asian smelter at currently available freight rates. Total transport costs for the
concentrate are estimated at $270.98/dmt.
50
Environmental, Permitting, Social and Closure Considerations
Environmental Considerations
The Arctic Project area includes the Ambler lowlands and Subarctic Creek within the Shungnak River drainage. A
moderate amount of baseline environmental data collection has occurred in the area including surface and groundwater
quality sampling, surface hydrology monitoring, wetlands mapping, aquatic life surveys, avian and mammal habitat
surveys, cultural resource surveys, hydrogeology studies, meteorological monitoring, and ML/ARD studies.
Permitting Considerations
Trilogy undertakes its current mineral exploration activities at the Arctic deposit under State of Alaska and Northwest
Arctic Borough (“NWAB”) permits. Trilogy is presently operating under a State of Alaska Miscellaneous Land Use Permit
that expires at the end of 2022, and a NWAB Permit that expires also expires at the end of 2022. Both permits are
renewable.
Mine development permitting will be largely driven by the underlying land ownership; regulatory authorities vary
depending on land ownership. The Arctic Project area includes patented mining claims (private land under separate
ownership by Trilogy), State of Alaska land, and NANA land (private land).
Because the Arctic Project is situated to a large extent on State land, it will be necessary to obtain a Plan of Operation
Approval (which includes the Reclamation Plan and Closure Cost Estimate) from the Alaska Department of Natural
Resources (“ADNR”). The Arctic Project will also require certificates to construct and then operate a dam(s) (tailings and
water storage) from the ADNR (Dam Safety Unit) as well as water use and discharge authorizations, an upland mining
lease and a mill site lease, as well as several minor permits including those that authorize access to construction material
sites from ADNR.
The Alaska Department of Environmental Conservation (“ADEC”) would authorize waste management under an
integrated waste management permit, air emissions during construction and then operations under an air permit, and
an Alaska Pollutant Discharge Elimination System permit for any wastewater discharges to surface waters, and a Multi-
Sector General Permit for stormwater discharges. The ADEC would also be required to review the US Army Corps of
Engineers (“USACE”) Section 404 permit to certify that it complies with Section 401 of the Clean Water Act (“CWA”).
The Alaska Department of Fish and Game would have to authorize any culverts or bridges that are required to cross fish-
bearing streams or other impacts to fish-bearing streams that result in the altering or affecting fish habitat.
U.S. Army Corps of Engineers (“USACE”) would require a CWA Section 404 permit for dredging and filling activities in
Waters of the United States including jurisdictional wetlands. The USACE Section 404 permitting action would require
the USACE to comply with the Natural Environmental Policy Act (“NEPA”) and, for a project of this magnitude, the
development of an Environmental Impact Statement is anticipated. The USACE would likely be the lead federal agency
for the NEPA process. As part of the Section 404 permitting process, the Arctic Project will have to meet USACE wetlands
guidelines to avoid, minimize and mitigate impacts to waters of the US including wetlands.
The Arctic Project will also have to obtain approval for a Master Plan from the NWAB. In addition, actions will have to be
taken to change the borough zoning for the Arctic Project area from Subsistence Conservation and General Conservation
to Resource Development and transportation.
The overall timeline required for permitting would be largely driven by the time required for the NEPA process, which is
triggered by the submission of the Section 404 permit application to the USACE. The timeline includes the development
and publication of a draft and final EIS and ends with a Record of Decision, and Section 404-permit issuance. In Alaska,
the EIS and other State and Federal permitting processes are generally coordinated so that permitting and environmental
review occurs in parallel. The NEPA process could require between two to three years to complete, and could potentially
take longer.
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Social and Community
The Arctic Project is located approximately 40 km northeast of the villages of Shungnak and Kobuk, and 64 km east-
northeast of the native village of Ambler. The population in these villages range from 151 in Kobuk (2010 Census) to 262
in Shungnak (2010 Census). Residents live a largely subsistence lifestyle with incomes supplemented by trapping, guiding,
local development projects, government aid and other work in, and outside of, the villages.
The Arctic Project has the potential to significantly improve work opportunities for village residents. Trilogy is working
directly with the villages to employ residents in the ongoing exploration program as mechanics, geotechnicians, core
cutters, administrative staff, camp-services staff, heavy equipment operators, drill helpers, and environmental
technicians. Trilogy and NANA have established a Workforce Development Committee to assist with developing a local
workforce. In addition, Trilogy has existing contracts with native-affiliated companies (such as NANA Management
Services and KUNA Engineering Inc.) that are providing camp catering and environmental services for the Arctic Project,
respectively.
Local community concerns will also be formally recognized during the development of the Arctic Project EIS. Early in the
EIS process, the lead federal permitting agency will hold scoping meetings in rural villages to hear and record the
concerns of the local communities so that the more significant of these concerns can be addressed during the
development of the EIS. In addition, the lead federal agency would have government-to-government consultations with
the Tribal Councils in each of the villages, as part of the EIS process, to discuss the Arctic Project and hear Council
concerns.
Closure Planning
Mine reclamation and closure are largely driven by State regulations that specify that a mine must be reclaimed
concurrent with mining operations to the greatest extent possible and then closed in a way that leaves the site stable in
terms of erosion and manages degradation of water quality from acid rock drainage or metal leaching on the site. A
detailed Reclamation Plan and Closure Cost Estimate will be submitted to the State agencies for review and approval in
the future, during the formal mine permitting process.
Owing to the fact that the Arctic Project is likely to have facilities on a combination of private (patented mining claims
and native land) and State land, it is likely that the Reclamation Plan will be submitted and approved as part of the plan
of operations, which is approved by the ADNR. However, since the reclamation plan must meet regulations of both ADNR
and the ADEC, both agencies will review and approve the Reclamation Plan and Closure Cost Estimate. In addition, private
land owners must formally concur with the portion of the Reclamation Plan for their lands so that it is compatible with
their intended post-mining land use.
The estimate cost of closure is based on unit rates used by SRK on other closure projects in cold environments. The
indirect costs were included as percentages of the estimated direct costs based on guidelines for Alaska (DOWL 2015).
Long-term water treatment and maintenance of certain water management facilities were calculated separately, and a
NPV is provided for the first 100 years, at a discount rate of 4.3%.
Reclamation and closure costs were estimated to be $158.2 million, in discounted 2020 US dollars. Annual
(undiscounted) costs associated with long-term closure activities and operation of the HDS WTP are estimated to be $5.1
million.
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Capital and Operating Costs
Capital Costs
The capital cost estimate has an estimated accuracy of ±15% and uses quarter 4, 2019 US dollars as the base currency.
The total estimated initial capital cost for the design, construction, installation, and commissioning of the Arctic Project
is estimated to be $905.6 million. A summary of the estimated capital cost is shown in Table 7.
Table 7 – Initial Capital Costs
Cost Type
Direct
Indirect
Project Total
Description
Mine
Crushing
Process
Tailings
On-Site Infrastructure
Off-Site Infrastructure
Direct Subtotal
Indirects
Contingency
Owners Costs
Indirect Total
US$M
280.1
28.3
116.6
70.0
109.3
53.7
658.0
130.7
94.6
23.4
248.7
906.7
The total sustaining capital cost estimate is $113.8 million for the 12-year LOM which includes equipment, tailings and
other items. Closure costs were estimated to be $205.4 million. These costs are summarized in Table 8.
Table 8 – Sustaining Capital and Closure Costs
Cost Type
Direct
Indirect
Description
Mine
Process
Tailings
On-Site Infrastructure
Indirects
Contingency
Total Sustaining Capital
Closure Costs
Operating Costs
US$M
15.1
1.3
25.1
50.4
13.8
8.0
113.8
205.4
The operating cost estimates use US dollars as the base currency and have an accuracy of ±15%. An average operating
cost was estimated for the Arctic Project based on the proposed mining schedule. These costs included mining,
processing, G&A, surface services, and road toll costs. The average LOM operating cost for the Arctic Project is estimated
to be $50.65/ t milled. The breakdown of costs in Table 9 is estimated based on the LOM average mill feed rate.
All pre-production costs have been included in capital costs.
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Table 9 – Operating Costs
LOM Average Unit
Operating Cost
Percentage of Total
($/ t milled) Annual Operating Costs
36%
36%
10%
1%
16%
100%
18.48
18.31
5.15
0.68
8.04
50.65
Description
Mining*
Processing
G&A
Surface Operations
Road Toll
Total Operating Cost
* Excludes pre-production costs
Economic Analysis
The results of this economic analysis represent forward looking information. The results depend on the inputs that are
subject to several known and unknown risks, uncertainties, and other factors that may cause actual results to differ
materially from those presented in this section. Information that is forward looking includes mineral reserve estimates,
commodity prices, the proposed mine production plan, construction schedule, projected recovery rates, proposed
capital and operating cost estimates, closure cost estimates, toll road cost estimates, and assumptions on geotechnical,
environmental, permitting, royalties, and hydrogeological information.
An economic analysis was undertaken on a 100% basis to determine the IRR, net present value and payback on initial
investment of the Arctic Project. Trilogy holds 50% of Ambler Metals. The Arctic Project consists of a three-year pre-
production construction period, followed by 12 years of production.
Ausenco developed a pre-tax cash flow model for the Arctic Project and the NPV and IRR were calculated at the beginning
of the construction period in Year -3.
The pre-tax financial model incorporated the production schedule and smelter term assumptions to produce annual
recovered payable metal, or gross revenue, in each concentrate stream by year. Off-site costs, including the applicable
refining and treatment costs, penalties, concentrate transportation charges, marketing and representation fees, and
royalties were then deducted from gross revenue to determine the NSR. The operating cash flow was then produced by
deducting annual mining, processing, G&A, surface services, and road toll charges from the NSR. Initial and sustaining
capital was deducted from the operating cash flow in the years they occur, to determine the net cash flow before taxes.
Initial capital cost includes all estimated expenditures in the construction period, from Year -3 to Year -1 inclusive. First
production occurs at the beginning of Year 1. Sustaining capital expenditure includes all capital expenditures purchased
after first production, including mine closure and rehabilitation. The model includes an allocation of a 1% NSR
attributable to NANA.
The pre-tax financial results are:
•
•
•
30.8% IRR
$1,550.9 million NPV at an 8% discount rate
2.4 year payback period, on the initial capital costs of $905.6 million
• Undiscounted pre-tax cashflow of $3,768.0 million over LOM
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The following tax regimes were incorporated in the post-tax analysis: US Federal Income Tax, Alaska State Income Tax,
and Alaska Mining License Tax. Taxes are calculated based on currently enacted United States and State of Alaska tax
laws and regulations, including the US Federal enactment of the Tax Cuts & Jobs Act on December 22, 2017. At the base
case metal prices used for this study, the total estimated taxes payable on the Arctic Project profits are $924.7 million
over the 12-year mine life.
The post-tax financial results are:
•
•
•
27.1% IRR
$1,134.7 million NPV at an 8% discount rate
2.6 year payback period, on the initial capital costs of $905.6 million
• Undiscounted post-tax cashflow of $ 2,843.4 million over LOM
Sensitivity Analysis
Ausenco investigated the sensitivity of the Arctic Project’s pre-tax NPV, and IRR to several project variables, including
metal prices (copper, zinc, lead, gold, silver), capital costs, and operating costs (onsite and offsite). The metal grade is
not presented in these sensitivity graphs because the impacts of changes in the metal grade mirror the impact of changes
in metal price.
The Arctic Project’s pre-tax NPV at an 8% discount rate is most sensitive to changes in copper price, followed by zinc
price, off-site operating costs, on-site operating costs, capital costs, silver price, gold price, and lead price.
The Arctic Project’s pre-tax IRR is most sensitive to changes in copper price and capital cost, followed by zinc price and
off-site operating costs, and in then decreasing order, on-site operating costs, silver price, gold price, and lead price
Exploration, Development, and Production
Constraints and Interfaces
The Arctic Project will be an integrated development with several consultants contributing to the overall design process.
Specialist contractors will most likely be engaged for specific packages, such as the Arctic access road, and the
construction camps, generally on a “design and construct” basis.
It is essential that these parties work together to ensure data being used is both current and meaningful. Data transfer
between parties shall be strictly controlled and in accordance with Document Control protocols.
The early design interfaces for the Arctic Project will include at least:
• Mine development
• Waste Rock placement and Tails Dam
•
Project water management and treatment
• Arctic Access Road design and construction, in particular the pioneer road necessary to allow earliest possible
access to the Mine pre-assembly construction site
•
Pioneer, Construction and Permanent Camps.
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The Interface Management procedures will be developed to ensure services at the battery limits are clearly defined and
understood by all parties affected.
Key Project Milestones
Key project milestones will be developed once the project is committed to construction and the required permits are in
hand.
The Mine requires nominally two years of pre-strip operations, tailings pond starter dam development and water
accumulation before actual production mining operations can commence.
For that pre-strip work to start, the Arctic access road from the AMDIAP intersection to the mine site will have to be
constructed to at least a pioneer road condition that will allow the mine fleet and the support facilities to be delivered,
built and made operational.
Tailings pond construction must be to a height to allow natural collection of water in quantities that will allow plant
operations to commence.
Proven Technology
The Arctic Project will utilize proven technology and equipment that can be built, operated and maintained under
adverse weather conditions
The Design Criteria, Technical Specifications and Data sheets shall reflect the location, the environmental and initial
logistics constraints that may affect the procurement and construction effort.
Engineering, Procurement and Construction Management Approach
Two engineering, procurement and construction management (“EPCM”) strategies have been identified that are
structured to account for the abnormally long pre-strip mining operation. The first option is the basis for the capital and
operating cost estimate.
Early Engineering Only with 2-Stage Procurement
There is a need to establish the mine facilities and assemble the Mine Fleet in time to allow the pre-strip operation to
start some two years before the Process Plant receives its first ore. This means that there will be a significant amount of
detailed engineering requiring completion well in advance of the time required for conventional engineering,
procurement and construction of just the process plant and supporting infrastructure. This has been assessed as
requiring detailed engineering to start some four years before the process plant starts production.
In particular, the pioneer access road design and contracts and civil design for the Mine Support facilities will be required
early in the schedule. By default, the rest of the civil design would need to attach to that early works for simple plant
layout and construction coordination purposes. For that to occur the plant layout will be required to be frozen a lot
earlier than normal. That in turn is dependent on sizing and selection of the major process equipment items and the
receipt of certified vendor data.
Effectively, the detailed design phase will need to follow the conventional approach and run its course but started at a
time that meets the early works schedule requirements. Everything other than the mine support facilities will be
designed some two years in advance of when it is needed.
With the early equipment order placement, the supply phase could become inordinately long, extending over three years
in most cases, when in fact the equipment is not likely to be needed until the last eighteen months prior to plant start-
up.
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An unorthodox but proven option to this extended design, supply and construction schedule is to have the EPCM
Contractor buy the major equipment in two steps:
•
•
Step 1: Buy only the vendor certified engineering data to allow detailed engineering to continue to completion
but hold the manufacturing functions until later in the overall schedule, effectively a delay of around twelve to
fifteen months.
Step 2: Based on agreed vendor manufacturing durations, apply a “late” release of the equipment for
manufacture with deliveries effectively becoming a “Just-in Time” logistics operation.
This strategy provides the following advantages:
•
•
•
•
•
Engineering can start and continue to completion using critical certified vendor data without the need for an
extended “standby” involvement.
Procurement functions can work in parallel with the engineering group with no disconnect between the two
disciplines.
The Procurement team can generally disband early in the schedule with just key personnel retained to provide
continuity of support.
The expediting team can mobilize later in the schedule to drive manufacture and delivery in a concerted
campaign.
Equipment deliveries can be orchestrated to suit the conditions at the time with everything consolidated into a
transit compound for coordinated shipping to site.
• Reduced cashflow demands.
The disadvantages with this approach are:
•
The vendors need to be clearly briefed as to what the system means to their manufacturing schedule.
• A payments formula needs to be in place to account for a delayed delivery strategy.
•
Some vendors have difficulty in determining just what their actual engineering costs are.
Early EPCM Leading to Plant Care and Maintenance
Under this approach, the EPCM would work to conventional design and construction schedule, starting to suit the mine
access requirements but following on to completion without interruption. That would bring the total process plant and
supporting infrastructure to a mechanical completion condition nominally twelve to fifteen months before it is able to
start work.
The plant could not be commissioned through lack of ore and would have to be placed into care and maintenance mode
until ore became available. This has an inherent advantage in that if the pre-strip operation was completed earlier than
scheduled, and sufficient water is accumulated, the plant operations would be able to take advantage of the fact the
plant was already mechanically complete. The care and maintenance requirements in that environment for that duration
will require close assessment.
Interpretations and Conclusions
The Arctic deposit will be mined at an annual rate of 36 Mt/a, with an overall stripping ratio of 6.9:1. Ore will be processed
by conventional methods to annually produce 241,024 tonnes of copper, 28,234 tonnes of lead, and 173,093 tonnes of
57
zinc, all in concentrates for provision to third party refiners. Waste and tailings materials will be stored in surface facilities,
which will be closed and reclaimed at the end of the mine; contact water will be treated and discharged to the
environment throughout the life of mine. Precious metals attendant with the concentrates will be largely payable. While
there are expected to be several deleterious elements in the concentrates at levels that may incur penalties, there are
no special processing requirements.
Under the assumptions presented in the 2020 Arctic Report, the Arctic Project shows positive economics.
The financial analysis excludes consideration of the NANA Agreement, whereby NANA has the right, following a
construction decision, to elect to purchase a 16% to 25% direct interest in the Arctic Project or, alternatively, to receive
a 15% Net Proceeds Royalty.
The financial analysis excludes consideration of the new joint venture formed between South32 and Trilogy.
The cost assumptions for the AMDIAP road are estimates provided by Trilogy. There is a risk to the capital and operating
cost estimates, the financial analysis, and the Mineral Reserves if the toll road is not built in the time frame required for
the Arctic Project, or if the toll charges are significantly different from what was assumed.
In terms of project execution, the mine requires nominally two years of pre-strip operations, tailings pond starter dam
development and water accumulation before actual production mining operations can commence.
For that pre-strip work to start, the Arctic access road from the AMDIAP intersection to the mine site will have to be
constructed to at least a pioneer road condition that will allow the mine fleet and the support facilities to be delivered,
built and made operational.
Recommendations
A single-phase work program is recommended, which will include: additional drilling program to upgrade a portion of
the indicated resource to measured resource; drill and blast study; geotechnical investigations and studies; further
geohazards assessment; site specific seismic hazard assessment; updating of hydrogeological models and groundwater
management plans; optimization of the plant and related service facilities and evaluation of the power supply;
examination of water management, water treatment, WRF and TMF designs; baseline studies and environmental
permitting activities; and additional metallurgical testwork. The budget for this work is estimated at about $7.0 million.
Bornite Project, Ambler District, Alaska
Bornite Project
Except as otherwise stated, the scientific and technical information relating to the Bornite Project contained in this Form
10-K is derived from the technical report entitled “NI 43-101 Technical Report on the Bornite Project, Northwest Alaska,
USA” dated February 11, 2022, with an effective date of December 31, 2021, prepared by SIM Geological Inc., Bruce M.
Davis and International Metallurgical & Environmental Inc. (the “2021 Bornite Report”). The information regarding the
Bornite Project is based on assumptions, qualifications and procedures which are not fully described herein. Reference
should be made to the full text of the 2021 Bornite Report which has been filed with certain Canadian securities
regulatory authorities pursuant to NI 43-101 and is available for review on SEDAR at www.sedar.com and on EDGAR at
www.sec.gov.
Bornite Project - Property Description and Location
The property is located in the Ambler Mining District of the southern Brooks Range in the Northwest Artic Borough
(“NWAB”) of Alaska. The property is located in Ambler River A-2 quadrangle, Kateel River Meridian T 19N, R 9E, sections
4, 5, 8 and 9. The Bornite Project is located 248 km east of the town of Kotzebue, 19 km north of the village of Kobuk,
275 km west of the Dalton Highway (an all-weather state maintained public road) at geographic coordinates N67.07°
58
latitude and W156.94° longitude (Universal Transverse Mercator North American Datum 83, Zone 4W coordinates
7440449N, 589811E).
At the time of the formation of Ambler Metals, Trilogy transferred its Alaskan assets, including the Bornite Project, to
the newly formed joint venture. The mineral resource estimates with respect to the Bornite Project are reported on a
100% basis, of which Trilogy’s share is 50%.
Bornite Project - Accessibility, Climate, Local Resources, Infrastructure, and Physiography
Primary access to the Bornite Project is by air, using both fixed wing aircraft and helicopters. There are four well
maintained, approximately 1,500 m-long gravel airstrips located near the property, capable of accommodating charter
fixed wing aircraft. These airstrips are located 40 km west at Ambler, 23 km southwest at Shungnak, 19 km south at
Kobuk, and 15 km south at Dahl Creek. There is daily commercial air service from Kotzebue to the village of Kobuk, the
closest community to the property. During the summer months, the Dahl Creek airstrip is suitable for larger aircraft, such
as C-130 and DC-6. There is also a 700 m airstrip located at the Bornite Camp. The airstrip at Bornite is suited to smaller
aircraft, which support the Bornite Camp with personnel and supplies.
There is no direct water access to the property. During spring runoff, river access is possible by barge from Kotzebue
Sound to Ambler, Shungnak, and Kobuk via the Kobuk River.
A two-lane, two-wheel drive gravel road links the Bornite Project’s main camp to the 1,525 m Dahl Creek airstrip and
village of Kobuk.
The climate in the region is typical of a sub-arctic environment. Exploration is generally conducted from late May until
late September. Weather conditions on the Bornite Project can vary significantly from year to year and can change
suddenly. During the summer exploration season, average maximum temperatures range from 10°C to 20°C, while
average lows range from -2°C to 7°C. By early October, unpredictable weather limits safe helicopter travel to the
property. During winter months, the property can be accessed by snow machine, track vehicle, or fixed-wing aircraft.
Winter temperatures are routinely below -25°C and can exceed -50°C. Annual precipitation in the region averages 395
mm with the most rainfall occurring from June through September, and the most snowfall occurring from November
through January.
Drilling and mapping programs are seasonal and have been supported out of the main Bornite Camp. The main Bornite
Camp facilities are located on Ruby Creek on the northern edge of the Cosmos Hills. The camp provides office space and
accommodations for the geologists, drillers, pilots, and support staff. There were four two-person cabins installed by
NANA prior to our tenure. The 85-person capacity Bornite Camp consists of 35 structures most of which are metal-
framed, insulated tents that house multi-occupancy sleeping accommodations, kitchen facilities, dining facilities, medical
services, showers, washrooms, laundry, administrative offices, and a recreation tent. Early 1960s-era legacy structures
constructed by Kennecott to support Bornite Shaft sinking are used for equipment maintenance, storage, and sleeping
cabins. Core is logged in two, metal-clad buildings: one from the early 1970s and one 30 m x 9 m structure that was built
in 2011. Electricity is generated at site by one 275 kW primary and one 300 kW backup diesel-powered generator.
Potable water is sourced from a permitted well. Solid waste disposal is accomplished by a combination of diesel-fired
incineration and permitted landfill placement. The primary camp’s domestic wastewater is treated in a packaged
bioreactor-style treatment plant before it is discharged. Wastewater from a small portion of the camp is treated in a
conventional septic system.
The Bornite Project is located on Ruby Creek on the northern edge of the Cosmos Hills. The Cosmos Hills are part of the
southern flank of the Brooks Range in Northwest Alaska. Topography in the area is moderately rugged. Maximum relief
in the Cosmos Hills is approximately 1,000 masl with an average of 600 masl. Talus covers the upper portions of the hills;
glacial and fluvial sediments occupy valleys. The Kobuk Valley is located at the transition between boreal forest and Arctic
tundra. Spruce, birch, and poplar are found in portions of the valley, with a ground cover of lichens (reindeer moss).
Willow and alder thickets and isolated cottonwoods follow drainages, and alpine tundra is found at higher elevations.
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Tussock tundra and low, heath-type vegetation covers most of the valley floor. Patches of permafrost exist on the
property. Wildlife in the property area is typical of Arctic and Subarctic fauna. Larger animals include caribou, moose,
Dall sheep, bears (grizzly and black), wolves, wolverines, coyotes, and foxes. Fish species include salmon, sheefish, arctic
char, and arctic grayling. The Kobuk River, which briefly enters the Upper Kobuk Mineral Projects on its southwest corner,
is a significant salmon spawning river. The caribou on the property belong to the Western Arctic herd that migrates twice
a year – south in August, from their summer range north of the Brooks Range, and north in March from their winter
range along the Buckland River.
Bornite Project - History
Kennecott and Bear Creek Mining Tenure
Regional exploration began in the early 1900s when gold prospectors noted copper occurrences in the hills north of
Kobuk, Alaska. In 1947, local prospector Rhinehart “Rhiny” Berg along with various partners traversing in the area located
outcropping mineralization along Ruby Creek (Bornite) on the north side of the Cosmos Hills. They subsequently staked
claims over the Ruby Creek showings and constructed an airstrip for access. In 1957, Bear Creek Mining Company
(“BCMC”), Kennecott's exploration subsidiary, optioned the property from Berg. Exploration drilling in 1961 and 1962
culminated in the discovery of the “No.1 Ore Body” where drill hole RC-34 cut 20 m of 24% Cu (the “No.1 Ore Body” is a
historical term used by BCMC that does not connote economic viability in the present context; it is convenient to
continue to use the term to describe exploration work and historical mineral resource estimation in a specific area that
was previously referred to as the Ruby Creek zone and is now referred to simply as the Ruby Zone). The discovery of the
“No.1 Ore Body” led to the development of an exploration shaft in 1965 through 1966. The shaft, which reached a depth
of 328 m, encountered a significant watercourse and was flooded near completion depth. The shaft was subsequently
dewatered and an exploration drift was developed to provide access for sampling and mapping, and to accommodate
underground drilling to further delineate mineralization. A total of 59 underground holes were drilled before the shaft
was allowed to re-flood. The discovery of the Arctic Project in 1965 prompted a hiatus in exploration at Bornite, and only
limited drilling occurred up until 1976.
In the late 1990s, Kennecott resumed its evaluation of the Bornite deposit and the mineralization in the Cosmos Hills
with an intensive soil, stream, and rock chip geochemical sampling program using a 32-element ICP analyses. Grid soil
sampling yielded 765 samples. Ridge and spur sampling resulted in an additional 850 soil samples in the following year.
Skeletonized core samples (85 samples) from key historical drill holes were also analyzed using 32 element ICP analytical
methods. Geochemical sampling identified multiple areas of elevated copper and zinc in the Bornite region.
Kennecott completed numerous geophysical surveys as an integral part of exploration throughout its tenure on the
property. Various reports, notes, figures, and data files stored in Kennecott’s Salt Lake City exploration office indicated
that geophysical work included, but was not limited to, the following:
• Airborne magnetic and EM surveys (fixed-wing INPUT) (1950s)
• Gravity, single point (“SP”), audio-frequency magnetotelluric (“AMT”), EM, borehole and surface IP/resistivity
surveys (1960s)
• Gravity, airborne magnetic, and controlled-source audio-frequency (“CSAMT”) surveys (1990s)
We have minimal information or documentation associated with these geophysical surveys conducted prior to the 1990s.
Where data are available in these earlier surveys, the lack of details in data acquisition, coordinate systems, and data
reduction procedures limit their usefulness. The only complete geophysical report that is available concerns down-hole
IP/resistivity results. Most notable is the 1996 Bouguer gravity survey from the Bornite deposit into the Ambler Lowlands.
The Bornite deposit itself is seen as a significant 3 milligal anomaly. Numerous 2 milligal to > 6 milligal anomalies occur
under cover in the Ambler Lowlands and near the Aurora Mountain and Pardner Hill occurrences. In addition to the
60
geophysical surveys conducted by Kennecott, the ADNR completed an aeromagnetic survey of portions of the Ambler
mining district in 1974-1975.
Several studies have been undertaken reviewing the geology and geochemistry of the Bornite deposit. Most notable is
Murray Hitzman’s PhD dissertation at Stanford University and Don Runnel’s PhD dissertation at Harvard University.
Bernstein and Cox reported on mineralization of the “No. 1 Ore Body” in a 1986 paper in Economic Geology. In addition
to the historical work, Ty Connor at the Colorado School of Mines recently completed a Master’s thesis which reported
on the timing of alteration and mineralization at the Bornite deposit.
Kennecott conducted two technical reviews of the groundwater conditions and a summary of the findings related to the
flooding of the exploration shaft. In 1961, Kennecott collected 32 coarse reject samples from five drill holes to support
preliminary metallurgical test work at Bornite. Samples targeted high-grade (> 10%) copper mineralization from the
Upper Reef at the Ruby Zone.
Bornite Project - Geological Setting and Mineralization
The Bornite Project is located within the Arctic Alaska Terrane, a sequence of mostly Paleozoic continental margin rocks
that make up the Brooks Range and North Slope of Alaska. It is within the Phyllite Belt geologic subdivision, which
together with the higher-metamorphic grade Schist Belt, stretches almost the entire length of the southern Brooks Range
and is considered to represent the hinterland of the Jura-Cretaceous Brookian orogeny. The southern margin of the
Phyllite Belt is marked by mélange and low-angle faults associated with the Kobuk River fault zone, while the northern
boundary is thought to be gradational with the higher-grade metamorphic rocks of the Schist Belt.
The geology of the Bornite resource area is composed of alternating inervals of carbonate rocks (limestone and
dolostone) and calcareous phyllite. Limestone transitions laterally into dolostone near zones of mineralization and is
considered to be hydrothermally altered. Spatial relationships and petrographic work suggest that dolomitization is
genetically related to early stages of the copper mineralizing system; however, recent re-logging has questioned this
view.
In 2015, Trilogy made an effort to improve the understanding of the distribution and nature of the various lithologic units
and their context within a sedimentary depositional model. A new interpreation, based on lithogeochemical signatures
of the various units along with their historical visual logging, concluded that stacked debris flows composed of basal non-
argillaceous channelized breccias were overlain by upward fining upward sequence of increasingly argillaceous-rich
breccias capped by high calcium (Ca) phyllites, confined laterally in channels between either massive or thin-bedded
platform carbonates.
Two mineralized stacked debrite sequences were named the Lower and Upper Reefs. The Upper Reef grades upward
into argillaceous limestones instead of discrete high Ca phyllites indicating a waning of debris supply. Based on this
interpretation, a series of individual debrites were identified and modeled. In contrast to the locally derived high-Ca
phyllites of the debrite- dominated Bornite carbonate sequence, low calcium (Ca) phyllites are abundant in the
allochthonous Anirak schist (quartz phyllite) and the The Beaver Creek phyllite that underlie and overlie the Bornite
carbonate sequence, respectively. In addition to depositional lithostratigraphy, a crosscutting mineralized breccia called
the “P-Breccia” has been identified in and around the South Reef deposit. Though poorly defined due to lack of drilling
in the area, the P-Breccia zone—which contains excellent copper grade—lies at the apex of the Iron Mountain
discontinuity. Although clearly post-deformational, it remains unclear whether the P-Breccia is a post-depositional
structural, hydrothermal or solution-collapse breccia.
A short lithostratigraphic project carried out during the 2021 field season updated the depositional environment of the
Bornite succession; this resulted in significant differences when compared to the previously summarized interpretations.
The Bornite succession is now understood to be a carbonate slope deposit characterized by (a) lime mudstone, exported
to the slope from a contemporaneous shallow-marine carbonate factory, variably mixed with and interlayered with (b)
“background” argillaceous sediment that is locally carbonaceous. Superimposed on these calcite-dominated “normal”
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slope strata are locally impressive thicknesses of dolomudstone-clast conglomerate (formerly “breccia”). Slope limestone
and siltstone-mudstone were originally centimetrically to decimetrically bedded, but are commonly ductilely deformed,
producing the variably limey ‘phyllites’ that exhibit sub-mm scale foliation. In contrast, the dolostone-clast
conglomerates and individual dolomudstone clasts responded brittlely to Brookian stress and show no significant
shearing or plastic deformation. Instead, plastic deformation is largely restricted to the various phyllitic layers around
the peripheries of the dolostone bodies.
Structural fabrics observed on the property include rare bedding and two distinct metamorphic foliations. Bedding (S0)
can be measured only rarely where phyllite and carbonate are interbedded and it is unclear to what extent it is
transposed. The pervasive foliation (S1) is often mylonitic and exhibits both an imprinted stretching lineation and
preferred “top” direction. It is easily measured in phyllites and is commonly reflected by colour banding and/or
stylolamination (flaggy habit in outcrop) of the carbonates. Core logging shows that S1 is folded gently on the 10 m scale
and locally tightly folded at the decimetre scale. S2 axial planar cleavage is locally developed in decimetre scale folds of
S1. Both S1 and S2 foliations are considered to be Jurassic in age. Some limestone outcrops, in particular the “TBLS” on
Aurora Mountain and the marbles at the base of Coral Hill, also exhibit a stretching lineation. Core-logging shows that
S1 is folded gently on a 10 m scale and locally tightly folded at the decimetre scale forming a common S2 axial planar
cleavage. S2 is folded gently on a 10 m scale forming an upright mesoscale S3 foliation. S1 and S3 foliations are thought
to be Jura-Cretaceous in age.
Structural mapping in 2021 recognized a well-developed stretching lineation (i.e., L-tectonite) in the carbonate-phyllite
rocks, typically oriented shallowly towards the NNE or SSW. “Top” direction indicate movement to the S or SSW along
the vector of the stretching lineation. Moreover, new mapping indicates that stiff Bornite rocks, in particular metric to
hectametric dolostone bodies, have been boudinaged into 3-D ellipsoids. Slip is accommodated by phyllites., Additional
mapping is required to determine whether such a tectonic style plays a role in the distribution of copper mineralization.
Owing to their greater rigidity, dolostone bodies of secondary dolostone manifest strain differently: tan hydrothermal
dolostone tends to be broken into centimetre- to decimetre-scale blocks, whereas grey (diagenetic?) dolostone may
exhibit unusual, contorted forms, some resembling human fingers or swan necks, as evident in outcrop. Dolostone is
rarely cut by plastically deformed zones and instead forms metric to hectametric lenses (“augens”) encased in plastically
deformed calc-mylonite and calc-phyllite. This deformation, presumably a product of the Jura-Cretaceous Brookian
orogeny, complicates sedimentological interpretations.
Mineralization at Bornite forms tabular mineralized zones that coalesce into crudely stratabound bodies hosted in
dolostone conglomerate/breccia. Two significant dolomitic horizons that host mineralization have been identified by
drilling and include: 1) the Lower Reef, a substantial 100 m to 300 m thick dolomitized zone lying immediately above the
basal quartz phyllite unit of the Anirak schist and 2) the Upper Reef, a 100 m to 150 m thick dolomite horizon that sits
roughly 300 m higher in the section. The Lower Reef is separated from the Upper Reef by a zone of ductilely sheared
phyllites up to 60 m thick.
The Lower Reef dolostone outcrops along the southern margin of the Ruby Zone and is spatially extensive throughout
the deposit area. It hosts a significant portion of the shallow mineral resources in the Ruby Zone as well as higher grade
mineral resources down-dip and to the northeast in the South Reef area. The Upper Reef hosts relatively high-grade
mineral resources to the north in the Ruby Zone. The Upper Reef appears to lie at an important NE-trending facies
transition to the NW of the main drilled area and appears to be at least partially thrust over the Lower Reef stratigraphy
to the southeast.
Drill results from 2013 show dolomitization and copper mineralization in the Upper and Lower Reefs coalescing into a
single unit along the northern limits of current exploration. The NE- trending Ruby Zone and South Reef areas also
coalesce into a roughly 1,000 m wide zone of >200 m thick dolomite containing significant copper mineralization dipping
north at roughly 5-10 degrees. The 2017 drill results show that the mineralized dolomite interval continues for at least
another 700m down-dip to the northeast from mineralization in the Upper and Lower Reefs.
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Bornite Project – Mineralization
Copper mineralization at Bornite comprises chalcopyrite, bornite, and chalcocite distributed in stacked, roughly
stratiform zones exploiting favourable lithologies (conglomerate/berccia) within the Bornite sequence. Mineralization
occurs, in order of increasing grade, as disseminations, irregular and discontinuous stringer-style veining, breccia matrix
replacement, and stratabound massive sulphides. The distribution of copper minerals is zoned around the bottom-centre
of each zone of mineralization, with bornite-chalcocite-chalcopyrite at the core progressing outward to a fringe of
chalcopyrite-pyrite. Additional volumetrically minor copper minerals include carrollite, digenite, tennantite-tetrahedrite,
and covellite. Stringer pyrite and locally significant sphalerite occur above and around the copper zones and locally
massive pyrite and sparse pyrrhotite are associated with siderite alteration below copper mineralization in the Lower
Reef.
Significant cobalt mineralization is found accompanying bornite-chalcocite mineralization. Cobalt often occurs with high-
grade copper as carrollite (Co2CuS4) and as cobaltiferous rims on recrystallized pyrite grains. Preliminary
geometallurgical work by Trilogy showed that cobalt occurs primarily as cobaltiferious pyrite (approximately 80% of he
contained cobalt) and within other cobalt minerals such as carrollite, and cobaltite (CoAsS).
Some appreciable silver values are also found at Bornite, particularly in association with bornite-rich mineralization in
the South Reef area and Ruby Zones.
Bornite Project – Exploration
Exploration in and around the Bornite Project by Kennecott from 1957 to 1998 is summarized above. In addition to the
extensive drilling completed during the more than 40-year tenure of Kennecott in the district, Kennecott completed
widespread surface geochemical sampling, regional and property scale mapping, and numerous geophysical surveys
employing a wide variety of techniques. The majority of this data has been acquired by us and forms the basis for
renewed exploration that targets Bornite-style mineralization in the Bornite carbonate sequence.
NovaGold as the precursor company to us began to actively pursue an agreement to explore the Bornite Project with
NANA in 2005 resulting in an initial airborne geophysical survey in 2006. Negotiations on the consolidation and
exploration of the entire Ambler district continued for the next several years culminating in the NANA Agreement in
October 2011.
With the NANA Agreement approaching completion, NovaGold initiated work in 2010 to begin to characterize the
exploration potential and depositional controls by re-logging and re-analyzing select drill holes with a Niton portable x-
ray fluorescence (“XRF”) to determine geochemical variability. In 2011, NovaGold began an initial drill program to verify
the historical database and exploration potential and conducted additional geophysical surveys to provide better
targeting tools for continued exploration in the district. In 2012, we expanded the IP geophysical coverage completing a
major district-wide survey that targeted the prospective Bornite Carbonate sequence. Subsequent resource drilling
between 2011 and 2013 based on the exploration targeting is discussed in the “Bornite Project - Mineral Resource
Estimates” section below.
2006 NovaGold
In 2006, NovaGold contracted Fugro Airborne Surveys to complete a detailed helicopter DIGHEM (frequency-domain
EM), magnetic and radiometric survey of the Cosmos Hills. The survey covered a rectangular block approximately 18 km
by 49 km which totaled 2,852-line km. The survey was flown at 300 m line spacing with a line direction of N20E. The
DIGHEM helicopter survey system produced detailed profile data of magnetics, EM responses and radiometrics (total
count, uranium, thorium, and potassium) and was processed into maps of magnetics, discrete EM anomalies, EM
apparent resistivity, and radiometric responses.
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2010 NovaGold
In 2010, in anticipation of completing the NANA Agreement, NANA granted NovaGold permission to begin low level
exploration at Bornite; this consisted of re-logging and re-analyzing select drill holes using a Niton portable XRF. In
addition to the 2010 re-logging effort, NovaGold contracted a consulting geophysicist, Lou O'Connor, to compile a unified
airborne magnetic map for the Ambler mining district from Kennecott, Alaska DNR, and NovaGold airborne geophysical
surveys.
2011 NovaGold
In 2011, NovaGold contracted Zonge International Inc. (“Zonge”) to conduct both dipole-dipole complex resistivity
induced polarization (“CRIP”) and natural source audio-magnetotelluric (“NSAMT”) surveys over the northern end of
Bornite to develop tools for additional exploration targeting under cover to the north.
NSAMT data were acquired along two lines totaling 5.15 line-km; one line is oriented generally north-south through the
centre of the survey area and the other being the southernmost east-west line in the survey area. CRIP data were
acquired on five lines: four east-west lines and one north-south line, for a total coverage of 14.1 line-km and 79 collected
CRIP stations. The initial objective of the survey was to investigate geological structures and the distribution of sulphides
possibly associated with copper mineralization.
Results from the paired surveys show that wide-spaced dipole-dipole resistivity is the most effective technique to directly
target the mineralization package. Broad, low-resistivity anomalies reflecting pyrite haloes and mineralization appear to
define the limits of the fluid package. Well-defined and often very strong chargeability anomalies are also present, but
appear in part to be masked by phyllitic units which also have strong chargeability signatures. NSAMT shows similar
resistivity features as the IP, but these are less well resolved.
2012 NovaCopper
In light of the success of the 2011 geophysical program, we contracted Zonge to conduct a major district-wide
dipole/dipole IP survey, a down-hole IP radial array survey in the South Reef area, and an extensive physical property
characterization study of the various lithologies to better interpret the existing historical geophysical data.
Zonge completed 48 line km of 200 m dipole/dipole IP during 2012, infilling and expanding on the 2011 survey, and
stretching across the most prospective part of the outcropping permissive Bornite carbonate sequence. The results show
a well-defined low resistivity area associated with mineralization and variable IP signatures attributed both to
mineralization and the overlying Beaver Creek phyllite. Numerous target areas occur in the immediate Bornite area with
lesser targets occurring in the Aurora Mountain and Pardner Hill areas and in the far east of the survey area.
During the 2012 drill program at South Reef, a single drill hole was targeted on a low resistivity area approximately 500
m to 600 m southeast of the South Reef mineralization trend. Although the drill hole intersected some dolomite
alteration in the appropriate stratigraphy, no significant sulphides were encountered.
In addition to the extensive ground IP survey, Zonge also completed 9 km of down-hole radial IP using an electrode
placed in drill hole RC12-0197 to further delineate the trend and potential in and around the South Reef. Extensive
physical property data including resistivity, chargeability, specific gravity, and magnetic susceptibility were captured for
use in modelling the existing ground IP and gravity surveys, and the airborne EM and magnetic surveys.
In addition to geophysical focused exploration, a district wide geologic map was compiled integrating Kennecott’s 1970’s
mapping of the Cosmos Hills with selective Trilogy mapping in 2012.
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2013 NovaCopper
The emphasis of the 2013 program was to further validate and refine the 2012 geologic map of the Cosmos Hills. A deep
penetrating soil and vegetation geochemical orientation survey was completed over the South Reef deposit, using
various partial leaches and pH methods. The initial, approximately 1 km, test lines suggest a good response for several
of the partial leaches of the soils but little response in the vegetative samples. Follow-up is warranted to the north of the
deposit into the Ambler Lowlands.
2014 NovaCopper
During 2014, exploration work was limited to a re-logging and re-sampling program of historical Kennecott drill core.
2015 NovaCopper
As a follow-up to the 2013 field program, a deep penetrating soil and vegetation geochemical survey was extended north
of the deposit into the Ambler Lowlands. Trilogy geologists completed a lithogeochemical desktop study and a
comprehensive update to the 3D lithology model.
2017 Trilogy
The 2017 field program extended the 2013 and 2015 deep penetrating geochemical (“DPG”) soil survey another 500m
to the northeast. The 2013 soil line was extended 1,500m to the east to test over the covered projection of the Two
Grey Hills carbonate section. The 3D lithology model was updated to incorporate the 2017 drill program results, which
are described in Section 10,
Trilogy also completed a close spaced ground gravity survey over a 2 km by 4km grid with 100 m station spacing over the
resource area and extending northeast over the 2017 drill target area. The complete Bouguer anomaly residual plot
(removes a strong decreasing to the northeast regional gradient) shows good correlation with the Lower Reef
mineralization that outcrops on surface with the gravity high gradually decreasing down-dip to the northeast.
As part of the overall gravity program, Mira Geosciences created a petrophysical model for the Bornite deposit that
synthesized the expected gravity response on surface (forward model) for the 2017 gravity stations. This forward model
matches very closely with the actual survey data over the deposit area, but diverges on the south end where the expected
response of gravity low is actually a strong gravity high that may reflect shallow mineralization up-dip along the South
Reef trend. Mira also completed a geologically constrained 3D inversion using the 2017 gravity data. Two areas of
anomalously high densities (>2.9 g/cc) were identified. The first area extends up to 750m to the east-northeast of RC17-
0239, which was one of the more successful holes in 2017 and is coincident with the Iron Mountain structure. The second
anomaly is located just above the Anirak contact (Lower Reef) to the west of the 2017 target area and 700m to the north
of the closest drill hole (RC-53), which is weakly mineralized along that horizon. This area falls along the northwest-
southeast high grade thickness trend.
2018 Trilogy
During the 2018 field season, Trilogy Metals carried out additional DPG and a 2D seismic survey at Bornite. In addition,
geophysical and geochemical data from Bornite were studied using existing datasets. Soil sampling was completed on
the westerly extension of the DPG lines on the northwestern portion of the Bornite deposit. DPG was used to assist with
outlining the edges of the deposit as well as to corroborate gravity anomalies defined during the 2017 field season.
A 2D seismic survey was completed by HiSeis (3D seismic imaging) in June 2018. This 2D acquisition program was
designed to test whether seismic reflection was suitable for the Bornite deposit and to understand the logistics of any
future 3D seismic survey over the project area. Two 6 km 2D seismic lines, a dip line and a strike line, were acquired with
a total of 792 unique source locations to attempt to image hanging wall and footwall shears; other faults and shears;
folding of stratigraphy; internal (within Bornite sequence) phyllite units; facies changes within the dolostones; and direct
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detection of massive sulphide mineralization; and any alteration associated with mineralization. Acquisition of this 2D
dataset used 500 g seismic charges as a means of producing seismic energy. All seismic vibrations were measured on a
“fully active” line of 1,189 geophone receivers which provided up to 6 km of offset on either side of the source using the
Aries I seismic acquisition system. Supporting rock property data were acquired from drill core stored in Fairbanks,
Alaska.
Mira Geosciences completed a 3D inversion model of the 100 m spaced ground gravity data that were collected over the
Bornite deposit during the 2017 exploration season. Using geology to constrain the model, three areas of anomalously
higher gravity were defined. Unfortunately, none of these intervals were properly tested in 2017 with two holes, those
at Anomaly “B” and “C”, ending above the gravity anomalies. Two of the three identified anomalies from the 2017
inversion modelling changed in size and relative orientation with the updated geologic model. Anomaly B, which
stretches to the northwest from hole RC17-0238 decreased in extent, likely the result of a thicker-than-previously-
modelled Upper Reef carbonate section in RC17-0238. Anomaly C is much broader and less defined, indicating that it
may be the result of underestimating the SG in the lithology model (incorrect interpretation). This anomaly remains
untested with the failures of drill holes RC17-0242 and RC18-0245 and should be redrilled in the future. Anomaly A is
relatively unchanged and remains coincident with the Iron Mountain structure. Holes RC18-0246, RC18-0249, and RC18-
0250 tested the southwest edge of the anomaly where it joins the South Reef trend. Hole RC18-0250 suggests that
mineralization wanes to the east, though this hole may have just missed mineralization controlled by the Iron Mountain
structure. The northeast extent of this anomaly is still considered a viable exploration target.
South32 completed a QA/QC review, lithogeochemical-alteration assessment, and a vectoring/targeting exercise on
downhole geochemical data on the Bornite deposit. The purpose of this exercise was to use downhole analyses to assess
the geology, alteration, and mineralogy of the deposit to vector towards mineralization. The Bornite sequence can be
classified into three geochemical groups including: 1) very low immobiles; 2) low immobiles; and 3) higher immobiles.
The latter was then subdivided into five groups based on Al, Cr, and V concentrations. The “very low” and “low immobile”
groups are predominately limestones and dolomites (including breccias), whereas increasing Al in “higher immobiles”
represent the increasingly argillaceous/micaceous units (phyllites). High Al samples in the lower Bornite sequence can
be discriminated from those in the upper sequence based on high Ni:Cu ratios. In the South Reef area, lithogeochemistry
supported Trilogy Metals’ geologic model, identified the lower, central and upper Bornite sequence units and
distinguished many of the logged phyllites from breccias. The results support Trilogy Metals’ interpretation that the Ruby
Zone in the Lower Reef is hosted in units corresponding to the South Reef central sequence.
2019 Trilogy
In 2019, Trilogy Metals contracted Geotech Ltd. (Geotech) of Aurora, Ontario to complete VTEM Plus (versatile time
domain electromagnetic) and ZTEM (z-axis tipper electromagnetic) airborne helicopter geophysical surveys over the
Cosmos Hills and the Ambler VMS belt. Magnetics were measured using a cesium vapour sensor, while radiometrics was
not collected due to snow cover.
The VTEM survey was flown along 200 m spaced lines oriented northwest-southeast over the entire Bornite carbonate
sequence north of the Cosmos Arch (which hosts the Bornite deposit), with additional lines at 100 m spacing directly
above the Bornite resource. A second set of perpendicular lines (southwest-northeast) were flown at 200 m spacing over
just the general Bornite area. Tie lines at ~4,000 m spacing were flown perpendicular to the EM flight lines to provide
control for the magnetic survey.
The VTEM results from the Bornite sequence are complex and appear to be mostly reflecting bedrock lithologies (the
graphitic phyllites). The conductive plates that were modelled are generally coincident with the interpreted phyllite units,
as are the apparent anomalies tested by holes RC19-0263 and RC19-0266.
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2020 Ambler Metals
Trilogy Metals and South32 decided not to proceed with the 2020 exploration program due to the coronavirus (COVID-
19) pandemic. The Bornite geologic model was updated using the 2019 drill program results. The Irish Centre for
Research in Applied Geosciences initiated a machine-learning geochemical modelling project to help define the controls
on high-grade copper mineralization.
2021 Ambler Metals
During the 2021 field season, the understanding of the Bornite deposit and the potential for additional deposits was
advanced with a new interpretation of the carbonate sequence at Bornite and an improved structural understanding of
the Cosmos Hills. Dr. Elizabeth Turner, specialist in carbonate geology from Laurentian University, re-logged two
fences/sections of drill holes, E-W and N-S, through the Bornite deposit, to identify, distinguish and correlate lithofacies
within the Bornite sequence and to identify and distinguish different types/ages of dolomitization, including, if possible,
their relation to mineralization.
Turner describes the Bornite sequence as a tectonized ”normal” carbonate slope deposit that consists of calcitic material
(lime mud) derived from a nearby shallow-marine source area, interlayered with variable amounts of ”background”
terrigenous mud (argillaceous proportion increases with distance downslope). The observed sequence includes massive
lime mudstone, thin-bedded argillaceous lime mudstone, lime mudstone centimetrically interbedded with terrigenous
mudstone, calcareous siltstone, and limestone-clast slope conglomerates. Brookian deformation strained these
argillaceous
limestone slope deposits to varying degrees producing phyllites and recrystallized, strained
limestones/marbles.
Importantly, superimposed on the active limestone slope system is the local presence of dolostone-clast conglomerate.
Dolostone clasts are equant and irregular; predominantly dolomudstone (locally with fossil fragments) and are likely
derived from subaqueous horst blocks of pre-existing older dolostone and shed into the slope limestone system. The
fault scarp(s) that shed dolostone clasts were probably part of a seafloor paleotopographic system that developed during
regional extension and associated fault-mediated syn-depositional subsidence.
Also initiated in 2021 was structural mapping around Pardner Hill and Aurora Mountain by Dr. Jason Price. Initial results
indicate: (1) Large carbonate bodies, such as Pardner Hill, Shield Mountain, and probably also Aurora Mountain, are fault
klippen in allochthonous contact with the structurally subjacent Anirak schist; (2) Dolostone bodies are typically
boudinaged forming metric to hectametric 3-D ellipsoids encased in ductilely deformed phyllites and, in some places,
calc-mylonites (limestone protolith); (3) Top-South (to SSW) deformation at a number of outcrops in the Cosmos Hills
suggest that this entire structural “block” may have been juxtaposed southward from the position of the Ambler
Lowlands or, potentially, from off the top of the Ambler Highlands (Arctic area) during exhumation that was part of the
Brookian orogeny; (4) the fault contact with the overlying Beaver Creek phyllite is likely a low-angle normal fault that
cuts out of the Bornite deposit to the southeast where Beaver Creek is in structural contact with Anirak schist.
Bornite Project – Drilling
From 1957 to 2019, a total of 273 holes targeted the Bornite deposit during 24 different campaigns; 222 surface core
holes and 51 underground core holes were drilled, totalling 106,406 m. All of the drill campaigns prior to 2011 were
completed by Kennecott or its exploration subsidiary, BCMC, and the drill campaigns since 2011 were completed by
NovaGold (2011), NovaCopper (2012 and 2013) or Trilogy.
In the summer of 2017, Trilogy Metals initiated eleven holes, but four were abandoned due to drilling problems. The
seven remaining drill holes stepped-out to the north for distances between 250 m to 400 m from the previous drill holes;
these were distances considered too far to support the estimation of mineral resources at that time.
From 1957 to 1976, Kennecott used drilling contractor Sprague and Henwood, a Pennsylvania-based drilling company.
Kennecott’s 1997 program (three drill holes) was completed by Tonto Drilling Services, Inc. (a NANA-Dynatec company).
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The 2011 through to 2013 NovaGold/Trilogy Metals programs used Boart Longyear Company as the drill contractor. The
2017 program used Tuuq drilling, a NANA company, who sub-contracted Major Drilling. The 2018 program used both
Major and Tuuq as the primary drill contactors and the 2019 program used Major as the primary contractor.
In the initial years of drilling at Bornite, Kennecott relied on AX diameter core (1.1875 in or 30.2 mm diameter), but, as
drilling migrated towards deeper targets, a change to BX diameter core (1.625 in or 41.3 mm diameter) was implemented
to help limit deviation. From 1966 to 1967, drilling activity at Bornite moved underground and EX diameter core (0.845
in or 21.5 mm diameter) was implemented to define the Ruby Upper Reef zone “No.1 Ore Body”. In 1968, drilling activity
moved back to the surface and from 1968 to 1972, BX diameter core was most commonly drilled. In later years, core size
increased to NX (2.125 in or 54.0 mm diameter) and finally, in 2011, core size increased to NQ (1.874 in or 47.6 mm
diameter) and HQ (2.5 in or 63.5 mm diameter). Over the years, progressively larger diameter drill rods have been used
in an effort to minimize drill hole deviation.
There is only limited information with respect to the specific drill core handling procedures used by Kennecott during its
tenure at the Bornite deposit. All of the drill data collected during the Kennecott drilling programs (1958 to 1997) were
logged on paper drill logs, and copies were stored in the Kennecott office in Salt Lake City, Utah. Electronic, scanned
copies of the paper logs, in PDF format, are held by Trilogy. Drill core was sawed or split in half with a splitter, half was
submitted to various assay labs and the remainder was stored in the Kennecott core storage facility at the Bornite
deposit. In 1995, Kennecott converted the drill assay data, geologic core logs and the down-hole collar survey data into
an electronic format. In 2009, NovaGold geologists verified the geologic data from the original paper logs against the
Kennecott electronic format and then merged the data into a MicrosoftTM SQL database. Sampling of drill core by
Kennecott and BCMC focused primarily on the moderate to high grade mineralized zones. Intervals of visible sulphide
mineralization containing roughly >0.5% to 1% Cu were selected for analysis by Union Assay Office Inc. of Salt Lake City,
Utah. This approach left numerous intervals containing weak to moderate copper mineralization, un-sampled in the
historical drill core. During the 2012 exploration program, we began sampling a portion of this remaining drill core in
select holes in the South Reef area. Trilogy extended this sampling program to the Ruby Zone in 2013 and 2014.
Throughout our tenure at Bornite, the following core handling procedures have been implemented (including programs
conducted by NovaGold and NovaCopper). Core is slung by helicopter, or transported by truck or ATV, from the drill rig
to the core-logging facility. Upon delivery, geologists and geotechnicians open and inspect the core boxes for any
irregularities. They first mark the location of each drilling block on the core box, and then convert footages on the blocks
into metric equivalents. Geotechnicians or geologists measure the intervals (or “from/to”) for each box of core and
include this information, together with the drill hole ID and box number, on a metal tag stapled to the end of each box.
Geotechnicians then measure the core to calculate percent recovery and rock quality designation (“RQD”). RQD is the
sum of the total length of all pieces of core in a run over 12 cm. The total length of core in each run is measured and
compared to the corresponding run length to determine percent recovery. Core is then logged with lithology and visual
alteration features captured on observed interval breaks. Mineralization data, including sulphide species and abundance
(recorded as percent), and gangue and vein mineralogy are collected for each sample interval with an average interval
of approximately 2 m. Structural data is collected as point data. Geologists then mark sample intervals to indicate each
lithology or other geologically appropriate intervals. Sample intervals of core are typically between 1 m and 3 m in length
but are not to exceed 3 m long. Occasionally, if warranted by the need for better resolution of geology or mineralization,
smaller sample intervals have been used. Geologists staple sample tags on the core boxes at the start of each sample
interval and mark the core itself with a wax pencil to designate sample intervals. This sampling approach is considered
sound and appropriate for this style of mineralization and alteration. Drill core is digitally photographed prior to
sampling. Drill core is cut in half using diamond core saws. Specific attention to core orientation is maintained during
core sawing to ensure that representative samples are obtained. One-half of the core is retained in the core box for
storage on site, or at our Fairbanks warehouse, and the other half is bagged and labeled for analysis. Samples are selected
for specific gravity measurements.
In 2013 and 2014, 33 historical drill holes and 37 historical drill holes, respectively, in the Ruby Zone were re-logged, re-
sampled and re-assayed as these holes had previously only been selectively sampled by Kennecott. Entire holes were re-
logged using Trilogy protocols discussed above. Samples were submitted either as half-core, where previously sampled,
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or whole core where un-sampled (to ensure that a sufficient volume of material was provided for analysis). Sample
intervals were matched to historical intervals whenever possible or selected to reflect Trilogy sampling procedures
described above. The objectives of the re-assay/re-logging program were threefold: 1) to implement a QA/QC program
on intervals previously sampled by Kennecott in order to confirm the validity of its results; 2) to identify additional lower
grade (0.2%-0.5% Cu), which was not previously sampled; and 3) to provide additional multi-element ICP data to assist
in the geologic interpretation of the deposit.
Bornite Project - Sample Preparation, Analyses and Security
Sample preparation, analytical lab accreditation and security measures taken during historical Kennecott and BCMC
programs are unknown to us; however, we are not aware of any reason to suspect that any of these samples have been
tampered with. The 2011 to 2013 and 2017 samples were either in the custody of NovaGold or Trilogy personnel or the
assay laboratories at all times, and the chain of custody of the samples is well documented.
Once drill core was sawed in half, one half was retained for future reference and the other half was sent to ALS Minerals
(formerly ALS Chemex) in Vancouver, BC for analyses. Core samples were shipped from the Bornite Camp when backhaul
capacity was available on the chartered aircraft; this was generally five to six days a week. Rice bags, containing two to
four individual poly-bagged core samples, were marked and labeled with the ALS Minerals address, project name
(Bornite), drill hole number, bag number, and the enclosed sample numbers. Rice bags were secured with a pre-
numbered plastic security tie, assembled into loads for transport by chartered flights on a commercial airline to
Fairbanks, Alaska, and delivered directly to the ALS Minerals preparation facility by a contracted expeditor. Core samples
were also inserted into these shipments at the rate of one standard, one blank and one duplicate per 17 core samples.
Samples were logged into a tracking system on arrival at ALS Minerals, and weighed. Samples were then crushed, dried,
and a 250 g split was pulverized to greater than 85% passing 75 μm.
Copper and cobalt data were derived using an additional 48-element suite assayed by inductively coupled plasma-mass
(ICP-MS) and atomic emission spectroscopy (ICP-AES) methodologies, following a four-acid digestion. Over limit (>1.0%)
copper and cobalt analyses were completed by atomic absorption (AA), following a four-acid digestion. In 2011 and 2012,
gold assays were determined using fire analysis followed by an atomic absorption spectroscopy (AAS) finish. Gold was
not analyzed in 2013 or 2014. The lower detection limit was 0.005 ppm Au; the upper limit was 10 ppm Au.
ALS Minerals has attained International Organization for Standardization (ISO) 9001:2000 registration. In addition, the
ALS Minerals laboratory in Vancouver is accredited to ISO 17025 by Standards Council of Canada for a number of specific
test procedures including fire assay of gold by AA, ICP and gravimetric finish, multi-element ICP and AA assays for silver,
copper, lead and zinc. Trilogy has no relationship with any of the primary or check assay labs used on the Bornite Project.
In 2012, 2013, 2014, and 2017 through to 2019, Trilogy Metals staff performed continuous validation of the drill data
during the logging process and after the field program was complete (West, 2013; Morris, 2014). Trilogy Metals also
retained independent consultant Caroline Vallat, P.Geo. of GeoSpark Consulting Inc. (GeoSpark) to import digital drill
data to the master database and conduct QA/QC checks upon import; conduct a QA/QC review of paired historical assays
and Trilogy Metals 2012, 2013 and 2014 re-assays; monitor an independent check assay program for the 2012, 2013 and
2014 campaigns; and generate a QA/QC report for each of the drilling campaigns conducted in 2012, 2013, 2014, 2017,
2018 and 2019, including a 2017 review of the cobalt data.
Bornite Project - Mineral Resource Estimates
We have filed several previous NI 43-101 Technical Reports on the Bornite Project dated March 18, 2014, February 5,
2013, July 18, 2012, April 19, 2016 and July 20, 2018. The effective date of this resource is December 31, 2021. These
discussions of underground and surface mining parameters are used solely for the purpose of testing the “reasonable
prospects for economic extraction” and do not represent an attempt to estimate mineral reserves. No mineral reserves
were calculated for the Bornite Project. These preliminary evaluations are used to assist with the preparation of a Mineral
Resource Statement and to select appropriate reporting assumptions.
69
In the opinion of the QPs, the mineral resource evaluation reported herein is a sound representation of the copper and
cobalt mineral resources for the Bornite Project at the current level of sampling. The mineral resources were estimated
in conformity with generally accepted CIM Estimation of Mineral Resources and Mineral Reserves Best Practice Guidelines
(November 2019) and are reported in accordance with the Canadian Securities Administrators’ NI 43-101. Mineral
resources are not mineral reserves and do not have demonstrated economic viability. There is no certainty that all or
any part of the mineral resource will be converted into a mineral reserve. The QPs audited the database used to estimate
the Bornite Project mineral resource, and the QPs are of the opinion that the current drilling information is sufficiently
reliable to confidently interpret the boundaries for copper and cobalt mineralization, and the assay data are sufficiently
reliable to support mineral resource estimation.
In the summer of 2017, seven holes were drilled that tested the down-dip continuity of the northern part of the Bornite
deposit. These drill holes successfully intersected the mineralized target horizon, but the spacing of these holes was
considered too far apart to support the generation of additional mineral resource estimates at that time, and as a result,
the estimate of copper mineral resources remained unchanged in the June 2018 report from those reported in the
previous technical report dated April 2016, and the June 2018 technical report included an estimate of cobalt mineral
resources.
In the summer of 2018, Trilogy Metals conducted a drilling program on the Bornite deposit that included the completion
of 12 holes that infilled gaps in previous drilling in the northern, down-dip part of the deposit as well as in the central
area between the Ruby Zone and South Reef area.
In the summer of 2019, another drilling program was conducted on the Property comprising eight holes that tested the
continuity of the mineralization within the Bornite deposit and two holes that tested exploration targets located about
1 km south and southeast of the deposit.
From 2011 through 2017, Trilogy Metals implemented an expanded program of re-sampling and re-assaying for an
extended suite of elements, including cobalt. Analyses of these additional elements were continued on samples collected
during the 2018 and 2019 drilling programs, and once again, estimates of both copper and cobalt mineral resources are
included in this report.
The Bornite Project database comprises a total of 273 diamond drill (core) holes totalling 106,406 m; 203 holes target
the Ruby Zone to the west and 58 holes target the South Reef area to the east. The remaining 12 holes in the database
are exploratory in nature and test for satellite mineralization proximal to the Bornite deposit or represent holes that
encountered problems and were therefore abandoned. The database contains a total of 39,740 samples that were
analyzed for copper content and 34,177 that were analyzed for cobalt content. Most holes drilled by Trilogy, plus a few
select historical holes drilled by Kennecott, contain additional analyses for elements such as zinc, lead, gold, silver, and
cobalt; at this time, only copper and cobalt show any significant economic potential, and the others were excluded from
the estimation of mineral resources.
During the 2012, 2013 and 2014 field seasons, Trilogy collected samples from drill hole intervals that Kennecott never
sampled. It is assumed that Kennecott did not sample these intervals because, visually, they did not exhibit the presence
of high-grade copper mineralization (amenable to underground mining). In previous mineral resource estimates, these
un-sampled intervals were assigned a default grade of 0% Cu. At this current stage, the majority of the core drilled by
Kennecott has been sampled and analyzed for copper content. The sampling and assaying for cobalt is less extensive.
Where assay data are not available, these intervals are assigned a zero grade for copper (0% Cu) when the host rocks are
phyllite, or they left as “missing” when the host rocks are carbonates. No adjustments were made to intervals where
cobalt grades are missing, and mineral resource estimates are estimated using the available sample data. Individual
sample intervals range from 3 cm to 39.58 m long and average 2.09 m.
Drill hole spacing at the Ruby Zone varies from approximately 10 m to 20 m for underground holes and 50 m to 100 m
or more for holes drilled from surface. All holes testing the South Reef area are collared from surface and typically
intersect mineralization at approximately 100 m to 200 m spacing.
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Specific gravity (SG) measurements were conducted on 7,476 samples in the database and range from a minimum of
2.12 to a maximum of 5.20 and average 2.89. The distribution of SG data is considered sufficient to support block model
estimation.
Drill core recovery was recorded for approximately one half of the drill holes at the Ruby Zone and in essentially all of
the South Reef drill holes. Overall, core recoveries are considered to be very good with an average of 86% for the Project.
Only 8% of samples have recoveries ≤ 50%, and approximately 85% of samples have core recoveries ≥ 75%. There is no
apparent correlation between copper grade and drill core recovery. There were no adjustments or omissions to the
mineral resource database in response to drill core recoveries. Trilogy provided a topographic digital terrain surface
derived from a 2010 PhotoSat 1 m resolution model. Drill hole collar locations, surveyed using a differential GPS,
correlate very well with the local, digital terrain (topographic) surface.
The geologic model interpreted for the Bornite deposit consists primarily of a series of inter-bedded carbonate and
phyllitic rocks that dip gently to the north and overlay a quartz-phyllite footwall. Copper and associated cobalt
mineralization occurs primarily as massive, semi-massive, stringer, veinlet and disseminated accumulations of
chalcopyrite, bornite and chalcocite in dolomitized portions of the sedimentary host rocks. Cobalt minerals such as
carrolite and cobaltiferous pyrite tend to be associated with the copper mineralization. The geologic model comprises
18 individual phyllite domains and 16 separate carbonate domains plus a series of separate domains representing the
hanging wall (Beaver Creek phyllite), the footwall (quartz-phyllite Anirak schist), and the overlying overburden. Some of
the phyllite and carbonate units are continuous across the entire deposit area and others “pinch out” and are more
localized.
The parts of the deposit with the highest grades occur within areas where semi-massive and massive sulphides are
present. The density of drilling is insufficient in most areas to allow for the interpretation of these massive sulphide
domains, and a probability shell approach is used to identify areas where higher grade mineralization is likely to occur.
Two probability shells were generated: one at a threshold of 2% Cu and another at a threshold of 0.2% Cu. The 2% Cu
shell generally correlates with the presence of massive and semi-massive zones of bornite and chalcopyrite
mineralization, and the 0.2% Cu shell correlates with the visual presence of chalcopyrite mineralization. Cobalt
mineralization is strongly associated with both sets of copper mineralization. The higher grade shell occurs mainly in the
South Reef area and is based primarily on visual observations of the distribution of sample data suggesting that a
relatively continuous zone of higher grade copper mineralization occurs above a threshold grade of 2% Cu. Note:
Approximately 90% of the sample data in the South Reef area is below 2% Cu and 10% of the data is greater than 2% Cu.
A relatively small (>2%) copper probability shell is also generated in the Upper Reef area of the Ruby Zone.
Approximately one half of the samples in the carbonate domains have copper grades above the lower grade threshold
of 0.2% copper. This limit roughly segregates areas of “mineralized” versus “unmineralized” (including cobalt) rocks and
is still below the anticipated cut-off grade of the mineral resource, ensuring that sufficient internal dilution is retained in
the mineral resource model. There are also areas where the phyllite domains contain appreciable copper or cobalt grades
(above the 0.2% copper threshold), but these tend to be rare and localized occurrences.
Indicator values are assigned to 2 m composites at the grade thresholds described here, and indicator variograms are
produced. Probability values are estimated in model blocks using ordinary kriging; the vertical range and locations are
controlled dynamically using elevations relative to the trend planes described previously. A series of shells are generated
at varying probability thresholds and are then compared to the distribution of the underlying sample data. The higher
grade shell represents areas where there is greater than a 30% probability that the grade will be more than 2% Cu. The
lower grade shell envelopes areas where there is a greater than 50% probability that the grade will exceed 0.2% Cu.
At this stage of project evaluation, copper is the main economic contributor at Bornite, and it can be assumed that cobalt
will act as a secondary metal or byproduct. Therefore, reasonable prospects for eventual economic extraction only
address the copper content in the deposit, and the available cobalt is reported based on a copper cut-off grade threshold.
It is very rare that appreciable cobalt grades occur where there is no associated copper mineralization. The Bornite
71
deposit comprises several zones of relatively continuous moderate- to high-grade copper mineralization that extends
from surface to depths of more than 800 m below surface. The deposit is potentially amenable to a combination of open
pit and underground extraction methods. The “reasonable prospects for eventual economic extraction” requirement
was tested using a pit shell based on a series of technical and economic assumptions considered appropriate for a deposit
of this type, scale and location.
A pit shell was generated in the area of the Ruby Zone that extends to a depth of approximately 500 m below surface
and contains a total of 1.01 billion tonnes. As stated previously, it is assumed that extraction from the Bornite deposit is
based on the copper content in the rocks and that cobalt would be a secondary contributor to the potential economic
viability of the deposit. As a result, both copper and cobalt mineral resource estimates are defined based on a copper
cut-off grade threshold. Mineral resource estimates are reported based at two cut-off grades: 0.5% Cu for material that
is amenable to open pit extraction and 1.5% Cu for mineral resources that occur below the pit shell. The cut-off grade of
mineral resources amenable to underground extraction is based on an underground mining cost of US$65/tonne.
Mineral resources below the open pit shell are separated into two separate areas to highlight that the underground
mineral resources in the South Reef area are much thicker and higher grade than those present in the area of the Ruby
Zone.
Based on the drilling information to date, the South Reef underground resource occurs in a relatively continuous zone,
measuring approximately 1,100 m north-south by 400 m east-west, that dips at about -25 degrees to the north and is
located between 400 m and 1,000 m below surface. The true thickness of the underground mineral resource at South
Reef is variable from 5 m to more than 40 m in some areas and averages about 15 m to 20 m thick. The underground
resources at the Ruby Zone tend to be lower grade, narrower and more patchy or discontinuous in nature, with average
true thicknesses typically ranging from 5 m to 10 m in most areas. Mineral resources located below the open pit shell
exclude zones of mineralization that are above the base case cut-off grade of 1.5% Cu but are considered too small
and/or isolated to be considered economically viable. The resulting continuity of grade and thickness of mineralization
included in the estimate of mineral resources below the pit shell exhibits reasonable prospects of eventual economic
extraction using underground mining methods such as a combination of longhole stoping and cut-and-fill mining.
Bornite Project - Mineral Resource Statement
Mineral Resources are classified in accordance with the CIM Definition Standards for Mineral Resources and Mineral
Reserves (May 2014).
Table 10: Indicated Resource Estimate for the Bornite Project
See “Cautionary Note to United States Investors”. This section uses the term “indicated resources”. We advise United
States investors that these terms are not recognized by the SEC. United States investors are cautioned not to assume
that estimates of indicated mineral resources are economically minable or will be upgraded into measured mineral
resources. See “Risk Factors” and “Cautionary Note to United States Investors”.
Estimate of Copper Mineral Resources for the Bornite Project - Indicated
Class
Type/Area
Indicated
In-Pit(1)
Cut-off
(Cu %)
0.5
Tonnes
(million)
41.7
Average
Grade
Cu (%)
1.04
Contained Metal
Cu (Mlbs)
955
1. These resource estimates have been prepared in accordance with NI 43-101 and the CIM Definition Standards.
See “Risk Factors” and “Cautionary Note to United States Investors.”
72
2. Mineral resources stated as contained within a pit shell developed using a metal price of US$3.50/lb Cu, mining
costs of US$3/tonne, milling costs of US$11/tonne, G&A cost of US$5/tonne, 87% metallurgical recoveries and
an average pit slope of 43 degrees. Underground mining cost is US$65/tonne.
3. Mineral Resources are not Mineral Reserves and do not have demonstrated economic viability. There is no
certainty that all or any part of the Mineral Resources will be converted into Mineral Reserves.
4. Rounding as required by reporting guidelines may result in apparent summation differences between tonnes,
grade and con-tained metal content.
5. Tonnage and grade measurements are in metric units. Contained copper are reported as imperial pounds.
6. All amounts are stated in U.S. dollars unless otherwise noted.
7. Mineral resources are reported on a 100% basis. Following the formation of Ambler Metals, Trilogy and South32
each own 50% of the Bornite Project.
Table 11: Inferred Resource Estimate for the Bornite Project
See “Cautionary Note to United States Investors”. This section uses the term “inferred resources”. We advise United
States investors that these terms are not recognized by the SEC. The estimation of inferred resources involves far greater
uncertainty as to their existence and economic viability than the estimation of other categories of resources. See “Risk
Factors” and “Cautionary Note to United States Investors”.
Estimate of Copper Mineral Resources – Inferred
Class
Inferred
Type/Area
In-Pit(1)
Below-Pit
South Reef
Below-Pit
Ruby Zone
Total Inferred
Cut-off
(Cu %)
0.5
1.5
1.5
Tonnes
(million)
93.9
Average Grade
Cu (%)
0.98
Contained Metal
Cu (Mlbs)
2034
35.3
15.0
144.1
3.39
1.98
1.68
2639
653
5326
1. These resource estimates have been prepared in accordance with NI 43-101 and the CIM Definition Standards.
See “Risk Factors” and “Cautionary Note to United States Investors.”
2. Mineral resources stated as contained within a pit shell developed using a metal price of US$3.50/lb Cu, mining
costs of US$3/tonne, milling costs of US$11/tonne, G&A cost of US$5/tonne, 87% metallurgical recoveries and
an average pit slope of 43 degrees. Underground mining cost is US$65/tonne.
3. Mineral Resources are not Mineral Reserves and do not have demonstrated economic viability. There is no
certainty that all or any part of the Mineral Resources will be converted into Mineral Reserves.
4. Rounding as required by reporting guidelines may result in apparent summation differences between tonnes,
grade and con-tained metal content.
5. Tonnage and grade measurements are in metric units. Contained copper are reported as imperial pounds.
6. All amounts are stated in U.S. dollars unless otherwise noted.
73
7. Mineral resources are reported on a 100% basis. Following the formation of Ambler Metals, Trilogy and South32
each own 50% of the Bornite Project.
8.
It is reasonably expected that the majority of Inferred mineral resources could be upgraded to Indicated mineral
resources with additional exploration.
Estimate of Cobalt Mineral Resources – Inferred
Class
Type/Area
Cut-off
(Cu %)
Tonnes
(million)
Inferred
In-Pit(1)
Below-Pit
South Reef
Below-Pit
Ruby Zone
Total Inferred
0.5
1.5
1.5
135.6
35.3
15.0
185.8
Average
Grade
Co (%)
0.017
0.039
0.021
0.021
Contained
Metal
Co (Mlbs)
51
30
7
88
1. Mineral resources stated as contained within a pit shell developed using a metal price of US$3.50/lb Cu, mining
costs of US$3/tonne, milling costs of US$11/tonne, G&A cost of US$5/tonne, 87% metallurgical recoveries and
an average pit slope of 43 degrees. Underground mining cost is US$65/tonne.
2. Mineral Resources are not Mineral Reserves and do not have demonstrated economic viability. There is no
certainty that all or any part of the Mineral Resources will be converted into Mineral Reserves.
3.
It is reasonably expected that the majority of Inferred mineral resources could be upgraded to Indicated mineral
resources with additional exploration.
4. Due to limited sample data, none of the cobalt mineral resource meets the confidence level for Indicated-class
mineral resources. All cobalt mineral resources are considered to be in the Inferred category.
5. Mineral resources are reported on a 100% basis. Following the formation of Ambler Metals, Trilogy and South32
each own 50% of the Bornite Project.
There are no known factors related to environmental, permitting, legal, title, taxation, socio-economic, marketing, or
political issues which could materially affect the mineral resource.
Bornite Project – Metallurgy
Metallurgical test work to date indicates that the Bornite Project can be treated using standard grinding and flotation
methods to produce copper concentrates. Initial testing indicates copper recoveries of approximately 87% resulting in
concentrate grades of approximately 28% Cu with very low potential penalty elements. Further metallurgical test work
is warranted to test these assumptions.
Bornite Project – Environmental Considerations
The Bornite Project area includes NANA’s Bornite and ANCSA lands, the Ruby Creek drainage (a tributary of the Shungnak
River), the Shungnak River drainage, and portions of the Ambler Lowlands. Since 2008, baseline environmental data
collection has occurred in the area including archaeology, aquatic life surveys, sediment sampling, wetlands mapping,
surface water quality sampling, hydrology, meteorological monitoring, and subsistence. Additional baseline
environmental data in NANA’s Bornite and ANCSA lands, Ruby Creek drainage, Shungnak River drainage, portions of the
Ambler Lowlands, and downstream receiving environments will be required to support future mine design, development
of an EIS, permitting, construction and operations.
74
Bornite Project – Mining Operations
The Bornite Project is not currently in production; for contemplated exploration or development activities see above.
Bornite Project – Exploration and Development Permitting
Development of the Bornite Project will require a significant number of permits and authorizations from state, federal,
and regional organizations. Much of the groundwork to support a successful permitting effort must be conducted before
permit applications are submitted so that issues can be identified and resolved, baseline data can be acquired, and
regulators and stakeholders can become familiar with the proposed project. The comprehensive permitting process for
the Bornite Project can be divided into three categories:
1. Exploration state/regional permitting phase: required to obtain approval for drilling, camp operations,
engineering, and environmental baseline studies.
2. Pre-application phase: conducted in conjunction with engineering feasibility studies. This stage includes the
collection of environmental baseline data and interaction with stakeholders and regulators to facilitate the
development of a project that can be successfully permitted.
3. The National Environmental Policy Act phase: formal agency review of the Federal and State requirements for
public and agency participation to determine if and how the Bornite Project can be done in an acceptable
manner.
The permit review process will determine the number of management plans required to address all aspects of the Project
to ensure compliance with environmental design and permit criteria. Each plan will describe the appropriate
environmental engineering standard and the applicable operations requirements, maintenance protocols, and response
actions.
Glossary of Technical Terms
The following technical terms defined in this section are used throughout this Form 10-K:
“2D” is two dimensional.
“3D” is three dimensional.
“AA” is atomic absorption.
“Ag” is the chemical symbol for silver.
“Ai” is abrasion index.
“Al” is the chemical symbol for aluminum.
“AMT” is audio-magnetotelluric.
“Au” is the chemical symbol for gold.
“BWi” is bond ball mill work index.
“C” is the chemical symbol for carbon.
“Ca” is the chemical symbol for calcium.
75
“CIM” is the Canadian Institute of Mining, Metallurgy and Petroleum.
“Co” is the chemical symbol for cobalt.
“CSAMT” is controlled-source audio-frequency magnetotelluric.
“Cu” is the chemical symbol for copper.
“CuEq” is copper equivalent.
"d/a" is days per annum.
“dilution” is waste, which is unavoidably mined with ore.
“dip” is the angle of inclination of a geological feature/rock from the horizontal.
“DIGHEM” is a proprietary geophysical survey system.
“DPG” is deep penetrating geochemistry.
“EM” is electromagnetic.
“fault” is the surface of a fracture along which movement has occurred.
“Fe” is the chemical symbol for iron.
“gangue” are non-valuable components of the ore.
“grade” is the measure of concentration of metal within mineralized rock.
“g” is a gram.
“g/t” is grams per metric tonne.
“ha” is a hectare.
“HDS” is high density sludge.
“ICP” is induced couple plasma.
“ICP-MS” is inductively coupled plasma-mass spectroscopy.
“ICP-AES” is inductively coupled plasma-atomic emission spectroscopy.
“IP” is induced polarization.
“IRR” is internal rate of return.
“K” is the chemical symbol for potassium.
“km” is a kilometer.
“kWhr” is kilowatt hours.
“kV” is a kilovolt.
76
“LOM” is the life-of-mine.
“LiDAR” is light detection and ranging.
“μm” is a micron or mircrometer and is one millionth of a meter.
“m” is a meter.
“Ma” is million years.
“masl” is meters above sea level.
“Mg” is the chemical symbol for magnesium.
“ML/ARD” is metal leaching and acid rock drainage.
“mm” is a millimeter.
“Mm3” is million cubic meters.
“MS” is massive sulphide.
“Mt/a” is million tonnes per annum.
“MW” is million watts.
“NPV” is net present value.
“NSAMT” is natural source audio-magnetotelluric.
“NSR” is net smelter return
“ounce” or “oz” is a troy ounce.
“Pb” is the chemical symbol for lead.
“ppm” is parts per million.
“QA/QC” is quality assurance and quality control.
“SAG” is semi-autogenous grind.
“SeWTP” is a selenium water treatment plant.
“SG” is specific gravity.
“SMS” is semi-massive sulphide.
“strike” is the duration of line formed by the intersection of strata surfaces within the horizontal plane, always
perpendicular to the dip direction.
“tailings” is the finely ground waste rock from which valuable minerals or metals have been extracted.
“TMF” is a tailings management facility.
77
“tonne" or "t” is a metric tonne: 1,000 kilograms or 2,204.6 pounds.
“t/d” is tonnes per day.
“VMS” is volcanogenic massive sulphide.
“WRCP” is a waste rock collection pond.
“WRF” is a waste rock facility.
“WTP” is a water treatment plan.
“XRF” is x-ray fluorescence spectroscopy.
“Zn” is the chemical symbol for zinc.
Item 3. LEGAL PROCEEDINGS
From time to time, we are a party to routine litigation and proceedings that are considered part of the ordinary course
of business. We are not aware of any material current, pending, or threatened litigation. There are no material
proceedings pursuant to which any of our directors, officers or affiliates or any owner of record or beneficial owner of
more than 5% of our securities or any associate of any such director, officer or security holder is a party adverse to us or
has a material interest adverse to us.
Item 4. MINE SAFETY DISCLOSURES
Operations are subject to regulation by the Federal Mine Safety and Health Administration (“MSHA”) under the Federal
Mine Safety and Health Act of 1977 (the “Mine Act”). At our current stage of exploration, we are not yet subject to
MSHA.
Companies required to file periodic reports under the Exchange Act, that operate mines regulated under the Mine Act
are required to make certain disclosures pursuant to Section 1503(a) of Dodd-Frank. We have nothing to disclose
pursuant to Section 1503(a) of Dodd-Frank for the fiscal year ended November 30, 2021.
78
PART II
Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
The Company’s common stock is traded on the TSX and the NYSE American under the symbol “TMQ”. As of February 11,
2022, there were 1,457 registered holders of our Common Shares.
Dividend Policy
We have not declared or paid any dividends on our Common Shares. Our current business plan requires that for the
foreseeable future, any future earnings be reinvested to finance the growth and development of our business. We will
not declare or pay any dividends until such time as our cash flow exceeds our capital requirements and will depend upon,
among other things, conditions then existing including earnings, financial condition, restrictions in financing
arrangements, business opportunities and conditions and other factors, or our Board determines that our shareholders
could make better use of the cash.
Unregistered Sales of Equity Securities
None.
Repurchase of Securities
During fiscal year 2021, neither Trilogy nor any affiliate of Trilogy repurchased Trilogy Common Shares.
Exchange Controls
There are no governmental laws, decrees or regulations in Canada that restrict the export or import of capital, including
foreign exchange controls, or that affect the remittance of dividends, interest or other payments to non-resident holders
of the securities of Trilogy, other than Canadian withholding tax.
Certain Canadian Federal Income Tax Considerations for U.S. Holders
The following is a general summary of the principal Canadian federal income tax considerations generally applicable
under Income Tax Act (Canada) (the “Tax Act”) to a holder of Common Shares, each of whom, at all relevant times, for
the purposes of the Tax Act, holds such Common Shares as capital property, deals at arm’s length with the Company, is
not affiliated with the Company and, for purposes of the Tax Act, is not, is not deemed to be, a resident of Canada and
has not and will not use or hold or be deemed to use or hold the Common Shares in the course of carrying on business
in Canada (a “Non-Resident Holder”) and is not a “specified shareholder” (as defined in subsection 18(15) of the Tax Act.
A “specified shareholder” for these purposes generally includes a person who (either alone or together with persons
with whom that person is not dealing at arm’s length for purposes of the Tax Act) owns or has the right to acquire or
control 25% or more of the Common Shares determined on a votes or fair market value basis. Special rules, which are
not discussed below, may apply to a non-resident of Canada that is an insurer which carries on business in Canada and
elsewhere.
The Common Shares will generally be considered capital property to a Non-Resident Holder unless either (i) the Non-
Resident Holder holds the Common Shares in the course of carrying on a business of buying and selling securities or
(ii) the Non-Resident Holder has acquired the Common Shares in a transaction or transactions considered to be an
adventure or concern in the nature of trade.
The term “U.S. Holder,” for the purposes of this section, means a Non-Resident Holder who, for purposes of the Canada-
United States Tax Convention (1980) as amended, (the “Convention”), is at all relevant times a resident of the United
79
States and is a “qualifying person” within the meaning of the Convention. In some circumstances, fiscally transparent
entities (including limited liability companies) will be entitled to benefits under the Convention. U.S. Holders are urged
to consult with their own tax advisors to determine their entitlement to benefits under the Convention based on their
particular circumstances.
This summary is based on the current provisions of the Tax Act, the regulations thereunder (the “Regulations”), the
current provisions of the Convention, counsel’s understanding of the current published administrative policies and
assessing practices of the Canada Revenue Agency (the “CRA”) publicly available prior to the date hereof. This summary
also takes into account all specific proposals to amend the Tax Act and Regulations publicly announced by or on behalf
of the Minister of Finance (Canada) prior to the date hereof (collectively, the “Proposed Tax Amendments”). No
assurances can be given that the Proposed Tax Amendments will be enacted or will be enacted as proposed. Other than
the Proposed Tax Amendments, this summary does not take into account or anticipate any changes in law or the
administration policies or assessing practice of CRA, whether by judicial, legislative, governmental or administrative
decision or action, nor does it take into account provincial, territorial or foreign income tax legislation or considerations,
which may differ significantly from those discussed herein.
This summary is of a general nature only and is not intended to be, nor should it be construed to be, legal or tax advice
to any particular Non-Resident Holder and no representations with respect to the income tax consequences to any
particular Non-Resident Holder are made. This summary is not exhaustive of all Canadian federal income tax
considerations. Accordingly, Non-Resident Holders should consult their own tax advisors with respect to their own
particular circumstances. The discussion below is qualified accordingly.
Currency Conversion
Subject to certain exceptions that are not discussed herein, for purposes of the Tax Act, all amounts relating to the
acquisition, holding or disposition of Common Shares, including dividends, adjusted cost base and proceeds of
dispositions must be determined in Canadian dollars using the daily exchange rate of the Bank of Canada on the particular
date the particular amount arose or such other rate of exchange as acceptable to the CRA.
Disposition of Common Shares
A Non-Resident Holder will not be subject to tax under the Tax Act in respect of any capital gain realized by such Non-
Resident Holder on a disposition of the Common Shares, nor will capital losses arising from the disposition be recognized
under the Tax Act, unless the Common Shares constitute “taxable Canadian property” (as defined in the Tax Act) of the
Non-Resident Holder at the time of disposition and the Non-Resident Holder is not entitled to relief under an applicable
income tax treaty or convention. As long as the shares are then listed on a “designated stock exchange” (as defined in
the Tax Act) (which currently includes the TSX and the NYSE American) at the time of disposition, the Common Shares
generally will not constitute taxable Canadian property of a Non-Resident Holder, unless at any time during the 60-month
period immediately preceding the disposition the following two conditions are met concurrently: (i) the Non-Resident
Holder, persons with whom the Non-Resident Holder did not deal at arm’s length, partnerships in which the Non-
Resident Holder or persons with whom the Non-Resident Holder did not deal at arm’s length holds a membership interest
directly or indirectly through one or more partnerships, or the Non-Resident Holder together with all such persons,
owned or was considered to own 25% or more of the issued shares of any class or series of shares of the capital stock of
the Company; and (ii) more than 50% of the fair market value of the Common Shares was derived directly or indirectly
from one or any combination of real or immovable property situated in Canada, “Canadian resource properties” (as
defined in the Tax Act), “timber resource properties” (as defined in the Tax Act) or a options in respect of, or interests
in, or civil law rights in, such properties, whether or not it exists.
If the Common Shares are taxable Canadian property to a Non-Resident Holder, any capital gain realized on the
disposition or deemed disposition of such shares, may not be subject to Canadian federal income tax pursuant to the
terms of an applicable income tax treaty or convention between Canada and the country of residence of a Non-Resident
Holder, including the Convention.
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A Non-Resident Holder whose shares are taxable Canadian property should consult their own advisors.
Dividends on Common Shares
Under the Tax Act, dividends on Common Shares paid or credited to a Non-Resident Holder will be subject to Canadian
withholding tax at the rate of 25% of the gross amount of the dividends. This withholding tax may be reduced pursuant
to the terms of an applicable income tax treaty or convention between Canada and the country of residence of a Non-
Resident Holder. Under the Convention, a U.S. Holder will generally be subject to Canadian withholding tax at a rate of
15% of the gross amount of such dividends (or 5% in the case of a U.S. Holder that is a company beneficially owning at
least 10% of the Company’s voting shares). In addition, under the Convention, dividends may be exempt from Canadian
non-resident withholding tax if paid to certain U.S. Holders that are qualifying religious, scientific, literary, educational
or charitable tax-exempt organizations and qualifying trusts, companies, organizations or arrangements operated
exclusively to administer or provide pension, retirement or employee benefits that are exempt from tax in the United
States and that have complied with specific administrative procedures.
Certain U.S. Federal Income Tax Considerations
The following is a general summary of certain anticipated U.S. federal income tax considerations applicable to a U.S.
Holder (as defined below) arising from and relating to the acquisition, ownership and disposition of Common Shares.
This summary is for general information purposes only and does not purport to be a complete analysis or listing of all
potential U.S. federal income tax considerations that may apply to a U.S. Holder as a result of acquisition of Common
Shares. Furthermore, this summary does not take into account the individual facts and circumstances of any particular
U.S. Holder that may affect the U.S. federal income tax considerations applicable to such U.S. Holder of Common Shares.
Except as specified below, this summary does not discuss applicable tax reporting requirements. Accordingly, this
summary is not intended to be, and should not be construed as, legal or U.S. federal income tax advice with respect to
any U.S. Holder. U.S. Holders should consult their own tax advisors regarding the U.S. federal, U.S. state and local, and
foreign tax consequences relating to the acquisition, ownership and disposition of Common Shares.
No ruling from the U.S. Internal Revenue Service (the “IRS”) or legal opinion has been requested, or will be obtained,
regarding the potential U.S. federal income tax considerations applicable to U.S. Holders as discussed in this summary.
This summary is not binding on the IRS, and the IRS is not precluded from taking a position that is different from, and
contrary to, the positions taken in this summary. In addition, because the authorities on which this summary is based
are subject to various interpretations, the IRS and the U.S. courts could disagree with one or more of the positions taken
in this summary.
Scope of this Summary
Authorities
This summary is based on the U.S. Internal Revenue, as amended (“Code”), regulations promulgated by the Department
of the Treasury (whether final, temporary or proposed) (“Treasury Regulations”), U.S. court decisions, published rulings
and administrative positions of the IRS, and the Convention, that are applicable and, in each case, in effect as of the date
of this document. Any of the authorities on which this summary is based could be changed in a material and adverse
manner at any time, and any such change could be applied on a retroactive or prospective basis, which could affect the
U.S. federal income tax considerations described in this summary. This summary does not discuss the potential effects,
whether adverse or beneficial, of any proposed legislation that, if enacted, could be applied on a retroactive basis.
U.S. Holders
For purposes of this section, a “U.S. Holder” is a beneficial owner of Common Shares that, for U.S. federal income tax
purposes, is (a) an individual who is a citizen or resident of the United States for U.S. federal income tax purposes; (b) a
corporation, or other entity classified as a corporation for U.S. federal income tax purposes, that is created or organized
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in or under the laws of the United States or any state in the United States, including the District of Columbia; (c) an estate
if the income of such estate is subject to U.S. federal income tax regardless of the source of such income; or (d) a trust if
(i) such trust has validly elected to be treated as a U.S. person for U.S. federal income tax purposes, or (ii) a U.S. court is
able to exercise primary supervision over the administration of such trust and one or more U.S. persons have the
authority to control all substantial decisions of such trust.
Non-U.S. Holders
For purposes of this summary, a “Non-U.S. Holder” is a beneficial owner of Common Shares that is neither a U.S. Holder
nor a U.S. partnership (or other “pass-through” entity). This summary does not address the U.S. federal income tax
considerations applicable to Non-U.S. Holders relating to the acquisition, ownership and disposition of Common Shares.
Accordingly, Non-U.S. Holders should consult their own tax advisors regarding the U.S. federal, U.S. state and local, and
foreign tax consequences (including the potential application of and operation of any tax treaties) relating to the
acquisition, ownership, and disposition of Common Shares.
U.S. Holders Subject to Special U.S. Federal Income Tax Rules Not Addressed
This summary does not address the U.S. federal income tax considerations applicable to U.S. Holders that are subject to
special provisions under the Code, including (a) U.S. Holders that are tax-exempt organizations, qualified retirement
plans, individual retirement accounts or other tax-deferred accounts; (b) U.S. Holders that are financial institutions,
underwriters, insurance companies, real estate investment trusts or regulated investment companies or that are broker-
dealers, dealers, or traders in securities or currencies that elect to apply a mark-to-market accounting method; (c) U.S.
Holders that have a “functional currency” other than the U.S. dollar; (d) U.S. Holders that own Common Shares as part
of a straddle, hedging transaction, conversion transaction, constructive sale or other arrangement involving more than
one position; (e) U.S. Holders that acquired Common Shares in connection with the exercise of employee stock options
or otherwise as compensation for services; (f) U.S. Holders that hold Common Shares other than as a capital asset
(generally property held for investment purposes) within the meaning of Section 1221 of the Code; (g) U.S. Holders that
are required to accelerate the recognition of any item of gross income with respect to Common Shares as a result of such
income being recognized on an applicable financial statement; (h) U.S. Holders that own, directly, indirectly or by
attribution, 10% or more, by voting power or value, of the outstanding shares of the Company; (i) are partnerships and
other pass-through entities (and investors in such partnerships and entities); (j) are U.S. expatriates or former long-term
residents of the United States; or (k) are subject to taxing jurisdictions other than, or in addition to, the United States.
U.S. Holders and others that are subject to special provisions under the Code, including U.S. Holders described
immediately above, should consult their own tax advisors.
If an entity that is classified as a partnership (or other “pass-through” entity) for U.S. federal income tax purposes holds
Common Shares, the U.S. federal income tax consequences applicable to such partnership (or “pass-through” entity) and
the partners of such partnership (or owners of such “pass-through” entity) generally will depend on the activities of the
partnership (or “pass-through” entity) and the status of such partners (or owners). Partners of entities that are classified
as partnerships (and owners of “pass-through” entities) for U.S. federal income tax purposes should consult their own
tax advisors regarding the U.S. federal income tax consequences relating to the acquisition, ownership and disposition
of Common Shares.
Tax Consequences Other than U.S. Federal Income Tax Consequences Not Addressed
This summary does not address the U.S. state and local, U.S. estate and gift, U.S. federal net investment income, U.S.
alternative minimum tax, or foreign tax consequences to U.S. Holders relating to the acquisition, ownership, and
disposition of Common Shares. Each U.S. Holder should consult its own tax advisor regarding the U.S. state and local,
U.S. estate and gift, U.S. federal net investment income, U.S. federal alternative minimum tax and foreign tax
consequences relating to the acquisition, ownership, and disposition of Common Shares.
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U.S. Federal Income Tax Consequences of the Acquisition, Ownership and Disposition of Common Shares
Distributions on Common Shares
Subject to the PFIC rules discussed below, a U.S. Holder that receives a distribution, including a constructive distribution,
with respect to a Common Share will be required to include the amount of such distribution in gross income as a dividend
(without reduction for any Canadian income tax withheld from such distribution) to the extent of the current or
accumulated “earnings and profits” of the Company, as computed for U.S. federal income tax purposes. To the extent
that a distribution exceeds the current and accumulated “earnings and profits” of the Company, such distribution will be
treated first as a tax-free return of capital to the extent of a U.S. Holder’s tax basis in the Common Shares and thereafter
as a gain from the sale or exchange of such Common Shares (see “Sale or Other Taxable Disposition of Common Shares”
below). However, the Company does not intend to maintain the calculations of earnings and profits in accordance with
U.S. federal income tax principles, and each U.S. Holder should therefore assume that any distribution by the Company
with respect to the Common Shares will constitute ordinary dividend income. Subject to applicable limitations, dividends
paid by the Company to non-corporate U.S. Holders, including individuals, generally will be eligible for the preferential
tax rates applicable to long-term capital gains for dividends, provided certain holding period and other conditions are
satisfied, including that the Company not be classified as a PFIC (as discussed below) in the tax year of distribution or in
the preceding tax year. Dividends received on Common Shares by corporate U.S. Holders will not be eligible for the
“dividends received deduction”. The dividend rules are complex, and each U.S. Holder should consult its own tax advisor
regarding the application of such rules.
Sale or Other Taxable Disposition of Common Shares
Subject to the PFIC rules discussed below, upon the sale or other taxable disposition of Common Shares a U.S. Holder
generally will recognize capital gain or loss in an amount equal to the difference between (a) the amount of cash plus
the fair market value of any property received and (b) its tax basis in such Common Shares sold or otherwise disposed
of. Such gain generally will be treated as “U.S. source” for purposes of applying the U.S. foreign tax credit rules unless
the gain is subject to tax in Canada and is re-sourced as “foreign source” under the Convention and such U.S. Holder
elects to treat such gain or loss as “foreign source” (see a more detailed discussion at “Foreign Tax Credit” below). Any
such gain or loss generally will be capital gain or loss, which will be long-term capital gain or loss if, at the time of the
sale or other disposition, such Common Shares are held for more than one year. Preferential tax rates apply to long-term
capital gains of a U.S. Holder that is an individual, estate, or trust. There are currently no preferential tax rates for long-
term capital gains of a U.S. Holder that is a corporation. Deductions for capital losses are subject to significant limitations
under the Code.
Foreign Tax Credit
Subject to the PFIC rules discussed below, a U.S. Holder that pays (whether directly or through withholding) Canadian
income tax with respect to dividends paid on Common Shares generally will be entitled, at the election of such U.S.
Holder, to receive either a deduction or a credit for such Canadian income tax. Generally, a credit will reduce a U.S.
Holder’s U.S. federal income tax liability on a dollar-for-dollar basis, whereas a deduction will reduce a U.S. Holder’s
income that is subject to U.S. federal income tax. This election is made on a year-by-year basis and applies to all foreign
taxes paid (whether directly or through withholding) by a U.S. Holder during a year. The foreign tax credit rules are
complex and involve the application of rules that depend on a U.S. Holder’s particular circumstances. Accordingly, each
U.S. Holder should consult its own U.S. tax advisors regarding the foreign tax credit rules.
Receipt of Foreign Currency
The amount of any distribution paid in foreign currency to a U.S. Holder in connection with the ownership of Common
Shares, or on the sale, exchange or other taxable disposition of Common Shares, generally will be equal to the U.S. dollar
value of such foreign currency based on the exchange rate applicable on the date of actual or constructive receipt
(regardless of whether such foreign currency is converted into U.S. dollars at that time). If the foreign currency received
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is not converted into U.S. dollars on the date of receipt, a U.S. Holder will have a basis in the foreign currency equal to
its U.S. dollar value on the date of receipt. A U.S. Holder that receives foreign currency and converts such foreign currency
into U.S. dollars at a conversion rate other than the rate in effect on the date of receipt may have a foreign currency
exchange gain or loss, which generally would be treated as U.S. source ordinary income or loss for foreign tax credit
purposes. Different rules apply to U.S. Holders who use the accrual method of tax accounting. U.S. Holders should consult
their own U.S. tax advisors regarding the U.S. federal income tax consequences of receiving, owning and disposing of
foreign currency.
Passive Foreign Investment Company Rules
If the Company is considered a PFIC within the meaning of Section 1297 of the Code at any time during a U.S. Holder’s
holding period, then certain different and potentially adverse tax consequences would apply to such U.S. Holder’s
acquisition, ownership and disposition of Common Shares.
PFIC Status of the Company
The Company generally will be a PFIC if, for a given tax year, (a) 75% or more of the gross income of the Company for
such tax year is passive income or (b) 50% or more of the assets held by the Company either produce passive income or
are held for the production of passive income, based on the fair market value of such assets. “Gross income” generally
includes all revenues less the cost of goods sold plus income from investments and from incidental or outside operations
or sources, and “passive income” includes, for example, dividends, interest, certain rents and royalties, certain gains
from the sale of stock and securities, and certain gains from commodities transactions. Active business gains arising from
the sale of commodities generally are excluded from passive income if substantially all of a foreign corporation’s
commodities are stock in trade or inventory, depreciable property used in a trade or business, or supplies regularly used
or consumed in a trade or business, and certain other requirements are satisfied.
For purposes of the PFIC income test and asset test described above, if the Company owns, directly or indirectly, 25% or
more of the total value of the outstanding shares of another corporation, the Company will be treated as if it (a) held a
proportionate share of the assets of such other corporation and (b) received directly a proportionate share of the income
of such other corporation. In addition, for purposes of the PFIC income test and asset test described above, “passive
income” does not include any interest, dividends, rents or royalties that are received or accrued by the Company from a
“related person” (as defined in Section 954(d)(3) of the Code), to the extent such items are properly allocable to the
income of such related person that is not passive income.
Under certain attribution rules, if the Company is a PFIC, U.S. Holders will be deemed to own their proportionate share
of any subsidiary of the Company which is also a PFIC (a “Subsidiary PFIC”), and will be subject to U.S. federal income tax
on (a) a distribution on the shares of a Subsidiary PFIC and (b) a disposition of shares of a Subsidiary PFIC, both as if the
U.S. Holder directly held the shares of such Subsidiary PFIC.
The Company believes that it was not a PFIC for the tax years ended November 30, 2015, 2016, 2017, 2020 and 2021.
The Company believes it was a PFIC for the tax years ended November 30, 2018 and 2019 and may be a PFIC in future
tax years. No opinion of legal counsel or ruling from the IRS concerning the status of the Company as a PFIC has been
obtained or is currently planned to be requested. The determination of whether the Company (or a subsidiary of the
Company) was, or will be, a PFIC for a tax year depends, in part, on the application of complex U.S. federal income tax
rules, which are subject to differing interpretations. In addition, whether the Company (or subsidiary) will be a PFIC for
any tax year depends on the assets and income of the Company (and each such subsidiary) over the course of each such
tax year and, as a result, cannot be predicted with certainty as of the date of this document. Accordingly, there can be
no assurance that the IRS will not challenge any determination made by the Company (or subsidiary) concerning its PFIC
status or that the Company (and any subsidiary) was not, or will not be, a PFIC for any tax year. U.S. Holders should
consult their own tax advisors regarding the PFIC status of the Company and any subsidiary of the Company.
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Default PFIC Rules under Section 1291 of the Code
If the Company is a PFIC, the U.S. federal income tax consequences to a U.S. Holder of the acquisition, ownership and
disposition of Common Shares will depend on whether such U.S. Holder makes a QEF election or makes a mark-to-market
election under Section 1296 of the Code (a “Mark-to-Market Election”) with respect to Common Shares. A U.S. Holder
that does not make either a QEF Election or a Mark-to-Market Election will be referred to in this summary as a “Non-
Electing U.S. Holder”.
A Non-Electing U.S. Holder will be subject to the rules of Section 1291 of the Code with respect to (a) any gain recognized
on the sale or other taxable disposition of Common Shares and (b) any excess distribution paid on the Common Shares.
A distribution generally will be an “excess distribution” to the extent that such distribution (together with all other
distributions received in the current tax year) exceeds 125% of the average distributions received during the three
preceding tax years (or during a U.S. Holder’s holding period for the Common Shares, if shorter).
If the Company is a PFIC, under Section 1291 of the Code any gain recognized on the sale or other taxable disposition of
Common Shares (including an indirect disposition of shares of a Subsidiary PFIC), and any excess distribution paid on
Common Shares (or a distribution by a Subsidiary PFIC to its shareholder that is deemed to be received by a U.S. Holder)
must be ratably allocated to each day of a Non-Electing U.S. Holder’s holding period for the Common Shares. The amount
of any such gain or excess distribution allocated to the tax year of disposition or excess distribution and to years before
the Company became a PFIC, if any, would be taxed as ordinary income. The amounts allocated to any other tax year
would be subject to U.S. federal income tax at the highest tax applicable to ordinary income in each such year, and an
interest charge would be imposed on the tax liability for each such year, calculated as if such tax liability had been due
in each such year. A Non-Electing U.S. Holder that is not a corporation must treat any such interest paid as “personal
interest”, which is not deductible.
If the Company is a PFIC for any tax year during which a Non-Electing U.S. Holder holds Common Shares, the Company
will continue to be treated as a PFIC with respect to such Non-Electing U.S. Holder, regardless of whether the Company
ceases to be a PFIC in one or more subsequent years. If the Company ceases to be a PFIC, a Non-Electing U.S. Holder may
terminate this deemed PFIC status with respect to Common Shares by electing to recognize gain (which will be taxed
under the rules of Section 1291 of the Code discussed above) as if such Common Shares were sold on the last day of the
last tax year for which the Company was a PFIC.
Under proposed Treasury Regulations, if a U.S. Holder has an option, warrant or other right to acquire stock of a PFIC,
such option, warrant or right is considered to be PFIC stock subject to the default rules of Section 1291 of the Code.
Under rules described below, if the Company was a PFIC, the holding period for the option, warrant or other right would
begin on the day after the date a U.S. Holder acquired the option, warrant or other right. This would impact the
availability of the QEF Election and Mark-to-Market Election with respect to an option, warrant or other right. Thus, a
U.S. Holder would have to account for an option, warrant or other right and Common Shares under the PFIC rules and
the applicable elections differently (see discussion below under “QEF Election” and “Market-to-Market Election”.)
QEF Election
In the event the Company is a PFIC and a U.S. Holder makes a QEF Election for the first tax year in which its holding period
of its Common Shares begins, such U.S. Holder generally will not be subject to the rules of Section 1291 of the Code
discussed above with respect to its Common Shares. However, a U.S. Holder that makes a QEF Election will be subject to
U.S. federal income tax on such U.S. Holder’s pro rata share of (a) the net capital gain of the Company, which will be
taxed as long-term capital gain to such U.S. Holder, and (b) the ordinary earnings of the Company, which will be taxed as
ordinary income to such U.S. Holder. Generally, “net capital gain” is the excess of (a) net long-term capital gain over
(b) net short-term capital gain, and “ordinary earnings” are the excess of (a) “earnings and profits” over (b) net capital
gain. A U.S. Holder that makes a QEF Election will be subject to U.S. federal income tax on such amounts for each tax
year in which the Company is a PFIC, regardless of whether such amounts are actually distributed to such U.S. Holder by
the Company. However, a U.S. Holder that makes a QEF Election may, subject to certain limitations, elect to defer
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payment of current U.S. federal income tax on such amounts, subject to an interest charge. If such U.S. Holder is not a
corporation, any such interest paid will be treated as “personal interest”, which is not deductible.
A U.S. Holder that makes a QEF Election generally (a) may receive a tax-free distribution from the Company to the extent
that such distribution represents “earnings and profits” of the Company that were previously included in income by the
U.S. Holder because of such QEF Election and (b) will adjust such U.S. Holder’s tax basis in the Common Shares to reflect
the amount included in income or allowed as a tax-free distribution because of such QEF Election. In addition, a U.S.
Holder that makes a QEF Election generally will recognize capital gain or loss on the sale or other taxable disposition of
Common Shares.
The procedure for making a QEF Election, and the U.S. federal income tax consequences of making a QEF Election, will
depend on whether such QEF Election is timely. A QEF Election will be treated as “timely” if it is made for the first year
in the U.S. Holder’s holding period for the Common Shares in which the Company was a PFIC. A U.S. Holder may make a
timely QEF Election by filing the appropriate QEF Election documents at the time such U.S. Holder files a U.S. federal
income tax return for such year.
A QEF Election will apply to the tax year for which such QEF Election is made and to all subsequent tax years, unless such
QEF Election is invalidated or terminated or the IRS consents to revocation of such QEF Election. If a U.S. Holder makes
a QEF Election and, in a subsequent tax year, the Company ceases to be a PFIC, the QEF Election will remain in effect
(although it will not be applicable) during those tax years in which the Company is not a PFIC. Accordingly, if the Company
becomes a PFIC in a subsequent tax year, the QEF Election will be effective, and the U.S. Holder will be subject to the
QEF rules described above during a subsequent tax year in which the Company qualifies as a PFIC.
As discussed above, under proposed Treasury Regulations, if a U.S. Holder has an option, warrant or other right to acquire
stock of a PFIC, such option, warrant or right is considered to be PFIC stock subject to the default rules of Section 1291
of the Code on its disposition. However, a holder of an option, warrant or other right to acquire stock of a PFIC may not
make a QEF Election that will apply to the option, warrant or other right to acquire PFIC stock. In addition, under
proposed Treasury Regulations, if a U.S. Holder holds an option, warrant or other right to acquire stock of a PFIC, the
holding period with respect to shares of stock of the PFIC acquired upon exercise of such option, warrant or other right
will include the period that the option, warrant or other right was held. U.S. Holders should consult their own tax advisors
regarding the application of the PFIC rules to Common Shares.
The Company will make available to U.S. Holders, upon their written request, information as to its status as a PFIC, as
reasonably determined by the Company, and will provide to a U.S. Holder all information and documentation that a U.S.
Holder making a QEF Election with respect to the Company is required to obtain for U.S. federal income tax purposes in
the event it is a PFIC. However, U.S. Holders should be aware that the Company can provide no assurances that it will
provide any such information relating to any Subsidiary PFIC. Because the Company may own shares in one or more
Subsidiary PFICs and may acquire shares in one or more Subsidiary PFICs in the future, they will continue to be subject
to the rules discussed above with respect to the taxation of gains and excess distributions with respect to any Subsidiary
PFIC for which the U.S. Holders do not obtain the required information to file a QEF Election. U.S. Holders should consult
their own tax advisor regarding the availability of, and procedure for making, a QEF Election with respect to the Company
and any Subsidiary PFIC.
Mark-to-Market Election
A U.S. Holder may make a Mark-to-Market Election only if the Common Shares are marketable stock. The Common
Shares generally will be “marketable stock” if they are regularly traded on (a) a national securities exchange that is
registered with the SEC; (b) the national market system established pursuant to section 11A of the Securities and
Exchange Act of 1934; or (c) a foreign securities exchange that is regulated or supervised by a governmental authority of
the country in which the market is located, provided that (i) such foreign exchange has trading volume, listing, financial
disclosure and other requirements and the laws of the country in which such foreign exchange is located, together with
the rules of such foreign exchange, ensure that such requirements are actually enforced; and (ii) the rules of such foreign
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exchange ensure active trading of listed stocks. If such stock is traded on such a qualified exchange or other market, such
stock generally will be “regularly traded” for any calendar year during which such stock is traded, other than in de
minimus quantities, on at least 15 days during each calendar quarter. Each U.S. Holder should consult its own tax advisor
regarding whether the Common Shares constitute marketable stock.
A U.S. Holder that makes a Mark-to-Market Election with respect to its Common Shares generally will not be subject to
the rules of Section 1291 of the Code discussed above. However, if a U.S. Holder does not make a Mark-to-Market
Election beginning in the first tax year of such U.S. Holder’s holding period for Common Shares or such U.S. Holder has
not made a timely QEF Election, the rules of Section 1291 of the Code discussed above will apply to certain dispositions
of, and distributions on, the Common Shares.
A U.S. Holder that makes a Mark-to-Market Election will include in ordinary income, for each tax year in which the
Company is a PFIC, an amount equal to the excess, if any, of (a) the fair market value of the Common Shares, as of the
close of such tax year over (b) such U.S. Holder’s tax basis in such Common Shares. A U.S. Holder that makes a Mark-to-
Market Election will be allowed a deduction in an amount equal to the excess, if any, of (i) such U.S. Holder’s adjusted
tax basis in the Common Shares over (ii) the fair market value of such Common Shares (but only to the extent of the net
amount of previously included income as a result of the Mark-to-Market Election for prior tax years).
U.S. Holders that make a Mark-to-Market Election generally also will adjust their tax basis in the Common Shares to
reflect the amount included in gross income or allowed as a deduction because of such Mark-to-Market Election. In
addition, upon a sale or other taxable disposition of Common Shares, a U.S. Holder that makes a Mark-to-Market Election
will recognize ordinary income or loss (not to exceed the excess, if any, of (a) the amount included in ordinary income
because of such Mark-to-Market Election for prior tax years over (b) the amount allowed as a deduction because of such
Mark-to-Market Election for prior tax years).
A Mark-to-Market Election applies to the tax year in which such Mark-to-Market Election is made and to each subsequent
tax year, unless the Common Shares cease to be “marketable stock” or the IRS consents to revocation of such election.
U.S. Holders should consult their own tax advisors regarding the availability of, and procedure for making, a Mark-to-
Market Election.
Although a U.S. Holder may be eligible to make a Mark-to-Market Election with respect to Common Shares, no such
election may be made with respect to the stock of any Subsidiary PFIC that a U.S. Holder is treated as owning because
such stock is not marketable. Hence, the Mark-to-Market Election will not be effective to eliminate the interest charge
described above with respect to deemed dispositions of Subsidiary PFIC stock or distributions from a Subsidiary PFIC.
Other PFIC Rules
Under Section 1291(f) of the Code, the IRS has issued proposed Treasury Regulations that, subject to certain exceptions,
would cause a U.S. Holder that had not made a timely QEF Election to recognize gain (but not loss) upon certain transfers
of Common Shares that would otherwise be tax-deferred (e.g., gifts and exchanges pursuant to corporate
reorganizations) in the event the Company is a PFIC during such U.S. Holder’s holding period for the relevant shares.
However, the specific U.S. federal income tax consequences to a U.S. Holder may vary based on the manner in which
Common Shares are transferred.
Certain additional adverse rules will apply with respect to a U.S. Holder if the Company is a PFIC, regardless of whether
such U.S. Holder makes a QEF Election. For example, under Section 1298(b)(6) of the Code, a U.S. Holder that uses
Common Shares as security for a loan will, except as may be provided in Treasury Regulations, be treated as having made
a taxable disposition of such Common Shares.
In any year in which the Company is classified as a PFIC, a U.S. Holder will be required to file an annual report with the
IRS containing such information as Treasury Regulations and/or other IRS guidance may require. U.S. Holders should
consult their own tax advisors regarding the requirements of filing such information returns under these rules, including
the requirement to file an IRS Form 8621.
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In addition, a U.S. Holder who acquires Common Shares from a decedent will not receive a “step up” in tax basis of such
Common Shares to fair market value unless such decedent had a timely and effective QEF Election in place.
Special rules also apply to the amount of foreign tax credit that a U.S. Holder may claim on a distribution from a PFIC.
The PFIC rules are complex, and U.S. Holders should consult their own tax advisors regarding the PFIC rules and how they
may affect the U.S. federal income tax consequences of the acquisition, ownership, and disposition of Common Shares
in the event the Company is a PFIC at any time during such holding period for such Common Shares.
Information Reporting, Backup Withholding Tax
Certain U.S. Holders are required to report information relating to an interest in Common Shares subject to certain
exceptions (including an exception for Common Shares held in accounts maintained by certain financial institutions), by
attaching a completed IRS Form 8938, Statement of Specified Foreign Financial Assets, with their tax return for each year
in which they hold an interest in Common Shares. U.S. Holders should consult their own tax advisors regarding
information reporting requirements relating to their ownership of Common Shares.
Payments made within the United States, or by a U.S. payor or U.S. middleman, of dividends on Common Shares, and
proceeds arising from certain sales or other taxable dispositions of Common Shares, may be subject to information
reporting and backup withholding tax, at the rate of 24%, if a U.S. Holder (a) fails to furnish such U.S. Holder’s correct
U.S. social security or other taxpayer identification number (generally on Form W-9); (b) furnishes an incorrect U.S.
taxpayer identification number; (c) is notified by the IRS that such U.S. Holder has previously failed to properly report
items subject to backup withholding tax; or (d) fails under certain circumstances to certify, under penalty of perjury, that
such U.S. Holder has furnished its correct U.S. taxpayer identification number and that the IRS has not notified such U.S.
Holder that it is subject to backup withholding tax. However, U.S. Holders that are corporations generally are excluded
from these information reporting and backup withholding tax rules. Backup withholding is not an additional tax. Any
amounts withheld under the U.S. backup withholding tax rules will be allowed as a credit against a U.S. Holder’s U.S.
federal income tax liability, if any, or will be refunded, if such U.S. Holder timely furnishes the required information to
the IRS. U.S. Holders should consult their own tax advisors regarding the information reporting and backup withholding
tax rules.
Item 6. Selected Financial Data
NA
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
88
General
This Management’s Discussion and Analysis (“MD&A”) of Trilogy Metals Inc. (“Trilogy”, “the Company”, “us” or “we”) is
dated February 10, 2022 and provides an analysis of our audited financial results for the year ended November 30, 2021
compared to the year ended November 30, 2020. A discussion of our year ended November 30, 2020 compared to
November 30, 2019 is contained in our report on Form 10-K for the year ended Novemebr 30, 2020.
The following information should be read in conjunction with our November 30, 2021 audited consolidated financial
statements and related notes which were prepared in accordance with United States generally accepted accounting
principles (“U.S. GAAP”). 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 States dollars unless otherwise stated. References to
“Canadian dollars” and “C$” 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, is a Qualified Person under National Instrument 43-101 - Standards of Disclosure for Mineral
Projects (“NI 43-101”), and has approved the scientific and technical information in this MD&A.
Trilogy’s shares are listed on the Toronto Stock Exchange (“TSX”) and the NYSE American under the symbol “TMQ”.
Additional information related to Trilogy, including our annual report on Form 10-K, is available on SEDAR
at www.sedar.com and on EDGAR at www.sec.gov.
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”). Our Upper
Kobuk Mineral Projects, (“UKMP” or “UKMP Projects”) 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. (“NANA”), a regional Alaska Native Corporation, which hosts the Bornite carbonate-hosted
copper project (the “Bornite Project”) and related assets. The Company also conducts early-stage exploration through a
wholly owned subsidiary, 995 Exploration Inc.
Property review
The UKMP Projects are held by our equity investee, Ambler Metals of which Trilogy holds a 50% interest. The projects
are located in the Ambler mining district in Northwest Alaska. The UKMP Projects comprise approximately 426,690 acres
(172,675 hectares) consisting of the Ambler and Bornite lands.
Arctic Project
The Ambler lands, which host a number of deposits, including the high-grade copper-zinc-lead-gold-silver Arctic Project,
and other mineralized occurrences within a 100-kilometer-long volcanogenic massive sulfide (“VMS”) belt. The Ambler
lands are located in Northwestern Alaska and consist of 185,805 acres (75,192 hectares) of Federal patented mining
claims which hosts the Arctic deposit and State of Alaska mining claims which we are actively exploring, within which
VMS mineralization has been found.
Prior to the formation of the Joint Venture on February 11, 2020, we had recorded the Ambler lands as a mineral property
with acquisition costs capitalized and exploration costs expensed in accordance with our accounting policies.
89
Bornite Project
On October 19, 2011, Trilogy Metals US and NANA signed a collaborative agreement to explore and develop the Ambler
mining district. Under the Exploration Agreement and Option to Lease (as amended, the “NANA Agreement”), we
acquired, in exchange for, among other things, a $4.0 million cash payment to NANA, the exclusive right to explore the
Bornite property and lands deeded to NANA through the Alaska Native Claims Settlement Act (“ANCSA”), located
adjacent to the Arctic Project, and the non-exclusive right to access and entry onto NANA’s lands. The NANA Agreement
establishes a framework for any future development of either the Bornite Project or the Arctic Project. Both projects are
included as part of a larger area of interest set forth in the NANA Agreement.
Upon the decision to proceed with development of a mine within the area of interest, NANA maintains the right to
purchase an ownership interest in the mine equal to between 16%-25% or retain a 15% net proceeds royalty which is
payable after we have recovered certain historical costs, including capital and cost of capital. Should NANA elect to
purchase an ownership interest in the mine, consideration will be payable based on the elected percentage purchased
and all the costs incurred on the properties less $40.0 million, not to be less than zero. The parties would form a joint
venture and be responsible for all future costs incurred in connection with the mine, including capital costs of the mine,
based on each party’s pro-rata share.
NANA would also be granted a net smelter return royalty between 1% and 2.5% upon the execution of a mining lease or
a surface use agreement, the amount of which is determined by the particular area of land from which production
originates.
Prior to the formation of the Joint Venture on February 11, 2020, we had accounted for the Bornite property as a mineral
property with acquisition costs capitalized and exploration costs expensed in accordance with our accounting policies.
Joint venture
Option agreement
On April 10, 2017, Trilogy and Trilogy Metals US entered into an Option Agreement to form a Joint Venture with South32
Group Operations Pty Ltd., a wholly-owned subsidiary of South32, which agreement was later assigned by South32
Operations Pty Ltd. to its affiliate, South32 USA Exploration Inc. on the UKMP (“Option Agreement”). Under the terms of
the Option Agreement, as amended, Trilogy Metals US granted South32 the right to form a 50/50 joint venture to hold
all of Trilogy Metals US’ Alaskan assets. South32 exercised its option on December 19, 2019.
Formation of joint venture
On February 11, 2020, Trilogy completed the formation of the 50/50 joint venture with South32. Trilogy contributed all
its assets associated with the 172,675-hectare UKMP, including the Arctic and Bornite Projects, while South32
contributed a subscription price of US$145 million (the “Subscription Price”), resulting in each party owning a 50%
interest in Ambler Metals. The Subscription Price will be used to advance the Arctic and Bornite Projects, along with
exploration in the Ambler mining district. With Ambler Metals being well funded, with access to $145 million, Trilogy
does not expect to fund programs and budgets to advance the UKMP until the Subscription Price is spent by Ambler
Metals. To assist Ambler Metals during the initial set up phase, Trilogy was paying all of Ambler Metals’ invoices and
being reimbursed pursuant to a services agreement (the “Services Agreement”) between Trilogy and Ambler Metals until
the back office was fully transitioned to a new permanent team employed by the Joint Venture in fiscal 2021. The Services
Agreement ended on December 31, 2020.
To ensure a successful startup of the Joint Venture, management from Trilogy and South32 took on interim management
roles. Darryl Steane, South32’s Business Development Manager assumed the duties as Interim President of Ambler
Metals; Elaine Sanders, Trilogy’s Chief Financial Officer assumed the duties as Interim Vice President Finance of Ambler
Metals; and Robert (Bob) Jacko, Trilogy’s Senior Vice President Operations assumed the duties as Interim Vice President
Operations of Ambler Metals. Prior to the end of fiscal 2020, the permanent management team at Ambler Metals was
90
hired and are all now based in Alaska. The joint venture company is led by President and Chief Executive Officer, Ramzi
Fawaz, Vice President Operations, Kevin Torpy and Vice President Finance, Rebecca Donald. In addition to the
appointment of the leadership team at Ambler Metals, the Trilogy technical team was also transitioned over to the joint
venture entity during fiscal 2020.
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. All significant decisions
related to the UKMP require the approval of both companies. We determined that Ambler Metals is a variable interest
entity, or VIE, because it is expected to need additional funding from its owners for its significant activities. However, we
concluded that we are not the primary beneficiary of Ambler Metals as the power to direct its activities, through its
board, is shared under the limited liability company agreement. 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 investment in Ambler Metals was initially measured at its fair value of $176 million upon recognition. 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, 2021, totaled $160.1 million.
During the year ended November 31, 2020, Ambler Metals loaned $57.5 million back to South32 and retained $87.5
million of the $146 million contributed by South32. The loan has a 7-year maturity date. During fiscal 2021, Ambler
Metals began to draw down on the loan with cash calls to South32 to fund their 50% share of the 2021 budget. The loan
is secured by South32’s membership interest in Ambler Metals and guaranteed by South32 International Investment
Holdings Pty Ltd.
Project activities
Upper Kobuk Mineral Projects
In a press release dated May 17, 2021, the Company announced that Ambler Metals had finalized the details of the 2021
exploration field program at the UKMP for the previously approved $27 million exploration budget. The budget was
100% funded by Ambler Metals and included 7,600 meters of infill and metallurgical drilling at the Arctic Project as well
as 7,000 meters of exploration drilling within the Ambler VMS Belt. The exploration program was aligned with a strategy
developed by the Company and South32 which prioritized the exploration budget within the UKMP. The strategy defined
a program that advances the highest priority projects and exploration targets, both VMS and Carbonate-Hosted Copper
(“CHC”), ranging from early-stage geophysical anomalies that were identified during the 2019 airborne Versatile Time
Domain Electromagnetic (“VTEM”) survey to advanced VMS and CHC prospects with historical resources. The site camp
opened on June 1, 2021 with the summer drill program completed on September 22, 2021.
Drilling productivity at the project was behind schedule during the 2021 field season due to adverse weather conditions
in the district and challenges with the contractor staffing the drill rigs. As a result, a total of 7,325 meters of the originally
planned drill program were completed. Despite the lower-than-expected drill productivity, all planned geotechnical
drilling at the Arctic Project was completed and sufficient mineralized material was recovered to complete the planned
metallurgical program.
Arctic Project
The 2021 field season plan for the Arctic Project focused on an additional 7,600 meters of drilling in order to extract
additional material for metallurgical work and for the conversion of mineral resources into the measured category. The
metallurgical program associated with this drilling was to support variability test work and pilot plant work. Technical
activities at the Arctic Project commenced in early June with initial work focused on infill drilling to further improve the
confidence of the Mineral Resources from the Indicated to Measured category. During the field season a total of 18 holes
were completed at Arctic comprising 4,131 meters of core. All the core has been logged and sampled.
91
Regional Exploration Project
During the 2021 field season, two drill rigs were relocated from the Arctic Project to the Regional drilling program.
Regional drilling was focused on near Arctic (“Arctic Hub”) exploration targets, with the goal of discovering nearby
copper-rich satellite deposits within a 3-to-5-kilometer radius of the Arctic deposit. Drilling was completed at the Arctic
East and Southeast Arctic targets before moving drills to investigate other targets within the UKMP, including Snow and
the Ambler Lowlands. A total of 8 holes were completed totaling 3,194 meters.
In addition to the regional drill program, geologists also carried out regional geological mapping within the Ambler VMS
belt. Traverses were completed along creeks within the Center of the Universe prospect, the DH prospect, and in Jackass
Creek (between the DH and Cliff prospects), the Bud-Sunshine-West Dead Creek prospect cluster, Dead Creek, Pipe, and
the Nora prospects.
Geochemical soil sampling is ongoing within the Cosmos Hills around Bornite and the Ambler VMS Belt. The goal of this
program is to follow-up on previous anomalous geochemical results and to investigate geophysical anomalies that were
identified during the 2019 airborne versatile time domain electromagnetic survey.
Arctic Mine Permitting
Arctic mine permitting preparation work was ongoing during fiscal 2021 for filing formal federal permitting
documentation for the Arctic Project. An independent consulting company has completed a preparedness review of the
draft permitting package for the Arctic Project and presented the results of this review to the technical teams of South32
and Trilogy. The review concluded that the Ambler Metals permitting strategy is sound and the permitting package can
proceed with minor changes. Ambler Metals is now making the recommended changes to the permitting package and
expects to file the permitting application, which expects to start the formal permitting process for the Arctic Project,
with the United States Army Corps. of Engineers (“USACE”) in 2022. The Company expects the overall permitting process
to take 24 to 30 months to be completed.
Ambler Mining District Industrial Access Project (“AMDIAP” or “Ambler Access Project”)
During the summer of 2020, the United States Bureau of Land Management ("BLM") issued the Joint Record of Decision
("JROD") for the AMDIAP. Lawsuits were filed shortly thereafter by a coalition of national and Alaska environmental non-
government organizations in response to the BLM's issuance of the JROD for the Ambler Access Project.
On January 6, 2021, BLM, the National Park Service and AIDEA signed Right-of-Way agreements giving AIDEA the ability
to cross federally owned and managed lands along the route for the Ambler Access Project approved in the JROD. The
authorizing documents with the two agencies are the final federal permits required for the Ambler Access Project.
During the second quarter of 2021, AIDEA signed a land access agreement with Doyon Limited to conduct feasibility and
permitting activities to advance the Ambler Access Project and in September 2021 AIDEA signed a land access agreement
with NANA Regional Corporation, Inc. to conduct similar activities.
On October 27, 2021, the federal defendants were granted a 60-day stay with respect to each of the lawsuits. In its
request for the stay, the DOJ stated that it was necessary to “accommodate review of this matter by officials within the
United States Department of the Interior who have engaged in various discussions with multiple parties involving this
matter and in government-to-government consultations with tribal entities”.
On February 7, 2022, the court granted a second request from the federal defendants for an extension to file their
response to the plaintiff’s brief. Ambler Metals had opposed the extension request. The federal defendants are now
required to file their response no later than February 22, 2022.
92
Development Funding Agreement regarding the Ambler Access Project with the Alaska Industrial Development and Export
Authority
The 2021 field season for the Ambler Access Project consisted of cultural heritage work along the proposed 211-mile,
east-west-running controlled industrial access road that would provide industrial access to the Ambler Mining District in
Northwestern Alaska. The Alaska Industrial Development and Export Authority has prioritized cultural heritage work,
aquatic habitat studies and geotechnical planning for this year’s and next year’s field seasons to progress the feasibility
engineering and permitting work for the road. On August 9, 2021, the Governor of Alaska, Mike Dunleavy, visited the
UKMP. During the visit, the Governor reiterated his strong support for the development of the Ambler Mining District
and for the development of the Ambler Access Project. He also announced the formation of the Subsistence Advisory
Committee Working Group which is to include Native stakeholders within the Northwest Arctic Borough and the Doyon
Region who could be affected by the proposed road. This committee is being formed to develop the terms of reference
for the formal Subsistence Advisory Committee that will provide guidance on subsistence and other matters for the
design and operation of the road.
Early-stage exploration
During the year, the Company acquired, through staking, mineral claims located in Alaska, USA outside of the UKMP.
During the 2021 field season, the Company executed a 10-day preliminary reconnaissance program of the claims to
confirm government-mapped geology and to collect rock and stream sediment samples.
Outlook
On January 11, 2022, the Company announced the approval of the 2022 program and budget for Ambler Metals of
approximately $28.5 million to advance the UKMP. The budget is fully funded by Ambler Metals. The 2022 budget for
Ambler Metals, approved by the owners, Trilogy and South32, will cover up to 10,000 meters of helicopter-supported
diamond drilling that is expected to commence in early June. The meterage will be divided between resource
development drilling at Arctic and scout drilling of both VMS targets in the Ambler Belt, with a focus on targets near
Arctic, and Carbonate-Hosted Copper targets around Bornite and the Cosmos Hills. A greater effort on the ground to
identify and evaluate new targets for drilling, including the use of ground and down-hole electro-magnetic (EM) surveys,
is planned.
On February 7, 2022, the Company announced the approval of the 2022 program and budget for the Ambler Access
Project of approximately $30.8 million of which $15.4 million will be funded by AIDEA and $15.4 million will be funded
by Ambler Metals. During the 2022 field season, AIDEA will be carrying out additional work including, geotechnical
investigations, right-of-way surveys, environmental studies, road and bridge engineering design work, and cultural
resources work.
The Company has approved a 2022 cash budget for corporate activities of approximately $5.5 million (2021 - $5.3
million). The corporate budget consists of personnel and related costs of $2.1 million (2021 - $2.0 million), professional
fees of $0.9 million (2021 - $1.1 million), investor relations and marketing costs of $0.6 million ( 2021 - $0.6 million),
office related costs of $0.5 million (2021 - $0.5 million), insurance costs of $0.5 million (2021 - $0.4 million), regulatory
costs of $0.3 million (2021 - $0.3 million) and exploration activities of $0.15 million (2021 - Nil). The 2022 budget has
increased slightly from the prior year due mainly to an increase in insurance costs, addition of exploration activities and
foreign exchange impacts on Canadian dollar sourced amounts for personnel and office related costs. The Company’s
management team is focused on the oversight of our investment in Ambler Metals and will closely work with Ambler
Metals. The Company’s technical staff will work closely with South32’s technical team and Ambler Metals exploration
staff to review opportunities on advancing its known deposits and look at potential new targets in the large land package
that is held by Ambler Metals. A significant amount of uncertainty continues to exist with the Company’s annual renewal
of its insurance policies and costs are currently unpredictable. Insurance premiums may differ significantly from our
budget. The Company has sufficient cash on hand to fund its corporate activities including any increases in insurance
premiums upon renewal.
93
Summary of results
Selected expenses
Exploration expense
Mineral properties and feasibility study expenses
General and administrative
Investor relations
Professional fees
Salaries
Salaries – stock-based compensation
Gain on derecognition of assets contributed to joint venture
Share of loss on equity investment
Comprehensive earnings (loss) for the year
Basic earnings (loss) per common share
Diluted earnings (loss) per common share
Year ended
November 30,
2021
$
in thousands of dollars,
except for per share amounts
Year ended
November 30,
2020
$
—
2,610
1,650
537
1,347
1,411
3,564
(175,770)
2,855
161,767
1.14
1.12
143
—
1,517
602
818
2,007
3,472
—
13,082
(21,660)
(0.15)
(0.15)
For the year ended November 30, 2021, we reported a net loss of $21.7 million (or $0.15 basic and diluted loss per
common share) compared to a net earnings of $161.8 million (or $1.14 basic earnings and $1.12 diluted earnings per
common share) in fiscal 2020. The $183.4 million decrease in comprehensive earnings in the current year, when
compared to fiscal 2020, is primarily due to the $175.8 million gain on the derecognition of assets contributed to the
joint venture during fiscal 2020. This variance is offset by $2.6 million in mineral property and feasibility study expenses
incurred in 2020 that were not incurred during 2021. Adding to the variances in 2021 were an increase of $10.2 million
in our 50% share of the joint venture’s net operating loss and an increase of $0.6 million in salaries, offset by a decrease
of $0.5 million in professional fees. Our share of loss on equity investment was higher versus the 2020 comparative due
to project related drill program costs incurred by Ambler Metals during the 2021 field season. These costs were not
incurred during the prior year as the 2020 field season had been cancelled due to the COVID-19 pandemic. The increase
in salaries reflects the additions to the executive team during the third quarter of 2020. Professional fees were higher in
2020 due to one-time charges incurred for the implementation of new accounting standards and legal and accounting
fees in relation to the formation of the joint venture. Additionally, the Company incurred exploration costs of $0.1 million
for a preliminary reconnaissance program on new mineral claims that were staked outside of the UKMP during fiscal
2021.
Fourth quarter results
During the fourth quarter of 2021, we incurred a loss of $6.1 million compared to a loss of $3.2 million in the fourth
quarter of 2020. The primary drivers for the difference were as follows: a) an increase of $3.2 million in our share of loss
on equity investment as the current quarter results include project activity costs that Ambler Metals incurred for
completing the 2021 drill program as well as pre-development costs for the Ambler Access Project for which there are
no prior year fourth quarter comparatives; b) $0.1 million lower professional fees as the comparative includes additional
legal fees for corporate matters and tax consulting fees; and c) $0.1 million lower stock-based compensation as the
comparative includes a Restricted Share Unit (“RSU”) grant that vested during the fourth quarter of 2020. There were no
RSUs granted during 2021.
94
Selected financial data
Annual information
The following annual information is prepared in accordance with U.S. GAAP.
Interest income
Services agreement income
Expenses
Comprehensive (loss) earnings for the year
Total assets
Total liabilities
Quarterly information
Year ended
in thousands of dollars
Year ended
November 30, November 30,
2020
$
87
929
12,164
161,767
185,265
1,454
2021
$
16
22
8,616
(21,660)
167,305
1,266
Q4 2021 Q3 2021 Q2 2021 Q1 2021
11/30/21 08/31/21 05/31/21 02/28/21
$
4
130
$
2
13
$
5
—
5
—
$
in thousands of dollars,
except per share amounts
Q4 2020 Q3 2020 Q2 2020 Q1 2020
11/30/20 08/31/20 05/31/20 02/29/20
$
$
62
8
—
—
$
12
—
$
5
—
—
—
—
—
91
232
742
1,545
4,190
(6,067)
6,072
(7,664)
1,700
(3,413)
1,120
(4,516)
1,022
(3,226)
1,094
(3,184)
561
178
(3,002) 171,179
(0.05)
(0.05)
(0.02)
(0.03)
(0.04)
(0.02)
(0.02)
1.22
(0.05)
(0.05)
(0.02)
(0.03)
(0.01)
(0.01)
(0.02)
1.16
Interest and other income
Exploration expense
Mineral properties and
feasibility study expenses
Share of loss on equity
investment
Earnings (loss) for the period
Earnings (loss) per common
share – basic
Earnings (loss) per common
share – diluted
Factors that can cause fluctuations in our quarterly results include the length of the exploration field season at the
properties, the type of program conducted, stock option vesting, and issuance of shares. Subsequent to the formation
of the Joint Venture, project related costs may cause fluctuations in our quarterly results through our 50% share of the
Joint Venture’s net operating loss.
For the third quarter of 2021, we reported a comprehensive loss of $7.7 million, which consisted of $1.6 million in
operating expenses and $6.1 million for Trilogy’s 50% share of Ambler Metals’ operating loss. In the third quarter of
2020, we reported a comprehensive loss of $3.2 million which consisted of $2.1 million in operating expenses and $1.1
million for Trilogy’s share of Ambler Metals’ operating loss. When compared to the third quarter of 2020, our pro rata
share of the joint venture’s operating loss is $5 million higher. The increase is due to the project drilling costs incurred
during the 2021 field season. Ambler Metals did not incur these costs during the third quarter of 2020 due to the
cancellation of the 2020 field season because of the COVID-19 pandemic. The $0.5 million decrease in operating expenses
for the current period versus the comparative was primarily due to a decrease of $0.7 million in stock-based
compensation, offset by a $0.2 million increase in salaries as in the current period, CEO compensation is salary-based
verses stock based in the comparative third quarter of 2020.
95
For the second quarter of 2021, we reported a comprehensive loss of $3.4 million, which consisted of $1.7 million in
operating expenses and $1.7 million for Trilogy’s 50% share of Ambler Metals’ operating loss. In the second quarter of
2020, we recognized a comprehensive loss of $3.0 million which consisted of $2.5 million in operating expenses and $0.6
million for Trilogy’s share of Ambler Metals’ operating loss. When compared to the second quarter of 2020, our pro rata
share of the joint venture’s operating loss is $1.1 million higher for the second quarter of 2021. The increase is due to
camp set up costs in relation to the 2021 field season. Ambler Metals did not incur these costs during the second quarter
of 2020 due to the cancellation of the 2020 field season because of the COVID-19 pandemic. The $0.8 million decrease
in operating expenses for the second second quarter versus the comparative was primarily due to the Arctic project
feasibility study costs that were incurred by Trilogy during the second quarter of 2020 for which there are no
comparatives for the same quarter in 2021.
For the first quarter of 2021, we reported a comprehensive loss of $4.5 million, which consists of $3.4 million in operating
expenses and $1.1 million for Trilogy’s 50% share of Ambler Metals’ operating loss. In the first quarter of 2020, we
recognized a gain of $176 million from the contribution of our Alaskan mineral properties to the joint venture for which
there was no comparative in fiscal 2021. Other variances, when compared to the three-month period ended February
29, 2020, include our pro rata share of the joint venture’s operating loss, which is $0.9 million higher in the period and
operating expenses, which are $1.1 million lower for the period. The decrease in the operating expenses is primarily due
to the elimination of $1.5 million in mineral properties expenses as the mineral properties were contributed to the joint
venture during the first quarter of 2020 and a cost savings of $0.4 million from professional fees, offset by an increase
of $1.0 million in stock-based compensation.
Liquidity and capital resources
We expended $5.1 million on operating activities during the 2021 fiscal year compared with $8.3 million for operating
activities for the same period in 2020. A majority of cash spent on operating activities during the prior fiscal year was
expended on mineral property expenses, general and administrative expenses, salaries and professional fees. Ambler
Metals assumed responsibility for project funding upon formation of the Joint Venture on February 11, 2020. As a result,
the majority of cash spent on operating activities during the 2021 fiscal year was expended on general and administrative
expenses, salaries and professional fees.
At November 30, 2021, we had $6.3 million in cash and cash equivalents and working capital of $5.6 million. Management
believes that the cash available is sufficient to meet its budgeted $5.5 million operating requirements for the next twelve
months. The Company continues to manage its cash expenditures through its working capital. All project related costs
are funded by the joint venture. Amber Metals is well funded to advance the UKMP with $61.2 million in cash and $55.4
million loan receivable from South32 as at November 30, 2021 and an operating budget of $28.5 million for fiscal 2022.
Trilogy does not anticipate having to fund the activities of Ambler Metals until the initial contribution of $145 million is
expended.
Future cash requirements may vary materially from current expectations due to a number of factors, including foreign
exchange denominated office related costs and insurance renewal costs. The Company will need to raise additional funds
to support its operations and administration expenses. Future sources of liquidity may include debt financing, equity
financing, convertible debt, exercise of options, or other means. The continued operations of the Company are
dependent on its ability to obtain additional financing or to generate future cash flows.
96
Off-balance sheet arrangements
We have no material off-balance sheet arrangements.
Outstanding share data
At February 11, 2022, we had 145,464,286 common shares issued and outstanding. At February 11, 2022, we had
12,242,150 stock options outstanding with a weighted-average exercise price of $1.98 and 1,438,186 Deferred Share
Units (“DSUs”) and 257,267 Restricted Share Units (“RSUs”) outstanding. We continue to hold 11,927 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 1,988 common
shares will be issued upon redemption of the NovaGold DSUs. For additional information on NovaGold DSUs, please refer
to note 9 in our November 30, 2021 audited consolidated financial statements. Upon the exercise of all the forgoing
convertible securities, the Company would be required to issue an aggregate of 13,939,591 common shares.
Financial instruments
Our financial instruments consist of cash and cash equivalents, accounts receivable, deposits, accounts payable and
accrued liabilities. The fair value of the financial instruments approximates their carrying value due to the short-term
nature of their maturity. Our financial instruments initially measured at fair value and then held at amortized cost include
cash and cash equivalents, accounts receivable, deposits, and accounts payable and accrued liabilities.
(a) Currency risk
Currency risk is the risk of a fluctuation in financial asset and liability settlement amounts due to a change in foreign
exchange rates. The Company operates in the United States and Canada. The Company’s exposure to currency risk at
November 30, 2021 is limited to Canadian dollar balances consisting of cash of CDN$247,000, accounts receivable of
CDN$23,000 and certain trade payables and accrued personnel costs CDN$946,000. Based on a 10% change in the US-
Canadian exchange rate, assuming all other variables remain constant, the Company’s net loss would change by
approximately $53,000.
(b) Credit risk
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 accounts receivable are for recoverable expenses. The Company’s exposure to credit risk is equal to the
balance of cash and cash equivalents and accounts receivable as recorded in the financial statements.
(c) Liquidity risk
Liquidity risk is the risk that we will encounter difficulties raising funds to meet our financial obligations as they fall due.
We are in the exploration stage and do not have cash inflows from operations; therefore, we manage liquidity risk
through the management of our capital structure and financial leverage. Future sources of liquidity may arise from equity
financing, debt financing, convertible debt, or other means.
(d) Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of
changes in market interest rates. The Company is exposed to interest rate risk with respect to interest earned on cash
and cash equivalents. Based on balances as at November 30, 2021, a 1% change in interest rates would result in a change
in net loss of $160, assuming all other variables remain constant.
97
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.
New accounting pronouncements
There were no new accounting pronouncements requiring management consideration during fiscal 2021.
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 LLC, income taxes and valuation of stock-based
compensation.
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.
Significant judgments are made in assessing the possibility of impairment. Factors that may be indicative of an
impairment include a loss in the value of an investment that is not temporary. Management considers several factors in
considering if an indicator of impairment has occurred, including but not limited to, sustained losses by the investment,
the absence of the ability to recover the carrying amount of the investment, significant changes in the legal, business or
regulatory environment, significant adverse changes impacting the investee and internal reporting indicating the
economic performance of an investment is, or will be, worse than expected.
These factors are subjective and require consideration at each period end. If an indicator of impairment is determined
to exist, the fair value of the impaired investment is determined based on the valuation of cohort companies with similar
projects or upon the present value of expected future cash flows using discount rates and other assumptions believed
to be consistent with those used by principal market participants and observed market earnings multiples of comparable
companies.
Management calculates the estimated undiscounted future net cash flows relating to the asset or asset group using
estimated future prices, proven and probable reserves and other mineral resources, and operating, capital and
reclamation costs. When the carrying value of an asset exceeds the related undiscounted cash flows, the asset is written
down to its estimated fair value, which is usually determined using discounted future cash flows. Management’s
estimates of mineral prices, mineral resources, foreign exchange rates, production levels operating, capital and
reclamation costs are subject to risk and uncertainties that may affect the determination of the recoverability of the
long-lived asset. It is possible that material changes could occur that may adversely affect management’s estimates.
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 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.
98
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 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.
Disclosure controls and procedures
Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or
submitted by the Company under U.S. and Canadian securities legislation is recorded, processed, summarized and
reported within the time periods specified in those rules, including providing reasonable assurance that material
information is gathered and reported to senior management, including the Chief Executive Officer (“CEO”) and Chief
Financial Officer (“CFO”), as appropriate, to permit timely decisions regarding public disclosure. Management, including
the CEO and CFO, has evaluated the effectiveness of the design and operation of the Company’s disclosure controls and
procedures, as defined in Rule 13a-15(e) and 15d-15(e) of the US Exchange Act and the rules of Canadian Securities
Administrators, as at November 30, 2021. Based on this evaluation, the CEO and CFO have concluded that the Company’s
disclosure controls and procedures were effective as at November 30, 2021.
Internal control over financial reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined
in Rule 13a-15(f) and 15d-15(f) of the U.S. Exchange Act and National Instrument 52-109 Certification of Disclosure in
Issuer’s Annual and Interim filings. Any system of internal control over financial reporting, no matter how well designed,
has inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable
assurance with respect to financial statement preparation and presentation. Management has used the Committee of
Sponsoring Organizations of the Treadway Commission in Internal Control – Integrated Framework (2013) to evaluate
the effectiveness of the Company’s internal control over financial reporting. Based on this assessment, management has
concluded that as at November 30, 2021, the Company’s internal control over financial reporting was effective.
Risk factors
Trilogy and its future business, operations and financial condition are subject to various risks and uncertainties due to
the nature of its business and the present stage of exploration of its mineral properties. Certain of these risks and
uncertainties are under the heading “Risk Factors” under Trilogy’s Form 10-K dated February 11, 2022 available on SEDAR
at www.sedar.com and EDGAR at www.sec.gov and on our website at www.trilogymetals.com.
Additional information
Additional information regarding the Company, including our annual report on Form 10-K, is available on SEDAR
at www.sedar.com and EDGAR at www.sec.gov and on our website at www.trilogymetals.com.
99
Cautionary notes
Forward-looking statements
This Management’s Discussion and Analysis 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; perceived merit of properties,
exploration results and budgets, the Company and Ambler Metals’s funding requirements, mineral reserves and resource
estimates, work programs, capital expenditures, operating costs, cash flow estimates, production estimates and similar
statements relating to the economic viability of a project, timelines, strategic plans, statements regarding Ambler Metals’
plans and expectations relating to its Upper Kobuk Mineral Projects, sufficiency of the $145 million subscription price to
fund the UKMP; impact of COVID-19 on the Company’s operations; market prices for precious and base metals;
statements regarding the Ambler Road 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. 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 Upper Kobuk Mineral Projects;
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;
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 matter;
expected trends and specific assumptions regarding metal prices and currency exchange rates;
100
•
•
the potential impact of the novel coronavirus (COVID-19); 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 the COVID-19 pandemic;
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;
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 mineral resources;
101
• 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;
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
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;
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;
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; and
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.
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
102
Company or other future events or conditions may differ materially from those reflected in the forward-looking
statements due to a variety of risks, uncertainties and other factors, including, without limitation, those referred to in
Trilogy’s Form 10-K dated February 11, 2022, filed with the Canadian securities regulatory authorities and the SEC, 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.
Cautionary note to United States investors
Reserve and resource estimates
This Management’s Discussion and Analysis has been prepared in accordance with the requirements of the securities laws
in effect in Canada, which differ from the requirements of U.S. securities laws. Unless otherwise indicated, all resource
and reserve estimates included in this Management’s Discussion and Analysis have been prepared in accordance with
National Instrument 43-101 Standards of Disclosure for Mineral Projects (“NI 43-101”) and the Canadian Institute of
Mining, Metallurgy, and Petroleum Definition Standards on Mineral Resources and Mineral Reserves. NI 43-101 is a
rule developed by the Canadian Securities Administrators which establishes standards for all public disclosure an issuer
makes of scientific and technical information concerning mineral projects. Canadian standards, including NI 43-101, differ
significantly from the requirements of the SEC, and resource and reserve information contained herein may not be
comparable to similar information disclosed by U.S. companies. In particular, and without limiting the generality of the
foregoing, the term “resource” does not equate to the term “reserves”. Under U.S. standards, mineralization may not be
classified as a “reserve” unless the determination has been made that the mineralization could be economically and
legally produced or extracted at the time the reserve determination is made. The SEC’s disclosure standards normally do
not permit the inclusion of information concerning “measured mineral resources”, “indicated mineral resources” or
“inferred mineral resources” or other descriptions of the amount of mineralization in mineral deposits that do not
constitute “reserves” by U.S. standards in documents filed with the SEC. Investors are cautioned not to assume that any
part or all of mineral deposits in these categories will ever be converted into reserves. U.S. investors should also
understand that “inferred mineral resources” have a great amount of uncertainty as to their existence and great
uncertainty as to their economic and legal feasibility. Under Canadian rules, estimated “inferred mineral resources” may
not form the basis of feasibility or pre-feasibility studies except in rare cases. Investors are cautioned not to assume that
all or any part of an “inferred mineral resource” exists or is economically or legally mineable. Disclosure of
“contained ounces” in a resource is permitted disclosure under Canadian regulations; however, the SEC normally only
permits issuers to report mineralization that does not constitute “reserves” by SEC standards as in-place tonnage and
grade without reference to unit measures. The requirements of NI 43-101 for identification of “reserves” are also not the
same as those of the SEC, and reserves reported by the Company in compliance with NI 43-101 may not qualify as
“reserves” under SEC standards. Accordingly, information concerning mineral deposits set forth herein may not be
comparable with information made public by companies that report in accordance with U.S. standards.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Supplementary Data
For the required supplementary data, please see the section heading “Item 7. Management’s Discussion and Analysis of
Financial Condition and Results of Operations” above.
103
Management’s Report on Internal Control over Financial Reporting
The management of Trilogy Metals Inc. is responsible for establishing and maintaining adequate internal control over
financial reporting under Rule 13a-15(f) and 15d-15(f) of the U.S. Exchange Act. The Securities Exchange Act of 1934
defines this as a process designed by, or under the supervision of, the Company’s principal executive and principal
financial officers and effected by the Company’s Board of Directors, management and other personnel, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles in the United States of America, and
includes those policies and procedures that:
•
•
•
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions
and dispositions of the assets of the Company;
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles in the United States of America, and
that receipts and expenditures of the Company are being made only in accordance with authorizations of
management and directors of the Company; and
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or
disposition of the Company’s assets that may have a material effect on the consolidated financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Projections of any evaluation of effectiveness to future periods are subject to risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of the Company’s internal control over financial reporting as of November 30,
2021. In making this assessment, the Company’s management used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission in Internal Control – Integrated Framework (2013).
Based upon our assessment and those criteria, management concluded that the Company’s internal control over
financial reporting is effective as of November 30, 2021.
/s/ Tony Giardini
/s/ Elaine Sanders
Tony Giardini
President, Chief Executive Officer & Director
Elaine Sanders
Vice President & Chief Financial Officer
February 10, 2022
104
Report of Independent Registered Public Accounting Firm
Report of Independent Registered Public Accounting Firm
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, 2021 and 2020, and the related consolidated statements of earnings (loss) and
comprehensive earnings (loss), changes in shareholders’ equity and cash flows for each of the three years in the period
ended November 30, 2021, 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, 2021 and 2020, and the results of its operations and its cash flows for each of the three
years in the period ended November 30, 2021 in conformity with accounting principles generally accepted in the United
States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to
express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting
firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules
and regulations of the Securities and Exchange Commission and the PCAOB.
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. The Company is not
required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our
audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of
expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we
express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures
included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial
statements. Our audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that
our audits provide a reasonable basis for our opinion.
Critical Audit Matters
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.
Assessment of impairment indicators related to the Investment in Ambler Metals LLC
As described in Notes 2 and 4 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, 2021, the carrying amount of
the Company’s investment in Ambler was $160.1 million. Management assesses impairment indicators whenever
changes in facts and circumstances indicate there is an other than temporary loss in value of the investment.
105
Management applies 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) sustained
losses by the investment, (ii) an absence of the ability to recover the carrying amount of the investment, and (iii)
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 assessment of impairment
indicators related to the investment in Ambler is a critical audit matter are that there was 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 judgements made by
management in their assessment of indicators of impairment related to the investment in Ambler.
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 indicators of impairment related to the investment in Ambler, which
included (i) evaluating whether there was an absence of the ability to recover the carrying amount of the investment by
considering changes in Trilogy Metals market capitalization, 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,
2021. Performing an audit of the financial statements of Ambler as of November 30, 2021 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.
/s/ PricewaterhouseCoopers LLP
Chartered Professional Accountants
Vancouver, Canada
February 10, 2022
We have served as the Company's auditor since 2012.
106
Trilogy Metals Inc.
Consolidated Balance Sheets
As at November 30, 2021 and 2020
in thousands of US dollars
November 30, 2021 November 30, 2020
$
$
Assets
Current assets
Cash and cash equivalents
Accounts receivable (note 3)
Deposits and prepaid amounts
Investment in Ambler Metals LLC (note 4)
Fixed assets (note 5)
Mineral properties (note 6)
Right of use asset (note 8 (a))
Liabilities
Current liabilities
Accounts payable and accrued liabilities (note 7)
Current portion of lease liability
Long-term portion of lease liability (note 8 (b))
Shareholders’ equity
Share capital (note 9) – unlimited common shares authorized, no
par value Issued – 145,009,811 (2020 – 144,137,850)
Contributed surplus
Contributed surplus – options (note 9(a))
Contributed surplus – units (note 9(b))
Deficit
6,308
19
285
6,612
160,063
29
119
482
167,305
852
179
1,031
235
1,266
180,820
122
25,990
1,712
(42,605)
166,039
167,305
11,125
129
184
11,438
173,145
206
—
476
185,265
888
158
1,046
408
1,454
179,746
122
23,303
1,585
(20,945)
183,811
185,265
Commitments and contingencies (note 13)
Subsequent events (note 14)
(See accompanying notes to the consolidated financial statements)
/s/Tony Giardini, President, CEO and Director
/s/ Kalidas Madhavpeddi, Director
Approved on behalf of the Board of Directors
107
Trilogy Metals Inc.
Consolidated Statements of Earnings (Loss) and Comprehensive Earnings (Loss)
For the Years Ended November 30
in thousands of US dollars, except share and per share amounts
2019
$
$
2020
2021
$
Expenses
Amortization
Exploration expense
Feasibility study (note 6(d))
Foreign exchange loss (gain)
General and administrative
Investor relations
Mineral properties expense (note 6(d))
Professional fees
Salaries
Salaries – technical services (note 4(e))
Salaries – stock-based compensation
Total expenses
Other items
Share of loss on equity investment (note 4(b))
Interest and other income
Services agreement income (note 4(e))
Gain on derecognition of assets contributed to joint venture
(note 4(a))
Comprehensive (loss) earnings for the year
Basic (loss) earnings per common share
Diluted (loss) earnings per common share
Basic weighted average number of common shares outstanding
Diluted weighted average number of common shares
outstanding
21
143
—
36
1,517
602
—
818
2,007
—
3,472
8,616
13,082
(16)
(22)
—
(21,660)
(0.15)
(0.15)
144,428,926
91
—
1,065
56
1,650
537
1,545
1,347
1,411
898
3,564
12,164
2,855
(87)
(929)
211
—
—
(19)
1,838
623
19,211
1,382
1,314
—
3,845
28,405
—
(500)
—
(175,770)
161,767
1.14
1.12
141,464,877
—
(27,905)
(0.21)
(0.21)
135,225,349
144,428,926
144,604,750
135,225,349
(See accompanying notes to the consolidated financial statements)
108
Trilogy Metals Inc.
Consolidated Statements of Changes in Shareholders’ Equity
For the Years Ended November 30
in thousands of US dollars, except share amounts
Total
shareholders’
Contributed
surplus –
options
Contributed
surplus –
units
Deficit
$
(154,807)
—
—
—
—
—
(27,905)
(182,712)
—
—
—
—
—
161,767
(20,945)
—
—
(21,660)
(42,605)
equity
$
32,202
208
9,913
—
—
3,845
(27,905)
18,263
217
—
—
—
3,564
161,767
183,811
416
3,472
(21,660)
166,039
Number of shares
Share capital
Warrants
Contributed
surplus
Balance – 2018
Exercise of options
Exercise of warrants
Restricted share units
Deferred share units
Stock-based compensation
Loss for the year
Balance – 2019
Exercise of options
Exercise of warrants
Restricted share units
Deferred share units
Stock-based compensation
Earnings for the year
Balance – 2020
Exercise of options
Stock-based compensation
Loss for the year
Balance – 2021
outstanding
131,585,612
1,725,776
6,521,740
412,501
182,132
—
—
140,427,761
3,297,588
—
412,501
—
—
—
144,137,850
871,961
—
—
145,009,811
$
164,069
1,123
12,166
424
189
—
—
177,971
1,133
—
642
—
—
—
179,746
1,074
—
—
180,820
$
2,253
—
(2,253)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
$
$
$
122
—
—
—
—
—
—
122
—
—
—
—
—
—
122
—
—
—
122
19,076
(915)
—
—
—
2,962
—
21,123
(916)
—
—
—
3,096
—
23,303
(658)
3,345
—
25,990
1,489
—
—
(424)
(189)
883
—
1,759
—
—
(642)
—
468
—
1,585
—
127
—
1,712
(See accompanying notes to the consolidated financial statements)
109
Trilogy Metals Inc.
Consolidated Statements of Cash Flows
For the Years Ended November 30
in thousands of US dollars
2019
$
2020
$
2021
$
Cash flows used in operating activities
(Loss) earnings for the year
Adjustments to reconcile net loss to cash flows in operating activities
Amortization
Office lease accounting
Loss on working capital written-off upon joint venture formation
Gain on derecognition of assets (note 4(a))
Loss on equity investment in Ambler Metals LLC (note 4(b))
Unrealized foreign exchange loss
Stock-based compensation
Net change in non-cash working capital
Decrease (increase) in accounts receivable
Decrease (increase) in deposits and prepaid amounts
(Decrease) increase in accounts payable and accrued liabilities
Cash flows from financing activities
Proceeds from exercise of options
Proceeds from exercise of warrants
Cash flows from investing activities
Acquisition of plant & equipment
Mineral properties funding
Mineral claims
Decrease in cash and cash equivalents
Effect of exchange rate on cash and cash equivalents
Cash and cash equivalents – beginning of year
Cash and cash equivalents – end of the year
(21,660)
161,767
(27,905)
91
21
(7)
(15)
—
18
— (175,770)
2,855
27
3,564
13,082
10
3,472
211
—
—
—
—
1
3,845
110
(101)
(36)
(5,117)
135
535
(1,466)
(8,251)
(241)
(100)
697
(23,492)
416
—
416
217
—
217
208
9,913
10,121
—
—
(119)
(119)
(4,820)
3
11,125
6,308
—
—
—
—
(8,034)
(15)
19,174
11,125
(645)
10,200
—
9,555
(3,816)
(1)
22,991
19,174
(See accompanying notes to the consolidated financial statements)
110
Trilogy Metals Inc.
Notes to the Consolidated Financial Statements
1) Nature of operations
Trilogy Metals Inc., (“Trilogy”, the “Company”, or “we”) was incorporated in British Columbia under the Business
Corporations Act (BC) on April 27, 2011. The Company is engaged in the exploration and development of mineral
properties, through our equity investee (note 4), with a focus on the Upper Kobuk Mineral Projects (“UKMP”), including
the Arctic and Bornite Projects located in Northwest Alaska in the United States of America (“US” or “USA”). The Company
also conducts early-stage exploration through a wholly owned subsidiary, 995 Exploration Inc.
2) Summary of significant accounting policies
Basis of presentation
These consolidated financial statements have been prepared using accounting principles generally accepted in the
United States (“U.S. GAAP”) and include the accounts of Trilogy and its wholly owned subsidiaries, NovaCopper US Inc.
(dba “Trilogy Metals US”) and 995 Exploration Inc. All intercompany transactions are eliminated on consolidation. For
variable interest entities (“VIEs”) where Trilogy is not the primary beneficiary, we use the equity method of accounting.
All figures are in United States dollars unless otherwise noted. References to CDN$ refer to amounts in Canadian dollars.
These financial statements were approved by the Company’s Board of Directors for issue on February 10, 2022.
Cash and cash equivalents
Cash and cash equivalents had been comprised of highly liquid investments maturing less than 90 days from date of
initial investment.
Investment in affiliates
Investments in unconsolidated ventures over which the Company has the ability to exercise significant influence, but
does not control, are accounted for under the equity method and include the Company’s investment in the Ambler
Metals project. We identified Ambler Metals LLC (“Ambler Metals”) as a VIE as the entity is dependent on funding from
its owners. All funding, ownership, voting rights and power to exercise control is shared equally on a 50/50 basis between
the owners of the VIE. Therefore, the Company has determined that it is not the primary beneficiary of the VIE. The
Company’s maximum exposure to loss is its investment in Ambler Metals.
Ambler Metals is a non-publicly traded equity investee holding exploration and development projects. Investments in
unconsolidated entities accounted for under the equity method are assessed for impairment whenever changes in the
facts and circumstances indicate an other than temporary loss in value has occurred. When indicators exist, the fair value
is estimated and compared to the investment carrying value. If any impairment is determined to be other than
temporary, the carrying value of the investment is written down to fair value. The fair value of the impaired investment
may be based upon the valuation of cohort companies with similar projects or 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. Judgement is applied in evaluating
indicators of impairment. Events that could indicate impairment of an investment in affiliates include sustained losses
by the investment, the absence of the ability to recover the carrying amount of the investment, or a deterioration of
market conditions, among others.
111
Fixed assets
Plant 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. Amortization periods by asset class
are:
Computer hardware and
software
Leasehold Improvements
Office furniture and equipment 5 years
Machinery and equipment
Vehicles
3 years
3 – 10 years
3 years
lease term
Mineral properties and development costs
All direct costs related to the acquisition of mineral property interests are capitalized. Mineral property exploration
expenditures is expensed when incurred. When it has been established that a mineral deposit is commercially mineable,
an economic analysis has been completed and permits are obtained, the costs subsequently incurred to develop a mine
on the property prior to the start of mining operations are capitalized. Capitalized costs will be amortized following
commencement of production using the unit of production method over the estimated life of proven and probable
reserves.
The acquisition of title to mineral properties is a complicated and uncertain process. The Company has taken steps, in
accordance with industry standards, to verify the title to mineral properties. Although the Company has made efforts to
ensure that legal titles to its mining assets are properly recorded through the Joint Venture, there can be no assurance
that such title will be secured indefinitely.
Impairment of long-lived assets
Management assesses the possibility of impairment in the carrying value of long-lived assets whenever events or
circumstances indicate that the carrying amounts of the asset or asset group may not be recoverable. Management
calculates the estimated undiscounted future net cash flows relating to the asset or asset group using estimated future
prices, proven and probable reserves and other mineral resources, and operating, capital and reclamation costs. When
the carrying value of an asset exceeds the related undiscounted cash flows, the asset is written down to its estimated
fair value, which is usually determined using discounted future cash flows. Management’s estimates of mineral prices,
mineral resources, foreign exchange rates, production levels operating, capital and reclamation costs are subject to risk
and uncertainties that may affect the determination of the recoverability of the long-lived asset. It is possible that
material changes could occur that may adversely affect management’s estimates.
Leases
At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on
the unique facts and circumstances present in the arrangement. Leases with a term greater than one year are recognized
on the balance sheet as ROU assets and short-term and long-term lease liabilities, as applicable. ROU assets represent
the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make
lease payments arising from the lease. The Company typically only includes an initial lease term in its assessment of a
lease arrangement. It also considers termination options and factors those into the determination of lease payments.
Options to renew a lease are not included in the assessment unless there is reasonable certainty that the Company will
renew.
Operating lease liabilities and their corresponding ROU assets are recorded based on the present value of lease payments
over the expected remaining lease term. Certain adjustments to the ROU asset may be required for items such as
112
incentives received. 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
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.
Income taxes
The liability method of accounting for income taxes is used and is based on differences between the accounting and tax
basis of assets and liabilities. Deferred income tax assets and liabilities are recognized for temporary differences between
the tax and accounting basis of assets and liabilities as well as for the benefit of losses available to be carried forward to
future years for tax purposes using enacted income tax rates expected to be in effect for the period in which the
differences are expected to reverse. Deferred income tax assets are evaluated and, if realization is not considered more
likely than not, a valuation allowance is provided.
Uncertainty in income tax positions
The Company recognizes tax benefits from uncertain tax positions only if it is at least more likely than not that the tax
position will be sustained on examination by the taxing authorities, based on the technical merits of the position. Any
tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that
has a greater than 50% likelihood of being realized upon settlement with the taxing authorities. Related interest and
penalties, if any, are recorded as tax expense in the tax provision.
Financial instruments
Valuation models require the use of assumptions which may include the expected life of the instrument, the expected
volatility, dividend payouts, and interest rates. In determining these assumptions, management uses readily observable
market inputs where available or, where not available, inputs generated by management.
Loans and receivables are recorded initially at fair value, net of transaction costs incurred, and subsequently at amortized
cost using the effective interest rate method. Loans and receivables consist of cash and cash equivalents, accounts
receivable, and deposits.
Other financial liabilities are recorded initially at fair value and subsequently at amortized cost using the effective interest
rate method. Other financial liabilities include accounts payable and accrued liabilities.
Translation of foreign currencies
Monetary assets and liabilities are translated into United States dollars at the exchange rate in effect at the balance sheet
date, and non-monetary assets and liabilities at the exchange rate in effect at the time of acquisition or issue. Income
and expenses are translated at rates approximating the exchange rate in effect at the time of transactions. 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.
Earnings and loss per share
Earnings and loss per common share is calculated based on the weighted average number of common shares outstanding
during the year. The Company follows the treasury stock method in the calculation of diluted earnings per share. Under
the treasury stock method, the weighted average number of common shares outstanding used for the calculation of
diluted loss per share assumes that the proceeds to be received on the exercise of dilutive stock options and in the prior
year, warrants are used to repurchase common shares at the average market price during the period.
113
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
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. The expense relating to the fair value of stock
options is included in expenses, net of forfeitures and is credited to contributed surplus. Shares are issued from treasury
in settlement of options exercised.
Compensation expense for restricted share units (“RSUs”) and deferred share units (“DSUs”) granted to employees and
directors, respectively, is determined based on estimated fair values of the units at the time of grant using quoted market
prices or at the time the units qualify for equity classification under ASC 718. The cost is recognized using the graded
attribution method over the vesting period of the respective units. The expense relating to the fair value of the units is
included in expenses, net of forfeitures and is credited to other liabilities or contributed surplus based on the unit’s
classification. 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.
Use of estimates and measurement uncertainties
The preparation of financial statements in conformity with U.S. 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. Significant estimates include the measurement of the South32 property acquisition option and subsequent
equity method investment, income taxes, and the valuation of stock-based compensation. Actual results could differ
materially from those reported.
3) Accounts receivable
GST input tax credits
Ambler Metals
Accounts receivable
November 30, 2021
in thousands of dollars
November 30, 2020
$
15
114
129
$
19
—
19
The balance due from Ambler Metals for the prior year (see note 4 below) consisted of services rendered by Trilogy and
reimbursements for invoices paid by Trilogy on behalf of Ambler Metals pursuant to a service agreement.
4) Investment in Ambler Metals LLC
(a) Formation of Ambler Metals LLC
On February 11, 2020, the Company completed the formation of a 50/50 joint venture named Ambler Metals with
South32 Limited (“South32”). 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. To assist Ambler Metals during the initial set up
phase, Trilogy paid all of Ambler Metals’ invoices and was being reimbursed pursuant to a services agreement (the
“Services Agreement”) between Trilogy and Ambler Metals until the back office transitioned to a new permanent team
employed by the joint venture. The Services Agreement ended on December 31, 2020.
114
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. All significant decisions
related to the UKMP require the approval of both companies. We determined that Ambler Metals is a VIE because it is
expected to need additional funding from its owners for its significant activities. However, we concluded that we are not
the primary beneficiary of Ambler Metals as the power to direct its activities, through its board, is shared under the
Ambler Metals LLC limited liability company agreement. 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
investment in Ambler Metals was initially measured at its fair value of $176 million upon recognition. Our maximum
exposure to loss in this entity is limited to the carrying amount of our investment in Ambler Metals, which totaled $160.1
million at November 30, 2021. The following table summarizes the gain on derecognition of the UKMP assets upon
transfer to the Ambler Metals joint venture on February 11, 2020.
Fair value ascribed to Ambler Metals LLC interest
Less: carrying value of contributed /eliminated assets
Mineral properties
Property, plant and equipment located in Alaska
Elimination of Fairbanks warehouse right of use asset
Elimination of prepaid State of Alaska mining claim fees
Add:
Reimbursement of claims staking
Demobilization costs of drills
Cancellation of Fairbanks warehouse lease liability
Fair value of mineral properties purchase option
Gain on derecognition
(b) Carrying value of investment in Ambler Metals
in thousands of dollars
$
176,000
(30,631)
(618)
(93)
(303)
44
278
93
31,000
175,770
During the year ended November 30, 2021, 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 $26.2 million for the year ended November
30, 2021 ( 2020 - $5.7 million). The carrying value of Trilogy’s 50% investment in Ambler Metals as at November 30, 2021
is summarized on the following table.
February 11, 2020, fair value ascribed to Ambler Metals interest
Share of loss on equity investment from February 11, 2020 to November 30, 2020
November 30, 2020, investment in Ambler Metals
Share of loss on equity investment for the year ending November 30, 2021
November 30, 2021, investment in Ambler Metals
in thousands of dollars
$
176,000
(2,855)
173,145
(13,082)
160,063
115
(c) The following table summarizes Ambler Metals’ Balance Sheet as at November 30, 2021.
Total assets
Cash
Loan receivable from South32 (current and long-term)
Mineral properties
Total liabilities
Accounts payable and accrued liabilities
Members' equity (Total assets less Total liabilities)
in thousands of dollars
November 30, 2021 November 30, 2020
$
$
171,991
149,374
81,673
61,205
58,478
55,355
30,705
30,757
(1,496)
(5,043)
(1,445)
(4,148)
170,495
144,331
(d) The following table summarizes Ambler Metals’ net loss for the year ended November 30, 2021 and from the
formation of the joint venture on February 11, 2020 to the end of the reporting period on November 30, 2020. For
the prior year comparative, $0.3 million has been reclassed from general and administrative expense to mineral
properties expense in order to reflect the current year presentation.
Depreciation
Corporate salaries and wages
General and administrative
Lease expense
Mineral property expense
Professional fees
Foreign exchange (gain)/loss
Interest income
Comprehensive loss
Year ended
November 30, 2021
$
in thousands of dollars
February 11, 2020 to
November 30, 2020
$
95
614
653
48
3,488
1,990
3
(1,180)
5,711
77
2,421
756
276
22,639
1,047
6
(1,058)
26,164
(e) Related party transactions - services agreement income
During the fiscal year, the Company charged approximately $22,000 (2020 - $0.9 million) of expenses related to
technical services, including geological, engineering, environmental and human resources and accounting services
in connection with the Services Agreement. In addition, the Company received payments of approximately $4,000
(2020 - $2.8 million) related to operating expenses paid on behalf of Ambler Metals for the year ended November
30, 2021.
116
5) Fixed assets
Cost
November 30, 2019
ASC 842 adoption
Assets derecognized
(note 4(a))
November 30, 2020
ROU asset reclass
November 30, 2021
Accumulated
amortization
November 30, 2019
Depreciation
Assets derecognized
(note 4(a))
November 30, 2020
ROU asset reclass
Depreciation
November 30, 2021
Net Book Value
November 30, 2020
November 30, 2021
British Columbia, Canada
Alaska, USA
in thousands of dollars
Furniture and
equipment
$
63
—
Leasehold
improvements
$
53
200
Computer
hardware and
Machinery and
Computer
hardware and
software
$
115
—
equipment
$
3,667
—
software Total
$
3,902
200
$
4
—
—
63
—
63
29
13
—
42
—
14
56
21
7
—
253
(200)
53
18
51
—
69
(44)
6
31
184
22
—
115
—
115
111
3
—
114
—
1
115
1
—
(3,667)
—
—
—
3,026
23
(3,049)
—
—
—
—
—
—
(4)
—
—
—
3
1
(4)
—
—
—
—
—
—
(3,671)
431
(200)
231
3,187
91
(3,053)
225
(44)
21
202
206
29
6) Mineral properties and development costs
November 30, 2020
Acquisition costs
$
—
—
—
November 30, 2019
$
in thousands of dollars
November 30, 2021
$
$
58
61
119
58
61
119
in thousands of dollars
Assets
derecognized
note 4(a)
November 30, 2020
$
$
26,631
4,000
30,631
(26,631)
(4,000)
(30,631)
—
—
—
117
Alaska, USA
West Kobuk
East Ambler
Alaska, USA
Ambler (a)
Bornite (b)
(a) Ambler
On January 11, 2010, NovaGold Resources Inc. (“NovaGold”), through Alaska Gold Company (“AGC”), its wholly-
owned subsidiary, purchased 100% of the Ambler lands in Northwest Alaska, which contains the copper-zinc-lead-
gold-silver Arctic Project and other mineralized targets within the volcanogenic massive sulfide belt, through a series
of cash and share payments. Total fair value of the consideration was $26.6 million. The vendor retained a 1% net
smelter return royalty that can be purchased at any time for a one-time payment of $10.0 million.
The Ambler lands were acquired on October 17, 2011 by Trilogy Metals US through a purchase and sale agreement
with AGC. On October 24, 2011, NovaGold transferred its ownership of Trilogy Metals US to the Company, then a
wholly owned subsidiary of NovaGold, which was subsequently spun-out to NovaGold shareholders and publicly
listed on April 30, 2012 (“NovaGold Arrangement”).
(b) Bornite
On October 19, 2011, Trilogy Metals US acquired the exclusive right to explore and the non-exclusive right to access
and enter on the Bornite lands, and lands deeded to NANA Regional Corporation, Inc. (“NANA”) through the Alaska
Native Claims Settlement Act, located adjacent to the Ambler lands in Northwest Alaska. As consideration, Trilogy
Metals US paid $4 million to acquire the right to explore and develop the combined Upper Kobuk Mineral Projects
(“UKMP”) through an Exploration Agreement and Option to Lease with NANA. Upon a decision to proceed with
construction of a mine on the lands, NANA maintains the right to purchase between a 16%-25% ownership interest
in the mine or retain a 15% net proceeds royalty which is payable after Trilogy Metals US has recovered certain
historical costs, including capital and cost of capital. Should NANA elect to purchase an ownership interest,
consideration will be payable equal to all historical costs incurred on the properties, less $40 million, with the
difference multiplied by the elected percentage purchased. In no event will the purchase amount be less than zero.
The parties would form a joint venture and be responsible for all future costs, including capital costs of the mine
based on their pro-rata share.
NANA would also be granted a net smelter return royalty of between 1% and 2.5% upon the execution of a mining
lease or a surface use agreement, the amount of which is determined by the classification of land from which
production originates.
(c) Option Agreement
On April 10, 2017, Trilogy and Trilogy Metals US entered into the South32 Option Agreement to form a Joint Venture
with South32 Group Operations Pty Ltd., a wholly-owned subsidiary of South32 Limited, which agreement was later
assigned by South32 Operations to its affiliate, South32 USA Exploration Inc. (“South32”) on the UKMP (“Option
Agreement”). Under the terms of the Option Agreement, as amended, Trilogy Metals US granted South32 the right
to form a 50/50 joint venture to hold all of Trilogy Metals US’ Alaskan assets. Upon exercise of the option, the option
agreement provided that Trilogy Metals US would transfer its Alaskan assets, including the UKMP, and South32
would contribute the Subscription Price (as defined below) to a newly formed and jointly held, limited liability
company (“LLC”) (see note 4(a)).
To maintain the option in good standing, South32 was required to fund a minimum of $10 million per year for up to
a three-year period, which funds were to execute a mutually agreed upon program at the UKMP. The funds provided
by South32 could only be expended in accordance with an approved program by a technical committee with equal
representation from Trilogy and South32. South32 could exercise its option at any time over the three-year period
to enter into the 50/50 joint venture. To subscribe for 50% of the joint venture, the Option Agreement provided that
South32 must contribute $150 million, plus (i) any amounts Trilogy spends on matched parallel funding to a
maximum of $16 million over the three-year period and (ii) $5 million if the option had been exercised between
April 1, 2018 and March 31, 2019 or $10 million if the option was exercised between April 1, 2019 and the expiration
date of the option, less the amount of the initial funding contributed by South32 (the “Subscription Price”). South32
118
funded the full three-year option period. During the year ended November 30, 2020, South32 elected to exercise
the option to form the LLC and made the Subscription Price payment on February 5, 2020 (see note 4 (a)).
As the initial option payments were credited against the future subscription price upon exercise, the Company
accounted for the payments received from South32 as deferred consideration for the purchase of the UKMP interest.
The $31.0 million of payments received were recognized as part of the consideration received for the Company’s
contribution of the UKMP into the LLC.
The option to form the LLC was recognized as a financial instrument at inception of the arrangement with an initial
fair value of $nil. This option was required to be re-measured at fair value at each reporting date with any changes
in fair value recorded in loss for the period. The Company determined that the fair value of the option remained $nil
during the option period and through to the formation of the Joint Venture on February 11, 2020.
(d) Mineral properties expense
The following table summarizes mineral properties expense for the UKMP, Alaska, USA for the years ended
November 30, 2021, 2020 and 2019, and includes expenditures funded by South32 up to the formation of the Joint
Venture on February 11, 2020, as applicable.
Alaska, USA
Community
Drilling
Engineering
Environmental
Geochemistry and geophysics
Land and permitting
Project support
Other income
Wages and benefits
In thousands of dollars
2021
$
2020
$
2019
$
—
—
—
—
—
—
—
—
—
—
137
—
723
99
12
134
249
—
191
1,545
596
5,194
2,410
611
1,259
744
4,652
(13)
3,758
19,211
Mineral property expenses consisted of direct drilling, personnel, community, resource reporting and other exploration
expenses as outlined above, as well as indirect project support expenses such as fixed wing charters, helicopter support,
fuel, and other camp operation costs. Other than the feasibility costs related to the Arctic project funded directly by the
Company, no additional mineral properties expenses were incurred subsequent to the formation of the joint venture, as
on February 11, 2020, upon the formation of the Joint Venture with South32, all mineral properties previously held by
the Company were contributed to Ambler Metals.
The Company funded the Arctic Project feasibility study costs of $1.1 million since the formation of the Joint Venture on
February 11, 2020. Prior to the formation of the Joint Venture, the Company had also incurred $0.7 million in Arctic
Project feasibility costs that are included in the mineral properties expense balance of $1.5 million for the year ended
November 30, 2020.
Cumulative mineral properties expense in Alaska from the initial earn-in agreement on the property in 2004 to the
formation of the Joint Venture on February 11, 2020 was $115.3 million and cumulative acquisition costs were $30.6
million. Cumulative spend to date totaled $147 million. On February 11, 2020, upon the formation of the joint venture
with South32, the acquisition costs of $30.6 million were derecognized upon the contribution of the mineral properties
to Ambler Metals.
119
(e) Derecognition
As part of the formation of the Joint Venture with South32 on February 11, 2020, Trilogy contributed all its assets
associated with the UKMP, including the Arctic and Bornite projects. As a result, machinery and equipment with a
carrying value of $0.62 million as well as $30.6 million of mineral properties related to the UKMP were derecognized by
Trilogy on February 11, 2020.
7) Accounts payable and accrued liabilities
Trade accounts payable
Accrued liabilities
Accrued salaries and vacation
Accounts payable and accrued liabilities
8) Leases
(a) Right-of-use asset
ASC transition as at December 1, 2019
Net amortization
Derecognition of Fairbanks warehouse lease
Balance as at November 30, 2020
Net amortization
Previously classified in fixed assets
Balance as at November 30, 2021
in thousands of dollars
November 30, 2021 November 30, 2020
$
$
226
205
198
105
464
542
888
852
in thousands of dollars
$
681
(112)
(93)
476
(150)
156
482
The pre-transition rent deposit of approximately $114,000 was transferred to the Right-of-use asset upon adoption of
ASC 842 on December 1, 2019 and is included in the opening balance of approximately $681,000.
(b) Lease liabilities
The Company’s lease arrangements primarily consist of an operating lease for our office space ending in June 2024. There
are no extension options.
Total lease expense recorded within general and administrative expenses was comprised of the following components:
Operating lease costs
Variable lease costs
Total lease expense
Year ended
in thousands of dollars
Year ended
November 30, 2021 November 30, 2020
$
$
162
187
131
122
293
309
120
Variable lease costs consist primarily of the Company’s portion of operating costs associated with the office space lease
as the Company elected to apply the practical expedient not to separate lease and non-lease components.
As of November 30, 2021, the remaining lease term was 2.5 years and the discount rate is 8%. 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, 2021 are as
follows:
•
Cash paid for amounts included in the measurement of lease liabilities was $201,783.
During the year ended November 30, 2020, no cash was paid upon termination of a lease for office and warehouse space
and reassignment to Ambler Metals that resulted in the derecognition of the right-of-use asset of $92,974 and the
operating lease liability of $93,006.
Future minimum payments relating to the lease recognized in our balance sheet as of November 30, 2021 are as follows:
Fiscal year
2022
2023
2024
Total undiscounted lease payments
Effect of discounting
Present value of lease payments recognized as lease liability
9) Share capital
Authorized:
unlimited common shares, no par value
November 30, 2019
Exercise of options
Restricted Share Units
November 30, 2020
Exercise of options
November 30, 2021, issued and outstanding
in thousands of dollars
November 30, 2021
$
204
210
35
449
(35)
414
Number of shares
in thousands of dollars, except share amounts
Ascribed value
$
177,971
1,133
642
179,746
1,074
180,820
140,427,761
3,297,588
412,501
144,137,850
871,961
145,009,811
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, 2021, a total of 11,927 NovaGold
DSUs remain outstanding representing a right to receive 1,988 Common Shares in Trilogy, which will settle upon certain
directors retiring from NovaGold’s board.
121
(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. The Company may grant options to its directors,
officers, employees and service providers. The exercise price of each option cannot be lower than the greater of market
price or fair market value of the Common Shares (as such terms are defined in the plan) at the date of the option grant.
The number of Common Shares optioned to any single optionee may not exceed 10% of the issued and outstanding
Common Shares at the date of grant. The options are exercisable for a maximum of five years from the date of grant and
may be subject to vesting provisions.
During the year ended November 30, 2021, a total of 3,374,150 options (2020 – 4,445,000 options, 2019 – 3,077,500) at
a weighted-average exercise price of CDN$2.52 (2020 - CDN$2.79, 2019 – CDN$2.86) were granted to employees, service
providers and directors exercisable for a period of five years with various vesting terms from immediate vesting to over
a two-year period. The weighted-average fair value attributable to options granted in 2021 was $0.84 (2020 - $0.90, 2019
- $1.03).
The fair value of the stock options recognized in the period has been estimated using the Black-Scholes option pricing
model.
Assumptions used in the pricing model for the period are as provided below.
Risk-free interest rates
Exercise price
Expected life
Expected volatility
Expected dividends
November 30, 2021
0.31%
1.98
3 years
64.4%
Nil
The Company recognized a stock option expense of $3.3 million for the year ended November 30, 2021 (2020 - $3.1
million; 2019 - $2.9 million), net of forfeitures.
As of November 30, 2021, there were 2,526,338 non-vested options outstanding with a weighted average exercise price
of $2.06. The non-vested stock option expense not yet recognized was $0.5 million. This expense is expected to be
recognized over the next two years. The exercise prices have been converted to US dollars based on the November 30,
2021 closing foreign exchange rate of CAD$1.00 = US$0.7817.
A summary of the Company’s stock option plan and changes during the year ended is as follows:
Balance – beginning of the year
Granted
Exercised
Cancelled
Forfeited
Balance – end of the year
Number of options
November 30, 2021
Weighted average
exercise price
$
1.87
1.97
1.14
2.38
2.09
1.99
8,647,500
3,374,150
(1,330,326)
(140,666)
(11,334)
10,539,324
122
The following table summarizes information about the stock options outstanding at November 30, 2021.
Outstanding
Weighted
Exercisable Unvested
Weighted
Number of
outstanding
Weighted
average years
average Number of
exercisable
exercise price
exercise price
Range of exercise price
$0.55 to $1.00
$1.01 to $1.50
$1.51 to $2.00
$2.01 to $2.50
$2.51 to $2.67
options
876,674
75,000
4,265,150
5,285,000
37,500
10,539,324
to expiry
0.95
1.06
3.78
2.98
2.47
3.12
$
0.78
1.15
1.95
2.23
2.67
1.99
options
876,674
75,000
2,775,483
4,248,329
37,500
8,012,986
average Number of
unvested
$ options
—
0.78
1.15
—
1.93 1,489,667
2.24 1,036,671
2.67
—
1.97 2,526,338
The aggregate intrinsic value of vested share options (the market value less the exercise price) at November 30, 2021
was $0.8 million (2020 - $2.4 million, 2019 - $7.2 million) and the aggregate intrinsic value of exercised options for the
year ended November 30, 2021 was $1.4 million (2020 - $2.6 million, 2019 - $2.6 million).
(b) 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. All units are accounted for as equity-settled awards.
There were no RSUs granted during the fiscal year ended November 30, 2021. Directors were granted 58,925 DSUs
throughout the year ended November 30, 2021 ( 2020 – 83,775, 2019 – 137,514) based on their election to receive 50%
of their annual retainer in DSUs.
A summary of the Company’s DSU Plan and changes during the year ended November 30, 2021 is as follows:
Balance – beginning of the year
Granted
Balance – end of the year
Number of DSUs
1,218,520
58,925
1,277,445
For the year ended November 30, 2021, Trilogy recognized a stock-based compensation expense of $0.1 million (2020 -
$0.5 million, 2019 - $0.9 million).
(c) Share purchase warrants
During the year ended November 30, 2019, all the outstanding warrants were exercised in advance of the July 2, 2019
expiry date. As a result of the warrants exercised, the Company issued a total of 6,521,740 common shares and received
cash proceeds of approximately $9.9 million. The Company had no warrants outstanding as at November 30, 2021.
10) Management of capital risk
The Company relies upon management to manage capital in order to accomplish the objectives of safeguarding the
Company’s ability to continue as a going concern in order to pursue the development of our main mineral properties, at
the UKMP, through our equity investee (note 4) and maintain a capital structure which optimizes the costs of capital at
an acceptable risk. The Company’s current capital consists of equity funding through capital markets.
123
As the Company is currently in the exploration phase none of its financial instruments are exposed to commodity price
risk; however, the Company’s ability to obtain long-term financing and its economic viability may be affected by
commodity price volatility. The Company will need to raise additional funds to support its operations and administration
expenses. Future sources of liquidity may include equity financing, debt financing, convertible debt, or other means.
To facilitate the management of its capital requirements, the Company prepares annual expenditure budgets that are
updated as necessary depending on various factors, including successful capital deployment and general industry
conditions.
11) Financial instruments
The Company is exposed to a variety of risks arising from financial instruments. These risks and management’s objectives,
policies and procedures for managing these risks are disclosed as follows.
The Company’s financial instruments consist of cash and cash equivalents, 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 Company’s financial instruments initially measured at fair value and
then held at amortized cost include cash and cash equivalents, accounts receivable, deposits, and accounts payable and
accrued liabilities.
Financial risk management
The Company’s activities expose them to certain financial risks, including currency risk, credit risk, liquidity risk, interest
risk and price risk.
(a) Currency risk
Currency risk is the risk of a fluctuation in financial asset and liability settlement amounts due to a change in foreign
exchange rates. The Company operates in the United States and Canada. The Company’s exposure to currency risk at
November 30, 2021 is limited to the Canadian dollar balances consisting of cash of CDN$247,000, accounts receivable of
CDN$23,000 and certain trade payables and accrued personnel costs CDN$946,000. Based on a 10% change in the US-
Canadian exchange rate, assuming all other variables remain constant, the Company’s net loss would change by
approximately $53,000.
(b) Credit risk
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.
(c) Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulties raising funds to meet its financial obligations as they
fall due. The Company is in the exploration stage and does not have cash inflows from operations; therefore, the
Company manages liquidity risk through the management of its capital structure and financial leverage.
124
Contractually obligated cash flow requirements as at November 30, 2021 are as follows.
Accounts payable and accrued liabilities
Office lease
(d) Interest rate risk
in thousands of dollars
Total < 1 Year 1–2 Years 2–5 Years Thereafter
$
—
—
—
$
852
204
1,056
$
852
449
1,301
$
—
245
245
$
—
—
—
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of
changes in market interest rates. The Company is exposed to interest rate risk with respect to interest earned on cash
and cash equivalents. Based on balances as at November 30, 2021, a 1% change in interest rates would result in a change
in net loss of approximately $160, 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.
Fair value accounting
Financial instruments measured at fair value are classified into one of three levels in the fair value hierarchy according
to the significance of the inputs used in making the measurement. The three levels of the fair value hierarchy are as
follows:
Level 1 — Unadjusted quoted prices in active markets that are accessible at the measurement date for identical,
unrestricted assets or liabilities;
Level 2 — Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly,
for substantially the full term of the asset or liability; and
Level 3 — Prices or valuation techniques that require inputs that are both significant to the fair value
measurement and unobservable (supported by little or no market activity).
The Company did not have any financial assets and liabilities that were measured and recognized at fair value as at
November 30, 2021.
125
12) Income taxes
Income tax expense differs from the amount that would result from applying the Canadian federal and provincial income
tax rates to earnings before income taxes. These differences result from the following items:
November 30, 2021
November 30, 2020
in thousands of dollars
November 30, 2019
$
$
$
Combined federal and provincial
statutory tax rate
Income tax (recovery) at statutory rate
Difference in foreign tax rates
Impact of change in tax rate
Effect of foreign exchange changes
Non-deductible expenditures
Income from option payments applied
as proceeds of sale
Return to provision adjustments
Impact of new lease accounting rules
(ASC 842 adoption)
Expiry of Losses
Change in valuation allowance
Income tax recovery (expense)
27.00 %
(5,848)
(194)
—
—
937
—
116
—
—
4,989
—
27.00 %
43,677
2,424
—
(4)
1,009
(8,812)
(6)
(28)
—
(38,260)
—
27.00 %
(7,534)
(281)
—
—
4,061
—
193
—
277
3,284
—
Deferred income taxes arise from temporary differences in the recognition of income and expenses for financial
reporting and tax purposes. The significant components of deferred income tax assets and liabilities at November 30,
2021 and 2020 are as follows:
in thousands of dollars
November 30, 2021 November 30, 2020
$
$
Deferred income tax assets
Non-capital losses
Mineral property interest
Deferred interest
Property, plant and equipment
Lease liability
Share issuance costs
Capital Loss
Investments
Other deductible temporary differences
Total deferred tax assets
Valuation allowance
Net deferred income tax assets
Deferred income tax liabilities
Investment in Ambler Metals LLC
Right of use asset
Other taxable temporary differences
Deferred income tax liabilities
Net deferred income tax assets
126
54,502
447
6,251
82
112
103
—
—
197
61,694
(34,249)
27,445
(27,315)
(130)
—
(27,445)
—
51,250
—
6,251
88
153
267
—
—
223
58,232
(29,259)
28,973
(28,844)
(129)
—
(28,973)
—
The Company has loss carry-forwards of approximately $194 million that may be available for tax purposes. Certain of
these losses occurred prior to the incorporation of the Company and are accounted for in the financial statements as if
they were incurred by the Company. 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
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.
The losses expire as follows in the following jurisdictions:
2022
2023
2024
2025
Thereafter
—
—
—
—
51,808
51,808
Non-capital losses
Canada
$
in thousands of dollars
Operating losses
United States
$
366
960
569
1,530
139,099
142,524
Future use of U.S. 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. Therefore, approximately $39.4 million of the U.S.
losses above are subject to limitation under Section 382. Accordingly, the Company’s ability to use these losses may be
limited. An additional change in control may have occurred after November 30, 2011 which may further limit the
availability of losses prior to the date of change in control.
Furthermore, tax reform provisions under Section 172 allow federal net operating losses arising in tax years subsequent
to December 31, 2017 to be carried forward indefinitely. As at November 30, 2021 the Company has approximately $21
million in operating losses that can be carried forward indefinitely.
On June 19, 2015, we completed the Sunward acquisition which resulted in an acquisition of control of Sunward
Resources ULC under of the Income Tax Act in Canada. Therefore, the Company’s ability to use approximately $15.2
million of losses in Canada may be limited.
13) Commitment
The Company has commitments with respect to an office lease requiring future minimum lease payments as summarized
in note 8(b).
14) Subsequent events
On December 9, 2021 directors were granted 350,000 stock options and 144,200 DSUs, all vesting immediately.
Employees and service providers were granted 1,734,500 stock options, of which 578,166 options vested immediately,
with the remainder vesting equally on the first anniversary of the grant date and the second anniversary of the grant
date. Employees were also granted 648,600 RSUs, of which 391,332 units vested on the grant date. The remaining
257,268 units vest equally on the first anniversary of the grant date and the second anniversary of the grant date.
127
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
Item 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or
submitted by the Company under U.S. and Canadian securities legislation is recorded, processed, summarized and
reported within the time periods specified in those rules, including providing reasonable assurance that material
information is gathered and reported to senior management, including the Chief Executive Officer (“CEO”) and Chief
Financial Officer (“CFO”), as appropriate, to permit timely decisions regarding public disclosure. Management, including
the CEO and CFO, has evaluated the effectiveness of the design and operation of the Company’s disclosure controls and
procedures, as defined in Rule 13a-15(e) and15d-15(e) of the Exchange Act and the rules of Canadian Securities
Administrators, as at November 30, 2021. Based on this evaluation, the CEO and CFO have concluded that the Company’s
disclosure controls and procedures were effective as at November 30, 2021.
Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined
in Rule 13a-15(f) and 15d-15(f) of the Exchange Act and National Instrument 52-109 Certification of Disclosure in Issuer’s
Annual and Interim filings. Any system of internal control over financial reporting, no matter how well designed, has
inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance
with respect to financial statement preparation and presentation. Management has used the Committee of Sponsoring
Organizations of the Treadway Commission in Internal Control – Integrated Framework (2013) to evaluate the
effectiveness of the Company’s internal control over financial reporting. Based on this assessment, management has
concluded that as at November 30, 2021, the Company’s internal control over financial reporting was effective.
Attestation Report of the Registered Public Accounting Firm
This Annual Report does not include an attestation report of the company’s registered public accounting firm regarding
internal controls over financial reporting. Management’s report was not subject to attestation by our registered public
accounting firm pursuant to law, rules and regulations that permit us to provide only management’s report in this Annual
Report.
Changes in Internal Controls
There has been no change in our internal control over financial reporting during the quarter ended November 30, 2021
that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. OTHER INFORMATION
None.
Item 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT
INSPECTIONS
Not applicable.
128
PART III
Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information in our 2022 Proxy Statement regarding directors and executive officers and Section 16 reporting
information appearing under the headings “Election of Directors” and “Information Concerning the Board of Directors
and Executive Officers” is incorporated by reference in this section. The information under the heading “Executive
Officers of Trilogy” in Part I, Item 1 of this Form 10-K is also incorporated by reference in this section. The information in
our 2022 Proxy Statement regarding our Code of Business Conduct and Ethics under the subheading “Ethical Business
Conduct” under “Statement of Corporate Governance Practices” is also incorporated by reference in this section. Finally,
the information in our 2022 Proxy Statement regarding the Audit Committee under the heading “Statement of Corporate
Governance Practices” is incorporated herein by reference.
Item 11. EXECUTIVE COMPENSATION
The information appearing in our 2022 Proxy Statement under the headings “Compensation Committee Interlocks and
Insider Participation”, “Statement of Executive Compensation”, and “Director Compensation” is incorporated by
reference in this section.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information appearing in our 2022 Proxy Statement under the heading “Securities Authorized For Issuance Under
Equity Compensation Plans” (which is also contained in this report in Part II, Item 5) and the information under the
heading “Security Ownership Of Certain Beneficial Owners And Management And Related Shareholder Matters” is
incorporated herein by reference.
Securities Authorized for Issuance under Equity Compensation Plans
The following table is as of November 30, 2021.
Plan category
Equity compensation plans
approved by security holders
Equity compensation plans not
approved by security holders
Total
Number of securities to be issued
upon exercise of outstanding
options, warrants and rights
(a)
11,816,769
$
—
11,816,769 $
Weighted-
average exercise price of
outstanding options, warrants and
Number of securities remaining
available for future issuance under
equity compensation plans
(excluding securities reflected in
rights
(b)
1.92
—
1.92
column (a))
(c)
9,934,703
—
9,934,703
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
The information appearing in our 2022 Proxy Statement under the heading “Independence of Directors” under the
heading “Information Concerning the Board of Directors and Executive Officers” and under the heading “Statement of
Corporate Governance Practices” is incorporated herein by reference.
129
Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information appearing in our 2022 Proxy Statement regarding Audit Fees, Audit-Related Fees, Tax Fees, All Other
Fees and Audit Committee Pre-Approval Policies under the subheading “Appointment of Auditors” is incorporated herein
by reference.
Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
PART IV
(a)
Documents Filed With This Report
1.
FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm (PCAOB ID 271)
Consolidated Balance Sheets
Consolidated Statements of Loss and Comprehensive Loss
Consolidated Statements of Shareholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Page
133
107
108
109
110
111
2.
FINANCIAL STATEMENT SCHEDULES
None.
3.
EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS
Employment Agreement between the Registrant and James Gowans, dated October 21, 2019, identified in
exhibit list below.
Amendment Agreement between the Company and James Gowans, dated April 9, 2020, identified in exhibit list
below.
Employment Agreement between the Registrant and Tony Giardini, dated April 20, 2020, identified in exhibit
list below.
Employment Agreement between the Registrant and Elaine Sanders, dated November 5, 2012, identified in
exhibit list below.
NovaCopper Inc. Equity Incentive Plan identified in exhibit list below.
Form of NovaCopper Inc. Stock Option Agreement identified in exhibit list below.
NovaCopper Inc. 2012 Restricted Share Unit Plan identified in exhibit list below.
Form of NovaCopper Inc. 2012 Restricted Share Unit Award Agreement identified in exhibit list below.
NovaCopper Inc. 2012 Deferred Share Unit Plan identified in exhibit list below.
Form of NovaCopper Inc. Deferred Share Unit Award Agreement identified in exhibit list below.
130
(b)
Exhibits
Exhibit
No.
2.1
Contribution Agreement, dated February 11, 2020, between NovaCopper US Inc., Trilogy Metals Inc. and
Ambler Metals LLC (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K
filed on February 18, 2020)
Description
3.1
Certificate of Incorporation (incorporated by reference to Exhibit 99.2 to the Company’s Registration
Statement on Form 40-F filed on March 1, 2012)
3.2
Articles of Trilogy Metals Inc., effective April 27, 2011, as altered March 20, 2011 (incorporated by reference
to Exhibit 99.3 to Amendment No. 1 to the Company’s Registration Statement on Form 40-F filed on April 19,
2012)
3.3
Notice of Articles and Certificate of Name Change, dated September 1, 2016 (incorporated by reference to
Exhibit 3.1 to the Company’s Current Report on Form 8-K dated September 8, 2016)
4.1
Description of Common Stock (incorporated by reference to Exhibit 4.1 to the Company’s Annual Report on
Form 10-K filed on February 13, 2020)
10.1
Net Smelter Returns Royalty Agreement, dated effective January 7, 2010, among Kennecott Exploration
Company, Kennecott Arctic Company, Alaska Gold Company, and NovaGold Resources Inc. (incorporated by
reference to Exhibit 99.1 to the Company’s Report on Form 6-K filed on April 25, 2012)
10.2
Exploration Agreement and Option to Lease, dated October 19, 2011, between NovaCopper US Inc. and NANA
Regional Corporation, Inc. (incorporated by reference to Exhibit 99.1 to the Company’s Report on Form 6-K
filed on April 25, 2012)
10.3
Option Agreement to Form Joint Venture, dated April 10, 2017, among the Company, NovaCopper US Inc.
and South32 Group Operations Pty Ltd. (incorporated by reference to Exhibit 2.1 to the Company’s Current
Report on Form 8-K/A filed on April 20, 2017)
10.4
Amended and Restated Limited Liability Company Agreement of Ambler Metals LLC dated February 11, 2020
(incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on February
18, 2020)
10.5
NovaCopper Inc. 2012 Restricted Share Unit Plan (incorporated by reference to Exhibit 10.11 to the
Company’s Annual Report on Form 10-K filed on February 12, 2013)
10.6
NovaCopper Inc. 2012 Deferred Share Unit Plan (incorporated by reference to Exhibit 10.12 to the Company’s
Annual Report on Form 10-K filed on February 12, 2013, File No. 001-35447)
10.7
Form of NovaCopper Inc. Stock Option Agreement (incorporated by reference to Exhibit 4.5 to the Company’s
Registration Statement on Form S-8 filed on April 27, 2012)
10.8
NovaCopper Inc. Equity Incentive Plan (incorporated by reference to Schedule G of Exhibit 99.1 to the
Company’s Registration Statement on Form 40-F filed on March 1, 2012)
10.9
Employment Agreement, dated October 21, 2019, between the Company and James Gowans (incorporated
by reference to Exhibit 10.15 to the Company’s Annual Report on Form 10-K filed on February 13, 2020)
10.10 Amendment Agreement, dated April 9, 2020, between the Company and James Gowans (incorporated by
reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on April 9, 2020)
131
10.11 Employment Agreement, dated April 20, 2020, between the Company and Tony Giardini (incorporated by
reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on April 20, 2020)
10.12 Employment Agreement, dated November 5, 2012, between the Company and Elaine Sanders (incorporated
by reference to Exhibit 10.5 to the Company’s Registration Statement on Form 10-K filed on February 12,
2013)
10.13
Equity Incentive Plan for Ambler Metals LLC Officers and Employees (incorporated by reference to the Revised
Appendix D to the Company’s proxy statement filed April 30, 2021)
21.1
Subsidiaries of the Registrant
23.1
Consent of PricewaterhouseCoopers LLP
23.2
Consent of Richard Gosse
23.3
Consent of Bruce M. Davis
23.4
Consent of SIM Geological Inc.
23.5
Consent of International Metallurgical & Environmental Inc.
23.6
Consent of Ausenco Engineering Canada Inc.
23.7
Consent of Wood Canada Limited
23.8
Consent of SRK Consulting (Canada) Inc.
31.1
Certification of the Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a)
31.2
Certification of the Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a)
32.1
Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350
32.2
Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350
101
The following materials from Trilogy Metals Inc.’s Annual Report on Form 10-K for the year ended
November 30, 2021, formatted in Inline XBRL (eXtensible Business Reporting Language): (i) the Consolidated
Statements of Operations, (ii) the Consolidated Statements of Comprehensive Income (iii) the Consolidated
Balance Sheets, (iv) the Consolidated Statements of Shareholders’ Equity, (v) the Consolidated Statements of
Cash Flows, (vi) the Notes to the Consolidated Financial Statements, and (vii) Schedule II – Valuation and
Qualifying Accounts.
104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
(c)
Financial Statement Schedules
Schedule A – The Financial Statement of Ambler Metals LLC as of November 30, 2021.
132
Schedule A
Report of Independent Registered Public Accounting Firm
To the Board of Ambler Metals LLC
Opinion on the Financial Statements
We have audited the accompanying balance sheets of Ambler Metals LLC (the Company) as of November 30, 2021 and
2020, and the related statements of loss and comprehensive loss, changes in members’ equity and cash flows for the
year ended November 30, 2021 and for the period from February 11, 2020 to November 30, 2020, including the related
notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all
material respects, the financial position of the Company as of November 30, 2021 and 2020, and the results of its
operations and its cash flows for the year ended November 30, 2021 and for the period from February 11, 2020 to
November 30, 2020 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an
opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the
Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect
to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.
We conducted our audits of these 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 financial statements are
free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements,
whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also
included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our
opinion.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the 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 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 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.
Assessment of impairment indicators of mineral properties
As described in Notes 2 and 5 to the financial statements, management assesses the possibility of impairment in the
carrying value of mineral properties whenever events or changes in circumstances indicate that the carrying value may
not be recoverable (impairment indicators). The carrying value of the Company’s mineral properties was $30.8 million
as of November 30, 2021. Management applies judgment to assess whether events or changes in circumstances indicate
the carrying value of an asset may not be recoverable, giving rise to the requirement to conduct an impairment test.
Events or changes in circumstances that could trigger an impairment test include (i) significant adverse changes in the
business climate including significant decreases in copper, zinc, and other metal prices, or significant adverse changes in
133
legal factors, (ii) an accumulation of costs significantly in excess of the amount originally expected for the acquisition or
construction of the mineral properties, and (iii) significant decreases in the market prices of the mineral properties.
The principal considerations for our determination that performing procedures relating to the assessment of impairment
indicators of mineral properties is a critical audit matter are that there was judgment by management when assessing
whether there were impairment indicators related to the Company’s mineral properties, specifically in regards to
assessing whether there were: (i) significant adverse changes in the business climate including significant decreases in
copper, zinc, and other metal prices, or significant adverse changes in legal factors, (ii) an accumulation of costs
significantly in excess of the amount originally expected for the acquisition or construction of the mineral properties,
and (iii) significant decreases in the market prices of the mineral properties. This in turn led to a high degree of auditor
judgment and subjectivity in performing procedures to evaluate audit evidence relating to the judgment made by
management in their assessment of impairment indicators that could give rise to the requirement to conduct an
impairment test.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our
overall opinion on the financial statements. These procedures included, among others, (i) evaluating whether there were
significant adverse changes in the business climate including significant decreases in copper, zinc, and other metal prices
by considering external market and industry data, (ii) evaluating whether there were significant adverse changes in legal
factors with respect to title matters by obtaining on a sample basis evidence to support the rights to the mineral
properties, (iii) evaluating whether there were significant decreases in the market prices of the mineral properties by
considering prolonged declines in Trilogy Metals Inc.’s share price, and (iv) evaluating whether there was an
accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the
mineral properties, or other factors that may indicate that the carrying values of the mineral properties may not be
recoverable, through consideration of evidence obtained in other areas of the audit.
/s/ PricewaterhouseCoopers LLP
Chartered Professional Accountants
Vancouver, Canada
February 10, 2022
We have served as the Company's auditor since 2020.
134
Ambler Metals LLC
Balance Sheet
As of November 30, 2021 and 2020
in thousands of US dollars
November 30, 2021
$
November 30, 2020
$
Assets
Current assets
Cash (note 3)
Deposits and prepaid
Current loan receivable (note 1,8)
Other assets
Total current assets
Right of use asset (note 7)
Loan receivable (note 1,8)
Property, plant and equipment (note 4)
Mineral properties (note 5)
Total assets
Liabilities
Current liabilities
Accounts payable and accrued liabilities (note 6,8)
Current lease liabilities (note 7)
Total current liabilities
Long term lease liability (note 7)
Total liabilities
Members' equity
Owner contribution - South 32
Owner contribution - Trilogy
Accumulated deficit
Total members' equity
Total liabilities and members equity
61,205
621
19,029
2
80,857
877
36,326
557
30,757
149,374
4,148
224
4,372
671
5,043
145,000
31,206
(31,875)
144,331
149,374
81,673
543
-
10
82,226
51
58,478
531
30,705
171,991
1,445
51
1,496
-
1,496
145,000
31,206
(5,711)
170,495
171,991
(See accompanying notes to the financial statements)
135
Ambler Metals LLC
Statement of Loss and Comprehensive Loss
For the Years Ended November 30
Expenses
Depreciation
Corporate salaries and wages
General and administrative
Lease expense
Mineral property expense (note 5)
Professional fees
Foreign exchange (gain)/loss
Total expenses
Other items
Interest income
Loss and comprehensive loss for the period
12 months ended
November 30, 2021
$
in thousands of US dollars
February 11, 2020 -
November 30, 2020
$
77
2,421
756
276
22,639
1,047
6
27,222
(1,058)
26,164
95
614
653
48
3,488
1,990
3
6,891
(1,180)
5,711
(See accompanying notes to the financial statements)
136
Ambler Metals LLC
Statement of Changes in Members’ Equity
For the Years Ended November 30
in thousands of US dollars
Total
members'
equity
$
176,206
(5,711)
170,495
Deficit
$
-
(5,711)
(5,711)
-
(26,164)
(31,875)
-
(26,164)
144,331
Opening balance
Loss for the period
Balance - November 30, 2020
Owner contributions
Loss for the period
Balance - November 30, 2021
Number of
units
outstanding
2,000,000
-
2,000,000
-
-
2,000,000
Trilogy owner
contribution
$
31,206
-
31,206
-
-
31,206
South32 owner
contribution
$
145,000
-
145,000
-
-
145,000
137
Ambler Metals LLC
Statement of Cash Flows
For the Years Ended November 30
Cash flows from (used in) operating activities
Loss for the period
Depreciation
Lease expense
Lease payments
Change in working capital
Decrease (increase) in deposits and prepaids
Decrease (increase) in other assets
Increase (decrease) in accounts payable and accrued liabilities
Interest earned on South32 loan
Interest received on South32 loan
Cash from (used in) operating activities
Cash flows from (used in) financing activities
Cash contributed by South32 upon JV formation
Cash from (used in) financing activities
Cash flows from (used in) investing activities
Loan issued to South32
Principle payment on South32 loan
Machinery and equipment
Computer hardware and software
Furniture and equipment
Property staking
Cash from (used in) investing activities
(Decrease) increase in cash
Cash - beginning of the period
Cash - end of period
12 months ended
November 30, 2021
$
in thousands of US dollars
February 11, 2020 -
November 30, 2020
$
(26,164)
77
261
(243)
(78)
8
2,703
(1,043)
1,909
(22,570)
-
-
-
2,256
(67)
-
(35)
(52)
2,102
(20,468)
81,673
61,205
(5,711)
95
-
-
(543)
(10)
1,445
(978)
-
(5,702)
145,000
145,000
(57,500)
-
-
(7)
-
(118)
(57,625)
81,673
-
81,673
(See accompanying notes to the financial statements)
138
Ambler Metals LLC
Notes to financial statements
expressed in U.S. dollars, unless otherwise noted
1. Organization & basis of presentation
Ambler Metals LLC (the “Company” or “Joint Venture”), a Delaware limited liability company, is a 50-50 joint venture
between NovaCopper US Inc., a wholly owned subsidiary of Trilogy Metals Inc. (collectively “Trilogy”), and South32 USA
Exploration Inc., a wholly owned subsidiary of South32 Limited (collectively “South32”).
The Company is engaged in the exploration and development of mineral properties with a focus on the Upper Kobuk
Mineral Projects (“UKMP”), including the Arctic and Bornite Projects located in Northwest Alaska in the United States of
America (“US” or “USA”).
On February 11, 2020, pursuant to a contribution agreement among Trilogy, South32 and the Company (the
“Contribution Agreement”), Trilogy contributed to the Company substantially all of Trilogy’s assets associated with the
Upper Kobuk Mineral Projects ("UKMP") located in northwest Alaska in exchange for a 50% membership interest in the
Company. Simultaneously, South32 contributed $145 million cash in exchange for a 50% membership interest in the
Company.
The operations and governance of the Joint Venture are provided for in the Company’s Limited Liability Company
Agreement dated February 11, 2020 (the “LLC Agreement”).
The mining rights, deposits and property, plant and equipment contributed to the Company from Trilogy are recognized
at Trilogy’s historical carrying value on the date of contribution. The contributions, including noncash contributions,
made to the Company by each respective member on February 11, 2020 are as follows:
Respective contributions to the Joint Venture
Intangible assets:
Mining rights
Trilogy contributed intangible assets
Tangible assets:
Deposits
Property, plant and equipment
Trilogy contributed tangible assets
Cash
South32 contributed cash
Total capital contributed at inception
in thousands of US dollars
$
30,587
30,587
1
618
619
145,000
145,000
176,206
As a result of these transactions, Trilogy and South32 each have equal interests in the Company and have equal
representation on the Board of the Company.
Following the formation of the Joint Venture, on March 17, 2020 the Company loaned South32 $57.5 million secured by
South32’s membership interest in Ambler Metals and guaranteed by South32 International Investment Holdings Pty Ltd.,
139
Ambler Metals LLC
Notes to financial statements
expressed in U.S. dollars, unless otherwise noted
a wholly owned subsidiary of South32. The loan has a 7-year maturity date and is recorded at amortized cost. The loan
repayment terms were such that quarterly payments became due from South32 in 2021 and management expects
continued quarterly payments in 2022 based on forecasted expenditures. See note 8 for additional information.
The financial statements have been prepared by management in conformity with generally accepted accounting
principles in the United States (“U.S. GAAP”) on a going concern basis, which contemplates the realization of assets and
the discharge of liabilities in the normal course of business for the foreseeable future.
These financial statements have been prepared pursuant to Rule 3-09 of SEC Regulation S-X for inclusion in Trilogy’s 10-
K/A, as the Company is an equity investee of Trilogy.
2. Summary of significant accounting policies
Property, plant and equipment
Plant and equipment are recorded at cost and depreciation begins when the asset is put into service. Depreciation is
calculated on a straight-line basis over the respective assets’ estimated useful lives. Depreciation periods by asset class
are:
Computer hardware and software
Machinery and equipment
Office furniture and equipment
Vehicles
Leasehold Improvements
3 years
3 – 10 years
5 years
3 years
lease term
Mineral properties and development costs
All direct costs related to the acquisition of mineral property interests are capitalized. Mineral property exploration
expenditures are expensed when incurred. When it has been established that a mineral deposit is commercially
mineable, an economic analysis has been completed and permits are obtained, the costs subsequently incurred to
develop a mine on the property prior to the start of mining operations are capitalized. Capitalized costs will be amortized
following commencement of production using the unit of production method over the estimated life of proven and
probable reserves.
Impairment of long-lived assets
Management assesses the possibility of impairment in the carrying value of long-lived assets whenever events or changes
in circumstances indicate that the carrying amounts of the asset or asset group may not be recoverable. Management
calculates the estimated undiscounted future net cash flows relating to the asset or asset group using estimated future
prices, proven and probable reserves and other mineral resources, and operating, capital and reclamation costs. When
the carrying value of an asset exceeds the related undiscounted cash flows, the asset is written down to its estimated
fair value, which is usually determined using discounted future cash flows. Management’s estimates of mineral prices,
mineral resources, foreign exchange rates, production levels, operating, capital and reclamation costs are subject to risk
and uncertainties that may affect the determination of the recoverability of the long-lived asset. It is possible that
material changes could occur that may adversely affect management’s estimates.
140
Ambler Metals LLC
Notes to financial statements
expressed in U.S. dollars, unless otherwise noted
Impairment testing
Management assesses the possibility of impairment in the carrying value of long-lived assets whenever events or changes
in circumstances indicate that the carrying amounts of the asset or asset group may not be recoverable. Management
applies judgment to assess mineral properties and property, plant and equipment for impairment indicators that could
give rise to the requirement to conduct a formal impairment test. Events and circumstances that could trigger an
impairment test include, but are not limited to, significant adverse changes in the business climate including significant
decreases to copper, zinc and other metal prices or significant adverse changes in legal factors, an accumulation of costs
significantly in excess of the amount originally expected for the acquisition or construction of the long-lived asset, and
significant decreases in the market prices for long-lived assets.
Leases
We determine if a contractual arrangement represents or contains a lease at inception. Operating leases are included in
right of use assets and lease liabilities on our balance sheet. Assets under finance leases are included in property, plant
and equipment and the related lease liabilities in lease liabilities on our balance sheet.
Operating and finance lease right of use assets and lease liabilities are recognized based on the present value of the
future lease payments over the lease term at the commencement date. When the rate implicit to the lease cannot be
readily determined, we utilize the incremental borrowing rate in determining the present value of the future lease
payments. The incremental borrowing rate is the rate of interest our Company would have to pay to borrow on a
collateralized basis over a similar term and the amount equal to the lease payments in a similar economic environment.
The operating lease expenses are recognized on a straight-line basis over the lease term and included in lease expenses.
Income taxes
The Company is not a taxable entity for income tax purposes. Accordingly, no recognition is given to income taxes for
financial reporting purposes. Tax on the net income (loss) of the Company is borne by the owners through the allocation
of taxable income (loss). Net income for financial statement purposes may differ significantly from taxable income for
the owners as a result of differences between the tax basis and financial reporting basis of assets and liabilities and the
taxable income allocation requirements under the shareholders agreement.
Financial instruments
Loans and receivables are recorded initially at fair value, net of transaction costs incurred, and subsequently at amortized
cost using the effective interest rate method. Loans and receivables consist of cash, deposits, and loans receivable.
Estimated future credit losses are based on historical credit loss experience and forward-looking considerations.
Individual receivables are written off when management deem them to be uncollectible. Further details on credit risk
are disclosed in note 9.
Other financial liabilities include accounts payable and accrued liabilities.
Translation of foreign currencies
Foreign denominated monetary assets and liabilities are translated into United States dollars at the exchange rate in
effect at the balance sheet date, and non-monetary assets and liabilities at the exchange rate in effect at the time of
141
Ambler Metals LLC
Notes to financial statements
expressed in U.S. dollars, unless otherwise noted
acquisition or issue. Income and expenses are translated at rates approximating the exchange rate in effect at the time
of transactions. Exchange gains or losses arising on translation are included in income or loss for the period.
The functional currency of the Company and the Company’s reporting currency is the United States dollar.
3. Cash
As of November 30, 2021, included in cash is $0.2 million denominated in Canadian dollars and $61 million denominated
in United States dollars.
4. Property, plant and equipment
A summary of property, plant and equipment as of November 30, 2021 and November 30, 2020, is as follows:
in thousands of US dollars
Machinery
and
equipment
$
1,057
(532)
525
1,057
67
(456)
(148)
520
Computer
hardware
and software
$
12
(6)
6
12
-
-
(9)
3
Furniture
and
equipment
$
-
-
-
-
35
-
(1)
34
Total
$
1,069
(538)
531
1,069
102
(456)
(158)
557
Cost at February 11, 2020
Accumulated Depreciation
Net book value at November 30, 2020
Cost at November 30, 2020
Additions
Assets derecognized
Accumulated Depreciation
Net book value at November 30, 2021
5. Mineral properties
February 11,
2020
$
26,587
4,000
30,587
Additions
$
118
-
118
November 30,
2020
$
26,705
4,000
30,705
in thousands of US dollars
November 30,
2021
$
26,757
4,000
30,757
Additions
$
52
-
52
Ambler
Bornite
a) Ambler
On February 11, 2020, the Ambler lands in Northwest Alaska, which contains the copper-zinc-lead-gold-silver Artic
Project and other mineralized targets within the volcanogenic massive sulfide belt, were contributed to Ambler Metals
LLC pursuant to the Contribution Agreement. The Ambler lands are subject to a 1% net smelter return (“NSR”) royalty
that can be purchased at any time for a one-time payment of $10 million.
142
Ambler Metals LLC
Notes to financial statements
expressed in U.S. dollars, unless otherwise noted
Mineral property acquisition costs of $118 thousand and $52 thousand were added to the Ambler land holdings during
the period ended November 30, 2020 and November 30, 2021, respectively.
b) Bornite
On February 11, 2020, the exclusive right to explore and the non-exclusive right to access and enter on the Bornite lands,
and lands deeded to NANA Regional Corporation, Inc. (“NANA”) through the Alaska Native Claims Settlement Act, located
adjacent to the Ambler lands in Northwest Alaska, were contributed to Ambler Metals LLC pursuant to the Contribution
Agreement.
Upon a decision to proceed with construction of a mine on the Ambler or Bornite lands, NANA maintains the right to
purchase between a 16%-25% ownership interest in the mine or retain a 15% net proceeds royalty which is payable after
Ambler Metals LLC has recovered certain historical costs, including capital and cost of capital. Should NANA elect to
purchase an ownership interest, consideration will be payable equal to all historical costs incurred on the properties at
the elected percentage, not to be less than zero. The parties would form a joint venture and be responsible for all future
costs, including capital costs of the mine based on their pro-rata share.
NANA would also be granted a net smelter return royalty of between 1% and 2.5% upon the execution of a mining lease
or a surface use agreement, the amount of which is determined by the classification of land from which production
originates.
c) Mineral properties expense
The following table summarizes mineral properties expense incurred November 30, 2021 and November 30, 2020,
respectively. Prior year Ambler Access Project expense of $261 thousand was previously classified as general and
administrative expense and was reclassed to mineral properties to reflect current year presentation.
Ambler Access Project
Community
Drilling
Engineering
Environmental
Geochemistry and geophysics
Land and permitting
Project support
Safety and risk
Wages and benefits
Mineral property expense
12 months ended
November 30, 2021
$
2,880
114
3,898
1,508
621
975
1,266
8,347
228
2,803
22,639
in thousands of US dollars
February 11, 2020 -
November 30, 2020
$
261
-
444
645
245
171
232
320
-
1,170
3,488
143
Ambler Metals LLC
Notes to financial statements
expressed in U.S. dollars, unless otherwise noted
6. Accounts payable and accrued liabilities
Accounts payable
Accrued demobilization charges
Accrued salaries and vacation
Due to related parties
Other accrued liabilities
Accounts payable and accrued liabilities
7. Leases
(a) Right of use assets
Opening balance
Recognition of right of use asset
Amortization
Right of use asset
in thousands of US dollars
November 30, 2021
$
844
113
1,082
-
2,109
4,148
November 30, 2020
$
444
339
232
114
316
1,445
November 30, 2021
$
51
1,046
(220)
877
in thousands of US dollars
November 30, 2020
$
93
-
(42)
51
In December 2020, the Company commenced a lease for their headquarters office in Anchorage, Alaska and recognized
the right of use asset approximately $816 thousand. In August 2021, the company commenced a new lease for a
warehouse in Fairbanks, Alaska and recognized the right of use asset of approximately $231 thousand. The Company’s
lease arrangement for a previously recognized warehouse in Fairbanks, Alaska ended in October 2021. Total lease
expense recorded was comprised of operating lease costs of $261 thousand, variable lease costs of $nil and property
taxes of $15 thousand. As of November 30, 2021, the remaining lease term was 49 months for the headquarters office
and 32 months for the warehouse.
Supplemental cash and non-cash information relating to our leases during the year ended November 30, 2021 are as
follows:
•
Cash paid for amounts included in the measurement of lease liabilities was $243 thousand.
• Non-cash amounts included in the measurement of lease liabilities was $nil.
144
Ambler Metals LLC
Notes to financial statements
expressed in U.S. dollars, unless otherwise noted
Future minimum payments relating to the lease recognized in our balance sheet as of November 30, 2021 are as follows:
2022
2023 to 2025
Total undiscounted lease payments
Effects of discounting
Present value of lease payments recognized as lease liability
8. Related party transactions
in thousands of US dollars
November 30, 2021
$
262
716
978
(82)
895
The Company’s Service Agreement between Trilogy and the Company dated February 18, 2020 (“Services Agreement”)
ended December 31, 2020 with minimal expenses for the year ended November 30, 2021. For the year ended November
30, 2020, the Company incurred $932 thousand of expenses related to employee compensation, payroll processing fees,
office supplies, and accounting services in connection with the Services Agreement and the Company made payments of
$2,772 thousand related to operating expenses paid by Trilogy and reimbursed by the Company pursuant to the Services
Agreement.
As of November 30, 2021, included in accounts payable owed to Trilogy and South32 is $nil and as of November 30,
2020, is $114 thousand due to Trilogy.
For the year ended November 30, 2021, the Company earned interest of $1 million ($1 million for November 30, 2020),
from the loan to South32 and received payments on the loan of $4.2 million, of which, $1.9 million applied to interest
and $2.3 million applied to principal.
9. Financial risk management
(a) Currency risk
Currency risk is the risk of a fluctuation in financial asset and liability settlement amounts due to a change in foreign
exchange rates. The Company operates in the United States and holds a bank account denominated in Canadian currency
to facilitate payments to Canadian vendors, as necessary. The Company’s exposure to the currency risk at November 30,
2021 is limited to the Canadian dollar balances consisting of cash of CDN $252 thousand and accounts payable of CDN
$75 thousand. Based on a 10% change in the US-Canadian exchange rate, assuming all other variables remain constant,
the Company’s net change would be approximately $14 thousand.
(b) Credit risk
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 with a financial institution that is federally insured through FDIC. The
Company’s receivables consist of a loan receivable from South32. The Company’s exposure to credit risk is equal to the
balance of cash and loan receivables recorded in the financial statements.
145
Ambler Metals LLC
Notes to financial statements
expressed in U.S. dollars, unless otherwise noted
(c) Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulties raising funds to meet its financial obligations as they
fall due. The Company is in the exploration stage and does not have cash inflows from operations; therefore, the
Company manages liquidity risk through the terms of the LLC Agreement.
Contractually obligated cash flow requirements as of November 30, 2021 are as follows:
Accounts payable and accrued liabilities
Warehouse and office lease
(d)
Interest rate risk
Total
$
4,148
978
5,126
<1 year
$
4,148
262
4,410
in thousands of US dollars
There
after
$
2-5 years
$
1-2 year
$
-
266
266
-
450
450
-
-
-
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of
changes in market interest rates. The Company is exposed to interest rate risk with respect to interest earned on cash
and the loan receivable from South32. Based on cash balances as of November 30, 2021, a 1% change in interest rates
would result in a negligible change in cash, over a 12-month period, 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, the ability for our Owners to obtain long-term financing and its economic viability could be affected by
commodity price volatility.
10. Commitments and contingencies
The Company has commitments with respect to a warehouse and office lease requiring future minimum lease payments
as summarized in note 7.
11. Members’ equity
The Company has been established as a limited liability company. Under the terms of the LLC Agreement, unless
otherwise provided for in the LLC Agreement, all membership interests are entitled to the same benefits, rights, duties
and obligations and vote on all matters.
The Company is authorized to establish a capital account for each member equal to that member’s initial capital
contribution, represented by Units. The Units are voting and subject to transfer restrictions as defined in the LLC
Agreement. As of November 30, 2021 and 2020, the Company had 2 million Units, with each of South32 and Trilogy
owning 1 million Units each, in exchange for the contributions made to the Company at inception.
As described in the LLC Agreement, under certain circumstances a member shall have the right to transfer to any third
party all or any part of its Membership Interest or any economic interest, (including its right to receive distributions of
cash or property from the Company). Any such transfer is subject to the satisfaction of certain conditions, and the
relevant purchase price is determined pursuant to specific formulas, all as set forth in the LLC Agreement.
146
Item 16. FORM 10-K SUMMARY
None.
147
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
TRILOGY METALS INC.
By: /s/ Tony Giardini
Name: Tony Giardini
Title: President and Chief Executive Officer
Date: February 11, 2022
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on the dates indicated:
Signature
Title
Date
/s/ Tony Giardini
Tony Giardini
/s/ Elaine Sanders
Elaine Sanders
/s/ James Gowans
James Gowans
/s/ William Hayden
William Hayden
/s/ William Hensley
William Hensley
/s/ Gregory Lang
Gregory A. Lang
/s/ Kalidas Madhavpeddi
Kalidas V. Madhavpeddi
/s/ Janice Stairs
Janice Stairs
/s/ Diana Walters
Diana Walters
President and Chief Executive Officer
February 11, 2022
(Principal Executive Officer) and Director
February 11, 2022
February 11, 2022
February 11, 2022
February 11, 2022
February 11, 2022
February 11, 2022
February 11, 2022
February 11, 2022
Chief Financial Officer (Principal Financial
Officer and Principal Accounting Officer)
Director
Director
Director
Director
Director
Director
Director
148
Name of Subsidiary
Jurisdiction of Organization
SUBSIDIARIES OF THE REGISTRANT
NovaCopper US Inc. (dba Trilogy Metals US)
Delaware
Ambler Metals LLC (50% owned by NovaCopper US Inc.)
Delaware
995 Exploration Inc.
Delaware
Exhibit 21.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Exhibit 23.1
We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (No. 333-181020, No. 333-188950,
No. 333-205102, No. 333-208149, No. 333-234417, and No. 333-257095) and Form S-3 (No. 333-234164) of Trilogy Metals Inc. of
(i) our report dated February 10, 2022, relating to the consolidated financial statements of Trilogy Metals Inc., and (ii) our report
dated February 10, 2022 relating to the financial statements of Ambler Metals LLC, both of which appears in this Form 10-K.
/s/ PricewaterhouseCoopers LLP
Chartered Professional Accountants
Vancouver, Canada
February 10, 2022
CONSENT OF RICHARD GOSSE
Exhibit 23.2
I hereby consent to the inclusion in this Annual Report on Form 10-K, which is being filed with the United States Securities and
Exchange Commission, of references to my name and to the use of the scientific and technical information included in Trilogy Metals
Inc.’s Annual Report on Form 10-K for the year ended November 30, 2021.
I also consent to the incorporation by reference in Trilogy Metals Inc.’s Registration Statements on Form S-8 (No. 333-181020, No.
333-188950, No. 333-205102, No. 333-208149, No. 333-234417 and No. 333-257095) and the Registration Statement on Form S-3
(No. 333-234164) of references to my name and to the use of the scientific and technical information included in the Annual Report on
Form 10-K as described above.
DATED: February 8, 2022
/s/ Richard Gosse
Name: Richard Gosse
CONSENT OF BRUCE M. DAVIS
Exhibit 23.3
The undersigned hereby consents to the inclusion in or incorporation by reference in (i) the Form 10-K of Trilogy Metals
Inc. being filed with the U.S. Securities and Exchange Commission (the “SEC”) for the fiscal year ended November 30,
2021 and (ii) the registration statements on Form S-3 (No. 333-234164) and Form S-8 (No. 333-181020, No. 333-188950,
No. 333-205102, No. 333-208149, No. 333-234417 and No. 333-257095) (the “Registration Statements”) of Trilogy Metals
Inc. filed with the SEC, to any amendments or post-effective amendments to the Registration Statements and to any
prospectuses or prospectus supplements thereto, of references to Mr. Davis’ name and to the use of the technical reports
titled (x) “Arctic Feasibility Study, Alaska, USA, NI 43-101 Technical Report” dated effective August 20, 2020 and released
October 2, 2020 and (y) “NI 43-101 Technical Report on the Bornite Project, Northwest Alaska, USA” dated February 11,
2022, with an effective date of December 31, 2021 (the “Technical Reports”), and the use of scientific and technical
information, including any reserve and resource estimates, from the Technical Reports (collectively, the “Technical
Information”), including extracts from or summaries of the Technical Information.
DATED: February 9, 2022
/s/ Bruce M. Davis
Name: Bruce M. Davis
Title: Independent Consultant
CONSENT OF SIM GEOLOGICAL INC.
Exhibit 23.4
The undersigned hereby consents to the inclusion in or incorporation by reference in (i) the Form 10-K of Trilogy Metals Inc. being
filed with the U.S. Securities and Exchange Commission (the “SEC”) for the fiscal year ended November 30, 2021 and (ii) the
registration statements on Form S-3 (No. 333-234164) and Form S-8 (No. 333-181020, No. 333-188950, No. 333-205102, No. 333-
208149, No. 333-234417 and No. 333-257095) (the “Registration Statements”) of Trilogy Metals Inc. filed with the SEC, to any
amendments or post-effective amendments to the Registration Statements and to any prospectuses or prospectus supplements thereto,
of references to SIM Geological Inc.’s name and to the use of the technical reports titled (x) “Arctic Feasibility Study, Alaska, USA, NI
43-101 Technical Report” dated effective August 20, 2020 and released October 2, 2020 and (y) “NI 43-101 Technical Report on the
Bornite Project, Northwest Alaska, USA” dated February 11, 2022, with an effective date of December 31, 2021 (the “Technical
Reports”), and the use of scientific and technical information, including any reserve and resource estimates, from the Technical Reports
(collectively, the “Technical Information”), including extracts from or summaries of the Technical Information.
DATED: February 11, 2022
SIM Geological Inc.
/s/ Robert Sim
Name: Robert Sim
Title: President
Exhibit 23.5
CONSENT OF INTERNATIONAL METALLURGICAL & ENVIRONMENTAL INC.
The undersigned hereby consents to the inclusion in or incorporation by reference in (i) the Form 10-K of Trilogy Metals Inc. being
filed with the U.S. Securities and Exchange Commission (the “SEC”) for the fiscal year ended November 30, 2021 and (ii) the
registration statements on Form S-3 (No. 333-234164) and Form S-8 (No. 333-181020, No. 333-188950, No. 333-205102, No. 333-
208149, No. 333-234417 and No. 333-257095) (the “Registration Statements”) of Trilogy Metals Inc. filed with the SEC, to any
amendments or post-effective amendments to the Registration Statements and to any prospectuses or prospectus supplements thereto,
of references to International Metallurgical & Environmental Inc.’s name and to the use of the technical reports titled (x) “Arctic
Feasibility Study, Alaska, USA, NI 43-101 Technical Report” dated effective August 20, 2020 and released October 2, 2020 and (y)
“NI 43-101 Technical Report on the Bornite Project, Northwest Alaska, USA” dated February 11, 2022, with an effective date of
December 31, 2021 (the “Technical Reports”), and the use of scientific and technical information, including any reserve and resource
estimates, from the Technical Reports (collectively, the “Technical Information”), including extracts from or summaries of the Technical
Information.
DATED: February 9, 2022
International Metallurgical & Environmental Inc.
/s/ Jeffrey Austin
Name: Jeffrey B. Austin
Title: President
Exhibit 23.6
CONSENT OF AUSENCO ENGINEERING CANADA INC.
The undersigned hereby consents to the inclusion in or incorporation by reference in (i) the Form 10-K of Trilogy Metals
Inc. being filed with the U.S. Securities and Exchange Commission (the “SEC”) for the fiscal year ended November 30,
2021 and (ii) the registration statements on Form S-3 (No. 333-234164) and Form S-8 (No. 333-181020, No. 333-188950,
No. 333-205102, No. 333-208149, No. 333-234417 and No. 333-257095) (the “Registration Statements”) of Trilogy Metals
Inc. filed with the SEC, of references to Ausenco Engineering Canada Inc.’s name and to the use of those sections of the
technical report titled “Arctic Feasibility Study, Alaska, USA, NI 43-101 Technical Report” dated effective August 20,
2020 and released October 2, 2020 (the “Technical Report”) that were prepared by Ausenco Engineering Canada Inc., and
the use of scientific and technical information from the Technical Report that was prepared by Ausenco Engineering Canada
Inc. (collectively, the “Technical Information”), including extracts from or summaries of the Technical Information.
DATED: January 27, 2022
Ausenco Engineering Canada Inc.
/s/ Paul Staples
Name: Paul Staples
Title: Vice President and Global Practice Lead, Minerals
and Metals
CONSENT OF WOOD CANADA LIMITED,
Exhibit 23.7
The undersigned hereby consents to the inclusion in or incorporation by reference in (i) the Form 10-K of Trilogy Metals Inc. being
filed with the U.S. Securities and Exchange Commission (the “SEC”) for the fiscal year ended November 30, 2021 and (ii) the
registration statements on Form S-3 (No. 333-234164) and Form S-8 (No. 333-181020, No. 333-188950, No. 333-205102, No. 333-
208149, No. 333-234417 and No. 333-257095) (the “Registration Statements”) of Trilogy Metals Inc. filed with the SEC, to any
amendments or post-effective amendments to the Registration Statements and to any prospectuses or prospectus supplements thereto,
of references to Wood Canada Limited’s name and to the use of the technical report titled “Arctic Feasibility Study, Alaska, USA, NI
43-101 Technical Report” dated effective August 20, 2020 and released October 2, 2020 (the “Technical Report”), and the use of
scientific and technical information, including any reserve and resource estimates, from the portions of the Technical Report prepared
by Wood Canada Limited (collectively, the “Technical Information”), including extracts from or summaries of the Technical
Information.
DATED: February 3, 2022
On behalf of Wood Canada Limited
/s/ Greg Gosson
Name: Greg Gosson
Title: Technical Director, Geology & Compliance
CONSENT OF SRK CONSULTING (CANADA) INC.
Exhibit 23.8
The undersigned hereby consents to the inclusion in or incorporation by reference in (i) the Form 10-K of Trilogy Metals Inc. being
filed with the U.S. Securities and Exchange Commission (the “SEC”) for the fiscal year ended November 30, 2021 and (ii) the
registration statements on Form S-3 (No. 333-234164) and Form S-8 (No. 333-181020, No. 333-188950, No. 333-205102, No. 333-
208149, No. 333-234417 and No. 333-257095) (the “Registration Statements”) of Trilogy Metals Inc. filed with the SEC, to any
amendments or post-effective amendments to the Registration Statements and to any prospectuses or prospectus supplements thereto,
of references to SRK Consulting (Canada) Inc.’s name and to the use of the technical report titled “Arctic Feasibility Study, Alaska,
USA, NI 43-101 Technical Report” dated effective August 20, 2020 and released October 2, 2020 (the “Technical Report”), and the use
of scientific and technical information, including any reserve and resource estimates, from the Technical Report (collectively, the
“Technical Information”), including extracts from or summaries of the Technical Information.
DATED: February 4, 2022
SRK Consulting (Canada) Inc.
/s/ Calvin Boese
Name: Calvin Boese
Title: Principal Geotechnical Engineer
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO RULE 13a-14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Exhibit 31.1
I, Tony Giardini, certify that:
1. I have reviewed this annual report on Form 10-K of Trilogy Metals Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the
period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such
evaluation; and
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the
registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected,
or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent
functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information;
and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Date: February 11, 2022
By:
/s/ Tony Giardini
Tony Giardini
Chief Executive Officer
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO RULE 13a-14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Exhibit 31.2
I, Elaine Sanders, certify that:
1. I have reviewed this annual report on Form 10-K of Trilogy Metals Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the
period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such
evaluation; and
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the
registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected,
or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent
functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information;
and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Date: February 11, 2022
By:
/s/ Elaine Sanders
Elaine Sanders
Chief Financial Officer
CERTIFICATION PURSUANT TO
18 U.S.C. §1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.1
In connection with the Annual Report of Trilogy Metals Inc. (the “Company”) on Form 10-K for the year ended November 30, 2021,
as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Tony Giardini, Chief Executive Officer of
the Company, certify that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
Date: February 11, 2022
By:
/s/ Tony Giardini
Tony Giardini
Chief Executive Officer
CERTIFICATION PURSUANT TO
18 U.S.C. §1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.2
In connection with the Annual Report of Trilogy Metals Inc. (the “Company”) on Form 10-K for the year ended November 30, 2021,
as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Elaine Sanders, Chief Financial Officer of
the Company, certify that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
Date: February 11, 2022
By:
/s/ Elaine Sanders
Elaine Sanders
Chief Financial Officer