Trilogy Metals Announces Positive Feasibility Study Results for the Arctic Project Located in Alaska, USA
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News Release
Trilogy Metals Announces Positive Feasibility Study Results
for the Arctic Project Located in Alaska, USA
August 20, 2020 - Vancouver, British Columbia – Trilogy Metals Inc. (TSX/NYSE
American: TMQ) (“Trilogy Metals” or t he “Company”) is pleased to announce the positive
results of its Feasibility Study (“FS”) for the Arctic Copper -Zinc-Lead-Silver-Gold Project
(“Arctic” or the “Arctic Project”) in the Ambler mining district of Northwestern Alaska . The
Arctic Project is held by Ambler Metals LLC (“Ambler Metals”), the joint venture operating
company equally owned by Trilogy and South32 Limited (“South32”). The FS was prepared on
a 100% ownership basis, of which Trilogy’s share is 50%. All amounts are in U.S. dollars unless
otherwise stated.
Trilogy Metals will host a conference call on August 20, 2020
at 8:00am (Pacific Time) or 11:00am (Eastern Time) to discuss these
results. Call-in information is provided in this news release and on our
website at www.trilogymetals.com.
Highlights of the Arctic Feasibility Study
• Pre-tax Net Present Value ( “NPV”)8% of $1.6 Billion and an Internal Rate of
Return (“IRR”) of 31% for the base case.
• After-tax NPV8% of $1.1 Billion and after-tax IRR of 27% for the base case.
• At current spot metals prices of $2.94/lb copper, $1.09/lb zinc, $0.89/lb lead,
$2,001/oz gold and $28.89/oz silver, the pre-tax NPV 8% is $1.8 Billion and
IRR is 33.8% and after-tax NPV8% is $1.3 Billion and IRR is 29.6%.
The 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. The base case scenario utilizes long-term metal prices of
$3.00/lb for copper, $1.10/lb for zinc, $1.00/lb for lead, $1,300/oz for gold and
$18.00/oz for silver.
Tony Giardini, President and Chief Executive Officer of Trilogy Metals comments, “Arctic is a
special project due to its unique high-grade polymetallic nature. The only other time that I’ve
seen a project of this quality where the grades were similar was in an underground mining
scenario. However, Arctic is mineable in an open pit scenario. I also want to highlight that
Arctic contains a significant amount of gold and silver. At current spot metal prices, the
precious metals output represents almost 20% of its revenue. The annual gold equivalent (gold
and silver) payable output is about 80,000 ounces per year.”
Jim Gowans, Director of Trilogy Metals and the Company’s representative on the Board of
Ambler Metals comments, “Arctic is located in the extremely prospective Ambler Mining
TSX/NYSE American
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District, in a mining friendly jurisdiction, in Alaska, USA, where solid environmental regulations
and a balanced permitting process is established. I am also very pleased that we are working
with NANA Regional Corporation, Inc., who understand mining and have an established record
of working at the Red Dog Mine.”
The salient details of the FS are displayed in Tables 1, 2 and 3 below.
Table 1. Metal Production and Assumed Metal Prices
Annual Payable Metals Production
Copper ('000'lb) 155,369
Lead ('000'lb) 32,367
Zinc ('000'lb) 192,023
Gold (oz) 32,165
Silver ('000'oz) 3,382
Metal Price
Copper ($/lb) 3.00
Lead ($/lb) 1.00
Zinc ($/lb) 1.10
Gold ($/oz) 1,300.00
Silver ($/oz) 18.00
Table 2. Operating and Capital Costs
On-Site Operating Costs
Mining ($/t milled) 18.48
Processing ($/t milled) 18.31
G&A ($/t milled) 5.15
Surface Service ($/t milled) 0.68
Road Toll ($/t milled) 8.04
Total Operating Cost ($/t milled) 50.65
Capital Expenditure
Initial Capital ($ million) 905.6
Sustaining Capital ($ million) 113.8
Mine Closure & Reclamation ($ million) 205.4
Total Capex ($ million) 1,224.7
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Table 3. Financial Results
Financial Summary
Pre-tax NPV ($ million) at 8% 1,550.9
After-tax Cash Flow ($ million) 2,843.4
After-tax NPV ($ million) at 8% 1,134.7
Cash Costs, Net of By-product Credits ($/lb Cu payable) 0.32
All-in Cost, Net of By-product Credits ($/lb Cu payable) 0.98
Pre-tax IRR (%) 30.8
Pre-tax Payback Period (years) 2.4
Post-tax IRR (%) 27.1
Post-tax Payback Period (years) 2.6
The FS was prepared on a 100% ownership basis, under National Instrument 43-101 standards
by independent consultant, Ausenco Engineering Canada Inc. (“Ausenco”) of Vancouver,
British Columbia, Canada and the full technical report will be filed on SEDAR and EDGAR within
45 days of this news release. The Company also engaged Wood Canada Limited (“Wood”) to
complete mine planning and SRK Consulting (Canada) Inc. (“SRK”) to complete taili ngs and
waste design, hydrology and water management studies.
The FS forecasts an average annual payable production to be more than 155 million pounds of
copper, 192 million pounds of zinc, 32 million pounds of lead, 32,165 ounces of gold and 3.4
million ounces of silver. Total life of mine 12-year production is projected at 1.9 billion pounds
of copper, 2.3 billion pounds of zinc, 388 million pounds of lead, 386 thousand ounces of gold
and 40.6 million ounces of silver.
The Company’s current mineral reserve and mineral resources tables can be found on the
Company’s website at the following link https://trilogy tables . There has been no material
change to the mineral reserve and mineral resource estimates for the Arctic Project as reported
in the Company’s previous technical report entitled “Arctic Project, Northwest Alaska, USA, NI
43-101 Technical Report on Pre-Feasibility Study” with an effective date of February 20, 2018.
However, there is a slight decrease in contained metal due to additional mining dilution.
The FS is based on a 10,000 tonne -per-day open-pit mining with a conventional milling and
flotation process that results in the production of copper, zinc and lead concentrates. Based
on the feasibility level metallurgical work on the sulphide mineralization, the average
recoveries are projected to be 89.9% for copper, 90.6% for zinc and 79.0% for lead, in their
respective concentrates. Over 60% of the recovered payable silver and gold report to the lead
concentrate at 95% payable. Life of mine strip ratio is approximately 6.9 to 1.
Initial capital expenditure of $906 million and sustaining capital of $114 million for total
estimated capital expenditures of $ 1,020 million. In addition, closure and reclamation costs
are estimated at $205 million. The Arctic FS offers a favourable capital intensity ratio on initial
capital of approximately $6, 432 per tonne of average annual copper equivalent produced.
Estimated pre-tax and after -tax payback of initial capital of 2.4 years and 2.6 years
respectively. Estimated cash costs of $0. 32/lb of payable copper (C1 cash costs include on -
site mining and processing costs, road tolls and maintenance, transport, royalties , and is net
of by-product credits). Total “all-in” cash costs (initial/sustaining capital, oper ating, closure
costs and is net of by-product metal credits) estimated at $0.98/lb of payable copper.
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NANA Agreement
Under the Exploration Agreement and Option to Lease (“NANA Agreement”) with NANA
Regional Corporation, Inc. (“NANA”), 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 (“NPR”). This FS was carried out on a 100% ownership basis and
does not include the impact on Trilogy Metals if NANA elects to purchase an interest in the
Arctic Project under the NANA Agreement or, alternativ ely, the impact on Trilogy Metals and
the Arctic Project if the NPR becomes applicable. The FS does include the 1.0% Net Smelter
Royalty to be granted to NANA under the NANA Agreement in exchange for a surface use
agreement.
Joint Venture with South32 Limited
The Company commenced work on the Arctic FS in 2019 and subsequently, on December 19,
2019, South32 exercised the right to form a 50/50 Joint Venture with respect to the Company’s
Alaskan assets , including the Company’s Arctic Project. In February 2020, the Company
transferred its Alaskan assets, including the Arctic Project, and South32 contributed $145
million, to a newly formed 50/50 joint venture named Ambler Metals LLC. This FS was carried
out on a 100% ownership basis and does not take into account South32’s interest in the Arctic
Project. The information generated from this FS will be provided to Ambler Metals for its use
as it carries forward advancing the Arctic Project. For more information on the Trilogy Metals
and South32 Joint Ventur e see the Company’s press releases on December 19, 2019 and
February 11, 2020 at www.trilogymetals.com/news.
Additional information on the NANA Agreement and the joint venture with South32 is included
in the Company’s 2019 Annual Report on Form 10-K, which is available on SEDAR and EDGAR.
Conference Call
Call-in details for the conference call to be held on August 20, 2020 at 8:00am (Pacific Time)
or 11:00am (Eastern Time) are:
Canada and USA Toll-Free: 1-800-319-4610
International Toll Dial-in: 1-604-638-5340
Australia Toll-Free: 1-800-423-528
UK Toll-Free: 0808-101-2791
Callers should dial in 5-10 minutes prior to the scheduled start time and ask to join the call.
Participants can access the Company’s presentation by a live webcast of the conference call
at the following link:
http://services.choruscall.ca/links/trilogy20200820.html
A replay of this conference call will be available on the Company’s website at
www.trilogymetals.com.
Qualified Persons and NI 43-101 Technical Report
The FS for the Arctic Project was prepared by Ausenco and the contributors listed below each
of whom is a Qualified Person under National Instrument 43-101 (“NI 43-101”)
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A technical report containing the FS and prepared in accordance with NI 43-101 will be
available on SEDAR and Edgar within the time frames prescribed under applicable securities
laws.
FS Contributors
Qualified Person Scope of Responsibility
L. Paul Staples, VP and Global
Practice Lead, Minerals and
Metals
Ausenco
Plant and infrastructure design and consolidation of the
capital costs and operating costs and the overall
financial model
Dr. Antonio Peralta, PhD, P.Eng,
Principal Mining Engineer
Wood
Mine design and mineral reserve estimates
Calvin Boese, P.Eng, M.Sc.,
Principal Consultant
SRK
Tailings and waste design
Bruce Murphy, P.Eng., Principal
Consultant, Rock Mechanics
SRK
Pit slope design
Dr. Tom Sharp, PhD, P.Eng,
Principal Consultant, Water
Management and Treatment
Engineering
SRK
Hydrology and water management
Bruce Davis, FAusIMM, President
BD Resource Consulting, Inc.
and
Robert Sim, P.Geo,
SIM Geological Inc.
Mineral resource estimates
Jeffrey B. Austin, P.Eng,
President
International Metallurgical &
Environmental Inc.
Metallurgy and recoveries
AJ MacDonald, P.Eng, Vice
President, Operations
Integrated Sustainability
Consultants
Selenium water treatment plant design
Data Verification
Messrs. Staples, Peralta, Boese, Murphy and Davis have visited the site of the Arctic Project.
The FS Contributors have had discussions with relevant site personnel and Company
management and have reviewed supporting documentation. Additional information can be
found in the technical report.
Qualified Persons
The FS Contributors prepared or supervised the preparation of the information that forms the
basis of the FS disclosure in this press release and have reviewed and approved the disclosure
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regarding the FS contained herein.
Andrew W. West, Certified Professional Geologist, Exploration Manager for Trilogy Metals Inc.,
is a Qualified Person as defined by National Instrument 43- 101. Mr. West has reviewed an d
approves the disclosure contained herein.
About Trilogy Metals
Trilogy Metals Inc. is a metals exploration and development company which holds a 50 percent
interest in Ambler Metals which has a 100 percent interest in the Upper Kobuk Mineral Projects
(“UKMP”) in north -western Alaska. On December 19, 2020, South32, which is a globally
diversified mining and metals company, exercised its option to form a 50/50 joint venture with
Trilogy. The UKMP is located within the Ambler Mining District which is one of the richest and
most-prospective known copper -dominant districts located in one of the safest geopolitical
jurisdictions in the world. It hosts world- class polymetallic volcanogenic massive sulphide
(“VMS”) deposits that contain copper, zinc, lead, gold and silver, and carbonate replacement
deposits which h ave been found to host high -grade copper and cobalt mineralization.
Exploration efforts have been focused on two deposits in the Ambler mining district - the Arctic
VMS deposit and the Bornite carbonate replacement deposit. Both deposits are located within
land package that spans approximately 172,636 hectares. Ambler Metals has an agreement
with NANA Regional Corporation, Inc., a Regional Alaska Native Corporation that provides a
framework for the exploration and potential development of the Ambler mining district in
cooperation with local communities. Our vision is to develop the Ambler mining district into a
premier North American copper producer.
Company Contacts
Tony Giardini Patrick Donnelly
President & Chief Executive Officer Vice President Corporate Communications
& Development
604-638-8088 or 1-855-638-8088
# # #
Cautionary Note Regarding Forward-Looking Statements
This press release includes certain "forward -looking information” and "forward -looking
statements” (collectively "forward -looking statements”) within the meaning of applicable
Canadian and United States securities legislation including the United States Private Securities
Litigation Reform Act of 1995. All statements, other than statements of historical fact, included
herein, including, without limitation, the future price of copper, zinc, lead, gold and silver; the
timing and amount of estimated future pro duction; net present values and internal rates of
return at Arctic; recovery rates; payback periods; costs of production ; capital expenditures;
costs and timing of the development of projects ; mine life; the potential future development
of Arctic and the future operating or financial performance of the Company, are forward-looking
statements. Forward-looking statements are frequently, but not always, identified by words
such as "expects”, "anticipates”, "believes”, "intends”, "estimates”, "potential”, "possible”, and
similar expressions, or statements that events, conditions, or results "will”, "may”, "could”, or
"should” occur or be achieved. These forward -looking statements may include statements
regarding perceived merit of properties; exploration plans and budgets; mineral reserves and
resource estimates; work programs; capital expenditures; timelines; strategic plans; market
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prices for precious and base metals; or other statements that are not statements of fact.
Forward-looking statements involve various risks and uncertainties. There can be no assurance
that such statements will prove to be accurate, and actual results and future events could differ
materially from those anticipated in such statements. Important factors that could cause actual
results to differ materially from the Company's expectations include the Company’s ability to
finance the development of its mineral properties ; assumptions and discount rates being
appropriately applied to the FS, uncertainty as to whether there will ever be production at the
Company’s mineral exploration and development properties; risks related to the Company’s
ability to commence production and generate material revenues or obtain adequate financing
for its 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 activities at the Company’s mineral properties; risks related
to the Company’s dependence on a third party for the development of its projects; commodity
price fluctuations; uncertainties relating to the assumptions underlying resource and reserve
estimates; mining and development risks, includin g risks related to infrastructure, accidents,
equipment breakdowns, labor disputes, bad weather, non-compliance with environmental and
permit requirements or other unanticipated difficulties with or interruptions in development,
construction or production ; the geology, grade and continuity of the Company’s mineral
deposits; the uncertainties involving success of exploration , development and mining
activities; permitting timelines; risks pertaining to the outbreak of the coronavirus (COVID -
19); government regulation of mining operations ; environmental risks ; unanticipated
reclamation expenses; prices for energy inputs, labour, materials, supplies and services ;
uncertainties involved in the interpretation of drilling results and geological tests and the
estimation of reserves and resources ; the need for cooperation of government agencies and
native groups in the development and operation of properties as well as the construction of
the AMDIAP; unanticipated variation in geological structures, metal grades or recover y rates;
fluctuations in currency exchange rates; unexpected cost increases in estimated capital and
operating costs; the need to obtain permits and government approvals; uncertainty related to
title to the Company’s mineral properties and other risks and uncertainties disclosed in the
Company’s Annual Report on Form 10 -K for the year ended November 30, 2019 filed with
Canadian securities regulatory authorities and with the United States Securities and Exchange
Commission and in other Company reports and documents filed with applicable securities
regulatory authorities from time to time. The Company's forward- looking statements reflect
the beliefs, opinions and projections on the date the statements are made. The Company
assumes no obligation to update the forward -looking statements or beliefs, opinions,
projections, or other factors, should they change, except as required by law.
Cautionary Note to United States Investors
This press release 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 includ ed or referenced in this press
release have been 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 (CIM) —CIM Definition Standards on Mineral Resources and
Mineral Reserves, adopted by the CIM Council, as amended ( “CIM Definition Standards”). NI
43-101 is a rule developed by the Canadian Securities Administrators which establishes
standards for all public disclosu re an issuer makes of scientific and technical information
concerning mineral projects. Canadian standards, including NI 43-101, differ significantly from
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the requirements of the United States Securities and Exchange Commission (SEC), and
resource and rese rve 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 norma lly 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 all or any part of
“measured” or “indicated resources” will ever be converted into “ reserves”. 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 excep t in rare cases. 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 Trilogy Metals in compliance with NI 43- 101 may not qualify as "reserves ” under SEC
standards. Arctic does not have known reserves, as defined under SEC Industry Guide
7. Accordingly, information concerning mineral deposits set forth or referenced herein may
not be comparable with information made public by companies that repor t in accordance with
U.S. standards.