Trilogy Metals Reports Year End Results
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News Release
Trilogy Metals Reports Year End Results
February 2, 2018 - Vancouver, British Columbia – Trilogy Metals Inc. (TSX / NYSE
American: TMQ) ("Trilogy Metals” or "the Company”) announces its financial results for the
year and fourth quarter ended November 30, 2017 and provides a review on its activities
during 2017. Details of the Company's financial results are contained in the audited
consolidated financial statements and Management's Discussion and Analysis which will be
available on the Company's website at www.trilogymetals.com, on SEDAR at www.sedar.com
and on EDGAR at www.sec.gov. All amounts ar e in United States do llars unless otherwise
stated.
Highlights
Strong cash position of $15.4 million in cluding $5.4 million at year end plus
fully received $10 million from South32 Limited (“South32”) in January 2018
Pre-Feasibility Study for the Arctic Project is on track for Q1 2018
Planning underway for the 2018 program at the Bornite Project
Review of 2017 Activities
South32 Option Agreement
On April 10, 2017, Trilogy Metals entered into an Option Agreement to form a Joint Venture
with South32 on the Company’s Upper Kobuk Minerals Projects (“UKMP Projects”) (“Option
Agreement”). Under the terms of the Option Agreement, Trilogy Metals granted South32 the
right to form a 50/50 joint venture to hold all of the Company’s Alaskan assets. Upon exercise
of the option, the Company will transfer its Alaskan assets, including the UKMP Projects, and
South32 will contribute a minimum of $150 million, to a ne wly formed joint venture. For
more information on the Option Agreement s ee the Company’s press release on April 10,
2017 (https://Trilogy PR April 10 2017).
Bornite Project
In partnership with South32, we completed a $10 million exploration program at the Bornite
Project. The focus of the 2017 program was to target high-grade copper mineralization north
and east of the previously identified resour ces last drilled by the Company in 2013 and to
define the edges of the mineralized system.
The 2017 exploration program was one of the larger programs in the history of drilling at the
Bornite Project. We drilled nine diamond drill holes comprising 8,437 meters this field season
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to test the extension of the mineralization from the drill holes from our 2013 drill campaign.
Drilling at the Bornite Project began in early June and wrapped up in mid-October with the
results released throughout the fall. Due to inclement weather, two holes (RC17-241 and
242) were stopped before reaching target dept h and cemented in preparation for re-entry
during the 2018 drill program. The 2017 drilling program doubled the size of the known
mineralized footprint and continues to demo nstrate that the high-grade Bornite copper
resource system is open to further expansion. Bornite drill results were released by the
Company’s on September 18, 2017 (https://Trilogy PR Sep 18 2017) and December 4, 2017
(https://Trilogy PR Dec 4 2017).
Early in December 2017, So uth32 committed to fund th e $10 million 2018 program and
budget for the Bornite Project. The funds, which represent the second tranche of $10 million
under the Option Agreement, maintains the agreement in good standing, were fully received
in January 2018. Planning for the 2018 program is underway and will include in-fill and off-
set drilling to better define and expand the high grade copper resources at Bornite.
Arctic Project
2017 continued to be a busy year at the Arctic Project. In the spring of 2017, we announced
several milestones including the release of an updated mineral resource estimate,
metallurgical, geotechnical and hydrogeological results in preparation for a pre-feasibility
study (“PFS”). In early June 2017, we announced the enga gement of Ausenco Engineering
Canada Inc. to prepare the Arctic Project PF S technical report. The Company also engaged
Amec Foster Wheeler to complete mine pla nning and SRK Consulting (Canada) Inc. to
complete tailings and waste design, hydrology and environmental studies. The PFS study is
on track to be completed in Q1 2018.
The summer field program for the Arctic Project PFS was conducted in July with the completion
of 274 meters of geotechnical drilling and 26 test pits completed to determine site facility
locations and mine design. We also completed geophysical ground surveys to evaluate ground
conditions. We continued our environmental baseline program through the summer of 2017
which includes baseline data collection on aquatic and avian resources, ongoing water quality,
hydrology and meteorology. The water qualit y program was expanded in 2017 to include
additional sample locations and increased sample frequency. The field program information is
currently being incorporated into the engineering design for the PFS.
We also completed 785 meters of infill drilling at Arctic in early September collecting core to
provide two tonnes of material for an ore-sort ing study. The core collected during the
program has been crushed and is currently being transported to begin the next phase of the
ore sorting study. Drill results were announced on January 16, 2018 ( https://Trilogy PR Jan
16 2018).
Corporate Developments
In December 2017, we announced the appointmen t of Mr. William Iggiagruk Hensley to the
Company’s Board of Directors. Mr. Hensley is an Alaska native leader who significantly
contributed to the settlement of Alaska’s Native claims with the United States federal
government in 1971. He was elected to the Alas kan House of Representatives, served four
full terms as an Alaskan Senator and two further terms through an appointment by Governor
Steve Cowper. Willie Hensley was a founder of NANA, served for 20 years as a director,
became the head of NANA Development Corporation and finally President of NANA. He was a
founder of the Alaska Federati on of Natives and served as director, executive director,
president and co-chair.
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Annual Financial Results
The following selected annual information is prepared in accordance with U.S. GAAP.
in thousands of dollars,
except for per share amounts
Selected financial results Year ended
November 30,
2017
$
Year ended
November 30,
2016
$
Year ended
November 30,
2015
$
General and administrative 1,385 1,337 1,346
Mineral properties expense 15,100 5,037 4,167
Professional fees 708 442 1,346
Salaries 975 1,003 1,085
Salaries – stock-based compensation 705 615 831
Unrealized loss (gain) on held for trading
investments
1,645 (88) -
Loss (gain) on sale of investments 580 (57) -
Loss from continued operations for the year 8,712 8,712 9,134
(Income)/loss from discontinued operations
for the year
- (3,850) 398
Loss and comprehensive loss for the year 21,104 4,862 9,532
Basic and diluted loss per common share $0.20 $0.05 $0.12
For the year ended November 30, 2017, we repo rted a net loss of $21.1 million (or $0.20
basic and diluted loss per common share) compared to a net loss for the corresponding period
in 2016 of $4.9 million (or $0.05 basic and diluted loss per common share) and a net loss of
$9.5 million for the corresponding period in 2015 (or $0.12 basic and diluted loss per common
share). This variance was primarily due to the significantly increased size and magnitude of
the field programs undertaken at our mineral properties in 2017 as well as a one-time gain
on the sale of Sunward Investments Ltd. (“Sunward Investments”), which through a
subsidiary, owned 100% of the Titiribi gold-copper exploration project in Colombia, in 2016.
Additionally, there were losses recognized on b o t h t h e s a l e o f i n v e s t m e n t s a s w e l l a s
investments designated as held for trading in 2017 that did not exist in the two prior fiscal
years. The investments consist of shares and warrants to purchase shares in Gold Mining Inc.
(“GMI”) that were acquired through the sale of Sunward Investments in 2016.
For the year ended November 30, 2017, we reported a net loss from continuing operations of
$21.1 million (or $0.20 basic and diluted loss from continuing operations per common share)
compared to a net loss for the corresponding period in 2016 of $8.7 million (or $0.08 basic
and diluted loss from continuing operations per common share) and a net loss of $9.1 million
for the corresponding period in 2015 (or $0. 11 basic and diluted loss from continuing
operations per common share).
The significant increase in th e loss pertaining to 2017 relates to the size of the program
undertaken at the UKMP in 2017. We executed a $15.1 million program at the UKMP in 2017,
with $10.0 million on the Bornit e Project funded by South32 under the Option Agreement.
The 2017 field program consisted of 8,437 meters of exploration drilling at the Bornite Project,
274 meters of geotechnical dril ling and 26 test pits comple ted to determine site facility
locations and mine design at the Arctic Project, and 785 meters of infill drilling to collect
material for an ore-sorting study at the Arctic Project. Additionally, significant engineering
work was completed on the PFS study at the Arctic Project to be completed in Q1 2018.
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Comparably, in 2016, we executed a $5.0 million program on the Arctic Project and in 2015,
a $4.2 million program on the Arctic Projec t. The programs in 2015 and 2016 were focused
on moving the Arctic Project towards pre-feasibility compared to the significant programs
undertaken at the Bornite and Arctic Projects in 2017. In 2016, we completed a drill program
consisting of 3,058 meters at the Arctic Pr oject and increased the environmental baseline
data collection and engineering site investigations compared to the 2015 program. In 2015,
we completed fourteen diamond drill holes amounting to 3,056 meters at the Arctic Project,
as well as engineering and envi ronmental site investigations. Mineral property expenses
consist of direct drilling, pe rsonnel, community, resource re porting and other exploration
expenses, as well as indirect project support expenses such as fixed wing charters, helicopter
support, fuel, and other camp operation costs.
Additionally, the significant variance in 2016, compared to 2017 and 2015, relates to the gain
recognized on the sale of Sunward Investments and the Titiribi Project of $4.4 million, pre-
tax. This was a one-time event for which there is no comparable gain in prior years. As a
result of the sale, the operations of Sunward Investments were reclassified as a discontinued
operation, retrospectively. Expenses of $0. 6 million for the year ended November 30, 2016
and $0.4 million for the year ended November 30, 2015 related to the Sunward Investments
operations were reclassified to discontinued operations. As Sunward Resources Ltd. was
purchased by the Company in June 2015, there are no amounts prior to June 2015 included
in the consolidated results.
During the year ended November 30, 2017, the Company sold 2,525,000 common shares of
GMI for proceeds of $3.5 million and realized a loss on sale of $0.6 million. For the year ended
November 30, 2017, we recognized an unrealized loss on held for trading investments of $1.6
million on 2,365,000 common shares of GMI and 1,000,000 warrants to purchase a common
share of GMI. During the year ended November 30, 2016, the Company sold 110,000 common
shares of GMI for net proceeds of $0.2 million an d realized a gain on sale of $0.06 million.
For the year ended November 30, 2016, we recognized an unrealized gain on held for trading
investments of $0.1 million.
Professional fees for the year ended November 30, 2017 were $0.7 million, an increase of
$0.3 million from the $0.4 million incurred for the year November 30, 2016, and a reduction
of $0.6 million from the $1.3 million incu rred for the year ended November 30, 2015.
Expenses in 2017 increased from 2016 due to the arrangement with South32 and preparatory
costs incurred associated with the filing of a base shelf prospectus in Canada and the US.
Costs in 2016 were down significantly from ot her years due to less corporate transaction
activity as well as $0.2 million in costs related to the sale of Sunward recorded to discontinued
operations. In 2015, expenses were incurred for legal and technical due diligence and
regulatory approvals associated with the acquisition of Sunward.
Other variances for the year ended November 30, 2017 compared to 2016 and 2015 are as
follows: (a) $1.4 million in general and admini strative expenses in 2017 compared to $1.3
million in 2016 and 2015 due to a less favorable foreign exchange movement; (b) $1.0 million
in salaries in 2017 and 2016 compared to $1.1 million in 2015 due to minor changes in staffing
levels at the corporate office; and (c) $0.7 million in stock based compensation in 2017
compared to $0.6 million in 2016 and $0.8 million in 2015 due to minor changes in the number
of eligible employees for annual stock option grants and the fair value of grants valued using
the Black-Scholes model which is most sensitive to the Company’s share price and future
expected volatility.
The comparable basic and diluted loss per commo n share for 2017 of $0.20 is significantly
higher than 2016 and 2015 due to the higher loss for the year. The basic and diluted loss per
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common share for 2016 of $0.05 is lower than 2017 and 2015 due to the gain on the sale of
Sunward Investments recognized in the year. The 2015 basic and diluted loss per common
share of $0.12 is also affected by the additional shares issued during 2015 as a result of the
Sunward acquisition completed in June 2015 as well as a lower loss figure compared to 2017.
Fourth Quarter Results
During the fourth quarter of 2017, we had a loss of $6.7 million compared to income earned
of $2.7 million in the fourth quarter of 2016. The earnings in the fourth quarter of 2016
were due to the gain on sale of Sunward Investments of $4.4 million offsetting net expenses
of $2.0 million. There is no comparable gain on the sale of Sunward Investments in the
fourth quarter of 2017 as it was a non-recurring item. We incurred $4.7 million of mineral
property expenses in the fourth quarter of 2017 compared to $1.0 million of mineral
property expenses in the fourth quarter of 2016. The increase in mineral property expenses
is due to the length and size of the field program in 2017 compared to 2016. Our 2017 field
program was a significantly larger program and longer program resulting in a significant
portion of mineral property expenses incurred in the fourth quarter as we were operating
through September and October of 2017. In 2016, the field program wrapped up during the
third quarter. The difference in timing and size of the programs accounts for the significant
movement between the periods.
Liquidity and Capital Resources
At November 30, 2017, we had $5.4 million in cash and cash equivalents. We expended $15.4
million on operating activities during the 2017 fiscal year compared with $8.9 million for
operating activities for the same period in 2016, and expenditures of $8.4 million for operating
activities for the same period in 2015. A majority of cash spent on operating activities during
all periods was expended on mineral property expenses, general and administrative expenses,
salaries and professional fees. The increase in cash spent in the year ended November 30,
2017 is mainly due to increased mineral property expenses of $10.1 million offset by an
increase in accounts payable and accrued liabilities of $3.5 million. As at November 30, 2017,
the Company had consolidated cash of $5.4 mill ion and working capital of $5.0 million. The
Company continues to manage its cash expenditures through the sale of investments, funding
from South32, and its working capital. 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 de bt, exercise of options, or other means. The
continued operations of the Company are depe ndent on its ability to obtain additional
financing or to generate future cash flows.
During the years ended November 30, 2017, 2016 and 2015, we have not undertaken
significant financing activities.
During the year ended November 30, 2017, we raised $13.5 million from investing activities.
$10.4 million was raised through mineral property funding from South32, $3.5 million from
proceeds from the sale of investments in GMI, net of $0.3 million expended on capital
purchases. During the year ended November 30, 2106, we raised $0.2 million in sales from
investments acquired through the sale of S unward Investments. During the year ended
November 30, 2015, we generated $19.4 millio n from investing activities through the
acquisition of Sunward.
Through December 2017 and January 2018, the Company has received proceeds of C$1.4
million from the sale of investments in GMI. In total, we have sold to the end of January
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2018 3,675,000 GMI shares for gross proceeds of C$6.1 million and have a further 1,325,000
GMI shares which we will continue to sell.
Qualified Persons
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 the
technical information in this news release and approves the disclosure contained herein.
About Trilogy Metals
Trilogy Metals Inc. is a metals exploration company focused on exploring and developing the
Ambler mining district located in northwestern Alaska. It is one of the richest and most-
prospective known copper-domina nt districts located in one of the safest geopolitical
jurisdictions in the world. It hosts world-class polymetallic VMS deposits that contain copper,
zinc, lead, gold and silver, and carbonate repl acement deposits which have been found to
host high grade copper 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 the Company's land package that spans
approximately 143,000 hectares. The Company 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 Am bler mining district into a premier North
American copper producer.
Company Contacts
Rick Van Nieuwenhuyse Elaine Sanders
President & Chief Executive Officer Vice President & Chief Financial Officer
604-638-8088 or 1-855-638-8088
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Cautionary Note Regarding Forward-Looking Statements
This press release includes certain "forward-looking inform ation” and "forward-looking
statements” (collectively "forward-looking stat ements”) 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 stat ements of historical fact,
included herein, including, without limitation, anticipated timing and results of the PFS, the
future operating or financial performance of the Company, planned expenditures and the
anticipated activity at the UKMP Projects, are forward-looking statements. Forward-looking
statements are frequently, bu t not always, identified by words such as "expects”,
"anticipates”, "believes”, "intends”, "estimates”, "potential”, "possible”, and similar
expressions, or statements that events, cond itions, or results "will”, "may”, "could”, or
"should” occur or be achieved . These forward-looking statem ents 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
prices for precious and base metals; or other statements that are not statements of fact.
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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
uncertainties involving the interpretation of drill results, the need for additional financing to
explore and develop properties and availability of financing in the debt and capital markets;
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 access road; the need to obtain permits and governmental approvals; risks of construction
and mining projects such as accidents, equipment breakdowns, bad weather, non-compliance
with environmental and permit requirements, unanticipated variation in geological structures,
metal grades or recovery rates; unexpected co st increases, which could include significant
increases in estimated capital and operating costs; fluctuations in metal prices and currency
exchange rates; and other risks and uncertainties disclosed in the Company’s Annual Report
on Form 10-K for the year ended November 30, 2017 filed with Canadian securities regulatory
authorities and with the United States Securities and Exchan g e C o m m i s s i o n a n d i n o t h e r
Company reports and documents filed with applic able 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 belie fs, opinions, projection s, or other factors,
should they change, except as required by law.
Cautionary Note to United States Investors
The Arctic Technical Report and the Bornite Technical Report have 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 press release have been prepared in accordance with National
Instrument 43-101 Standards of Disclosure for Mineral Pro jects ("NI 43-101”) and the
Canadian Institute of Mining, Metallurgy, an d 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 concerni ng mineral projects. Canadian standards,
including NI 43-101, differ significantly from the requirements of the United States Securities
and Exchange Commission ("SEC”), and resource and reserve information contained therein
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 o unces” in a resource is permitted disclosure
under Canadian regulations; however, the S EC normally only permits issuers to report
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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 in this press release or the Bornite Technical
Report may not be comparable with informatio n made public by companies that report in
accordance with U.S. standards.