Trilogy Metals Reports Second Quarter Fiscal 2024 Financial Results and Provides Updated Cash Position

Rhea-AI Summary

Trilogy Metals has released its financial results for the second quarter of Fiscal 2024, ending May 31, with a net loss of $1.8 million, a reduction from $2.8 million the previous year. For the six-month period, the net loss was $5.4 million, down from $7.9 million in 2023, attributed to lower general and administrative expenses, and reduced share of losses in Ambler Metals. The company had $14 million in cash as of May 31 and $26.5 million as of July 10.

The Ambler Metals joint venture returned $50 million in excess cash to owners, contributing to Trilogy's cash preservation strategies. The Ambler Access Project faced a setback as the BLM issued a Record of Decision favoring a "No Action" alternative, denying the ROW Grant application.

Trilogy has implemented a Fixed Deferred Share Unit Plan to reduce cash outflows, and maintains a budget-conscious approach, having spent $1.1 million of its $2.8 million fiscal year budget by mid-year. Ambler Metals also invested excess cash in low-risk deposits, earning significant interest income.

Positive

• Cash on hand increased to $26.5 million as of July 10, 2024.
• Net loss reduced from $2.8 million to $1.8 million YoY for Q2 2024.
• Ambler Metals returned $50 million in excess cash to owners.
• Implementation of Fixed Deferred Share Unit Plan for non-employee directors to reduce cash outflows.

Negative

• BLM's Record of Decision selected 'No Action' alternative, blocking Ambler Access Project.

Insights

Financial Analyst

The financial results presented show some relevant improvements for Trilogy Metals. Notably, net loss for the three-month period ended May 31, 2024, has decreased to $1.8 million from $2.8 million in the same period of 2023. Similarly, for the six-month period, the net loss has decreased by 32% compared to last year. This signifies that the company has effectively managed to reduce its operational expenses. The reduction in losses is primarily attributed to decreased general and administrative expenses, professional fees and stock-based compensation. Investors might find this reduction in losses encouraging as it shows progress in controlling costs and optimizing resources.

Moreover, the company's liquidity position appears strong with a reported $14 million in cash as of the end of May 2024, which increased to $26.5 million by July 10, 2024. The return of excess cash from Ambler Metals also highlights effective cash management strategies. This bolstered liquidity provides a cushion for Trilogy Metals to continue its operations and explore growth opportunities without immediate concerns of cash shortages.

However, it's essential to note the company's significant losses from equity investment in Ambler Metals, which reported a $1.4 million share of loss. This continued financial drain could be a point of concern for long-term investors if similar trends persist. Investors should monitor future financial statements closely to see if Trilogy Metals can mitigate these equity losses further.

Market Research Analyst

The market dynamics surrounding Trilogy Metals are complex, particularly with the Ambler Access Project (AAP). The U.S. Bureau of Land Management's (BLM) Record of Decision identifying 'No Action' as the preferred alternative poses a significant regulatory hurdle. This decision essentially blocks access to critical mining claims, affecting the long-term viability of their projects. The withdrawal of the NANA Regional Corporation adds another layer of complexity. These regulatory and partnership issues suggest a challenging operational environment, potentially impacting investor sentiment negatively.

For retail investors, understanding the regulatory landscape is crucial. The 'No Action' decision by the BLM and the subsequent actions by AIDEA point to possible prolonged legal and operational battles. This uncertainty may hinder the company’s ability to monetize its assets efficiently in the near term. On the other hand, the strong cash position and cost-saving measures could offer some short-term stability. Therefore, while the financial health of the company offers some assurances, regulatory challenges present a significant risk factor that cannot be ignored.

Environmental Compliance Expert

The complexities and regulatory challenges associated with the Ambler Access Project (AAP) are paramount for stakeholders to understand. The BLM's 'No Action' decision effectively halts the project, citing environmental and legal concerns. This decision, confirmed on June 28, 2024, means that AIDEA's application for a Right-Of-Way grant was denied, thus complicating Trilogy Metals’ access to important land for mining operations. Investors should be aware that this could significantly delay or even potentially halt future development of the project, impacting expected returns.

The environmental and legal landscape for mining projects in regions like Alaska is becoming increasingly stringent. Companies like Trilogy Metals must not only navigate these regulatory waters but also consider public opinion and stakeholder interests, including those of indigenous groups like the NANA Regional Corporation, which has already withdrawn from further involvement with the AAP. This adds an additional layer of complexity and potential delays, which could impact the company's timeline and profitability metrics.

VANCOUVER, BC, July 10, 2024 /PRNewswire/ - Trilogy Metals Inc. (TSX: TMQ) (NYSE American: TMQ) ("Trilogy", "Trilogy Metals" or "the Company") announces its financial results for the second quarter ended May 31, 2024. Details of the Company's financial results are contained in the interim unaudited 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.sedarplus.ca and on EDGAR at www.sec.gov. All amounts are in United States dollars unless otherwise stated.

Highlights

• Expenditures tracking on or below budget for the first half of the fiscal year.
• Cash on hand of $14.0 million as at May 31, 2024 and $26.5 million as at July 10, 2024.
• Our 50/50 joint venture with South32 Limited ("South32"), Ambler Metals LLC ("Ambler Metals") returns excess cash to owners for ease of cash management.
• Final Supplemental Environmental Impact Statement for the Ambler Access Project ("AAP") identifies "No Action" as preferred alternative.

Corporate Activities

The Company has a 2024 fiscal year cash budget totaling $2.8 million. For the six-month period ended May 31, 2024, we used $1.1 million in operating activities mainly for personnel costs, professional fees, regulatory and office expenses compared with budgeted cash expenditures totaling $1.5 million. The difference is due to the timing of paying our annual insurance premiums which occurred in June 2024.

The Annual General Meeting of Shareholders was held on May 22, 2024. All directors nominated by the Company were elected by shareholders of the Company, with each director receiving greater than 98% of the votes cast. The shareholders of the Company also approved the adoption of a new Fixed Deferred Share Unit Plan (the "Fixed DSU Plan") for non-employee directors to receive up to 1,200,000 common shares of the Company in lieu of cash compensation. Upon the approval of the Fixed DSU Plan by shareholders, the Company terminated the Ambler Metals Equity Plan which had 1,181,519 common shares available for future grants. The adoption of the Fixed DSU Plan, along with the termination of the Ambler Metals Equity Plan, allows the Company to continue its cash preservation activities without significantly impacting potential dilution.

Ambler Metals Joint Venture

The Board of Ambler Metals approved a 2024 fiscal year budget totaling $5.5 million to support external and community affairs, to maintain the State of Alaska mineral claims in good standing and for the maintenance of physical assets. During the six-month period ended May 31, 2024, Ambler Metals expended $2.4 million on salaries and wages, professional fees, engineering, project support costs and mineral property expenses, excluding AAP costs, compared with the budget of $2.6 million.

The Board of Ambler Metals also approved a 2024 fiscal year budget totaling $2.5 million to support the AAP. During the six-month period ended May 31, 2024, Ambler Metals funded $1.1 million to the Alaska Industrial Development and Export Authority ("AIDEA") in support of the AAP compared with the budget of $1.3 million.

Since the beginning of the year, the Board of Ambler Metals, through a Finance Committee, has been actively investing excess cash in low-risk, short-term deposits earning substantial interest income for the joint venture. During the second quarter of 2024, Trilogy and South32 agreed to return excess cash held by Ambler Metals to the owners for ease of cash management. The owners also agreed to maintain a minimum cash balance at Ambler Metals of $10 million which will be reviewed on a regular basis and during the budget cycle. Ambler Metals returned $25 million to Trilogy and South32 prior to the end of May 2024 and another $25 million during the first half of June 2024. Trilogy and South32 continue to each hold a 50% interest in Ambler Metals.

Ambler Access Project

On April 22, 2024, the Company announced that the United States Bureau of Land Management ("BLM") had filed the final Supplemental Environmental Impact Statement ("Final SEIS") for the AAP on its website. The Final SEIS identified "No Action" as the BLM's preferred alternative. The proponent for the AAP is AIDEA which is a public corporation of the State of Alaska. AIDEA's purpose is to promote, develop, and advance the general prosperity and economic welfare of the people of Alaska. AIDEA strongly objected to the process used by the BLM to reach a "No Action" decision as well as the effect of the decision which illegally blocks access to statehood lands, minerals, and federally patented mining claims. On May 8, 2024, NANA Regional Corporation, Inc. announced its withdrawal from further involvement with the AAP and stated its intentions to not renew the surface access permit with AIDEA upon its expiry this year.

On June 28, 2024, the BLM issued the Record of Decision confirming its selection of the No Action Alternative and thus denied AIDEA's application for a Right-Of-Way grant ("ROW Grant") across BLM-managed lands and terminates the BLM ROW Grant issued to AIDEA on January 5, 2021. Ambler Metals is working with AIDEA on next steps.

Selected Results

The following selected financial information is prepared in accordance with U.S. GAAP.

in thousands of dollars, except for per share amounts
Three months ended			Six months ended
Selected expenses	May 31, 2024 $	May 31, 2023 $	May 31, 2024 $	May 31, 2023 $
General and administrative	319	328	734	736
Investor relations	19	23	31	53
Professional fees	191	188	392	758
Salaries	178	193	369	430
Salaries and directors expense – stock- based compensation	509	491	2,508	2,853
Share of loss on equity investment	602	1,603	1,394	3,088
Comprehensive loss for the period	(1,759)	(2,803)	(5,360)	(7,875)
Basic and diluted loss per common share	(0.01)	(0.02)	(0.03)	(0.05)

For the three-month period ended May 31, 2024, we reported a net loss of $1.8 million compared to a net loss of $2.8 million for the three-month period ended May 31, 2023. The decrease in comprehensive loss in the second quarter of 2024 compared to the same quarter in 2023 is due to the decrease in general and administrative, professional fees, our share of loss of Ambler Metals, and stock-based compensation and salaries. The decrease of our share of losses of Ambler Metals is mainly due to the decrease in corporate wages and in mineral property expenses partially offset from the increase in professional fees. The primary drivers in the decrease in mineral property expenses over the comparative quarter in the prior year were from a reduction in activities both at the project level and at the AAP.

For the six-month period ended May 31, 2024, we reported a net loss of $5.4 million compared to a net loss of $7.9 million for the six-month period ended May 31, 2023. The decrease for the six-month period ended May 31, 2024 when compared to the same period in 2023, is primarily due to the decrease in our share of loss of Ambler Metals, professional fees and stock-based compensation and salaries. The decrease of our share of losses of Ambler Metals is mainly due to the decrease in corporate wages due to a reduction in staffing and a reduction in mineral property expenses due to a reduction in project activities which was partially offset by an increase in professional consulting fees related to government and external affairs.

Liquidity and Capital Resources

We expended $1.1 million on operating activities during the six-month period ending May 31, 2024 with the majority of cash spent on professional fees and American and Canadian securities commission fees related to our annual regulatory filings, annual fees paid to the Toronto Stock Exchange and the NYSE American Exchange, and corporate salaries.

As at May 31, 2024, we had cash and cash equivalents of $14.0 million and working capital of $13.6 million. Prior to the end of the fiscal quarter, Trilogy received $12.5 million from Ambler Metals as a return of excess cash to the joint venture owners. Although the Company has a strong cash position, Management continues with cash preservation strategies to reduce cash expenditures where feasible, including but not limited to reductions in marketing and investor conferences and office expenses. In addition, the Company's Board of Directors continues to take all of their fees in deferred share units in an effort to preserve cash. The Company's senior management team is also continuing to take a portion of their base salaries in shares of the Company to preserve cash.

All project-related costs are funded by Ambler Metals. Amber Metals had $35.1 million in cash and cash equivalents and $34.9 million in working capital as at May 31, 2024. During the first half of June 2024, Ambler Metals returned $25 million to the owners, resulting in a cash position of approximately $11 million which is sufficient for Ambler Metals to fund this fiscal year's budget for the Upper Kobuk Mineral Projects ("UKMP') and the AAP.

Qualified Persons

Richard Gosse, P.Geo., Vice President Exploration for Trilogy Metals, is a Qualified Person as defined under National Instrument 43-101 – Standard of Disclosure for Mineral Projects. Mr. Gosse has reviewed the technical information in this news release and approves the disclosure contained herein.

About Trilogy Metals

Trilogy Metals Inc. is a metal exploration and development company which holds a 50 percent interest in Ambler Metals LLC, which has a 100 percent interest in the Upper Kobuk Mineral Projects in northwestern Alaska. On December 19, 2019, South32, 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 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 have 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 a land package that spans approximately 190,929 hectares. Ambler Metals has an agreement with NANA Regional Corporation, Inc., an Alaska Native Corporation that provides a framework for the exploration and potential development of the Ambler Mining District in cooperation with local communities. Trilogy's vision is to develop the Ambler Mining District into a premier North American copper producer while protecting and respecting subsistence livelihoods.

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, perceived merit of properties, the continued willingness of the Company's directors and executives to receive their compensation in equity, the Company's plans to look for opportunities to reduce its cash spend and the success of such cash reductions strategies, future plans regarding the AAP, the sufficiency of cash for the fiscal budget, and the Company's plans to provide further updates and the timing thereof 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. 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 our ability to conserve cash and to raise capital at terms favorable to the Company, or at all and other risks and uncertainties disclosed in the Company's Annual Report on Form 10-K for the year ended November 30, 2023 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.

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SOURCE Trilogy Metals Inc.

FAQ

What were Trilogy Metals' financial results for Q2 2024?

Trilogy Metals reported a net loss of $1.8 million for Q2 2024, compared to a net loss of $2.8 million in Q2 2023.

What is Trilogy Metals' cash position as of July 10, 2024?

Trilogy Metals had $26.5 million in cash as of July 10, 2024.

What impact did the BLM's Record of Decision have on Trilogy Metals?

The BLM's Record of Decision selected the 'No Action' alternative, blocking the Ambler Access Project, impacting Trilogy Metals' plans.

How did Ambler Metals contribute to Trilogy's cash management?

Ambler Metals returned $50 million in excess cash to its owners, aiding Trilogy Metals' cash preservation strategies.

What is the purpose of Trilogy Metals' Fixed Deferred Share Unit Plan?

The Fixed Deferred Share Unit Plan allows non-employee directors to receive shares instead of cash, reducing cash outflows.

How much did Trilogy Metals spend on operating activities in the first half of Fiscal 2024?

Trilogy Metals spent $1.1 million on operating activities in the first half of Fiscal 2024.

What were the key expenses for Ambler Metals in the first half of Fiscal 2024?

Ambler Metals spent $2.4 million on salaries, wages, professional fees, engineering, project support costs, and mineral property expenses.