Trilogy Metals Inc 10-Q for FY2020 Q3

Trilogy Metals Inc. (TMQ)

10-Q 2020-10-07 For: 2020-08-31

Added on April 11, 2026

About this 10-Q

Trilogy Metals Inc filed this 10-Q on October 7, 2020, covering the quarter ended August 31, 2020 (FY2020 Q3).

Headline figures

Quarter ended August 31, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Net loss: $3.18M; compared with a net loss of $12.54M a year earlier
Diluted EPS: -$0.02; compared with -$0.09 a year earlier

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British Columbia	98-1006991
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

Suite 1150, 609 Granville Street Vancouver, British Columbia Canada	V7Y 1G5
(Address of Principal Executive Offices)	(Zip Code)


Large accelerated filer ◻	Accelerated filer ⌧	Non-accelerated filer ◻	Smaller reporting company☒	Emerging growth company ☐


		Page
PART I - FINANCIAL INFORMATION		3
Item 1.	Financial Statements	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	27
Item 4.	Controls and Procedures	28

PART II - OTHER INFORMATION		30
Item 1.	Legal Proceedings	30
Item 1A.	Risk Factors	30
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30
Item 3.	Defaults Upon Senior Securities	30
Item 4.	Mine Safety Disclosures	30
Item 5.	Other Information	31
Item 6.	Exhibits	31


		in thousands of US dollars
	August 31, 2020		November 30, 2019
	$		$
Assets
Current assets
Cash and cash equivalents	12,780		19,174
Accounts receivable (note 3)	121		264
Deposits and prepaid amounts	379		719
	13,280		20,157

Equity method investment (note 4)	174,167		—
Plant and equipment (note 5)	222		715
Mineral properties and development costs (note 6)	—		30,631
Rent deposit (note 8 (a))	—		114
Right of use asset (note 8 (a))	503		—
	188,172		51,617
Liabilities
Current liabilities
Accounts payable and accrued liabilities (note 7)	1,287		2,354
Current portion of lease liability	152		—
	1,439		2,354

Long-term portion of lease liability (note 8 (b))	447		—
Mineral properties purchase option	—		31,000
	1,886		33,354
Shareholders’ equity
Share capital (note 9) – unlimited common shares authorized, no par value Issued – 142,978,805 (2019 – 140,427,761)	179,310		177,971
Contributed surplus	122		122
Contributed surplus – options (note 9(a))	23,024		21,123
Contributed surplus – units (note 9(b))	1,549		1,759
Deficit	(17,719)		(182,712)
	186,286		18,263
	188,172		51,617


	in thousands of US dollars, except share and per share amounts
	For the three months ended			For the nine months ended
	August 31, 2020		August 31, 2019		August 31, 2020	August 31, 2019
	$		$		$	$
Expenses
Amortization		17	31		75	106
Feasibility study (note 6(a))		232	—		974	—
Foreign exchange (gain) loss		37	3		44	(26)
General and administrative		265	435		1,349	1,363
Investor relations		156	164		383	456
Mineral properties expense (note 6(a))		—	10,951		1,545	15,392
Professional fees		165	414		1,031	658
Salaries		170	272		620	835
Salaries – stock-based compensation		1,064	402		3,030	3,005
Total expenses		2,106	12,672		9,051	21,789
Other items
Gain on derecognition of assets contributed to joint venture (note 4(a))		—	—		(175,770)	—
Share of loss on equity investment (note 4(b))		1,094	—		1,833	—
Interest and other income		(16)	(137)		(107)	(409)
Comprehensive (loss) earnings for the period		(3,184)	(12,535)		164,993	(21,380)
Basic (loss) earnings per common share		(0.02)	(0.09)		1.17	(0.16)
Diluted (loss) earnings per common share		(0.02)	(0.09)		1.12	(0.16)
Basic weighted average number of common shares outstanding		141,018,130	136,981,179		140,807,319	133,677,437
Diluted weighted average number of common shares outstanding		141,018,130	136,981,179		146,660,689	133,677,437


/s/ Tony Giardini, President, CEO and Director		/s/ Kalidas Madhavpeddi, Director

Approved on behalf of the Board of Directors


					Contributed	Contributed		Total
				Contributed	surplus –	surplus –		shareholders’
	Number of shares	Share capital	Warrants	surplus	options	units	Deficit	equity
	outstanding	$	$	$	$	$	$	$
Balance – November 30, 2018	131,585,612	164,069	2,253	122	19,076	1,489	(154,807)	32,202
Exercise of options	44,230	28	—	—	(28)	—	—	—
Restricted Share Units	412,501	424	—	—	—	(424)	—	—
Stock-based compensation	—	—	—	—	1,586	353	—	1,939
Loss for the period	—	—	—	—	—	—	(4,336)	(4,336)
Balance – February 28, 2019	132,042,343	164,521	2,253	122	20,634	1,418	(159,143)	29,805
Exercise of options	101,064	53	—	—	(53)	—	—	—
Stock-based compensation	—	—	—	—	355	309	—	664
Loss for the period	—	—	—	—	—	—	(4,509)	(4,509)
Balance – May 31, 2019	132,143,407	164,574	2,253	122	20,936	1,727	(163,652)	25,960
Exercise of options	57,818	41	—	—	(41)	—	—	—
Stock-based compensation	—	—	—	—	288	114	—	402
Deferred share units	182,132	189	—	—	—	(189)	—	—
Exercise of warrants	6,521,740	12,166	(2,253)					9,913
Loss for the period	—	—	—	—	—	—	(12,535)	(12,535)
Balance – August 31, 2019	138,905,097	176,970	—	122	21,183	1,652	(176,187)	23,740

Balance – November 30, 2019	140,427,761	177,971	—	122	21,123	1,759	(182,712)	18,263
Exercise of options	19,514	6	—	—	(6)	—	—	—
Restricted Share Units	212,501	330	—	—	—	(330)	—	—
Stock-based compensation	—	—	—	—	1,155	41	—	1,196
Earnings for the period	—	—	—	—	—	—	171,179	171,179
Balance – February 29, 2020	140,659,776	178,307	—	122	22,272	1,470	(11,533)	190,638
Exercise of options	63,110	31	—	—	(31)	—	—	—
Restricted Share Units	200,000	312	—	—	—	(312)	—	—
Stock-based compensation	—	—	—	—	420	350	—	770
Loss for the period	—	—	—	—	—	—	(3,002)	(3,002)
Balance – May 31, 2020	140,922,886	178,650	—	122	22,661	1,508	(14,535)	188,406
Exercise of options	2,055,919	660	—	—	(660)	—	—	—
Restricted Share Units	—	—	—	—	—	—	—	—
Stock-based compensation	—	—	—	—	1,023	41	—	1,064
Loss for the period	—	—	—	—	—	—	(3,184)	(3,184)
Balance – August 31, 2020	142,978,805	179,310	—	122	23,024	1,549	(17,719)	186,286


	in thousands of dollars
	August 31, 2020	November 30, 2019
	$	$
GST input tax credits	15	42
Recoverable payments	—	222
Ambler Metals LLC	106	—
Accounts receivable	121	264


		in thousands of dollars
		$
Fair value ascribed to Ambler Metals LLC interest		176,000
Less: carrying value of contributed /eliminated assets
Mineral properties		(30,631)
Property, plant and equipment		(618)
Elimination of Fairbanks warehouse right of use asset		(93)
Elimination of prepaid State of Alaska mining claim fees		(303)
Add:
Reimbursement of claims staking		44
Demobilization costs of drills		278
Cancellation of Fairbanks warehouse lease liability		93
Fair value of mineral properties purchase option		31,000
Gain on derecognition		175,770


		in thousands of dollars
		$
February 11, 2020, fair value ascribed to Ambler Metals LLC interest		176,000
Share of loss on equity investment for the nine-month period ended August 31, 2020		(1,833)
August 31, 2020, equity method investment		174,167


		in thousands of dollars
		August 31, 2020
		$
Current assets: Cash, deposits and prepaid expenses		84,245
Non - current assets: Property, equipment and mineral properties		31,308
Loan receivable from South32		58,205
Current liabilities: Accounts payable and accrued liabilities		(1,155)
Non - current liabilities: Lease obligation		(64)
Net assets		172,539


		in thousands of dollars
	Three months ended	Nine months ended
	August 31, 2020	August 31, 2020
	$	$
Amortization	37	87
Mineral properties expense	1,329	2,409
General and administrative expense	1,168	2,072
Interest income	(345)	(902)
Comprehensive loss	2,189	3,666


	in thousands of dollars
	November 30, 2019
		Accumulated
	Cost	amortization	Net
	$	$	$
British Columbia, Canada
Furniture and equipment	63	(29)	34
Leasehold improvements	53	(17)	36
Computer hardware and software	115	(112)	3
Alaska, USA
Machinery, and equipment	3,667	(3,026)	641
Vehicles	348	(348)	—
Computer hardware and software	4	(3)	1
	4,250	(3,535)	715


			in thousands of dollars
	November 30, 2018	Acquisition costs	November 30, 2019
	$	$	$
Alaska, USA
Ambler (a)	26,587	44	26,631
Bornite (b)	4,000	—	4,000
	30,587	44	30,631


		in thousands of dollars
		$
ASC 842 transition as at December 1, 2019		681
Amortization		(124)
Lease accretion		39
Derecognition of Fairbanks warehouse lease		(93)
		503


		in thousands of dollars
		August 31, 2020
Fiscal year		$
2020		48
2021		195
2022		184
2023		223
2024		122
Total undiscounted lease payments		772
Effect of discounting		(173)
Present value of lease payments recognized as lease liability		599


	in thousands of dollars, except share amounts
	Number of shares	Ascribed value
		$
November 30, 2018	131,585,612	164,069
Exercise of options	1,725,776	1,123
Restricted Share Units	412,501	424
Deferred Share Units	182,132	189
Exercise of warrants	6,521,740	12,166
November 30, 2019	140,427,761	177,971
Exercise of options	2,138,543	697
Restricted Share Units	412,501	642
August 31, 2020, issued and outstanding	142,978,805	179,310


		August 31, 2020
Risk-free interest rates		0.97%
Exercise price		CAD$2.74
Expected life		3 years
Expected volatility		64.3%
Expected dividends		Nil


	August 31, 2020
		Weighted average
		exercise price
	Number of options	$
Balance – beginning of the period	9,205,600	1.11
Granted	4,095,000	2.14
Exercised	(2,924,221)	0.56
Forfeited	(710,000)	2.26
Balance – end of period	9,666,379	1.63


	Outstanding			Exercisable		Unvested
			Weighted		Weighted
	Number of	Weighted	average	Number of	average	Number of
	outstanding	average years	exercise price	exercisable	exercise price	unvested
Range of price	options	to expiry	$	options	$	options
$0.34 to $0.50	1,304,879	0.24	0.36	1,304,879	0.36	—
$0.51 to $1.00	1,765,000	1.85	0.68	1,765,000	0.68	—
$1.01 to $1.50	129,000	2.50	1.27	129,000	1.27	—
$1.51 to $2.00	2,685,000	4.55	1.94	1,448,333	1.89	1,236,667
$2.01 to $2.50	3,695,000	3.84	2.29	2,558,330	2.28	1,136,670
$2.51 to $2.61	87,500	3.61	2.58	87,500	2.58	—
	9,666,379	3.17	1.63	7,293,042	2.77	2,373,337


	Number of RSUs	Number of DSUs
Balance – beginning of the period	212,501	1,137,488
Granted	200,000	66,682
Vested/paid	(412,501)	—
Balance – end of period	—	1,204,170


	in thousands of dollars
	Total	< 1 Year	1–2 Years	2–5 Years	Thereafter
	$	$	$	$	$
Accounts payable and accrued liabilities	1,287	1,287	—	—	—
	1,287	1,287	—	—	—



	in thousands of dollars,
	except for per share amounts
	Three months ended				Nine months ended
	August 31, 2020		August 31, 2019		August 31, 2020		August 31, 2019
Selected expenses	$		$		$		$
General and administrative		265		435		1,349		1,363
Mineral properties expense		—		10,951		1,545		15,392
Feasibility study		232		—		974
Professional fees		165		414		1,031		658
Salaries		170		272		620		835
Salaries – stock-based compensation		1,064		402		3,030		3,005
Investor relations		156		164		383		456
Gain on derecognition of assets contributed to joint venture		—		—		(175,770)		—
Equity in investee		1,094		—		1,833		—
Comprehensive earnings (loss) for the period		3,184		(12,535)		164,993		(21,380)
Basic earnings (loss) per common share	$	(0.02)	$	(0.09)	$	1.17	$	(0.16)
Diluted earnings (loss) per common share	$	(0.02)	$	(0.09)	$	1.12	$	(0.16)


		in thousands of dollars,
		except per share amounts
	Q3 2020	Q2 2020	Q1 2020	Q4 2019	Q3 2019	Q2 2019	Q1 2019	Q4 2018
	08/31/20	05/31/20	02/29/20	11/30/19	08/31/19	05/31/19	02/28/19	11/30/18
	$	$	$	$	$	$	$	$
Interest and other income	16	29	62	91	137	150	122	117
Mineral property expenses	—	—	1,545	3,819	10,951	2,906	1,535	3,833
Share of loss on equity investment	1,094	561	178	—	—	—	—	—
Earnings (loss) for the period	(3,184)	(3,002)	171,179	(6,525)	(12,535)	(4,509)	(4,336)	(5,319)
Earnings (loss) per common share – basic	(0.02)	(0.02)	1.22	(0.05)	(0.09)	(0.04)	(0.03)	(0.04)
Earnings (loss) per common share – diluted	(0.02)	(0.02)	1.16	(0.05)	(0.09)	(0.04)	(0.03)	(0.04)


	In thousands of dollars
	Total	<1 Year	1–2 Years	2–5 Years	Thereafter
	$	$	$	$	$
Accounts payable and accrued liabilities	1,287	1,287	—	—	—
Office lease	772	193	404	175	—
	2,059	1,480	404	175	—


Exhibit No.		Description
3.1		Certificate of Incorporation, dated April 27, 2011 (incorporated by reference Exhibit 99.2 to the Registration Statement on Form 40-F as filed on March 1, 2012, File No. 001-35447)

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 Registration Statement on Form 40-F as filed on April 19, 2012, File No. 001-35447)

3.3		Notice of Articles and Certificate of Change of Name, dated September 1, 2016 (incorporated by reference to Exhibit 3.1 to the Form 8-K dated September 8, 2016)

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		Interactive Data Files

101.INS		Inline XBRL Instance Document

101.SCH		Inline XBRL Taxonomy Extension Schema Document

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document

104		Cover Page Interactive Data File – the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document


Date: October 7, 2020	TRILOGY METALS INC.


	By:	/s/ Tony Giardini
		Tony Giardini

		President and Chief Executive Officer


	By:	/s/ Elaine M. Sanders
		Elaine M. Sanders

		Vice President and Chief Financial Officer