Trilogy Metals reports 2020 results

Highlights

• Ambler Mining District Industrial Access Project (AMDIAP) receives final federal permits.
• Feasibility study for the Arctic Project completed and NI 43-101 report filed.
• Strong cash position of US$11.1 million and US$10.4 million in working capital at year end.
• Ambler Metals LLC, the joint venture (JV) with South32 Ltd, has US$81.7 million cash and YS$58.5 million loan receivable dedicated to advancing the Upper Kobuk Mineral Projects (UKMP).

2020 project activities

AMDIAP

AMDIAP reached significant project milestones. On 27 March 2020, the BLM, the lead federal agency for the permitting of the AMDIAP, released the final environmental impact statement (EIS) for the AMDIAP. This follows on the draft EIS completed on 23 August 2019. On 23 July 2020, the BLM issued the joint record of decision (JROD) for the Ambler Road Project. Along with the JROD, a Section 404 Permit, which is governed by the Clean Water Act, was issued by the United States Army Corp. of Engineers to the Alaska Industrial Development and Export Authority (AIDEA).

On 6 January 2021, BLM, NPS 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 authorising documents with the two agencies are the final federal permits required for the Ambler Access Project.

Arctic feasibility study

The company announced the positive results of its feasibility study for the Arctic Copper-Zinc-Lead-Silver-Gold Project (the Arctic FS) on 20 August 2020. The Arctic FS describes the technical and economic viability of establishing a conventional opencast copper-zinc-lead-silver-gold mine and mill complex for a 10 000 tpd operation for a minimum 12-year mine life. The Arctic FS resulted in a pre-tax net present value (NPV)_8% of US$1.6 billion and an internal rate of return (IRR) of 31% for the base case and an after-tax NPV_8% of US$1.1 billion and after-tax IRR of 27% for the base case. The base case scenario utilised long-term metal prices of US$3/lb for copper, US$1.10/lb for zinc, US$1/lb for lead, US$1300/oz for gold and US$18/oz for sil-ver.

At current spot metals prices of US$3.55/lb copper, US$1.18/lb zinc, US$0.91/lb lead, US$1833/oz gold and US$26.63/oz silver, the pre-tax NPV_8% is US$2.4 billion and IRR is 40.1% and after-tax NPV_8% is US$1.7 billion and IRR is 35.1%.

Tony Giardini, the company’s President and CEO, said: “Due to the polymetallic nature of the deposit, Arctic not only contains a significant amount of base metals but it will produce a significant amount of precious metals. The Arctic FS estimated an average annual payable gold and silver production of 32 000 oz and 3.4 million oz respectfully which, in total, represents 16% of Arctic’s net revenue.”

On 2 October 2020, Trilogy Metals 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 20 August 2020, prepared by Ausenco Engineering Canada Inc., Wood Canada Ltd and SRK Consulting (Canada) Inc. (the Arctic FS Technical Re-port).

Outlook for 2021

On 19 November 2020, the company announced the approval of the 2021 programme and budget for Ambler Metals of approximately US$27 million to advance the UKMP. The budget is fully funded by Ambler Metals. Activities planned at the Arctic Project include 7600 m of drilling which will have the dual purpose of extracting additional material for metallurgical work and for the conversion of mineral resources into the measured category. The metallurgical programme that is associated with this drilling will support variability test work and pilot plant work which will commence later in 2021. Engineering work will continue at Arctic with the aim of submitting the application for the Notice of Intent for the 404 Dredge and Fill Permit, which is covered by the Clean Water Act, to the United States Army Corps of Engineers. The company currently anticipates Ambler Metals will submit the permit applications during 2H21.

Following up from the 2019 work performed along the 70-mile (100 km) Ambler volcanogenic massive sulfide (VMS) belt, Ambler Metals will continue exploration efforts along the belt to discover and define additional deposits that may provide additional feed to a future Arctic mill. Ambler Metals plans to conduct a 7000-m regional exploration drill campaign which is expected to commence in early summer and finish before the end of September. The drilling may be preceded by detailed geologic mapping, geochemical soil sampling and ground geophysics.

The company has approved a 2021 cash budget for corporate activities of approximately US$5.3 million, which includes personnel and related costs of US$2 million, professional fees of US$1.1 million, investor relations and marketing costs of US$0.6 million, office related costs of US$0.5 million, insurance costs of US$0.4 million and regulatory costs of US$0.3 million. The company’s management team is focused on the oversight of its investment in Ambler Metals and will closely work with Ambler Metals as it starts its first field season as a new team and prepares to submit the permit applications for the development and operation of the Arctic Project during 2H21. 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.

Annual financial results

For the year ended 30 November 2020, the company reported a net earnings of US$161.8 million (or US$1.14 basic earnings and US$1.12 diluted earnings per common share) compared to a net loss in 2019 of US$27.9 million (or US$0.21 basic and diluted loss per common share) and a net loss of US$21.8 million in 2018 (or US$0.18 basic and diluted loss per common share). The 2020 movement to net earnings was primarily due to the US$175.8 million gain realised on the de-recognition of assets contributed to Ambler Metals, offset by Trilogy Metals’ 50% share of Ambler Metal’s net operating loss and feasibility study charges incurred for the Arctic Project subsequent to the formation of the JV. Mineral properties expense was eliminated after the contribution of mineral properties to the joint venture at the end of 1Q20. This resulted in a significant cost savings of US$17.7 million in relation to the prior year comparative. Going forward, all project related costs will be captured through its 50% equity recognition of Ambler Metal’s operating loss. Adding to the variances in 2020 were incremental decreases in general and administrative expenses, professional fees and stock-based compensation offset by an increase in salaries. The increase in salaries resulted from the addition of management during the current year for which there is no prior year comparative. Pursuant to a services agreement between the company and Ambler Metals, US$0.9 million of salaries and wages were incurred by the company in support of Ambler Metal’s back office while the JV company set up its permanent team.

The 2019 movement in net loss was primarily due to the increased size and magnitude of the field programs undertaken at its mineral properties. Adding to this variance in 2019 were incremental increases in general and administrative expenses, professional fees and stock-based compensation offset by a slight decrease in salaries. Additionally, there were losses recognised on both the sale of investments as well as investments designated as held for trading in the prior year that did not exist in the fiscal 2019 year. The company executed a US$18.2 million programme at the UKMP in 2019, with US$9.2 million on the Bornite Project funded by South32 under the option agreement, US$2 million on a new regional exploration programme funded 50/50 by Trilogy Metals and South32 and US$7 million on the Arctic Project funded entirely by Trilogy Metals.

Read the article online at: https://www.globalminingreview.com/finance-business/15022021/trilogy-metals-reports-2020-results/