An anonymous director reports

TRILOGY METALS REPORTS FIRST QUARTER FISCAL 2018 FINANCIAL RESULTS

Trilogy Metals Inc. has provided its first quarter results for the period ended Feb. 28, 2018. Details of the company's financial results are contained in the unaudited interim consolidated financial statements and management's discussion and analysis which will be available on the company's website, on SEDAR and on EDGAR. All amounts are in United States dollars unless otherwise stated.

First quarter 2018 highlights:

• Strong working capital position of $12.6-million, with cash on hand of $12.1-million;
• Announced final drill results for the 2017 Bornite project drill program and the results of a metallurgical test work program demonstrating that a high-quality, 30-per-cent copper concentrate containing no deleterious metals can be produced from the currently defined in-pit resources at the Bornite project;
• Announced $10-million program and budget for the Bornite project in 2018 which has been fully financed by South32 Ltd.;
• Announced additional infill drill results for the 2017 Arctic project drill program and the results of the Arctic project prefeasibility study showing strong economics;
• Announced a wholly owned subsidiary of South32 had become a new large shareholder of the company and concurrently, Trilogy had given South32 participation rights in future financings to participate to a minimum of 20 per cent to a maximum of 40 per cent in future financings, private or public, to a maximum ownership of 19.9 per cent in the company. The right expires if South32 does not participate for the lesser of 20 per cent, or that number of shares that would not put it past a 19.9-per-cent ownership interest in the company, in any particular financing.

Arctic project

In a press release dated Feb. 20, 2018, the company announced the results of the Arctic PFS for its Arctic copper-zinc-lead-silver-gold project located in the Ambler mining district of northwestern Alaska. These results converted indicated mineral resources at the Arctic project to probable mineral reserves.

Highlights of the Arctic PFS are as follows:

• Pretax net present value (NPV) 8 per cent of $1,935.2-million calculated at the beginning of the three-year construction period and an internal rate of return (IRR) of 38.0 per cent for the base case;
• After-tax NPV 8 per cent of $1,412.7-million and after-tax IRR of 33.4 per cent for the base case;
• Initial capital expenditure of $779.6-million and sustaining capital of $65.9-million for total estimated capital expenditures of $845.5-million over the estimated 12-year mine life. In addition, closure and reclamation costs are estimated at $65.3-million;
• Estimated pretax and after-tax payback of initial capital within two years for the base case at $3 per pound copper. At $2/lb copper, pretax and after-tax payback of initial capital is three years;
• Minimum 12-year mine life supporting a maximum 10,000-tonne-per-day conventional grinding mill-and-flotation circuit to produce copper, zinc and lead concentrates containing significant gold and silver byproducts;
• Life of mine strip ratio of 6.9 to 1;
• Average annual payable production projected to be more than 159 million pounds of copper, 199 million pounds of zinc, 33 million pounds of lead, 30,600 ounces of gold and 3.3 million ounces of silver for life of mine;
• A capital intensity ratio on initial capital of approximately $6,200 per tonne of average annual copper equivalent produced;
• Estimated cash costs of 15 cents/lb of payable copper (C1 cash costs include on-site mining and processing costs, road tolls and maintenance, transport, royalties, and are net of byproduct credits);
• Total all-in cash costs (initial/sustaining capital, operating, transportation, treatment and refining charges, road toll, and byproduct metal credits) estimated at 63 cents/lb of payable copper;
• Management believes economic indicators justify moving forward with permitting and a feasibility study.

Bornite project

In a press release dated Dec. 4, 2017, the company announced the final set of drill results at the Bornite project from the 2017 exploration drill program and in a press release dated Jan. 10, 2018, the company announced the results of a metallurgical test work program demonstrating that a high-quality, 30-per-cent copper concentrate containing no deleterious metals can be produced at the currently defined in-pit resource at the Bornite project.

In a press release dated Dec. 14, 2017, the company announced that South32 Ltd. had committed to finance the second tranche of $10-million under an option agreement on the company's Alaskan assets entered into on April 10, 2017. The funds were fully received during the quarter and maintain the option agreement in good standing.

Selected results

The selected financial information in the attached table is prepared in accordance with U.S. generally accepted accounting principles (GAAP).

  
              (in thousands of dollars, except for per share amounts)
                                                                                Three months ended
Selected expenses                                              Feb. 28, 2018         Feb. 28, 2017

General and administrative                                              $345                  $370
Mineral properties expense                                             1,131                   639
Professional fees                                                        159                   125
Salaries                                                                 229                   239
Salaries and stock-based compensation                                    922                   395
Unrealized (gain)/loss on held for trading investments                  (639)                1,239
Loss/(gain) on sale of investments                                       774                    (3)
Loss and comprehensive loss for the period                             2,946                 2,996
Basic and diluted loss per common share                                $0.03                 $0.03

For the three months ended Feb. 28, 2018, Trilogy reported a net loss of $2.9-million (or three-cent basic and diluted loss per common share) which was comparable with a net loss of $3.0-million for the corresponding period in 2017 (or three-cent basic and diluted loss per common share). However, there were notable variances in the following expenses.

Both realized and unrealized loss (gain) on held for trading investments had significant movements period to period. The investments consist of common shares and warrants in GoldMining Inc. (GMI) acquired as consideration for the sale of Sunward Investments Ltd. and its Titiribi gold-copper exploration project in Colombia. During the period ended Feb. 28, 2018, the company sold 1.36 million (2017 -- 410,000) common shares of GMI for proceeds of $1.4-million (2017 -- $600,000) and realized a loss on sale of $800,000 (2017 -- nil). During the period, the company recorded an unrealized gain on the common shares of GMI of $600,000 (2017 -- loss of $1.2-million).

Adjusting for the realized and unrealized loss (gain) on held for trading investments, total expenses increased to $2.8-million for Q1 2018 compared with $1.8-million in Q1 2017. The increase is due to an increase in mineral property expenses and stock-based compensation.

The company incurred $1.1-million in mineral properties expense in Q1 2018 compared with $600,000 in Q1 2017. The increase in mineral property expenses in 2018 was a result of the engineering, environmental and other consulting costs incurred in preparation of the Arctic PFS.

The increase in stock-based compensation is due to a higher share price contributing to an overall greater fair value for option grants and an increase in units granted in the period compared with the prior period.

Outlook

The 2018 program and budget at the Bornite project of $10-million wer approved by a technical committee jointly represented by Trilogy and South32 and will include infill and offset drilling to better define and expand the high-grade copper resources at the Bornite project. The company is currently planning for the field season which it anticipates to start in May, 2018.

For the Arctic project, the company will continue the ore sorting program that has been initiated in fiscal year 2017. With the release of the Arctic PFS results during the quarter and the filing of the National Instrument 43-101 technical report subsequent to quarter-end, the company will start looking into next steps for the Arctic project which will be getting prepared for feasibility and permitting.

The company will be continuing to work closely with the Alaska Industrial Development and Export Authority (AIDEA) (the proponent for the Ambler mining district industrial access project (AMDIAP)) to advance the permitting process on the AMDIAP throughout 2018. The Bureau of Land Management (BLM), as the lead federal agency for the environmental impact statement (EIS), will be moving the project through the EIS process. BLM has reached the end of the scoping process and according to the notice of intent will be delivering a draft EIS by March 29, 2019, with the final EIS due Dec. 30, 2019. A record of decision is due within one month of the final EIS. BLM will be developing preliminary alternatives based on the project purpose and need over the next few months, taking into account the input received from the public and agency comments during the scoping phase that was recently completed on Jan. 31, 2018.

Qualified persons

Andrew W. West, certified professional geologist, exploration manager for Trilogy Metals, 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 Inc.

Trilogy Metals 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-dominant districts located in one of the safest geopolitical jurisdictions in the world. It hosts world-class polymetallic VMS (volcanogenic massive sulphide) deposits that contain copper, zinc, lead, gold and silver, and carbonate replacement 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.

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