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Enter Symbol
or Name
USA
CA



Trilogy Metals Inc
Symbol TMQ
Shares Issued 131,319,758
Close 2018-07-16 C$ 2.19
Market Cap C$ 287,590,270
Recent Sedar Documents

Trilogy Metals spends $2.47M (U.S.) on properties in Q2

2018-07-16 16:58 ET - News Release

Mr. Patrick Donnelly reports

TRILOGY METALS REPORTS SECOND QUARTER FISCAL 2018 FINANCIAL RESULTS

Trilogy Metals Inc. has released its second quarter results for the period ended May 31, 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 at the company's website, on SEDAR and on EDGAR. All amounts are in U.S. dollars (unless otherwise stated).

Second quarter 2018 highlights:

  • The company had a strong working capital position of $36.1-million, with cash on hand of $37.5-million.
  • The company completed a bought deal financing, with participation by certain large shareholders (including South32 Ltd.), for aggregate gross proceeds of $28.7-million. South32's involvement in this financing represented the maximum allocation of its rights to participate, to a minimum of 20 per cent to a maximum of 40 per cent, in future financings, private or public, subject to a maximum aggregate ownership of 19.9 per cent in the company.
  • The company announced a $6.7-million budget for 2018 to advance the Arctic project toward feasibility and permitting.
  • The company announced that work has been initiated to estimate a cobalt resource for the Bornite project. On June 5, 2018, the company announced a maiden cobalt resource of 182.4 million tonnes grading 0.019 per cent cobalt for 77 million pounds of inferred resources.
  • The company anticipates filing an updated technical report for the Bornite project by July 20, 2018, incorporating the cobalt resource and updates from the 2017 drill program at the Bornite project.
  • The program and budget for 2018 at the Bornite project of $10-million, which has been fully financed by South32, are currently under way. This year's program includes approximately 8,000 metres of infill and offset drilling to better define and expand the high-grade copper resources at the Bornite project. Assay results from the drilling program are anticipated to be released throughout the fall.

Arctic project

In a press release dated Feb. 20, 2018, the company announced the results of the prefeasibility study titled, "Arctic project, Northwest Alaska, USA, NI 43-101 Technical Report on Pre-Feasibility Study," with an effective date of Feb. 20, 2018, and a release date of April 6, 2018, for its Arctic copper-zinc-lead-silver-gold project located in the Ambler mining district of Alaska. These results converted indicated mineral resources at the Arctic project to probable mineral reserves.

Highlights of the Arctic prefeasibility study are as follows:

  • Pretax net present value (8 per cent) of $1,935.2-million (calculated at the beginning of the three-year construction period) and an internal rate of return of 38 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 -- 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 per pound 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 one;
  • 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 the 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 per pound of payable copper;
  • Total all-in cash costs (initial/sustaining capital, operating, transportation, road toll, treatment and refining charges, and byproduct metal credits) estimated at 63 cents per pound of payable copper;
  • Management believes economic indicators justify moving forward with permitting and a feasibility study.

The Arctic prefeasibility study was prepared under National Instrument 43-101 standards by an independent consultant, Ausenco Engineering Canada Inc. of Vancouver, Canada, and the full technical report was filed on SEDAR on April 6, 2018, and on EDGAR on April 12, 2018. The company also engaged Amec Foster Wheeler to complete mine planning, and SRK Consulting (Canada) Inc. to complete hydrology, tailings and waste design, and water management studies.

In a press release dated May 29, 2018, the company announced that its board of directors approved a $6.7-million budget for 2018 to advance the Arctic project toward feasibility and permitting. The focus of the Arctic project work program for the remainder of the year is to be on geotechnical and hydrological engineering studies at the Arctic project's proposed waste and tailings sites (with the objective to advance the engineering design for these facilities to a feasibility level of study). A number of geotechnical and hydrological drill holes are to be completed to support this effort. The company also expects to gather extensive environmental data for a variety of studies to support the submission of a mine permit application in 2019.

Bornite project

On May 3, 2018, the company announced work had been initiated to estimate a cobalt resource for the Bornite project. On June 5, 2018, the company announced a maiden cobalt resource with the following highlights:

  • At a base case 0.5 per cent copper cut-off grade (and within the combined indicated and inferred copper resource pit shell), the Bornite project is estimated to contain in-pit inferred resources of 124.6 million tonnes grading 0.017 per cent Co for 45 million pounds of contained cobalt.
  • Below the resource limiting pit shell and at a base case cut-off grade of 1.5 per cent copper, the Bornite project is estimated to contain additional inferred resources of 57.8 million tonnes grading 0.025 per cent Co for 32 million pounds of contained cobalt.
  • Total inferred resources (in-pit and below-pit resources) of 182.4 million tonnes grading 0.019 per cent Co for 77 million pounds of contained cobalt.

                      ESTIMATE OF COBALT MINERAL RESOURCES FOR THE BORNITE DEPOSIT
  
Type              Cu cut-off (%)   Tonnes (million)   Average grade Co (%)   Contained metal Co (million pounds)

In-pit                      0.5              124.6                  0.017                                    45 
Below-pit                   1.5               57.8                  0.025                                    32
Total inferred                               182.4                  0.019                                    77

Corporate developments

Financing

On April 16, 2018, the company entered into an underwriting agreement with a syndicate of underwriters led by Cantor Fitzgerald Canada Corp. acting as sole lead underwriter and bookrunning manager. The syndicate included Cormark Securities Inc., BMO Capital Markets and Roth Capital Partners LLC. The underwriters agreed to buy, on a bought deal underwritten basis, 21,551,724 common shares of the company at a price of $1.16 per common share for aggregate gross proceeds of approximately $25-million. On April 20, 2018, the company announced the closing of the offering of 24,784,482 common shares, including the exercise (in full) by the underwriters of the overallotment option (at a price of $1.16 per common share) for aggregate gross proceeds of approximately $28.7-million.

Certain large shareholders participated in the offering, with South32 purchasing approximately 40 per cent (or $11.5-million), Electrum Strategic Opportunities Fund LP taking approximately 20 per cent (or $5.8-million), The Baupost Group LLC taking approximately 10 per cent (or $2.8-million) and Selz Capital LLC taking approximately 4 per cent (or $1.2-million) of the common shares. South32's involvement in this financing represented the maximum allocation of its rights to participate, to a minimum of 20 per cent to a maximum of 40 per cent, in future financings, private or public, subject to a maximum aggregate ownership of 19.9 per cent in the company.

The company intends to use the net proceeds from the offering throughout an anticipated period of three years to finance advancement the Arctic project toward feasibility and permitting, for exploration in the Ambler mining district and for general corporate purposes.

Annual general meeting

The annual general meeting of shareholders was held on May 15, 2018. In a press release dated May 15, 2018, the company was pleased to report that all directors nominated by the company and standing for election were resoundingly elected by shareholders of the company.

Additions to the senior management team

On May 31, 2018, the company announced the additions of Patrick Donnelly as vice-president of corporate communications and development, and Robert Jacko as vice-president of projects to the company's senior management team.

Selected results

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

                         (in thousands of dollars, except for per-share amounts)

                                                         Three months ended                Six months ended
                                               May 31, 2018    May 31, 2017    May 31, 2018    May 31, 2017  
 
Selected expenses
General and administrative                          $   454         $   407        $   799          $   785
Mineral properties expense                            2,475           1,297          3,606            1,936
Professional fees                                       114             193            273              318
Salaries                                                223             224            452              466
Salaries -- stock-based compensation                    151             106          1,073              499
Investor relations                                      138              93            202              156
(Loss) and comprehensive (loss) 
for the period                                       (3,664)         (2,390)        (6,610)          (5,387)
Basic and diluted (loss) per common share             (0.03)          (0.02)         (0.06)           (0.05)

For the three months ended May 31, 2018, Trilogy reported a net loss of $3.7-million (or three cents basic and diluted loss per common share), compared with a net loss of $2.4-million for the corresponding period in 2017 (or two cents basic and diluted loss per common share). This variance was primarily due to the difference in mineral properties expense with the preparation of the Arctic prefeasibility study in 2018 with no comparable activity in 2017. An increase of $1.2-million of mineral property expenses occurred during the three months ended May 31, 2018, compared with the three months ended May 31, 2017.

Other differences noted for the comparable periods were an increase in general and administrative expenses to support the increased field program at the UKMP, a decrease in professional fees as the main activity in the second quarter of 2018 was related to the financing completed on April 20, 2018, with the associated legal fees recorded as issuance costs in shareholders equity, and an increase in investor relations expenses due to the company's increased level of marketing activity, including attendance at more investor conferences in 2018 (compared with 2017).

The basic and diluted loss per common share of three cents for the three months ended May 31, 2018, increased from the basic and diluted loss per common share of two cents for the three months ended May 31, 2017, due to the increased activities affecting the loss for the period as described above.

For the six months ended May 31, 2018, Trilogy reported a net loss of $6.6-million (or six cents basic and diluted loss per common share), compared with a net loss of $5.4-million for the corresponding period in 2017 (or five cents basic and diluted loss per common share). This variance was primarily due to the increased activity level at the company's projects, which amounts are recorded as mineral properties expense. An increase of $1.7-million of mineral property expenses occurred during the six months ended May 31, 2018, compared with the six months ended May 31, 2017, due to the work performed for the Arctic prefeasibility study in 2018 with no comparable activity in 2017. Similar to the activity levels for the three months ended May 31, 2018, other differences noted relate to a small increase in general and administrative expenses, a decrease in professional fees (as legal costs related to the financing completed on April 20, 2018, are recorded as issuance costs in shareholders equity) and an increase in investor relations expenses due to an increase in the number of investor conferences attended in 2018 (compared with 2017).

The basic and diluted loss per common share of six cents for the six months ended May 31, 2018, increased from the basic and diluted loss per common share of five cents for the six months ended May 31, 2017, due to the increased activities affecting the loss as described above.

Outlook

The 2018 program and budget at the Bornite project of $10-million, which includes infill and offset drilling to better define and expand the high-grade copper resources at the Bornite project, is currently under way. The camp opened in mid-May and a seismic program was completed in early June. Three drill rigs have started up in June to complete a planned field program of approximately 8,000 metres of drilling. Assay results from the drilling program are anticipated to be released throughout the fall. The company also anticipates filing an updated technical report for the Bornite project by July 20, 2018, incorporating the company's cobalt resources and updates from the 2017 drill program at the Bornite project.

The 2018 program and budget at the Arctic project of $6.7-million includes the work performed to date on the Arctic prefeasibility study and work to advance the Arctic project toward feasibility and permitting. In May, 2018, the company completed an ore-sorting test at the Steinert facility in Kentucky (Ohio) and results are being incorporated into a final ore-sorting study (expected by the end of the third quarter). One drill has started up in June at the Arctic project for feasibility-level geotechnical drilling at the sites identified in the Arctic prefeasibility study for the tailings dam and waste storage facilities. The company is anticipating drilling 580 metres for geotechnical and hydrological studies. Engineering studies are planned to include additional metallurgical, tailings and waste dump design, water treatment, and water balance studies for the feasibility study and permitting. The company will also continue with baseline environmental studies, which includes hydrology, meteorological, sampling and archeology data collection.

The company will continue to work closely with The Alaska Industrial Development and Export Authority (AIDEA) to advance the permitting process on the Ambler Mining District Industrial Access project throughout 2018. On April 30, 2018, the Bureau of Land Management (BLM) released the Ambler Road Environmental Impact Statement Scoping Summary Report. The permitting process of the AMDIAP under the National Environmental Policy Act (NEPA) Environmental Impact Statement (EIS) has now concluded the scoping phase of permitting and has moved to the draft EIS phase. The draft EIS is scheduled for the end of March, 2019.

Qualified person

Andrew W. West, a certified professional geologist, and the exploration manager for Trilogy Metals, is a qualified person as defined by NI 43-101. Mr. West has reviewed and verified 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 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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