Trilogy Metals Reports Second Quarter Fiscal Financial Results
VANCOUVER - Trilogy Metals Inc. reported financial results for the second quarter. Highlights: Strong working capital position of $12.8 million and cash on hand of $12.3 million; Ambler Mining District Industrial Access Project, or AMDIAP, Record of Decision expected by the end of July 2020; Feasibility study results for the Arctic Project expected in Q3 2020; & The outbreak of the novel coronavirus (COVID-19) has resulted in the deferral of this summer’s exploration programs at the Upper Kobuk Mineral Projects (UKMP”).
The Company previously announced the release of the final Environmental Impact Statement (EIS) by the United States Bureau of Land Management (BLM). The final step in the permitting process for the AMDIAP is the issuance of the Record of Decision by the BLM which is expected to be issued by the end of July 2020.
Activities at the Arctic Project during the second quarter focused mainly on updating the 2020 Arctic resource and metallurgical drill program for resource definition and variability testing and planning for the next stages of engineering studies to advance the project towards permitting and development. Work on the feasibility study for the Arctic project continued during the second quarter, with an expected completion date in the third quarter of 2020.
The Bornite geological model was updated during the second quarter incorporating the 2019 drill program results. Additional sample collection from Bornite drill core was completed during the quarter for age determinations on certain mineral species. Five additional composite samples for metallurgical testing from the potential underground resource area were collected during the quarter.
Regional project activities during the second quarter consisted mainly of updating the Sunshine prospect geologic model incorporating the 2019 drill results. In addition, metallurgical work began on five composite samples from the Sunshine prospect. Test work is ongoing and will continue through the third quarter. The Company also continued its review of historical exploration data collected for the Ambler Mining District.
Through Ambler Metals LLC (Ambler Metals) we and our joint venture partner, South32 Limited (South32) have decided not to proceed with the 2020 exploration program after assessing the current novel coronavirus (COVID-19) environment. Ambler Metals gave due consideration to the merits of carrying out an abridged work program at the UKMP. However, given the continued uncertainty resulting from COVID-19, ongoing safety concerns (despite added safety protocols including physical distancing, protective equipment and testing) and the fact that, due to COVID-19, the planned field season had already been delayed to the point at which any field season would provide limited critical path benefits, the decision has been made not to proceed with a 2020 field season. The safety of our employees, contractors and the communities where we work is paramount. We are disappointed as we know delay affects everyone involved, including our partner NANA Regional Corporation, Inc. (“NANA”) and our NANA shareholder hires.
We do not anticipate the deferral of the field season to significantly impact the development timeframe for the UKMP. In the meantime, Ambler Metals will continue advancing the metallurgical test work on both Sunshine and Bornite over the last half of the year which will provide a better understanding of metallurgical performance in an operating scenario and advancing Arctic to the next level of mine design with identifying engineering studies such as trade-off studies and optimization studies of previously completed work. Ambler Metals will continue focusing on regional exploration by compiling historical data from the Ambler VMS Belt and developing 3D geologic models of the most promising prospects and prospect areas.
For the three months ended May 31, 2020, Trilogy reported loss of $3.0 million. For the comparable period in 2019, we reported a net loss of $4.5 million. The decrease in comprehensive loss is primarily due to the elimination of mineral properties expense as these expenditures became the responsibility of Ambler Metals subsequent to the formation of the joint venture with South32 Limited (South32) on February 11, 2020. For the three-month period ended May 31, 2019, Trilogy Metals spent $2.9 million in mineral properties expense, mostly consisting of internal engineering studies for the Bornite and Arctic Projects, meteorological and air quality studies for the Arctic Project and costs associated with preparing the camp for the field season.
Other variances in relation to the comparative three-month period ended May 31, 2020 consists of the following: i) feasibility study expenses of $0.7 million were related to the Arctic Project, and include costs incurred subsequent to the formation of Ambler Metals on February 11, 2020, for which there are no prior year comparatives; ii) share of loss in equity investment in Ambler Metals of $0.6 million, amounts for which do not exist in the comparable second quarter of 2019; iii) an increase of $0.1 million in stock-based compensation primarily due to option and restricted share unit (“RSU”) awards that were granted and fully vested during the quarter; and iv) a decrease of $0.07 million in investor relations as marketing events scheduled during the quarter were postponed due to the impact of COVID-19.
For the six-month period ended May 31, 2020, Trilogy Metals reported comprehensive earnings of $168 million. For the comparable period in 2019, we reported a comprehensive loss of $8.8 million. The differences for the six-month period ended May 31, 2020, when compared to the same period in 2019, are primarily due to the gain of $176 million recognized from the contribution of mineral property assets to the joint venture with South32 upon formation of the Ambler Metals on February 11, 2020. This gain was offset by a $0.7 million loss reflecting the Company’s 50% equity share of Ambler Metals operating loss for the six-month period ended May 31, 2020. There is no comparable amount in the second quarter of 2019.
Other variances noted for the comparative six-month period ended May 31, 2020 consist of the following: i) an increase in general and administrative expenses of $0.2 million, primarily due to executive recruiting fees; ii) an elimination of $2.9 million in mineral properties expense as all mineral property assets were contributed to Ambler Metals upon formation of the joint venture on February 11, 2020; iii) an increase of $0.6 million in professional fees primarily attributed to the implementation of new lease accounting standards, legal fees related to the formation of the joint venture and consulting fees for the former CEO, Rick Van Nieuwenhuyse who remained as a consultant to Trilogy Metals through to February 29, 2020; iv) the inclusion of $0.1 million of salaries in stock based compensation for the interim CEO; and iv) a decrease of $0.6 million in stock-based compensation driven primarily by a combination of a 200,000 unit reduction in the number of stock options granted as well as a lower share price contributing to a lower fair value for stock options, RSUs and deferred share units granted to non-executive directors as a portion of their director fees during the six-month period ended May 31, 2020.