VANCOUVER, Oct. 5, 2017 /CNW/ - Trilogy Metals Inc.
(TSX, NYSE American: TMQ) ("Trilogy", "Trilogy Metals" or "the
Company") is pleased to report its third quarter results for the
period ended August 31, 2017. 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 at www.trilogymetals.com, on SEDAR at www.sedar.com and on
EDGAR at www.sec.gov. All amounts are in United States dollars unless otherwise
stated.
Third Quarter 2017 Highlights:
- Strong working capital position of $11.2
million, with cash on hand of $10.2
million.
- The focus of this third fiscal quarter has been working to
advance our Upper Kobuk Mineral Projects. With a combined 2017
budget of $17.1 million for the
Bornite and Arctic Projects, this quarter was busy at our project
sites in northwest Alaska.
- Financial partnership announced with South32 Limited in Q2 2017
granting an option to form a 50/50 joint venture for a minimum
investment of $150 million, subject
to certain adjustments. South32 is required to fund a minimum of
$10 million per year, for up to three
years to keep the option in good standing.
Bornite Project
We are currently executing a $10
million exploration program at the Bornite Project, funded
by South32 Limited (ASX/JSE/LSE: S32), ("South32") under an Option
Agreement on the Company's Upper Kobuk Mineral Projects ("UKMP")
announced on April 10, 2017 ("Option
Agreement"). The focus of this year's program is to target
high-grade copper mineralization north and east of the previously
identified resources which were last drilled by the Company in
2013. This year's exploration at Bornite was approved by a joint
Trilogy-South32 Technical Committee.
Under the terms of the Option Agreement, we granted South32 the
right to form a 50/50 joint venture to hold all of the Company's
Alaskan assets currently held directly by our wholly owned
subsidiary NovaCopper US Inc., doing business as Trilogy Metals US
("Trilogy Metals US"). Upon exercise of the option, Trilogy Metals
US will transfer its Alaskan assets, including the UKMP and South32
will contribute a minimum of $150
million, subject to certain adjustments, to a newly formed
50/50 joint venture.
To maintain the option in good standing, South32 is required to
fund a minimum of $10 million per
year for up to a three year period, which funds will be used to
execute a mutually agreed upon program at the UKMP. South32 may
exercise its option at any time over the next three years to enter
into the 50/50 joint venture. Provided that all the exploration
data and information has been made available to South32 by no later
than December 31 of each year,
South32 must decide before the end of January of the following year
whether: (i) to fund a further tranche of a minimum of $10 million, or (ii) to withdraw and not provide
any further annual funding. If the election to fund a further
tranche is not made in January, South32 has until the end of March
to exercise the option to form the LLC and make the subscription
payment.
This year's exploration program at Bornite is one of the larger
programs in the history of drilling at the Bornite Project. With an
approved budget of $10 million, we
plan on drilling approximately 9,000 meters at Bornite this field
season to test the extension of the mineralization from the drill
holes from our 2013 drill campaign along with a ground gravity
survey, continuation of hydrology data collection and initiating
metallurgy and acid based accounting for Bornite.
Drilling at the Bornite Project began in early June and is
expected to be finished by mid-October with results released
throughout the fall. We completed 6,037 meters by August 31, 2017 and released our first results on
September 18, 2017 from the first
three holes comprising 3,083 meters.
Arctic Project
In early June 2017, we announced
the engagement of Ausenco Engineering Canada Inc. to prepare the
Arctic Project Pre-feasibility Study ("PFS") technical report
anticipated to be complete in Q1 2018. The Company has also engaged
Amec Foster Wheeler to complete mine planning and SRK Consulting
(Canada) Inc. to complete tailings
and waste design, hydrology and environmental studies.
The summer field program for the Arctic Project PFS was
conducted in July with the completion of 257 meters of geotechnical
drilling and 26 test pits completed to determine site facility
locations and mine design. We also completed geophysical ground
surveys to evaluate ground conditions. We continued our
environmental baseline program through the summer of 2017 which
includes baseline data collection on aquatic and avian resources,
ongoing water quality, hydrology and meteorology. The water quality
program was expanded in 2017 to include additional sample locations
and increased sample frequency.
The results from this summer's field program are currently being
compiled and analyzed by the PFS consultants. We currently
anticipate the completion of the PFS in Q1 2018.
We also completed 455 meters of in-fill drilling at Arctic in
late August collecting PQ size core to provide two tonnes of
material for an ore-sorting study to be initiated in Q4 2017. We
anticipate releasing assay results for the additional Arctic
in-fill holes by November. The results of the ore sorting
program will be evaluated in Q1 2018.
Selected Results
The following selected financial information is prepared in
accordance with U.S. GAAP.
|
in thousands of
dollars, except for per share amounts
|
Three months
ended
|
Nine months
ended
|
Selected
expenses
|
August 31,
2017
$
|
August 31,
2016
$
|
August 31,
2017
$
|
August 31,
2016
$
|
Foreign exchange
(gain) loss
|
(592)
|
3
|
(542)
|
8
|
General and
administrative
|
273
|
311
|
1,050
|
1,030
|
Mineral properties
expense
|
8,471
|
3,077
|
10,407
|
4,067
|
Professional
fees
|
86
|
84
|
404
|
430
|
Salaries
|
218
|
250
|
683
|
719
|
Salaries –
stock-based compensation
|
104
|
146
|
603
|
544
|
Unrealized loss on
held for trading investments
|
83
|
-
|
1,252
|
-
|
Loss from continuing
operations for the period
|
8,992
|
3,902
|
14,378
|
6,885
|
Loss from
discontinued operations for the period
|
-
|
353
|
-
|
712
|
Loss and
comprehensive loss for the period
|
8,992
|
4,255
|
14,378
|
7,597
|
Basic and diluted
loss per common share
|
$0.09
|
$0.04
|
$0.14
|
$0.07
|
For the three months ended August 31,
2017, Trilogy reported a net loss of $9.0 million (or $0.09 basic and diluted loss per common share)
compared to a net loss of $4.3
million for the corresponding period in 2016 (or
$0.04 basic and diluted loss per
common share). This variance of $4.7
million was primarily due to the size of the field programs
at the UKMP in 2017 as well as the timing of the program. An
increase of $5.4 million in mineral
property expenses incurred during the three months ended
August 31, 2017 compared to the three
months ended August 31, 2016
accounted for the increase in its entirety. The 2017 program
consists of a $10.0 million
exploration program at the Bornite Project, funded by South32, and
a $7.1 million program towards
completing a pre-feasibility study at the Arctic Project expected
to be completed in Q1 2018. Comparably, in 2016, the field program
consisted of a drill program at Arctic to prepare the project for
pre-feasibility work. The field program in 2017 began in late May
and continued through the third quarter. In 2016, the field program
consisted of a 45-day program that wrapped up in late July. The
increase in the mineral property expenses is due to the size and
variety of the programs being undertaken. The increase was offset
by slight decreases in general and administrative, salaries and
stock-based compensation expense during the three months ended
August 31, 2017 compared to the three
months ended August 31, 2016.
Trilogy recognized a gain on foreign exchange during the three
months ended August 31, 2017 of
$0.6 million due to the appreciation
of the Canadian dollar in the current fiscal year. We were holding
a higher average volume of cash and cash equivalents in Canadian
dollars during the third quarter of 2017 mainly due to the sale of
investments which consist of shares in Gold Mining Inc. ("GMI").
The investments are also denominated in Canadian dollars and
benefited from the appreciation of the Canadian dollar in the third
quarter. We acquired the investments on September 1, 2016 as consideration for the sale
of Sunward Investments Limited ("Sunward") and its Titiribi
gold-copper exploration project in Colombia. As such, a comparable foreign
currency movement did not exist in the third quarter of 2016. There
was also a loss from discontinued operations of $0.4 million for the three months ended
August 31, 2016 which relates to the
sale of Sunward. There is no comparable amount in the current
fiscal year as the sale was completed on September 1, 2016. Other minor differences noted
for the comparable periods were i) a small decrease in general and
administrative expenses; ii) a small decrease in salaries due to
lower level of staff in the third quarter of 2017 compared to 2016;
and iii) a small decrease in stock-based compensation due to the
timing of the amortization of expense.
The basic and diluted loss per common share of $0.09 for the three months ended August 31, 2017 increased from the basic and
diluted loss per common share of $0.04 for the three months ended August 31, 2016 due to the increased loss as
described above.
For the nine months ended August 31,
2017, Trilogy reported a net loss of $14.4 million (or $0.14 basic and diluted loss per common share)
compared to a net loss of $7.6
million for the corresponding period in 2016 (or
$0.07 basic and diluted loss per
common share). The increase in net loss is primarily due to an
increase in mineral property expense of $6.3
million from $4.1 million for
the nine months ended August 31, 2016
to $10.4 million for the nine months
ended August 31, 2017.
Similarly to the variance in the three-month periods, the field
program being executed in 2017 is significantly larger and more
varied than the field program completed in 2016. The variance is
also due to an unrealized loss on investments on the GMI securities
of $1.3 million classified as held
for trading for which changes in the fair value of the investments
are recorded through the statement of loss. There are no comparable
amounts for the nine months ended August 31,
2016 as the Company acquired the investments in September 2016.
Trilogy recognized a gain on foreign exchange during the nine
months ended August 31, 2017 of
$0.5 million due to the appreciation
of the Canadian dollar in the current quarter as well as the volume
of funds held in Canadian dollars. There is no comparable amount in
2016 due to the timing of acquiring the GMI investments.
Additionally, there was a loss from discontinued operations of
$0.7 million for the nine months
ended August 31, 2016 from the
operations of Sunward for which there is no comparable amount in
2017. Other minor differences noted for the comparable periods were
i) a small increase in general and administrative expenses; ii) a
small decrease in professional fees due to a lower level of
corporate activity compared to 2016, iii) a small decrease in
salaries due to lower level of staff in the third quarter of 2017
compared to 2016; and iv) a small increase in stock-based
compensation due to increasing Black-Scholes valuations from an
increased share price.
The basic and diluted loss per common share of $0.14 for the nine months ended August 31, 2017 increased from the basic and
diluted loss per common share of $0.07 for the nine months ended August 31, 2016 due to the increased loss as
described above.
Outlook
Our 2017 program has a total budget of $17.1 million with $7.1
million to be expended during the fiscal year to advance the
Arctic Project to pre-feasibility and $10.0
million for the exploration program at the Bornite Project.
The Arctic Project PFS will be supported by information collected
during the 2015 - 2017 field seasons. The completion of our 2017
field program has completed a staged three-year site investigation
program where the first two years focused almost exclusively on
collecting data in and around the proposed Arctic open-pit, and the
third year focused on infrastructure and mine design. The Arctic
Project PFS is anticipated to be completed in Q1 2018.
The exploration program at the Bornite Project is an opportunity
to potentially expand the size of the Bornite deposit by drilling
the extensions of mineralization last drilled by the Company in
2013. It is expected that approximately 9,000 meters will be
drilled at Bornite which drilling will be focused entirely on
testing the size and depth of the extension of the known
deposit.
Qualified Persons
Andrew W. West, P.Geo.,
Exploration Manager for Trilogy Metals Inc., 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
Trilogy Metals Inc., formerly NovaCopper Inc., 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. Both deposits are located within the Company's
land package that spans approximately 143,000 hectares. The Company
has an agreement with NANA Regional Corporation, Inc., a Regional
Alaska Native Corporation that provides a framework for the
exploration and potential development of the Ambler mining district
in cooperation with local communities. Our vision is to develop the
Ambler mining district into a premier North American copper
producer.
Cautionary Note Regarding Forward-Looking
Statements
This press release includes certain "forward-looking
information" and "forward-looking statements" (collectively
"forward-looking statements") within the meaning of applicable
Canadian and United States
securities legislation including the United States Private
Securities Litigation Reform Act of 1995. All statements, other
than statements of historical fact, included herein, including,
without limitation, statements relating to our outlook, the future
operating or financial performance of the Company, planned
expenditures and the anticipated exploration and development
activity, including with respect to the drilling at Bornite, the
timing of drill results at Bornite, the preparation of a PFS on the
Arctic deposit and timing of its release, and the potential
exercise of the option by South32 are forward-looking statements.
Forward-looking statements are frequently, but not always,
identified by words such as "expects", "anticipates", "believes",
"intends", "estimates", "potential", "possible", and similar
expressions, or statements that events, conditions, or results
"will", "may", "could", or "should" occur or be achieved.
Forward-looking statements involve various risks and uncertainties.
There can be no assurance that such statements will prove to be
accurate, and actual results and future events could differ
materially from those anticipated in such statements. Important
factors that could cause actual results to differ materially from
the Company's expectations include the uncertainties involving the
need for additional financing to explore and develop properties and
availability of financing in the debt and capital markets;
uncertainties involved in the interpretation of drilling results
and geological tests and the estimation of reserves and resources;
the need for cooperation of government agencies and native groups
in the development and operation of properties as well as the
construction of the access road; the need to obtain permits and
governmental approvals; risks of construction and mining projects
such as accidents, equipment breakdowns, bad weather,
non-compliance with environmental and permit requirements,
unanticipated variation in geological structures, metal grades or
recovery rates; unexpected cost increases, which could include
significant increases in estimated capital and operating costs;
fluctuations in metal prices and currency exchange rates; and other
risks and uncertainties disclosed in the Company's Annual Report on
Form 10-K for the year ended November 30,
2016 filed with Canadian securities regulatory authorities
and with the United States Securities and Exchange Commission and
in other Company reports and documents filed with applicable
securities regulatory authorities from time to time. The Company's
forward-looking statements reflect the beliefs, opinions and
projections on the date the statements are made. The Company
assumes no obligation to update the forward-looking statements or
beliefs, opinions, projections, or other factors, should they
change, except as required by law.
SOURCE Trilogy Metals Inc.