Trilogy Metals (TMQ) - 2025 Q3 - Quarterly Report

PART I - FINANCIAL INFORMATION This section presents Trilogy Metals Inc.'s unaudited condensed interim consolidated financial statements and management's discussion and analysis Item 1. Financial Statements This section presents the unaudited condensed interim consolidated financial statements for Trilogy Metals Inc., including the balance sheets, statements of loss and comprehensive loss, statements of changes in shareholders' equity, and statements of cash flows, along with their accompanying notes. These statements provide a snapshot of the company's financial position, performance, and cash flows for the period ended August 31, 2025 Condensed Interim Consolidated Balance Sheets This statement provides a snapshot of the company's assets, liabilities, and shareholders' equity at specific dates Metric Summary | Metric | August 31, 2025 ($ thousands) | November 30, 2024 ($ thousands) | Change ($ thousands) | Change (%) | | :-------------------------------- | :------------------------------ | :------------------------------ | :------------------- | :--------- | | Assets | | | | | | Total current assets | 23,733 | 26,045 | (2,312) | -8.88% | | Investment in Ambler Metals LLC | 105,261 | 107,497 | (2,236) | -2.08% | | Total assets | 129,120 | 133,697 | (4,577) | -3.42% | | Liabilities | | | | | | Total current liabilities | 373 | 793 | (420) | -53.00% | | Total liabilities | 455 | 903 | (448) | -49.61% | | Shareholders' Equity | | | | | | Total shareholders' equity | 128,665 | 132,794 | (4,129) | -3.11% | Condensed Interim Consolidated Statements of Loss and Comprehensive Loss This statement details the company's revenues, expenses, and net loss over specific reporting periods Metric Summary | Metric | Three months ended Aug 31, 2025 ($ thousands) | Three months ended Aug 31, 2024 ($ thousands) | Nine months ended Aug 31, 2025 ($ thousands) | Nine months ended Aug 31, 2024 ($ thousands) | | :-------------------------------- | :------------------------------------ | :------------------------------------ | :----------------------------------- | :----------------------------------- | | Total expenses | 1,165 | 1,141 | 6,063 | 5,179 | | Interest income and other income | (311) | (152) | (741) | (200) | | Share of loss on equity investment | 891 | 624 | 2,236 | 2,019 | | Loss and comprehensive loss for the period | (1,747) | (1,591) | (7,547) | (6,951) | | Basic loss per common share | (0.01) | (0.01) | (0.05) | (0.04) | - The company reported an increased net loss for both the three-month period ($1.7 million vs $1.6 million YoY) and the nine-month period ($7.5 million vs $7.0 million YoY) ended August 31, 2025[11] Condensed Interim Consolidated Statements of Changes in Shareholders' Equity This statement outlines changes in the company's equity components, including share capital and deficit, over time Metric Summary | Metric | August 31, 2025 ($ thousands) | November 30, 2024 ($ thousands) | Change ($ thousands) | Change (%) | | :-------------------------------- | :------------------------------ | :------------------------------ | :------------------- | :--------- | | Share capital | 192,898 | 190,503 | 2,395 | 1.26% | | Contributed surplus – options | 29,712 | 28,801 | 911 | 3.16% | | Contributed surplus – units | 3,884 | 3,772 | 112 | 2.97% | | Deficit | (97,947) | (90,400) | (7,547) | 8.35% | | Total shareholders' equity | 128,665 | 132,794 | (4,129) | -3.11% | - The deficit increased by $7.5 million from November 30, 2024, to August 31, 2025, reflecting the loss for the period[13] Condensed Interim Consolidated Statements of Cash Flows This statement summarizes the cash inflows and outflows from operating, investing, and financing activities Cash Flow Activity Summary | Cash Flow Activity | Nine months ended Aug 31, 2025 ($ thousands) | Nine months ended Aug 31, 2024 ($ thousands) | Change ($ thousands) | | :-------------------------------- | :----------------------------------- | :----------------------------------- | :------------------- | | Cash flows used in operating activities | (2,690) | (1,854) | (836) | | Cash flows from financing activities | 224 | — | 224 | | Cash flows from investing activities | — | 25,000 | (25,000) | | Change in cash | (2,466) | 23,146 | (25,612) | | Cash – end of the period | 23,372 | 25,738 | (2,366) | - The company experienced a significant decrease in cash from investing activities, primarily due to a $25 million return of capital from Ambler Metals LLC in the prior year period that did not recur in the current period[15] Notes to the Condensed Interim Consolidated Financial Statements This section provides detailed explanations and supplementary information for the condensed interim consolidated financial statements, covering the company's operations, accounting policies, investment in Ambler Metals LLC, lease arrangements, share capital, and other financial commitments and events Note 1) Nature of operations%20Nature%20of%20operations) This note describes Trilogy Metals Inc.'s primary business activities, focusing on mineral exploration and development through its joint venture - Trilogy Metals Inc. is engaged in the exploration and development of mineral properties, primarily through its 50/50 joint venture, Ambler Metals LLC, focusing on the Upper Kobuk Mineral Projects (UKMP) in Northwest Alaska, US, including the Arctic and Bornite Projects[16] Note 2) Summary of significant accounting policies%20Summary%20of%20significant%20accounting%20policies) This note outlines the key accounting principles and estimates used in preparing the financial statements - The financial statements are prepared using U.S. GAAP and include Trilogy and its wholly-owned subsidiaries, with intercompany transactions eliminated. The equity method is used for variable interest entities where Trilogy is not the primary beneficiary, such as Ambler Metals LLC[17] - Management makes significant estimates for income taxes and stock-based compensation, and assesses impairment of its equity investment in Ambler Metals LLC based on recoverability and changes in development plans[22][23][24] - The company is evaluating the impact of new FASB ASUs on reportable segment disclosures (ASU 2023-07, effective FY2025) and income tax disclosures (ASU 2023-09, effective FY2026)[25][26] Note 3) Investment in Ambler Metals LLC%20Investment%20in%20Ambler%20Metals%20LLC) This note details Trilogy Metals Inc.'s equity method investment in its 50/50 joint venture, Ambler Metals LLC - Trilogy Metals formed a 50/50 joint venture, Ambler Metals LLC, with South32 Limited on February 11, 2020, contributing its UKMP assets while South32 contributed $145.0 million cash[27] - Trilogy uses the equity method for its investment in Ambler Metals, as it has significant influence but is not the primary beneficiary. Its maximum exposure to loss is limited to the carrying amount of its investment[28] Metric Summary | Metric | August 31, 2025 ($ thousands) | November 30, 2024 ($ thousands) | Change ($ thousands) | Change (%) | | :-------------------------------- | :------------------------------ | :------------------------------ | :------------------- | :--------- | | Investment in Ambler Metals LLC | 105,261 | 107,497 | (2,236) | -2.08% | | Share of loss on equity investment (9-month period) | (2,236) | (2,019) | (217) | 10.75% | Ambler Metals LLC Balances (100% basis) Summary | Ambler Metals LLC Balances (100% basis) | August 31, 2025 ($ thousands) | | :-------------------------------------- | :---------------------------- | | Cash and cash equivalents | 3,749 | | Mineral properties | 30,899 | | Total assets | 35,414 | | Total liabilities | 685 | | Members' equity | 34,729 | Ambler Metals LLC Loss (100% basis) Summary | Ambler Metals LLC Loss (100% basis) | Nine months ended Aug 31, 2025 ($ thousands) | | :---------------------------------- | :------------------------------------------- | | Corporate salaries and wages | 209 | | General and administrative | 379 | | Mineral property expense - exclude Ambler Access Project | 2,126 | | Professional fees | 1,124 | | Ambler Access Project | 710 | | Depreciation | 88 | | Foreign exchange (gain)/loss | 1 | | Interest and other income | (166) | | Comprehensive loss | 4,471 | - Trilogy charged Ambler Metals $102,250 for administrative and accounting services during the nine-month period ended August 31, 2025, an increase from $47,000 in the prior year[37] Note 4) Accounts payable and accrued liabilities%20Accounts%20payable%20and%20accrued%20liabilities) This note provides a breakdown of the company's short-term financial obligations to vendors and for accrued expenses Metric Summary | Metric | August 31, 2025 ($ thousands) | November 30, 2024 ($ thousands) | Change ($ thousands) | Change (%) | | :-------------------------------- | :------------------------------ | :------------------------------ | :------------------- | :--------- | | Trade accounts payable | 141 | 196 | (55) | -28.06% | | Accrued liabilities | 112 | 62 | 50 | 80.65% | | Accrued salaries and vacation | 80 | 498 | (418) | -83.94% | | Total accounts payable and accrued liabilities | 333 | 756 | (423) | -55.95% | Note 5) Leases%20Leases) This note describes the company's lease arrangements, including right-of-use assets and lease liabilities Lease Metric Summary | Lease Metric | August 31, 2025 ($ thousands) | November 30, 2024 ($ thousands) | | :-------------------------------- | :------------------------------ | :------------------------------ | | Right-of-use asset | 126 | 155 | | Current portion of lease liability | 40 | 37 | | Long-term portion of lease liability | 82 | 110 | | Total lease liability | 122 | 147 | - The company entered a new four-year operating lease for its corporate office on July 1, 2024, expiring in June 2028, with current monthly payments of approximately CDN$9,500[40] Lease Expense Summary | Lease Expense | Nine months ended Aug 31, 2025 ($ thousands) | Nine months ended Aug 31, 2024 ($ thousands) | Change ($ thousands) | Change (%) | | :-------------------------------- | :----------------------------------- | :----------------------------------- | :------------------- | :--------- | | Operating lease costs | 38 | 122 | (84) | -68.85% | | Variable lease costs | 13 | 103 | (90) | -87.38% | | Total lease expense | 51 | 225 | (174) | -77.33% | Note 6) Share capital%20Share%20capital) This note details the company's share capital activities, including common shares, stock options, and unit plans Share Capital Activity Summary | Share Capital Activity | Number of shares (thousands) | Value ($ thousands) | | :-------------------------------- | :--------------------------- | :------------------ | | Balance – November 30, 2024 | 161,085 | 190,503 | | Exercise of options | 400 | 337 | | Shares issued from Restricted Share Units | 2,768 | 2,008 | | Services settled by common shares | 38 | 50 | | Balance – August 31, 2025 | 164,291 | 192,898 | - The company has an effective Base Shelf Prospectus allowing for future issuance of up to $50 million in securities and established an At-The-Market (ATM) equity program to sell up to $25 million of common shares, neither of which has been utilized as of August 31, 2025[42][43][44] Stock Option Activity (9-month period) Summary | Stock Option Activity (9-month period) | Number of options | Weighted average exercise price (CDN$) | | :------------------------------------- | :---------------- | :------------------------------------- | | Balance – beginning of the year | 13,630,234 | 1.77 | | Granted | 2,125,000 | 1.52 | | Exercised | (400,000) | 0.79 | | Expired | (3,640,000) | 2.75 | | Balance – end of the period | 11,715,234 | 1.45 | - For the nine-month period ended August 31, 2025, Trilogy recognized a stock-based compensation charge of $1.0 million for stock options and $2.0 million for RSUs and DSUs[45][53] Unit Plan Activity (9-month period) Summary | Unit Plan Activity (9-month period) | Number of RSUs | Number of DSUs | Number of Fixed DSUs | | :---------------------------------- | :------------- | :------------- | :------------------- | | Balance – beginning of the year | 2,793,339 | 3,133,412 | — | | Granted | 1,811,096 | 72,943 | 304,605 | | Settled in common shares | (2,806,097) | — | — | | Balance – end of the period | 1,798,338 | 3,206,355 | 304,605 | Note 7) Fair value accounting%20Fair%20value%20accounting) This note explains the fair value measurement of the company's financial instruments - The fair value of the company's financial instruments (cash, receivables, payables) approximates their carrying value due to their short-term nature[55][56] Note 8) Commitment%20Commitment) This note outlines the company's significant contractual obligations and future financial commitments - The company has commitments related to its office lease, with future minimum lease payments detailed in Note 5(b)[57] Note 9) Supplemental cash flow information%20Supplemental%20cash%20flow%20information) This note provides additional details on specific non-cash transactions and other cash flow items Metric Summary | Metric | Nine months ended Aug 31, 2025 ($ thousands) | Nine months ended Aug 31, 2024 ($ thousands) | Change ($ thousands) | Change (%) | | :-------------------------------- | :----------------------------------- | :----------------------------------- | :------------------- | :--------- | | Interest received | 741 | 200 | 541 | 270.50% | Note 10) Subsequent events%20Subsequent%20events) This note discloses significant events that occurred after the reporting period but before the financial statements were issued - On September 2, 2025, the Board of Directors were granted 49,343 DSUs in settlement of approximately $82,000 of director fees[59] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on Trilogy Metals Inc.'s financial condition and operational results for the quarter ended August 31, 2025, discussing key financial metrics, corporate activities, liquidity, and critical accounting estimates, alongside cautionary notes regarding forward-looking statements and associated risks Cautionary Notes and Forward-Looking Statements This section highlights the inherent risks and uncertainties associated with forward-looking statements in the report - The MD&A contains forward-looking statements regarding work programs, budgets, funding, mineral estimates, timelines, and market prices, which are based on management's beliefs and expectations but are subject to significant risks and uncertainties[62][63][64] - Key risks include the ability to achieve production, financing development, obtaining permits for the Ambler Access Project, commodity price fluctuations, and regulatory changes[66][67][68] General Information and Business Description This section provides an overview of Trilogy Metals Inc.'s business, including its focus on mineral exploration and stock listings - Trilogy Metals Inc. is a base metals exploration company focused on the Ambler mining district in Alaska, USA, operating through its 50/50 joint venture, Ambler Metals LLC, which includes the Arctic and Bornite Projects[76] - The company's shares are listed on the TSX and NYSE American under the symbol "TMQ"[75] Corporate and Project Activities This section details the company's recent corporate initiatives and project-related expenditures - Trilogy filed a Base Shelf Prospectus allowing for the future issuance of up to $50 million in securities and established an At-The-Market (ATM) equity program to sell up to $25 million of common shares, with anticipated proceeds for UKMP development and general corporate purposes. Neither program has been utilized as of August 31, 2025[77][78][79] Budget Category Summary | Budget Category | 2025 Fiscal Year Budget ($ millions) | 9-month period ended Aug 31, 2025 Actual Spend ($ millions) | Variance ($ millions) | | :-------------------------------- | :----------------------------------- | :---------------------------------------------------------- | :-------------------- | | Trilogy Corporate Budget | 3.1 | 3.1 | 0.0 | | Ambler Metals LLC Initial Budget | 5.8 | 3.8 | (2.0) | | Ambler Access Project Supplemental Budget | 0.8 | 0.7 | (0.1) | - Ambler Metals LLC's expenditures for the nine-month period were $0.2 million under budget, mainly due to delayed hiring and lower general administrative expenses[81] Summary of Results This section provides a concise overview of the company's financial performance for the reporting periods Metric Summary | Metric | Three months ended Aug 31, 2025 ($ thousands) | Three months ended Aug 31, 2024 ($ thousands) | Nine months ended Aug 31, 2025 ($ thousands) | Nine months ended Aug 31, 2024 ($ thousands) | | :-------------------------------- | :------------------------------------ | :------------------------------------ | :----------------------------------- | :----------------------------------- | | Comprehensive loss for the period | (1,747) | (1,591) | (7,547) | (6,951) | | Basic and diluted loss per common share | (0.01) | (0.01) | (0.05) | (0.04) | - The increase in comprehensive loss for the three-month period was primarily due to Ambler Metals' site activities for environmental baseline work and a core re-boxing program[85] - The increase in net loss for the nine-month period was driven by higher regulatory expenses and legal fees related to the Base Shelf Prospectus and ATM Program, and increased share of losses from Ambler Metals, partially offset by lower office expenses and higher interest income[86][87] Liquidity and Capital Resources This section discusses the company's cash position, working capital, and ability to meet its short-term and long-term financial obligations Metric Summary | Metric | August 31, 2025 ($ millions) | | :-------------------------------- | :--------------------------- | | Cash and cash equivalents | 23.4 | | Working capital | 23.4 | - The company used $2.7 million in operating activities during the nine-month period, primarily for corporate salaries, professional fees, and regulatory costs related to the Base Shelf Prospectus and ATM Program[88] - Management believes current cash is sufficient for the next 12 months, but additional funds may be needed beyond that to support operations and contributions to Ambler Metals[91] Outstanding Share Data This section provides a summary of the company's issued and outstanding equity securities Security Type Summary | Security Type | As of September 30, 2025 | | :-------------------------------- | :----------------------- | | Common shares issued and outstanding | 164,311,410 | | Stock options outstanding | 11,695,234 | | DSUs outstanding | 3,206,355 | | Fixed DSUs outstanding | 353,948 | | RSUs outstanding | 1,798,338 | | NovaGold DSUs | 5,144 | | Total common shares upon exercise of convertible securities | 17,054,734 | New Accounting Pronouncements This section outlines the impact of recently issued accounting standards on the company's financial reporting - The company is evaluating the impact of ASU 2023-07 (Segment Reporting) effective for FY2025 and ASU 2023-09 (Income Tax Disclosures) effective for FY2026[94][95][96] Critical Accounting Estimates This section describes the accounting estimates that require significant management judgment and can materially affect financial results - Critical accounting estimates include the recoverability of the equity method investment in Ambler Metals, income taxes, and the valuation of stock-based compensation, all requiring significant management judgment[97][98][99] Item 3. Quantitative and Qualitative Disclosures about Market Risk This section states that there are no applicable quantitative and qualitative disclosures about market risk for the company - The company has no applicable quantitative and qualitative disclosures about market risk[103] Item 4. Controls and Procedures Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of August 31, 2025, and reported no material changes in internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of August 31, 2025[104] - There were no material changes in internal controls over financial reporting during the fiscal quarter ended August 31, 2025[106] PART II - OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, defaults, mine safety, other information, and exhibits Item 1. Legal Proceedings The company is not aware of any material current, pending, or threatened litigation, beyond routine proceedings that are part of its ordinary course of business - The company is not aware of any material current, pending, or threatened litigation[109] Item 1A. Risk Factors This section refers to the risk factors outlined in the company's Form 10-K, with an additional emphasis on the potential adverse impact of changes in U.S. laws and policies regulating international trade, such as tariffs, on revenues, costs, and mineral resource estimates - No material changes to risk factors from the Form 10-K, except for the addition of risks related to changes in U.S. laws and policies regulating international trade[110][111] - Potential impacts of trade policy changes include increases or decreases in revenues due to metal prices, increased costs, and uncertainty over mineral resources and reserve estimates[112] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities or use of proceeds during the period - No unregistered sales of equity securities or use of proceeds were reported[113] Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities - No defaults upon senior securities were reported[114] Item 4. Mine Safety Disclosures Mine safety disclosures are not applicable to Trilogy Metals Inc - Mine safety disclosures are not applicable to the company[115] Item 5. Other Information This section confirms that no director or officer adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter - No director or officer adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter ended August 31, 2025[117] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including corporate documents, certifications from the CEO and CFO, and interactive data files in XBRL format - The report includes various exhibits such as corporate organizational documents, CEO and CFO certifications (Rule 13a-14(a) and 18 U.S.C. Section 1350), and Interactive Data Files in XBRL format[118]