Trilogy Metals (TMQ) - 2022 Q4 - Annual Report

Mineral Reserves and Resources - As of November 30, 2022, the Arctic Project has probable mineral reserves of 23.35 million tonnes with an average grade of 2.11% Cu, 0.56% Pb, 2.90% Zn, 0.42 g/t Au, and 31.8 g/t Ag[143]. - The book value of the company's investment in the Upper Kobuk Mineral Projects is $142.8 million as of November 30, 2022[144]. - The mineral resource estimate includes 35.7 million tonnes of indicated resources with an average copper grade of 2.98% and a contained copper content of 2,347 million pounds[243]. - The inferred mineral resource estimate is 4.5 million tonnes with an average copper grade of 1.92% and a contained copper content of 189 million pounds[243]. - As of November 30, 2022, the Mineral Reserve estimate includes 46.7 million tonnes with an average grade of 2.11% Cu, 0.56% Pb, 2.90% Zn, 0.42 g/t Au, and 31.8 g/t Ag[259]. - Trilogy Metals holds a 50% attributable interest in the reported Mineral Reserves and Resources[259][260]. Project Economics - The project demonstrates a pre-tax net present value (NPV) of $1,500 million at an 8% discount rate, with an internal rate of return (IRR) of 25.8% and a payback period of 2.9 years[319]. - The estimated cash flow forecast over the life of the mine is $3,942.6 million undiscounted pre-tax cash flow[320]. - The average life-of-mine (LOM) operating cost is estimated to be $59.83 per tonne milled, with mining and processing costs accounting for 37.6% and 37.8% of total operating costs respectively[311][314]. - The total estimated initial capital cost for the Arctic Project is $1,177 million, with a total project cost of $1,291.2 million including sustaining and closure costs[308][309]. - The project has an initial capital cost of $1,177 million, sustaining capital costs of $114 million, and closure costs of $428 million, leading to a pre-tax IRR of 25.8% and an NPV of $1,500 million at an 8% discount rate[339]. - The project has a payback period of 2.9 years pre-tax and 3.1 years post-tax, with a post-tax IRR of 22.8% and an NPV of $1,108 million[339]. Mining and Processing - The project is amenable to open pit extraction methods, with reasonable prospects for economic extraction established[237]. - The Arctic Project is designed as a conventional truck-shovel operation with a processing rate of 10 kt/d[262]. - The processing plant is designed for a capacity of 10,000 t/d, operating at an overall availability of 92%[267]. - The average lead concentrate grade for the Avg Talc composite could be improved with optimized separation conditions, indicating potential for enhanced recovery[228]. - The project will require a combination of existing and proposed access roads, including the AAP road to connect to the Dalton Highway[277]. - The mine requires approximately two years of pre-strip operations before actual production can commence[337]. Metallurgical Testing and Recovery - The average Bond ball mill work index (BWi) was reported at 8.82 kWh/t, indicating the materials are considered soft or very soft for grinding requirements[216]. - The 2012-2015 metallurgical test results indicated that the samples responded well to the flotation flowsheet tested[214]. - Copper recoveries to the bulk copper-lead concentrates ranged from 89% to 93%, with grades between 24% to 28%[216]. - Lead recovery to the bulk copper-lead concentrates was approximately 92% to 94%, containing 9% to 13% lead[216]. - Zinc recovery was reported at 84.2% from Composite Zone 1 & 2, 93.0% from Composite Zone 3, and 90.5% from Composite Zone 5, with average zinc grades higher than 55%[216]. - Gold recoveries to the bulk copper-lead concentrates ranged from 65% to 80%, while silver recoveries ranged from 80% to 86%[216]. - The metallurgical recovery projections for the life-of-mine (LOM) are 92% for copper, 77% for lead, 88% for zinc, 63% for gold, and 56% for silver[239]. Environmental and Community Impact - The project is expected to create significant employment opportunities for local residents during exploration, construction, and operation phases[300]. - The company aims to support education, job training, and economic growth for local communities throughout the project's life[303]. - The water treatment plant is designed to treat all parameters in the predicted site wastewater to meet the state's Water Quality Standards for Subarctic Creek[288]. - A cyanide removal process demonstrated a 99% removal efficiency, supporting low cyanide concentrations in tailings pond solutions[222]. Exploration and Geological Information - Exploration activities targeting VMS style mineralization in the Ambler Sequence have been conducted from 2004 to the present, with significant work completed between 2004 and 2007[187]. - The Ambler Mining District is characterized by a 110 km strike length of VMS-like stratabound mineralization[173]. - The Arctic deposit mineralization occurs within eight modelled zones, extending to a depth of approximately 250 m below the surface[179]. - The mineralization predominantly consists of coarse-grained sulphides, including chalcopyrite, sphalerite, and galena[181]. - The Arctic deposit has strong similarities to deposits found in the Finlayson Lake VMS district, Yukon, and the Bathurst district, New Brunswick[186]. Infrastructure and Access - The Arctic Project is located in a geographically isolated area with no current road access, approximately 270 km from Kotzebue[151]. - Primary access to the Arctic Project is by air, with four gravel airstrips capable of accommodating charter fixed wing aircraft[153]. - The Arctic access road must be constructed to at least a pioneer road condition to facilitate the delivery and operation of mine fleet and support facilities[338].