VANCOUVER, Feb. 11, 2019 /CNW/ - Trilogy Metals
Inc. (TSX / NYSE American: TMQ) ("Trilogy Metals" or "the
Company") announces its financial results for the year and fourth
quarter ended November 30, 2018 and
provides an outlook for 2019. Details of the Company's
financial results are contained in the audited 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.
Highlights
- Strong cash position of $23.0
million at year end
- Additional $10.2 million from
South32 Limited ("South32") anticipated to be received in
February 2019
- Potential for an additional $10.0
million upon the exercise of in-the-money warrants expiring
July 2019
- Mineral property expenditures totalling $16.5 million in 2018 and $15.1 million in 2017
- 2019 progams and budgets totalling $18.2 million
- Feasibility Study for the Arctic Project anticipated in
first half of 2020
Outlook for 2019
The Company has approved budgets for the fiscal year ending
November 30, 2019 totaling
$18.2 million for its project
activities at the UKMP. $9.2
million (to be funded by South32) is approved for the
Bornite Project which is to be focused on additional exploration
drilling a combination of infill and expansion drilling of the
known deposit, $7.0 million is
approved for the Arctic Project to be focused on feasibility level
engineering and environmental work, and $2.0
million (to be funded 50/50 as between the Company and
South32) is approved for regional or district exploration focused
on identifying new drill targets.
At the Bornite Project, we anticipate drilling approximately
8,000 metres in approximately 12 drill holes with the objective to
infill and extend the underground resource. Drilling will be
completed with 3 drill rigs during the summer of 2019. At the
Arctic Project, we anticipate the need for further geotechnical
drilling inside the open pit for feasibility level engineering
studies on water management, tailings storage and waste containment
analysis and design. Work will be focused on completing the
necessary work for a feasibility study, which is anticipated to be
completed within the first half of 2020. Environmental
baseline studies will continue at both Bornite and Arctic while
specific environmental studies will be completed at Arctic for
feasibility and permitting of the mine.
Trilogy and South32 have agreed to fund equally a $2 million regional or district exploration
program and budget. We anticipate completing an aerial EM
geophysics survey in the spring of 2019 over the Company's 100
kilometer volcanogenic massive sulphide ("VMS") belt and with that
information, prepare for exploration drilling of certain
targets.
South32 will fund $9.2 million for
the Bornite budget on or before February
12, 2019. The funds received by South32 represent
their funding of the third and final year of the Option Agreement
and keeps the agreement in good standing. South32 can
exercise its option under the agreement to form the 50/50 joint
venture at any time prior to January
31, 2020. For 2019, the Company will fund 100% of the
Arctic budget.
Review of 2018 Activities
Bornite Project
In partnership with South32 we completed a 2018 exploration
program directed by the joint Trilogy-South32 Technical Committee
at the Bornite Project with a total budget of $10.8 million, fully funded by South32. The focus
of the 2018 program was to follow-up on the 2017 wide step-out
exploration program.
The 2018 program comprised of 12 drill holes totaling
approximately 10,123 meters (33,212 feet) of exploration drilling
through a combination of infill and expansion drill holes in and
around the known deposit. The original drilling campaign was
budgeted to be 8,000 meters utilizing 3 drill rigs at a cost of
$10.0 million and was subsequently
expanded to 10,000 meters with the addition of 2 more drill rigs
for a revised budget of $10.8
million. The 2018 program followed up on drilling
completed during the 2017 exploration program, which was one of the
larger programs in the history of drilling at the Bornite
Project. The objective of the 2018 drill campaign was to
infill and expand the currently defined open pit and underground
mineral resources. Drill results were released on
August 23, 2018, October 9, 2018, November
19, 2019 and December 13,
2018. In addition, we completed a cobalt resource estimate at
Bornite released on June 5, 2018.
Arctic Project
The 2018 program comprised of approximately 593 meters of
geotechnical and hydrological drilling completed during the 2018
summer field season. The geotechnical program consisted of 24
large diameter drill holes and 40 excavated test pits and was
completed to provide additional geotechnical and hydrologic
information for the waste rock dump, tailings management facility,
and surface infrastructure in the area. In addition, studies
on the Arctic road alignment (from the Arctic mine site to the Dahl
Creek airstrip), acid rock drainage and metal leaching potential,
ore sorting capabilities and metallurgical studies at Arctic were
started during 2018. We also continued the collection of
baseline environmental data on hydrology, meteorology and
archeology in preparation of a feasibility study and the submission
of permitting documents for the mine.
Annual Financial Results
The following selected annual information is prepared in
accordance with U.S. GAAP.
|
|
in thousands of
dollars,
|
|
|
except for per
share amounts
|
Selected financial
results
|
Year
ended
November 30,
2018
$
|
Year
ended
November 30,
2017
$
|
Year
ended
November 30,
2016
$
|
General and
administrative
|
1,532
|
1,385
|
1,337
|
Mineral properties
expense
|
16,490
|
15,100
|
5,037
|
Professional
fees
|
453
|
708
|
442
|
Salaries
|
1,467
|
975
|
1,003
|
Salaries –
stock-based compensation
|
1,441
|
705
|
615
|
Unrealized loss
(gain) on held for trading investments
|
-
|
1,645
|
(88)
|
Loss (gain) on sale
of investments
|
272
|
580
|
(57)
|
Loss from continued
operations for the year
|
21,849
|
21,104
|
8,712
|
Income from
discontinued operations for the year
|
-
|
-
|
(3,850)
|
Loss and
comprehensive loss for the year
|
21,849
|
21,104
|
4,862
|
Basic and diluted
loss per common share
|
$0.18
|
$0.20
|
$0.05
|
For the year ended November 30,
2018, we reported a net loss of $21.8
million (or $0.18 basic and
diluted loss per common share) compared to a net loss for the
corresponding period in 2017 of $21.1
million (or $0.20 basic and
diluted loss per common share) and a net loss of $4.9 million for the corresponding period in 2016
(or $0.05 basic and diluted loss per
common share). The 2018 movement in net loss was primarily due to
the increased size and magnitude of the field programs undertaken
at our mineral properties. Adding to this variance in 2018 were
incremental increases in general and administrative expenses,
salaries and stock-based compensation, offset by decreases in
professional fees as well the loss on disposition of Gold Mining
Inc. ("GMI") shares when compared to the prior year.
The 2017 movement in net loss was primarily due to the
significantly increased size and magnitude of the field programs
undertaken at our mineral properties in 2017 offset by a one-time
gain in 2016 on the sale of Sunward Investments Ltd. ("Sunward
Investments"), which, through a subsidiary, owned 100% of the
Titiribi gold-copper exploration project in Colombia.
Additionally, there were losses recognized on both the sale of
investments as well as investments designated as held for trading
in 2017 that did not exist in the prior fiscal year. The investment
in shares and warrants to purchase shares in GMI (formerly, Brazil
Resources Inc.) that were acquired through the sale of Sunward
Investments in 2016 were fully disposed of during the year ended
November 30, 2018.
For the year ended November 30,
2018, we reported a net loss from continuing operations of
$21.8 million (or $0.18 basic and diluted loss from continuing
operations per common share) compared to a net loss for the
corresponding period in 2017 of $21.1
million (or $0.20 basic and
diluted loss from continuing operations per common share) and a net
loss of $8.7 million for the
corresponding period in 2016 (or $0.08 basic and diluted loss from continuing
operations per common share).
The slight increase in the loss pertaining to 2018 relates to
the size of the program undertaken at the UKMP in 2018. We executed
a $16.5 million program at the UKMP
in 2018, with $10.8 million on the
Bornite Project funded by South32 under the Option Agreement. The
2018 field program consisted of 10,123 meters of exploration
drilling at the Bornite Project. At Arctic, 593 meters of
geotechnical drilling and 40 test pits were completed to provide
additional geotechnical and hydrologic information for the waste
rock dump, tailings management facility and surface infrastructure
in the area.
Comparably, the significant increase in the loss pertaining to
2017 relates to the size of the program undertaken at the UKMP in
2017. We executed a $15.1 million
program at the UKMP in 2017, with $10.0
million on the Bornite Project funded by South32 under the
Option Agreement. The 2017 field program consisted of 8,437 meters
of exploration drilling at the Bornite Project, 274 meters of
geotechnical drilling and 26 test pits completed to determine site
facility locations and mine design at the Arctic Project, and 785
meters of infill drilling to collect material for an ore-sorting
study at the Arctic Project. Additionally, significant engineering
work was completed on the PFS study at the Arctic Project that was
completed in Q1 2018.
In contrast, in 2016, we executed a $5.0
million program on the Arctic Project. The program in 2016
was focused on moving the Arctic Project towards pre-feasibility
compared to the significant programs undertaken at the Bornite and
Arctic Projects in 2017 and 2018. In 2016, we completed a drill
program consisting of 3,058 meters at the Arctic Project and
increased the environmental baseline data collection and
engineering site investigations. Mineral property expenses consist
of direct drilling, personnel, community, resource reporting and
other exploration expenses, as well as indirect project support
expenses such as fixed wing charters, helicopter support, fuel, and
other camp operation costs.
Additionally, the significant variance in 2016, compared to 2017
and 2018, relates to the pre-tax gain recognized on the sale of
Sunward Investments and the Titiribi Project of $4.4 million. This was a one-time event for which
there is no comparable gain in either of the two subsequent years.
As a result of the sale, the operations of Sunward Investments were
reclassified as a discontinued operation, retrospectively. Expenses
of $0.6 million for the year ended
November 30, 2016 related to the
Sunward Investments operations were reclassified to discontinued
operations.
During the year ended November 30,
2018, the Company sold the remaining 2,365,000 common shares
of GMI for proceeds of $2.3 million
and realized a loss on sale of $0.3
million. Similarly, during the year ended November 30, 2017, the Company sold 2,525,000
common shares of GMI for proceeds of $3.5
million and realized a loss on sale of $0.6 million. For the year ended November 30, 2017, we recognized an unrealized
loss on held for trading investments of $1.6
million on 2,365,000 common shares of GMI and 1,000,000
warrants to purchase a common share of GMI.
Professional fees for the year ended November 30, 2018 were $0.5 million, a decrease of $0.2 million from the $0.7
million incurred for the year November 30, 2017, and an increase of
$0.1 million from the $0.4 million incurred for the year ended
November 30, 2016. Expenses in 2018
decreased from 2017 as the prior year included the arrangement with
South32 and preparatory costs associated with the filing of a base
shelf prospectus in Canada and the
US. Costs in 2016 were down significantly from other years due to
less corporate transaction activity as well as $0.2 million in costs related to the sale of
Sunward recorded to discontinued operations.
Other variances for the year ended November 30, 2018 compared to 2017 and 2016 are
as follows: (a) $1.5 million in
general and administrative expenses in 2018 compared to
$1.4 million in 2017 and $1.3 million in 2016 due to a less favorable
foreign exchange movement; (b) $1.5
million in salaries in 2018 compared to $1 million in 2017 and 2016 due to changes in
staffing levels at the corporate office; and (c) $1.4 million in
stock based compensation in 2018 compared to $0.7 million in 2017
and $0.6 million in 2016 due to the fair value of grants valued
using the Black-Scholes model, which is most sensitive to the
Company's increased share price and future expected volatility.
The comparable basic and diluted loss per common share for 2018
of $0.18 is slightly lower than 2017
due to the dilutive effect of the increased weighted average number
of shares outstanding at November 30,
2018 versus the prior year. The basic and diluted loss per
common share for 2016 of $0.05 is
lower than 2017 due to the gain on the sale of Sunward Investments
recognized in the 2016 year.
Fourth Quarter Results
During the fourth quarter of 2018, we had a loss of $5.3 million compared to a loss of $6.7 million in the fourth quarter of 2017. The
primary drivers for the difference were $0.9
million lower mineral properties expenses, loss on
disposition of investments of $0.8
million in the fourth quarter of 2017 for which the
comparative is nil in the fourth quarter 2018, all offset by
$0.5 million in increased salaries
benefits in the fourth quarter 2018. We incurred $3.8 million of mineral property expenses in the
fourth quarter of 2018 compared to $4.7
million of mineral property expenses in the fourth quarter
of 2017 as the camp closed earlier in the 2018 program
(October 13, 2018) versus the 2017
program (October 31, 2017).
Liquidity and Capital Resources
At November 30, 2018, we had
$23.0 million in cash and cash
equivalents and anticipates receiving $10.2
million from South32 in February
2019 to fund certain 2019 project budgets. The Company
also anticipates receiving an additional $10
million upon the exercise of 6.5 million warrants, with an
exercise price of $1.52, expiring on
July 2, 2019 as the warrants are
in-the-money.
We expended $22.1 million on
operating activities during the 2018 fiscal year compared with
$15.4 million for operating
activities for the same period in 2017, and expenditures of
$8.7 million for operating activities
for the same period in 2016. A majority of cash spent on
operating activities during all periods was expended on mineral
property expenses, general and administrative expenses, salaries
and professional fees. The increase in cash spent in the year ended
November 30, 2018 is mainly due to
increased mineral property expenses of $1.4, general and administrative expenses of
$0.2 million, salaries of
$0.5 million and a reduction in
accounts payable and accrued liabilities of $2.6 million. As at November 30, 2018, the Company had consolidated
cash of $23.0 million and working
capital of $22 million. The Company
continues to manage its cash expenditures through its working
capital and funding from South32 under the Option Agreement. The
Company has adequate funds to meet its operations and
administration expenses.
On April 20, 2018 the Company
completed an offering for gross proceeds of $28.7 million by issuing 24,784,482 common shares
at $1.16 per common share.
Expenses including bank commissions, legal fees, stock exchange and
other fees totaled $1.8 million for
net proceeds of $26.9 million.
During the year ended November 30,
2018, we raised $12.7 million
from investing activities. These investing proceeds consisted
of $10.4 million raised through
mineral property funding from South32 and $2.3 million from proceeds from the sale of the
remaining investments in GMI, net of $7
thousand expended on capital purchases. During the year
ended November 30, 2017, we raised
$13.5 million from investing
activities. $10.4 million was raised
through mineral property funding from South32, $3.5 million from proceeds from the sale of
investments in GMI, net of $0.3
million expended on capital purchases. During the year ended
November 30, 2016, we raised
$0.2 million in sales from
investments acquired through the sale of Sunward Investments.
Qualified Persons
Andrew W. West, Certified
Professional Geologist, 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. 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, the outlook for 2019, anticipated timing and
results of a feasibility study on the Arctic Project, the future
operating or financial performance of the Company, planned
expenditures and the anticipated activity at the UKMP Projects, 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. These forward-looking statements may include
statements regarding perceived merit of properties; exploration
plans and budgets; mineral reserves and resource estimates; timing
of the feasibility study; anticipated exercise of warrants; funding
by South32; work programs; capital expenditures; timelines;
strategic plans; market prices for precious and base metals; or
other statements that are not statements of fact. 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 interpretation of drill
results, 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,
2018 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.
Cautionary Note to United States Investors
The Arctic Technical Report and the Bornite Technical Report
have been prepared in accordance with the requirements of the
securities laws in effect in Canada, which differ from the requirements of
U.S. securities laws. Unless otherwise indicated, all resource and
reserve estimates included in this press release have been prepared
in accordance with National Instrument 43-101 Standards of
Disclosure for Mineral Projects ("NI 43-101") and the Canadian
Institute of Mining, Metallurgy, and Petroleum Definition Standards
on Mineral Resources and Mineral Reserves. NI 43-101 is a rule
developed by the Canadian Securities Administrators which
establishes standards for all public disclosure an issuer makes of
scientific and technical information concerning mineral projects.
Canadian standards, including NI 43-101, differ significantly from
the requirements of the United States Securities and Exchange
Commission ("SEC"), and resource and reserve information contained
therein may not be comparable to similar information disclosed by
U.S. companies. In particular, and without limiting the generality
of the foregoing, the term "resource" does not equate to the term
"reserves". Under U.S. standards, mineralization may not be
classified as a "reserve" unless the determination has been made
that the mineralization could be economically and legally produced
or extracted at the time the reserve determination is made. The
SEC's disclosure standards normally do not permit the inclusion of
information concerning "measured mineral resources", "indicated
mineral resources" or "inferred mineral resources" or other
descriptions of the amount of mineralization in mineral deposits
that do not constitute "reserves" by U.S. standards in documents
filed with the SEC. Investors are cautioned not to assume that any
part or all of mineral deposits in these categories will ever be
converted into reserves. U.S. investors should also understand that
"inferred mineral resources" have a great amount of uncertainty as
to their existence and great uncertainty as to their economic and
legal feasibility. Under Canadian rules, estimated "inferred
mineral resources" may not form the basis of feasibility or
pre-feasibility studies except in rare cases. Investors are
cautioned not to assume that all or any part of an "inferred
mineral resource" exists or is economically or legally mineable.
Disclosure of "contained ounces" in a resource is permitted
disclosure under Canadian regulations; however, the SEC normally
only permits issuers to report mineralization that does not
constitute "reserves" by SEC standards as in-place tonnage and
grade without reference to unit measures. The requirements of NI
43-101 for identification of "reserves" are also not the same as
those of the SEC, and reserves reported by the Company in
compliance with NI 43-101 may not qualify as "reserves" under SEC
standards. Accordingly, information concerning mineral deposits set
forth in this press release or the Bornite Technical Report may not
be comparable with information made public by companies that report
in accordance with U.S. standards.
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SOURCE Trilogy Metals Inc.