VANCOUVER, July 9, 2019 /CNW/ - Trilogy Metals
Inc. (TSX / NYSE American: TMQ) ("Trilogy Metals" or "the
Company") announces its financial results for the second quarter
ended May 31, 2019. Details of
the Company's financial results are contained in the interim
unaudited 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 working capital position of $26.0
million and cash on hand of $25.8
million.
- Additional $9.9 million received
subsequent to the quarter end from the exercise of warrants.
- Regional exploration program started with district-wide
airborne geophysical surveys completed this spring along the entire
100-kilometer long belt hosting known polymetallic deposits.
- Exploration program at Bornite commenced at the beginning of
June with more than 2,000 meters of drilling completed.
- Feasibility level studies started for the Arctic Project with
the goal of completing the feasibility study in the first half of
2020.
Outlook and Project Activities
Arctic Project
The $7.0 million engineering and
environmental program, which will be funded entirely by Trilogy,
has commenced at Arctic with two rigs from Tuuq Drilling LLC
currently in operation at the site. Work at the Arctic
deposit commenced in late June with a view of completing
feasibility level geotechnical and hydrology work. The main
goal of this year's work program is to complete engineering and
environmental studies to prepare a National Instrument 43-101
compliant feasibility study which results are anticipated to be
released in the first half of 2020. Work is also being done
to prepare the Arctic Project for permitting, which we expect to
commence in 2020. The permitting preparation work being carried out
will support Federal, State and Borough permitting
requirements.
Bornite Project
Exploration activities commenced at the beginning of June with
more than 2,000 meters of drilling completed so far at the Bornite
Project with three rigs from Major Drilling
America, Inc. currently in operation at site. The main
goal of the $9.2 million program will
be to drill approximately 8,000 meters within 12 holes and will
include both infill and expansion drilling. Drilling is
anticipated to continue throughout the summer and results from the
first few holes of this program are expected to be release in late
summer. South32 Limited ("South32") funded the entire
$9.2 million budget in which funds
were fully received during the first quarter maintaining the Option
Agreement in good standing.
Regional Exploration Project
District-wide VTEM and ZTEM helicopter airborne geophysical
surveys were completed this spring along the entire 100-kilometer
long belt of the favorable stratigraphy hosting known polymetallic
volcanogenic-massive sulphide ("VMS") deposits, as well as the
areas around the Bornite deposit and the surrounding Cosmos Hills
area. The surveys were flown by Geotech Ltd. and the data is
currently being re-processed by Resource Potential PTY Ltd.
The new VTEM and ZTEM surveys will be integrated into our dataset
of historical drilling accumulated over a 40-year period of
exploration, all of which has been geo-referenced into an
integrated GIS database. This dataset will be analyzed to
determine and prioritize targets for drill testing later in the
summer after the Arctic environmental and geotechnical drill
program has been completed. The Company and South32 have
agreed to equally fund the Regional Exploration budget. Funds
were received during the first quarter from South32 for their
$1.0 million contribution, which is
in excess of the $30 million in
option payments received to date.
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
|
Six months
ended
|
Selected
expenses
|
May 31,
2019
$
|
May 31,
2018
$
|
May 31,
2019
$
|
May 31,
2018
$
|
General and
administrative
|
436
|
454
|
928
|
799
|
Mineral properties
expense
|
2,906
|
2,275
|
4,441
|
3,606
|
Professional
fees
|
153
|
114
|
244
|
273
|
Salaries
|
282
|
223
|
563
|
452
|
Salaries –
stock-based compensation
|
664
|
151
|
2,603
|
1,073
|
Investor
relations
|
175
|
138
|
292
|
202
|
Loss and
comprehensive loss for the period
|
4,509
|
3,664
|
8,845
|
6,610
|
Basic and diluted
loss per common share
|
$0.04
|
$0.03
|
$0.07
|
$0.06
|
For the three month period ended May 31,
2019, Trilogy reported a net loss of $4.5 million (or $0.04 basic and diluted loss per common share)
which was higher than the net loss of $3.7
million for the comparative period in 2018 (or $0.03 basic and diluted loss per common
share).
The differences in relation to the comparative three month
period ended May 31, 2018 are
primarily due to: i) an increase of $0.4
million in mineral properties expense mostly consisting of
engineering work related to the scoping study for Bornite and
Arctic projects, environmental work related to meteorological and
air quality study for the Arctic project during the second quarter
of 2019, personnel costs and project support costs including camp
facilities repair and maintenance, fixed wing costs and set-up
costs incurred for the new office and warehouse in Fairbanks; and ii) an increase of $0.5 million in stock-based compensation due to a
higher share price contributing to a higher fair value amortization
for stock options, RSUs and DSUs granted during the six month
period ended May 31, 2019.
Other differences noted for the comparable periods were: i) an
increase in salaries as the current period includes compensation
for a new hire during the third quarter of 2018 for which there is
no comparative for the second quarter of 2018; ii) an
increase in professional fees due to an increase in accounting and
audit fees; iii) an increase in investor relations expenses due to
the Company's increased level of marketing activity including
attendance at more investor conferences and meetings in the
current period; and iv) a slight decrease in general and
administrative expenses in the current period.
The comparative period also included a $0.1 million loss on held for trading investments
resulting from the disposition of 725,000 common shares of Gold
Mining Inc. ("GMI") for which there are no comparative figures for
the three month period ended May 31,
2019 as the remaining investment in GMI was fully disposed
during fiscal 2018.
For the six month period ended May 31,
2019, Trilogy reported a net loss of $8.8 million (or $0.07 basic and diluted loss per common share)
compared to a net loss of $6.6
million for the corresponding period in 2018 (or
$0.06 basic and diluted loss per
common share).
The differences in relation to the comparative six month period
ended May 31, 2018 are primarily due
to: i) an increase of $0.8 million in
mineral properties expense mostly consisting of Geophysics work
including core scan work for the Arctic project, aerial
electromagnetic survey for Bornite and the region, engineering work
related to additional metallurgical and scoping studies,
environmental work related to meteorological and air quality
study, personnel costs and project support costs including
camp facilities repair and maintenance, and fixed wing costs
and set-up costs incurred for the new office and warehouse in
Fairbanks; ii) an increase of
$1.5 million in stock-based
compensation due to a higher share price contributing to a greater
fair value amortization of stock options, RSUs and DSUs granted
during the six month period ended May 31,
2019; iii) an increase of $0.1
million in general and administration costs; iv) an increase
of $0.9 million in investor relations
expenses due to the Company's increased level of marketing activity
including attendance at more investor conferences and meetings
during the six month period ended May 31,
2019 and v) an increase of $0.1
million in salaries due to a new hire during the third
quarter of 2018 for which there is no comparative for the six month
period ended May 31, 2018.
During the six month period ended May 31,
2018, the Company recorded a loss on held for trading
investments of $0.3 million upon
disposition of 2,085,000 common shares of GMI for which there are
no comparative figures for the six month period ended May 31, 2019 as the remaining investment in GMI
was fully disposed during fiscal 2018. For the three months
ended February 28, 2019, Trilogy
reported a net loss of $4.3 million
(or $0.03 basic and diluted loss per
common share) which was higher than the net loss of $2.9 million for the corresponding period in 2018
(or $0.03 basic and diluted loss per
common share). The first quarter 2019 differences, when compared to
the first quarter 2018, are mostly due to factors discussed
below.
Liquidity and Capital Resources
At May 31, 2019, we had
$25.8 million in cash and cash
equivalents and working capital of $26.0
million. The increase in cash was a result of fully
receiving the $9.2 million Year 3
funding from South32 as well as an additional $1.0 million for the regional exploration
program. The increase in working capital for the period was a
result of higher accounts receivable and prepaids balances as well
as a lower accounts payable balance as at May 31, 2019. Subsequent to the end of the second
quarter, the Company received additional proceeds of approximately
$9.9 million as a result of an
exercise of 6,521,740 warrants.
We expended $7.4 million on
operating activities during the six months ended May 31, 2019 compared with $6.6 million for operating activities for the
same period in 2018. Most cash spent on operating activities during
all periods was expended on mineral property expenses, general and
administrative, salaries and professional fees.
The Company continues to fund its cash expenditures through its
working capital. As the Company is not currently in production, the
Company will need to raise additional funds to support its
operations and administration expenses in the future. Future
sources of liquidity may include debt financing, equity financing,
convertible debt, exercise of options, or other means. The
continued operations of the Company are dependent on its ability to
obtain additional financing or to generate future cash flows.
All cash generated from investing activities during the six
months ended May 31, 2019 were from
the South 32 Option Agreement funding of $10.2 million (2018 - $9.6
million) and there were no proceeds from the sale of
investments (2018 - $2.1 million) as
all GMI shares were full disposed during fiscal 2018. During
the six months ended May 31, 2019, no
cash was generated from financing activities (2018 - $26.9 million).
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, statement under Outlook and Project Activities,
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; 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.