Investing in our securities is speculative
and involves a high degree of risk due to the nature of our business and the present stage of exploration of our mineral properties.
The following risk factors, as well as risks currently unknown to us, could materially adversely affect our future business, operations
and financial condition and could cause them to differ materially from the estimates described in forward-looking information relating
to Trilogy, or our business, property or financial results, each of which could cause purchasers of securities to lose all or part
of their investments.
None of our mineral properties are in
production or under development.
We have no history of commercially producing
precious or base metals and all of our properties are in the exploration stage. We have no proven or probable reserves on our Upper
Kobuk Mineral Projects, as defined in SEC Industry Guide 7. Mineral exploration involves significant risk, since few properties
that are explored contain bodies of ore that would be commercially economic to develop into producing mines. We cannot assure you
that we will establish the presence of any measured resources or proven or probable reserves at the Upper Kobuk Mineral Projects,
or any other properties. The failure to establish proven or probable reserves would severely restrict our ability to implement
our strategies for long-term growth. See “Cautionary Note to United States Investors”.
We may not have sufficient funds to
develop our mineral projects or to complete further exploration programs.
We have limited financial resources. We
currently generate no mining operating revenue and must primarily finance exploration activity and the development of mineral projects
by other means. In the future, our ability to continue exploration, development and production activities, if any, will depend
on our ability to obtain additional external financing. Any unexpected costs, problems or delays could severely impact our ability
to continue exploration and development activities. The failure to meet ongoing obligations on a timely basis could result in a
loss or a substantial dilution of our interests in projects.
The sources of external financing that
we may use for these purposes include project or bank financing or public or private offerings of equity and debt. In addition,
we may enter into one or more strategic alliances or joint ventures, sell marketable securities held by the Company, decide to
sell certain property interests, or utilize one or a combination of all of these alternatives. The financing alternative we choose
may not be available on acceptable terms, or at all. If additional financing is not available, we may have to postpone further
exploration or development of, or sell, one or more of our principal properties.
Even if one of our mineral projects
is determined to be economically viable to develop into a mine, such development may not be successful.
If the development of one of our projects
is found to be economically feasible and approved by our Board, such development will require obtaining permits and financing,
the construction and operation of mines, processing plants and related infrastructure, including road access. As a result, we are
and will continue to be subject to all of the risks associated with establishing new mining operations, including:
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the timing and cost, which can be considerable, of the construction of mining and processing facilities
and related infrastructure;
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the availability and cost of skilled labor and mining equipment;
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the availability and cost of appropriate smelting and refining arrangements;
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the need to obtain necessary environmental and other governmental approvals and permits and the
timing of the receipt of those approvals and permits;
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the availability of funds to finance construction and development activities;
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potential opposition from non-governmental organizations, environmental groups or local groups
which may delay or prevent development activities; and
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potential increases in construction and operating costs due to changes in the cost of fuel, power,
materials and supplies.
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The costs, timing and complexities of developing
our projects may be greater than anticipated because our property interests are not located in developed areas, and, as a result,
our property interests are not currently served by appropriate road access, water and power supply and other support infrastructure.
Cost estimates may increase significantly as more detailed engineering work is completed on a project. It is common in new mining
operations to experience unexpected costs, problems and delays during construction, development and mine start-up. In addition,
delays in the early stages of mineral production often occur. Accordingly, we cannot provide assurance that we will ever achieve,
or that our activities will result in, profitable mining operations at our mineral properties.
In addition, there can be no assurance
that our mineral exploration activities will result in any discoveries of new mineralization. If further mineralization is discovered
there is also no assurance that the mineralization would be economical for commercial production. Discovery of mineral deposits
is dependent upon a number of factors and significantly influenced by the technical skill of the exploration personnel involved.
The commercial viability of a mineral deposit is also dependent upon a number of factors which are beyond our control, including
the attributes of the deposit, commodity prices, government policies and regulation and environmental protection.
The Upper Kobuk Mineral Projects are
located in a remote area of Alaska, and access to them is limited. Exploration and any future development or production activities
may be limited and delayed by infrastructure challenges, inclement weather and a shortened exploration season.
The Upper Kobuk Mineral Projects are located
in a remote area of Alaska. Access to the Upper Kobuk Mineral Projects is limited and there is currently no infrastructure in the
area.
We cannot provide assurances that the proposed
AMDIAP that would provide access to the Ambler mining district will be permitted or built, that it will be built in a timely manner,
that the cost of accessing the proposed road will be reasonable, that it will be built in the manner contemplated, or that it will
sufficiently satisfy the requirements of the Upper Kobuk Mineral Projects. In addition, successful development of the Upper Kobuk
Mineral Projects will require the development of the necessary infrastructure. If adequate infrastructure is not available in a
timely manner, there can be no assurance that:
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the development of the Upper Kobuk Mineral Projects will be commenced or completed on a timely
basis, if at all;
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the resulting operations will achieve the anticipated production volume; or
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the construction costs and operating costs associated with the development of the Upper Kobuk Mineral
Projects will not be higher than anticipated.
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As the Upper Kobuk Mineral Projects are
located in a remote area, exploration, development and production activities may be limited and delayed by inclement weather and
a shortened exploration season.
We are dependent on a third party that
participates in exploration and development of our Upper Kobuk Mineral Projects.
In December 2019, South32 exercised
its option to acquire a 50% interest in the Joint Venture that will own the Upper Kobuk Mineral Projects. This formation
of the Joint Venture was completed in early February. Our success with respect to the Upper Kobuk Mineral Projects depends
on the efforts and expertise of South32 with whom we have contracted; we hold a 50% interest and the remaining 50% interest is
held by South32, who is not under our control or direction. We are dependent on them for the progress and development of the Upper
Kobuk Mineral Projects. South32 may also have different priorities which could impact the timing and cost of development of the
Upper Kobuk Mineral Projects. The third party may also be in default of its agreement with us, without our knowledge, which
may put the mineral property and related assets at risk. The existence or occurrence of one or more of the following circumstances
and events could have a material adverse impact on our ability to achieve our business plan, profitability, or the viability of
our interests held with the third party, which could have a material adverse impact on our business, future cash flows, earnings,
results of operations and financial condition: (i) disagreement with our business partner on how to develop and operate the
Upper Kobuk Mineral Projects efficiently; (ii) inability to exert influence over certain strategic decisions made in respect
of the jointly-held Upper Kobuk Mineral Projects; (iii) inability of our business partner to meet its obligations to the
joint business or third parties; and (iv) litigation with our business partner regarding joint business matters.
We have no history of production and
no revenue from mining operations.
We have a very limited history of operations
and to date have generated no revenue from mining operations. As such, we are subject to many risks common to such enterprises,
including under-capitalization, cash shortages, limitations with respect to personnel, financial and other resources and lack of
significant revenues. There is no assurance that the Upper Kobuk Mineral Projects, or any other future projects will be commercially
mineable, and we may never generate revenues from our mining operations.
Future sales or issuances of equity
securities could decrease the value of any existing Common Shares, dilute investors’ voting power and reduce our earnings
per share.
We may sell additional equity securities
(including through the sale of securities convertible into Common Shares) and may issue additional equity securities to finance
our operations, exploration, development, acquisitions or other projects. We are authorized to issue an unlimited number of Common
Shares. We cannot predict the size of future sales and issuances of equity securities or the effect, if any, that future sales
and issuances of equity securities will have on the market price of the Common Shares. Sales or issuances of a substantial number
of equity securities, or the perception that such sales could occur, may adversely affect prevailing market prices for the Common
Shares. With any additional sale or issuance of equity securities, investors will suffer dilution of their voting power and may
experience dilution in our earnings per share.
Changes in the market price of copper,
zinc and other metals, which in the past have fluctuated widely, will affect our ability to finance continued exploration and development
of our projects and affect our operations and financial condition.
Our long-term viability will depend, in
large part, on the market price of copper, zinc and other metals. The market prices for these metals are volatile and are affected
by numerous factors beyond our control, including:
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global or regional consumption patterns;
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the supply of, and demand for, these metals;
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speculative activities;
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the availability and costs of metal substitutes;
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expectations for inflation; and
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political and economic conditions, including interest rates and currency values.
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We cannot predict the effect of these factors
on metal prices. A decrease in the market price of copper, zinc and other metals could affect our ability to raise funds to finance
the exploration and development of any of our mineral projects, which would have a material adverse effect on our financial condition
and results of operations. The market price of copper, zinc and other metals may not remain at current levels. In particular, an
increase in worldwide supply, and consequent downward pressure on prices, may result over the longer term from increased copper
production from mines developed or expanded as a result of current metal price levels. There is no assurance that a profitable
market may exist or continue to exist.
We will incur losses for the foreseeable
future.
We expect to incur losses unless and until
such time as our mineral projects generate sufficient revenues to fund continuing operations. The exploration and development of
our mineral properties will require the commitment of substantial financial resources that may not be available.
The amount and timing of expenditures
will depend on a number of factors, including the progress of ongoing exploration and development, the results of consultants’
analyses and recommendations, the rate at which operating losses are incurred, the execution of any joint venture agreements with
strategic partners and the acquisition of additional property interests, some of which are beyond our control. We cannot provide
assurance that we will ever achieve profitability.
Mineral resource and reserve calculations
are only estimates.
Any figures presented for mineral resources
or reserves in this Form 10-K and in our other filings with securities regulatory authorities and those which may be presented
in the future are and will only be estimates. There is a degree of uncertainty attributable to the calculation of mineral reserves
and mineral resources. Until mineral reserves or mineral resources are actually mined and processed, the quantity of metal and
grades must be considered as estimates only and no assurances can be given that the indicated levels of metals will be produced.
In making determinations about whether to advance any of our projects to development, we must rely upon estimated calculations
as to the mineral resources or reserves and grades of mineralization on our properties.
The estimating of mineral reserves and
mineral resources is a subjective process that relies on the judgment of the persons preparing the estimates. The process relies
on the quantity and quality of available data and is based on knowledge, mining experience, analysis of drilling results and industry
practices. Valid estimates made at a given time may significantly change when new information becomes available. While we believe
that the mineral resource estimates included in this Form 10-K for the Upper Kobuk Mineral Projects are well-established and
reflect management’s best estimates, by their nature mineral resource estimates are imprecise and depend, to a certain extent,
upon analysis of drilling results and statistical inferences that may ultimately prove to be inaccurate. There can be no assurances
that actual results will meet the estimates contained in feasibility studies or pre-feasibility studies. As well, further studies
are required.
Estimated mineral reserves or mineral resources
may have to be recalculated based on changes in metal prices, further exploration or development activity or actual production
experience. This could materially and adversely affect estimates of the volume or grade of mineralization, estimated recovery rates
or other important factors that influence mineral reserve or mineral resource estimates. The extent to which mineral resources
may ultimately be reclassified as mineral reserves is dependent upon the demonstration of their profitable recovery. Any material
changes in mineral resource estimates and grades of mineralization will affect the economic viability of placing a property into
production and a property’s return on capital. We cannot provide assurance that mineralization can be mined or processed
profitably.
Our mineral resource estimates have been
determined and valued based on assumed future metal prices, cut-off grades and operating costs that may prove to be inaccurate.
Extended declines in market prices for copper, zinc, lead, gold and silver may render portions of our mineralization uneconomic
and result in reduced reported mineral resources, which in turn could have a material adverse effect on our results of operations
or financial condition. We cannot provide assurance that mineral recovery rates achieved in small scale tests will be duplicated
in large scale tests under on-site conditions or in production scale.
A reduction in any mineral reserves that
may be estimated by us could have an adverse impact on our future cash flows, earnings, results of operations and financial condition.
No assurances can be given that any mineral resource estimates for the Upper Kobuk Mineral Projects will ultimately be reclassified
as mineral reserves. See “Cautionary Note to United States Investors.”
Significant uncertainty exists related
to inferred mineral resources.
There is a risk that inferred mineral resources
referred to in this Form 10-K cannot be converted into measured or indicated mineral resources as there may be limited ability
to assess geological continuity. It is reasonably expected that the majority of inferred mineral resources could be upgraded to
indicated mineral resources with continued exploration. See “Cautionary Note to United States Investors.”
Mining is inherently risky and subject
to conditions or events beyond our control.
The development and operation of a mine
is inherently dangerous and involves many risks that even a combination of experience, knowledge and careful evaluation may not
be able to overcome, including:
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unusual or unexpected geological formations;
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metallurgical and other processing problems;
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periodic interruptions due to inclement or hazardous weather conditions;
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flooding, explosions, fire, rockbursts, cave-ins and landslides;
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mechanical equipment and facility performance problems; and
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the availability of materials and equipment.
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These risks could result in damage to,
or destruction of, mineral properties, production facilities or other properties, personal injury or death, including to our employees,
environmental damage, delays in mining, increased production costs, asset write downs, monetary losses and possible legal liability.
We may not be able to obtain insurance to cover these risks at economically feasible premiums, or at all. Insurance against certain
environmental risks, including potential liability for pollution and other hazards associated with mineral exploration and production,
is not generally available to companies within the mining industry. We may suffer a material adverse effect on our business if
we incur losses related to any significant events that are not covered by our insurance policies.
General economic conditions may adversely
affect our growth, future profitability and ability to finance.
The unprecedented events in global financial
markets in the past several years have had a profound impact on the global economy. Many industries, including the copper mining
industry, are impacted by these market conditions. Some of the key impacts of the current financial market turmoil include contraction
in credit markets resulting in a widening of credit risk, devaluations, high volatility in global equity, commodity, foreign exchange
and precious metal markets and a lack of market liquidity. A worsening or slowdown in the financial markets or other economic conditions,
including but not limited to, consumer spending, employment rates, business conditions, inflation, fuel and energy costs, consumer
debt levels, lack of available credit, the state of the financial markets, interest rates and tax rates, may adversely affect our
growth and ability to finance. Specifically:
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the volatility of copper, zinc, lead and other metal prices would impact our estimates of mineral
resources, revenues, profits, losses and cash flow, and the feasibility of our projects;
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negative economic pressures could adversely impact demand for our future production, if any;
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construction related costs could increase and adversely affect the economics of any project;
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volatile energy, commodity and consumables prices and currency exchange rates could impact our
estimated production costs; and
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the devaluation and volatility of global stock markets would impact the valuation of our equity
and other securities.
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We cannot provide assurance that we
will successfully acquire commercially mineable mineral rights.
Exploration for and development of copper
properties involves significant financial risks which even a combination of careful evaluation, experience and knowledge may not
eliminate. While the discovery of an ore body may result in substantial rewards, few properties which are explored are ultimately
developed into producing mines. Major expenses may be required to establish reserves by drilling, constructing mining and processing
facilities at a site, developing metallurgical processes and extracting metals from ore. We cannot ensure that our current exploration
and development programs will result in profitable commercial mining operations.
The economic feasibility of development
projects is based upon many factors, including the accuracy of mineral resource estimates; metallurgical recoveries; capital and
operating costs; government regulations relating to prices, taxes, royalties, land tenure, land use, importing and exporting and
environmental protection; and metal prices, which are highly volatile. Development projects are also subject to the successful
completion of feasibility studies, issuance of necessary governmental permits and availability of adequate financing.
Most exploration projects do not result
in the discovery of commercially mineable ore deposits, and no assurance can be given that any anticipated level of recovery of
ore reserves, if any, will be realized or that any identified mineral deposit will ever qualify as a commercially mineable (or
viable) ore body which can be legally and economically exploited. Estimates of mineral reserves, mineral resources, mineral deposits
and production costs can also be affected by such factors as environmental permitting regulations and requirements, weather, environmental
factors, unforeseen technical difficulties, the metallurgy of the mineralization forming the mineral deposit, unusual or unexpected
geological formations and work interruptions. If current exploration programs do not result in the discovery of commercial ore,
we may need to write-off part or all of our investment in our existing exploration stage properties and may need to acquire additional
properties.
Material changes in mineral reserves, if
any, grades, stripping ratios or recovery rates may affect the economic viability of any project. Our future growth and productivity
will depend, in part, on our ability to develop commercially mineable mineral rights at our existing properties or identify and
acquire other commercially mineable mineral rights, and on the costs and results of continued exploration and potential development
programs. Mineral exploration is highly speculative in nature and is frequently non-productive. Substantial expenditures are required
to:
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establish mineral reserves through drilling and metallurgical and other testing techniques;
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determine metal content and metallurgical recovery processes to extract metal from the ore; and
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construct, renovate or expand mining and processing facilities.
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In addition, if we discover ore, it would
take several years from the initial phases of exploration until production is possible. During this time, the economic feasibility
of production may change. As a result of these uncertainties, there can be no assurance that we will successfully acquire commercially
mineable (or viable) mineral rights.
We are subject to significant governmental
regulations.
Our exploration activities are subject
to extensive federal, state, provincial and local laws and regulations governing various matters, including:
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environmental protection;
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the management and use of toxic substances and explosives;
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the management of natural resources;
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the exploration and development of mineral properties, including reclamation;
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taxation and mining royalties;
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management of tailing and other waste generated by operations;
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labor standards and occupational health and safety, including mine safety; and
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historic and cultural preservation.
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Failure to comply with applicable laws
and regulations may result in civil or criminal fines or penalties or enforcement actions, including orders issued by regulatory
or judicial authorities enjoining, curtailing or closing operations or requiring corrective measures, installation of additional
equipment or remedial actions, any of which could result in significant expenditures. We may also be required to compensate private
parties suffering loss or damage by reason of a breach of such laws, regulations or permitting requirements. It is also possible
that future laws and regulations, or more stringent enforcement of current laws and regulations by governmental authorities, could
cause us to incur additional expense or capital expenditure restrictions, suspensions or closing of our activities and delays in
the exploration and development of our properties.
We require further permits in order
to conduct current and anticipated future operations, and delays in obtaining or failure to obtain such permits, or a failure to
comply with the terms of any such permits that we have obtained, would adversely affect our business.
Our current and anticipated future operations,
including further exploration, development and commencement of production on our mineral properties, require permits from various
governmental authorities. Obtaining or renewing governmental permits is a complex and time-consuming process. The duration and
success of efforts to obtain and renew permits are contingent upon many variables not within our control. Due to the preliminary
stages of the Upper Kobuk Mineral Projects, it is difficult to assess what specific permitting requirements will ultimately apply.
Shortage of qualified and experienced personnel
in the U.S. federal and Alaskan State agencies to coordinate a federally led joint environmental impact statement process could
result in delays or inefficiencies. Backlog within the permitting agencies could affect the permitting timeline or potential of
the Upper Kobuk Mineral Projects, as may negative public perception of mining projects in general due to circumstances unrelated
to the Company and outside of its control. Other factors that could affect the permitting timeline include (i) the number
of other large-scale projects currently in a more advanced stage of development which could slow down the review process for the
Upper Kobuk Mineral Projects and (ii) significant public response regarding the Upper Kobuk Mineral Projects.
We cannot provide assurance that all permits
that we require for our operations, including any for construction of mining facilities or conduct of mining, will be obtainable
or renewable on reasonable terms, or at all. Delays or a failure to obtain such required permits, or the expiry, revocation or
failure to comply with the terms of any such permits that we have obtained, would adversely affect our business.
Our activities are subject to environmental
laws and regulations that may increase our costs and restrict our operations.
All of our exploration, potential development
and production activities are subject to regulation by governmental agencies under various environmental laws. These laws address
emissions into the air, discharges into water, management of waste, management of hazardous substances, protection of natural resources,
antiquities and endangered species and reclamation of lands disturbed by mining operations. Environmental legislation is evolving,
and the general trend has been towards stricter standards and enforcement, increased fines and penalties for noncompliance, more
stringent environmental assessments of proposed projects and increasing responsibility for companies and their officers, directors
and employees. Compliance with environmental laws and regulations may require significant capital outlays on our behalf and may
cause material changes or delays in our intended activities.
Several regulatory initiatives are currently
ongoing within the State of Alaska that have the potential to influence the permitting process for the Upper Kobuk Mineral Projects.
These include revisions to Alaska's Water Quality Standards regarding mixing zones regulations, which are currently under EPA review,
and which revisions may be required in order to authorize a mixing zone for discharge in Subarctic Creek. Future changes in these
laws or regulations could have a significant adverse impact on some portion of our business, requiring us to re-evaluate those
activities at that time.
Environmental hazards may exist on our
properties that are unknown to us at the present time and that have been caused by previous owners or operators or that may have
occurred naturally. We may be liable for remediating such damage.
Failure to comply with applicable environmental
laws, regulations and permitting requirements may result in enforcement actions thereunder, including orders issued by regulatory
or judicial authorities, causing operations to cease or to be curtailed, and may include corrective measures requiring capital
expenditures, installation of additional equipment or remedial actions.
Land reclamation requirements for our
exploration properties may be burdensome.
Land reclamation requirements are generally
imposed on mineral exploration companies (as well as companies with mining operations) in order to minimize long term effects of
land disturbance. Reclamation may include requirements to:
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treat ground and surface water to drinking water standards;
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control dispersion of potentially deleterious effluents; and
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reasonably re-establish pre-disturbance land forms and vegetation.
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In order to carry out reclamation obligations
imposed on us in connection with exploration, potential development and production activities, we must allocate financial resources
that might otherwise be spent on further exploration and development programs. In addition, regulatory changes could increase our
obligations to perform reclamation and mine closing activities. If we are required to carry out unanticipated reclamation work,
our financial position could be adversely affected.
Title and other rights to our properties
may be subject to challenge.
We cannot provide assurance that title
to our properties will not be challenged. We (directly or indirectly) own mineral claims which constitute our property holdings.
We may not have, or may not be able to obtain, all necessary surface rights to develop a property. Title insurance is generally
not available for mineral properties and our ability to ensure that we have obtained a secure claim to individual mining properties
may be severely constrained. Our mineral properties may be subject to prior unregistered agreements, transfers or claims, and title
may be affected by, among other things, undetected defects. We have not conducted surveys of all of the claims in which we hold
direct or indirect interests. A successful claim contesting our title to a property will cause us to lose our rights to explore
and, if warranted, develop that property or undertake or continue production thereon. This could result in our not being compensated
for our prior expenditures relating to the property. In addition, our ability to continue to explore and develop the property may
be subject to agreements with other third parties including agreements with native corporations and first nations groups, for instance,
the lands at the Upper Kobuk Mineral Projects are subject to the NANA Agreement (as more particularly described under “History
of Trilogy – Agreement with NANA Regional Corporation”).
Risks inherent in acquisitions of new
properties.
We may actively pursue the acquisition
of exploration, development and production assets consistent with our acquisition and growth strategy. From time to time, we may
also acquire securities of or other interests in companies with respect to which we may enter into acquisitions or other transactions.
Acquisition transactions involve inherent risks, including but not limited to:
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accurately assessing the value, strengths, weaknesses, contingent and other liabilities and potential
profitability of acquisition candidates;
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ability to achieve identified and anticipated operating and financial synergies;
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diversion of management attention from existing business;
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potential loss of our key employees or key employees of any business acquired;
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unanticipated changes in business, industry or general economic conditions that affect the assumptions
underlying the acquisition;
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decline in the value of acquired properties, companies or securities;
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assimilating the operations of an acquired business or property in a timely and efficient manner;
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maintaining our financial and strategic focus while integrating the acquired business or property;
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implementing uniform standards, controls, procedures and policies at the acquired business, as
appropriate; and
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to the extent that we make an acquisition outside of markets in which it has previously operated,
conducting and managing operations in a new operating environment.
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Acquiring additional businesses or properties
could place increased pressure on our cash flow if such acquisitions involve a cash consideration. The integration of our existing
operations with any acquired business will require significant expenditures of time, attention and funds. Achievement of the benefits
expected from consolidation would require us to incur significant costs in connection with, among other things, implementing financial
and planning systems. We may not be able to integrate the operations of a recently acquired business or restructure our previously
existing business operations without encountering difficulties and delays. In addition, this integration may require significant
attention from our management team, which may detract attention from our day-to-day operations. Over the short-term, difficulties
associated with integration could have a material adverse effect on our business, operating results, financial condition and the
price of our Common Shares. In addition, the acquisition of mineral properties may subject us to unforeseen liabilities, including
environmental liabilities, which could have a material adverse effect on us. There can be no assurance that any future acquisitions
will be successfully integrated into our existing operations.
Any one or more of these factors or other
risks could cause us not to realize the anticipated benefits of an acquisition of properties or companies and could have a material
adverse effect on our financial condition.
High metal prices in past years have
encouraged increased mining exploration, development and construction activity, which has increased demand for, and cost of, exploration,
development and construction services and equipment.
The relative strength of metal prices in
past years has encouraged increases in mining exploration, development and construction activities around the world, which has
resulted in increased demand for, and cost of, exploration, development and construction services and equipment. Increased demand
for and cost of services and equipment could result in delays if services or equipment cannot be obtained in a timely manner due
to inadequate availability and may cause scheduling difficulties due to the need to coordinate the availability of services or
equipment, any of which could materially increase project exploration, development and/or construction costs.
We face industry competition in the
acquisition of exploration properties and the recruitment and retention of qualified personnel.
We compete with other exploration and producing
companies, many of which are better capitalized, have greater financial resources, operational experience and technical capabilities
or are further advanced in their development or are significantly larger and have access to greater mineral reserves, for the acquisition
of mineral claims, leases and other mineral interests as well as for the recruitment and retention of qualified employees and other
personnel. If we require and are unsuccessful in acquiring additional mineral properties or in recruiting and retaining qualified
personnel, we will not be able to grow at the rate we desire, or at all.
We may experience difficulty attracting
and retaining qualified management and technical personnel to grow our business.
We are dependent on the services of key
executives and other highly skilled and experienced personnel to advance our corporate objectives as well as the identification
of new opportunities for growth and funding. Mr. Gowans and Ms. Sanders are currently our only executive officers. It
will be necessary for us to recruit additional skilled and experienced executives. Our inability to do so, or the loss of any of
these persons or our inability to attract and retain suitable replacements for them, or additional highly skilled employees required
for our activities, would have a material adverse effect on our business and financial condition.
Some of our directors and officers have
conflicts of interest as a result of their involvement with other natural resource companies.
Certain of our directors and officers also
serve as directors or officers, in other companies involved in natural resource exploration and development or mining-related activities,
including, in particular, NovaGold. To the extent that such other companies may participate in ventures in which we may participate
in, or in ventures which we may seek to participate in, our directors and officers may have a conflict of interest in negotiating
and concluding terms respecting the extent of such participation. In all cases where our directors and officers have an interest
in other companies, such other companies may also compete with us for the acquisition of mineral property investments. Any decision
made by any of these directors and officers involving Trilogy will be made in accordance with their duties and obligations to deal
fairly and in good faith with a view to the best interests of Trilogy and its shareholders. In addition, each of the directors
is required to declare and refrain from voting on any matter in which these directors may have a conflict of interest in accordance
with the procedures set forth in the Business Corporations Act (British Columbia) and other applicable laws. In appropriate
cases, the Company will establish a special committee of independent directors to review a matter in which several directors, or
management, may have a conflict. Nonetheless, as a result of these conflicts of interest, the Company may not have an opportunity
to participate in certain transactions, which may have a material adverse effect on the Company’s business, financial condition,
results of operation and prospects.
In the future, we may be subject to
legal proceedings.
Due to the nature of our business, we may
be subject to numerous regulatory investigations, claims, lawsuits and other proceedings in the ordinary course of our business.
The results of these legal proceedings cannot be predicted with certainty due to the uncertainty inherent in litigation, including
the effects of discovery of new evidence or advancement of new legal theories, the difficulty of predicting decisions of judges
and juries and the possibility that decisions may be reversed on appeal. There can be no assurances that these matters will not
have a material adverse effect on our business.
Our largest shareholder has significant
influence on us and may also affect the market price and liquidity of the securities.
Electrum Strategic Opportunities Fund L.P.
(“Electrum”) is our single largest shareholder, controlling approximately 21% of the outstanding voting securities.
Accordingly, Electrum will have significant influence in determining the outcome of any corporate transaction or other matter submitted
to the shareholders for approval, including mergers, consolidations and the sale of all or substantially all of our assets and
other significant corporate actions. Unless significant participation of other shareholders takes place in such shareholder meetings,
Electrum may be able to approve such matters itself. The concentration of ownership of the shares by Electrum may: (i) delay
or deter a change of control of the Company; (ii) deprive shareholders of an opportunity to receive a premium for their shares
as part of a sale of the Company; and (iii) affect the market price and liquidity of the shares. Without the consent of Electrum,
we could be prevented from entering into transactions that are otherwise beneficial to us. The interests of Electrum may differ
from or be adverse to the interests of our other shareholders. The effect of these rights and Electrum’s influence may impact
the price that investors are willing to pay for securities. If Electrum sells a substantial number of shares in the public market,
the market price of the shares could fall. The perception among the public that these sales will occur could also contribute to
a decline in the market price of the shares.
Global climate change is an international
concern and could impact our ability to conduct future operations.
Global climate change is an international
issue and receives an enormous amount of publicity. We would expect that the imposition of international treaties or U.S. or Canadian
federal, state, provincial or local laws or regulations pertaining to mandatory reductions in energy consumption or emissions of
greenhouse gasses could affect the feasibility of our mining projects and increase our operating costs.
Adverse publicity from non-governmental
organizations could have a material adverse effect on us.
There is an increasing level of public
concern relating to the effect of mining production on our surroundings, communities and environment. Non-governmental organizations
(“NGOs”), some of which oppose resource development, are often vocal critics of the mining industry. While we seek
to operate in a socially responsible manner, adverse publicity generated by such NGOs related to extractive industries, or our
operations specifically, could have an adverse effect on our reputation and financial condition or our relationship with the communities
in which we operate.
We may fail to achieve and maintain
the adequacy of our internal control over financial reporting as per the requirements of the Sarbanes-Oxley Act.
We are required to document and test our
internal control procedures in order to satisfy the requirements of Section 404 of SOX. It requires an annual assessment by
management of the effectiveness of our internal control over financial reporting. We may in the future fail to achieve and maintain
the adequacy of our internal control over financial reporting, as such standards are modified, supplemented or amended from time
to time, and we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal control over
financial reporting in accordance with Section 404 of SOX. Our failure to satisfy the requirements of Section 404 of
SOX on an ongoing, timely basis could result in the loss of investor confidence in the reliability of our financial statements,
which in turn could harm our business and negatively impact the trading price of our Common Shares. In addition, any failure to
implement required new or improved controls, or difficulties encountered in their implementation, could harm our operating results
or cause us to fail to meet our reporting obligations. Future acquisitions of companies may provide us with challenges in implementing
the required processes, procedures and controls in our acquired operations. Acquired companies may not have disclosure control
and procedures or internal control over financial reporting that are as thorough or effective as those required by securities laws
currently applicable to us.
Our business is subject to evolving
corporate governance and public disclosure regulations that have increased both our compliance costs and the risk of noncompliance,
which could have an adverse effect on our stock price.
We are subject to changing rules and
regulations promulgated by a number of United States and Canadian governmental and self-regulated organizations, including the
SEC, the Canadian Securities Administrators, the NYSE American, the TSX, and the Financial Accounting Standards Board. These rules and
regulations continue to evolve in scope and complexity and many new requirements have been created in response to laws enacted
by the United States Congress, making compliance more difficult and uncertain. Our efforts to comply with new rules and regulations,
including those promulgated under Dodd-Frank, have resulted in, and are likely to continue to result in, increased general and
administrative expenses and a diversion of management time and attention from revenue-generating activities to compliance activities.
Our Common Shares are subject to various
factors that have historically made share prices volatile.
The market price of our Common Shares may
be subject to large fluctuations, which may result in losses to investors. The market price of the Common Shares may increase or
decrease in response to a number of events and factors, including: our operating performance and the performance of competitors
and other similar companies; volatility in metal prices; the arrival or departure of key personnel; the number of Common Shares
to be publicly traded after an offering; the public’s reaction to our press releases, material change reports, other public
announcements and our filings with the various securities regulatory authorities; changes in earnings estimates or recommendations
by research analysts who track the Common Shares or the shares of other companies in the resource sector; changes in general economic
and/or political conditions; acquisitions, strategic alliances or joint ventures involving us or our competitors; and the factors
listed under the heading “Cautionary Statement Regarding Forward-Looking Information.”
The market price of the Common Shares may
be affected by many other variables which are not directly related to our success and are, therefore, not within our control, including
other developments that affect the market for all resource sector securities, the breadth of the public market for the Common Shares
and the attractiveness of alternative investments.
We do not intend to pay any cash dividends
in the foreseeable future.
We have not declared or paid any dividends
on our Common Shares. Our current business plan requires that for the foreseeable future, any future earnings be reinvested to
finance the growth and development of our business. We do not intend to pay cash dividends on the Common Shares in the foreseeable
future. We will not declare or pay any dividends until such time as our cash flow exceeds our capital requirements and will depend
upon, among other things, conditions then existing including earnings, financial condition, restrictions in financing arrangements,
business opportunities and conditions and other factors, or our Board determines that our shareholders could make better use of
the cash.
We may be a “passive foreign investment
company” in future periods, which may have adverse U.S. federal income tax consequences for U.S. shareholders.
U.S. investors in the Company should be
aware that we believe we were not a passive foreign investment company (“PFIC”) for the years ending November 30,
2015, 2016 and 2017 but we believe we were a PFIC for the years ending November 30, 2018 and 2019 and may be a PFIC in future
tax years. If we are a PFIC for any year during a U.S. Holder’s (as defined below under Certain U.S. Federal Income Tax
Considerations – U.S. Holders”) holding period, then such U.S. Holder generally will be required to treat any gain
realized upon a disposition of Common Shares and any so-called “excess distribution” received on its Common Shares
as ordinary income, and to pay an interest charge on a portion of such gain or distributions, unless the shareholder makes a timely
and effective “QEF Election” or a “Mark-to-Market Election” (each as defined below under “Certain
U.S. Federal Income Tax Considerations – Default PFIC Rules under Section 1291 of the Code”). A U.S.
Holder who makes a QEF Election generally must report on a current basis its share of our net capital gain and ordinary earnings
for any year in which we are a PFIC, whether or not we distribute any amounts to our shareholders. A U.S. Holder who makes the
Mark-to-Market Election generally must include as ordinary income each year the excess of the fair market value of the Common Shares
over the U.S. Holder’s tax basis therein. This paragraph is qualified in its entirety by the discussion below the heading
“Certain U.S. Federal Income Tax Considerations.” Each U.S. shareholder should consult its own tax advisor regarding
the PFIC rules and the U.S. federal income tax consequences of the acquisition, ownership, and disposition of Common Shares.
The following descriptions summarize selected
information about our Upper Kobuk Mineral Projects, which are located in the Ambler mining district of Alaska and include the Arctic
Project and the Bornite Project. All of the UKMP Projects are without known reserves, as defined under SEC Industry Guide 7, and
all proposed programs for the properties are exploratory in nature. Please also see “Management’s Discussion and
Analysis—Project Activities” for more information on the development and nature of our interest in the Upper Kobuk
Mineral Projects.
Arctic Project, Ambler Mining District,
Alaska
Technical information in this Annual Report
on Form 10-K regarding the Arctic Project is derived from the 2018 Arctic Report. The following summary is qualified in its
entirety by reference to the full text of the 2018 Arctic Report. Investors are directed to review the full text of the 2018 Arctic
Report, available for review on our profile on SEDAR at www.sedar.com and on the SEC’s EDGAR website at www.sec.gov, for
additional information. Capitalized terms used in this section but not otherwise defined herein shall have the meanings set out
in the 2018 Arctic Report. See “Cautionary Note to United States Investors.”
Introduction
We commissioned Ausenco Engineering Canada
Inc. (“Ausenco”) to compile the 2018 Arctic Report, a technical report on the results of a Pre-Feasibility Study on
the Arctic deposit, part of the Arctic Project in the Ambler mining district of Northwest Alaska.
The firms and consultants who are providing
Qualified Persons responsible for the content of the 2018 Arctic Report, which is based on the Pre-Feasibility Study completed
in 2018 (the “2018 PFS”) and supporting documents prepared for the 2018 PFS, are, in alphabetical order, Amec Foster
Wheeler Americas Ltd. (“Amec Foster Wheeler”); BD Resource Consulting, Inc., (“BDRC”); SRK Consulting
(Canada) Inc. (“SRK”), and SIM Geological Inc.
Management Property Description and
Location
The Arctic Project is located in the Ambler
mining district of the southern Brooks Range, in the Northwest Arctic Borough (“ NWAB”) of Alaska. The property is
geographically isolated with no current road access or nearby power infrastructure. The Arctic Project is located 270 km east of
the town of Kotzebue, 36 km north of the village of Kobuk, and 260 km west of the Dalton Highway, an all-weather state-maintained
highway.
NovaGold acquired the Arctic Project
from Kennecott Exploration Company and Kennecott Arctic Company (collectively, “Kennecott”) in 2004. In 2012,
NovaGold transferred all copper projects to NovaCopper Inc. NovaCopper Inc. subsequently underwent a name change to Trilogy
Metals Inc. in 2016. The Arctic Project comprises approximately 75,192 ha of State of Alaska mining claims and U.S. Federal
patented mining claims in the Kotzebue Recording District. As of February 10, 2020 the Arctic Project land tenure consists of
1,869 contiguous claims, including 905 40-acre State claims, 946 160-acre State claims, and 18 Federal patented claims
comprising 272 acres (110 ha) held in the name of NovaCopper US Inc., a wholly owned subsidiary of Trilogy.
Surface use of the private land held as
Federal patented claims is limited only by reservations in the patents and by generally-applicable environmental laws. Surface
use of State claims allows the owner of the mining claim to make such use of the surface as is “necessary for prospecting
for, extraction of, or basic processing of minerals.”
Under the Kennecott Purchase and Termination
Agreement, Kennecott retained a 1% net smelter return (“NSR”) royalty that is purchasable at any time by Trilogy for
a one-time payment of $10 million.
NANA controls lands granted under the
Alaska Native Claims Settlement Act (ANCSA) to the south of the Arctic Project boundary. Trilogy and NANA have entered into the
NANA Agreement that consolidates Trilogy’s and NANA’s land holdings into an approximately 172,675 ha land package
and provides a framework for the exploration and development of the area. The NANA Agreement has a term of 20 years, with an option
in favour of Trilogy to extend the term for an additional 10 years. If, following receipt of a feasibility study and the release
for public comment of a related draft environmental impact statement, Trilogy decides to proceed with construction of a mine on
the lands subject to the NANA Agreement, NANA will have 120 days to elect to either (a) exercise a non-transferrable back-in-right
to acquire between 16% and 25% (as specified by NANA) of that specific project; or (b) not exercise its back-in-right, and
instead receive a net proceeds royalty equal to 15% of the net proceeds realized by Trilogy from such project. In the event that
NANA elects to exercise its back-in-right, the parties will, as soon as reasonably practicable, form a joint venture with NANA
electing to participate between 16% to 25%, and Trilogy owning the balance of the interest in the joint venture. If Trilogy decides
to proceed with construction of a mine on its own lands subject to the NANA Agreement, NANA will enter into a surface use agreement
with Trilogy which will afford Trilogy access to the Arctic Project along routes approved by NANA. In consideration for the grant
of such surface use rights, Trilogy will grant NANA a 1% net smelter royalty on production and provide an annual payment on a
per acre basis.
Trilogy has entered into the South32 Option
Agreement whereby South32 had the right to form a 50/50 Joint Venture with respect to the Trilogy’s Alaskan assets including
the Arctic Project. In December 2019, South32 exercised its option under the South32 Option Agreement and the completion of
the Joint Venture occurred in February 2020. See “Significant Developments in 2019”. At such time, Trilogy
transferred its Alaskan assets, including the Arctic Project, and South32 contributed a subscription price payment of $145 million,
to a newly formed Joint Venture.
Geology and Mineralization
The Arctic deposit is considered to be
a polymetallic VMS deposit containing copper, lead, zinc, gold and silver mineralized material.
The Ambler mining district is located on
the southern margin of the Brooks Range. Within the VMS belt, several deposits and prospects (including the Arctic deposit) are
hosted in the Ambler Sequence, a group of Middle Devonian to Early Mississippian, metamorphosed, bimodal volcanic rocks with interbedded
tuffaceous, graphitic, and calcareous volcaniclastic metasediments. The Ambler sequence occurs in the upper part of the regional
Anirak Schist. VMS-style mineralization is found along the entire 110 km strike length of the district.
Stratigraphically, the Ambler Sequence
consists of variably metamorphosed calc-turbidites, overlain by calcareous schists with irregularly distributed mafic sills and
pillow lavas. These are overlain by the Arctic-sulphide host section which consists mainly of fine-grained, carbonaceous siliciclastic
rocks which are in turn overlain by reworked silicic volcanic rocks, including meta-rhyolite porphyries and most notably the regionally
extensive Button Schist with its characteristically large relic phenocrysts. Greywacke sandstones, interpreted to be turbidites,
occur throughout the section but are concentrated higher in the stratigraphy. Several rock units within the stratigraphy show substantial
variation in local thickness as a consequence of basin morphology at the time of deposition.
Alteration at the Arctic deposit is characterized
by magnesium alteration, primarily as talc, chlorite, and phengite alteration products associated with the sulphide-bearing horizons
and continuing in the footwall. Stratigraphically above the sulphide-bearing horizons, significant muscovite as paragonite is developed
and results in a marked shift in Na/Mg (sodium/magnesium) ratios across the sulphide bearing horizons.
Mineralization occurs as stratiform semi-massive
sulphide (“SMS”) to massive sulphide (“MS”) beds within primarily graphitic chlorite schists and fine-grained
quartz sandstones. The sulphide beds average 4 m in thickness but vary from less than 1 m up to as much as 18 m in thickness.
The bulk of the mineralization occurs within
eight modelled SMS and MS zones lying along the upper and lower limbs of the Arctic isoclinal anticline. All of the zones are within
an area of roughly 1 km2 with mineralization extending to a depth of approximately 250 m below the surface. Mineralization
is predominately coarse-grained sulphides consisting mainly of chalcopyrite, sphalerite, galena, tetrahedrite-tennantite, pyrite,
arsenopyrite, and pyrrhotite. Trace amounts of electrum are also present.
Drilling and Sampling
Drilling at the Arctic deposit and within
the Ambler mining district has been ongoing since its initial discovery in 1967. Approximately 60,259 m of drilling has been completed
within the Ambler mining district, including 41,745 m of drilling in 184 drill holes at the Arctic deposit or on potential extensions
in 28 campaigns spanning 53 years. Drill programs were completed by Kennecott and its subsidiaries, Anaconda, and Trilogy and its
predecessor companies.
Core recoveries are acceptable. Geological
and geotechnical logging is in line with industry generally-accepted practices. Drill collar and downhole survey data were collected
using industry-recognized instrumentation and methods.
Between 2004 and 2006, NovaGold conducted
a systematic drill core re-logging and re-sampling campaign of Kennecott and BCMC era drill holes. NovaGold either took 1 to 2
m samples every 10 m, or sampled entire lengths of previously unsampled core within a minimum of 1 m and a maximum of 3 m intervals.
During the Trilogy campaigns, sample intervals were determined by the geological relationships observed in the core and limited
to a 3 m maximum length and 1 m minimum length. An attempt was made to terminate sample intervals at lithological and mineralization
boundaries. Sampling was generally continuous from the top to the bottom of the drill hole. When the hole was in unmineralized
rock, the sample length was generally 3 m, whereas in mineralized units, the sample length was shortened to 1 to 2 m.
Gold assays were determined using fire
analysis followed by an atomic absorption spectroscopy finish. An additional 49-element suite was assayed by inductively coupled
plasma-mass spectroscopy methodology, following nitric acid aqua regia digestion. The copper, zinc, lead, and silver analyses were
completed by AA, following a triple acid digest, when overlimits.
Standard reference materials, blanks, duplicates
and check samples have been regularly submitted at a combined level of 20% of sampling submissions for all NovaGold/NovaCopper/Trilogy
era campaigns. BDRC reviewed the QA/QC dataset and reports and found the sample insertion rate and the timeliness of results analysis
meets or exceeds industry best practices.
SG measurements have been conducted on
3,023 samples in the database and range from a minimum of 2.43 to a maximum of 4.99 and average 3.08. The distribution of SG data
is considered sufficient to support estimation in the resource model.
An aerial LIDAR survey was completed to
support pre-feasibility level resource estimation, engineering design, environmental studies, and infrastructure layout evaluations.
Agreement between surveyed drill hole collar elevations and a LIDAR topographic surface verifies the correctness of the digital
topography for use in estimation.
It was concluded that the drill database
and topographic surface for the Arctic deposit is reliable and sufficient to support the current estimate of mineral resources.
Mineral Processing and Metallurgical
Testing
Since 1970, metallurgical test work has
been conducted to determine the flotation response of various samples extracted from the Arctic deposit. In general, the samples
tested produced similar metallurgical performances. In 2012, SGS Mineral Services conducted a metallurgical test program to further
study metallurgical responses of the samples produced from Zones 1, 2, 3, and 5 of the Arctic deposit. The flotation test procedures
used talc pre-flotation, conventional copper-lead bulk flotation and zinc flotation, followed by copper and lead separation. In
general, the 2012 test results indicated that the samples responded well to the flowsheet tested. The average results of the locked
cycle tests (without copper and lead separation) were as follows:
|
·
|
The copper recoveries to the bulk copper-lead concentrates ranged from 89 to 93% excluding the
Zone 1 & 2 composite which produced a copper recovery of approximately 84%; the copper grades of the bulk concentrates
were 24 to 28%.
|
|
·
|
Approximately 92 to 94% of the lead was recovered to the bulk copper-lead concentrates containing
9 to 13% lead.
|
|
·
|
The zinc recovery was 84.2% from Composite Zone 1 & 2, 93.0% from Composite Zone 3 and
90.5% from Composite Zone 5. On average, the zinc grades of the concentrates produced were higher than 55%, excluding the concentrate
generated from Composite Zone 1 & 2, which contained only 44.5% zinc.
|
|
·
|
Gold and silver were predominantly recovered into the bulk copper-lead concentrates. Gold recoveries
to this concentrate ranged from 65 to 80%, and silver recoveries ranged from 80 to 86%.
|
Using an open circuit procedure, the copper and lead
separation tests on the bulk copper-lead concentrate produced from the locked cycle tests generated reasonable copper and lead
separation. The copper concentrates produced contained approximately 28 to 31% copper, while the grades of the lead concentrates
were in the range of 41% to 67% lead. In this test work program, it appeared that most of the gold reported to the copper concentrate
and on average the silver was equally recovered into the copper and lead concentrates. Subsequent test work to better define the
copper and lead separation process was conducted in 2017, including a more detailed evaluation of the precious metal deportment
in the copper and lead separation process.
The 2012 grindability test results showed
that the Bond ball millwork index (BWi) tests ranged from 6.5 to 11 kWh/t and abrasion index (Ai) tests fluctuated from 0.017 to
0.072 g for the mineralized samples. The data indicate that the samples are neither resistant nor abrasive to ball mill grinding.
The materials are considered to be soft or very soft in terms of grinding requirements.
In 2017, ALS Metallurgy conducted detailed
copper and lead separation flotation test work using a bulk sample of copper-lead concentrate produced from the operation of a
pilot plant. This test work confirmed high lead recoveries in locked cycle testing of the copper-lead separation process and confirmed
precious metal recoveries into the representative copper and lead concentrates. This test work indicated a clear tendency of the
gold values to follow the lead concentrate, giving it a significant gold grade and value.
The conclusions of test work conducted
both in 2012 and 2017 indicate that the Arctic materials are well-suited to the production of high-quality copper and zinc concentrates
using flotation techniques which are industry standard. Copper and zinc recovery data is reported in the range of 91 to 89% respectively,
which reflects the high grade nature of the deposit as well as the coarse grained nature of these minerals. Lead concentrates have
the potential to be of high quality and can also be impacted by zones of very high talc contents which has the potential to dilute
lead concentrate grades. The lead concentrate is also shown to be rich in precious metals, which has some advantages in terms of
marketability of this material.
Mineral Resource Estimate
The mineral resource estimate has been
prepared by SIM Geological Inc. and BD Resource Consulting, Inc.
Mineral resource estimates are made from
a 3D block model based on geostatistical applications using commercial mine planning software (MineSight® v11.60-2). The block
model has a nominal block size measuring 10 x 10 x 5 m and utilizes data derived from 152 drill holes in the vicinity of the Arctic
deposit. The resource estimate was generated using drill hole sample assay results and the interpretation of a geological model
which relates to the spatial distribution of copper, lead, zinc, gold and silver. Interpolation characteristics were defined based
on the geology, drill hole spacing, and geostatistical analysis of the data. The effects of potentially anomalous high-grade sample
data, composited to two metre intervals, are controlled by limiting the distance of influence during block grade interpolation.
The grade models have been validated using a combination of visual and statistical methods. The resources were classified according
to their proximity to the sample data locations and are reported, as required by NI 43-101, according to the CIM Definition Standards
for Mineral Resources and Mineral Reserves. Model blocks estimated by three or more drill holes spaced at a maximum distance of
100 metres are included in the Indicated category. Inferred blocks are within a maximum distance of 150 metres from a drill hole.
The estimate of Indicated and Inferred mineral resources is within a limiting pit shell derived using projected technical and economic
parameters.
Table 1: Mineral Resource Estimate for
Arctic Deposit
|
|
|
|
|
Average Grade:
|
|
|
Contained metal:
|
|
Class
|
|
M
tonnes
|
|
|
Cu %
|
|
|
Pb%
|
|
|
Zn%
|
|
|
Au g/t
|
|
|
Ag g/t
|
|
|
Cu Mlbs
|
|
|
Pb Mlbs
|
|
|
Zn Mlbs
|
|
|
Au koz
|
|
|
Ag Moz
|
|
Indicated
|
|
|
36.0
|
|
|
|
3.07
|
|
|
|
0.73
|
|
|
|
4.23
|
|
|
|
0.63
|
|
|
|
47.6
|
|
|
|
2441
|
|
|
|
581
|
|
|
|
3356
|
|
|
|
728
|
|
|
|
55
|
|
Inferred
|
|
|
3.5
|
|
|
|
1.71
|
|
|
|
0.60
|
|
|
|
2.72
|
|
|
|
0.36
|
|
|
|
28.7
|
|
|
|
131
|
|
|
|
47
|
|
|
|
210
|
|
|
|
40
|
|
|
|
3
|
|
Notes:
|
(1)
|
Resources stated as contained within a pit shell developed using metal prices of US$3.00/lb Cu,
$0.90/lb Pb, $1.00/lb Zn, $1300/oz Au and $18/oz Ag and metallurgical recoveries of 92% Cu, 77% Pb, 88% Zn, 63% Au and 56% Ag and
operating costs of $3/t mining and $35/t process and G&A. The average pit slope is 43 degrees.
|
|
(2)
|
The base case cut-off grade is 0.5% copper equivalent. CuEq = (Cu%x0.92)+(Zn%x0.290)+(Pb%x0.231)+(Augptx0.398)+(Aggptx0.005).
|
|
(3)
|
The Mineral Resource Estimate is reported on a 100% basis without adjustments for metallurgical
recoveries. Following the formation of the Joint Venture, Trilogy and South32 each own 50% of the Arctic Project.
|
|
(4)
|
The Mineral Resource Estimate is inclusive of Mineral Reserves. Mineral Resources are not Mineral
Reserves and do not have demonstrated economic viability. There is no certainty that all or any part of the Mineral Resources will
be converted into Mineral Reserves.
|
|
(5)
|
Inferred resources have a great amount of uncertainty as to whether they can be mined legally or
economically. It is reasonably expected that a majority of Inferred resources will be converted to Indicated resources with additional
exploration.
|
|
(6)
|
Effective date of the Mineral Resource Estimate is April 25, 2017.
|
|
(7)
|
See “Cautionary Note to United States Investors”.
|
Mining Reserves and Mining Methods
The Arctic Project is designed as a conventional
truck-shovel operation assuming 131 t trucks for waste and 91 t trucks for ore, as well as 17 m3 and 12 m3shovels
for waste and ore respectively. The pit design includes three nested phases to balance stripping requirements while satisfying
the concentrator requirements.
The design parameters include a ramp width
of 28.5 m, in-pit road grades of 8% and out-pit road grades of 10%, bench height of 5 m, targeted mining width between 70 and 100
m, berm interval of 15 m, variable slope angles by sector and a minimum mining width of 30 m.
The smoothed final pit design contains
approximately 43 Mt of ore and 296 Mt of waste for a resulting stripping ratio of 6.9:1. Within the 43 Mt of ore, the average grades
are 2.32% Cu, 3.24% Zn, 0.57 % Pb, 0.49 g/t Au and 36.0 g/t Ag.
The Mineral Reserve estimates are shown
in Table 1-2.
Table 2: Mineral Reserve Estimate for
the Arctic Deposit
|
|
Tonnage
|
|
|
Grades
|
|
Class
|
|
t
x 1000
|
|
|
Cu
(%)
|
|
|
Zn
(%)
|
|
|
Pb
(%)
|
|
|
Au
(g/t)
|
|
|
Ag
(g/t)
|
|
Proven Mineral Reserves
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Probable Mineral
Reserves
|
|
|
43,038
|
|
|
|
2.32
|
|
|
|
3.24
|
|
|
|
0.57
|
|
|
|
0.49
|
|
|
|
36.0
|
|
Proven &
Probable Mineral Reserves
|
|
|
43,038
|
|
|
|
2.32
|
|
|
|
3.24
|
|
|
|
0.57
|
|
|
|
0.49
|
|
|
|
36.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Waste within Designed Pit
|
|
|
296,444
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Tonnage within Designed
Pit
|
|
|
339,482
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes:
|
(1)
|
Mineral Reserves are estimated assuming open pit mining methods and include a combination of planned
and contact dilution.
|
|
(2)
|
Mineral Reserves are based on prices of $2.90/lb Cu, $0.90/lb Pb, $1.10/lb Zn, $1250/oz Au and
$18/oz Ag.
|
|
|
Fixed process
recoveries of 90.0% Cu, 89.9% Pb, 91.7% Zn, 61.1% Au and 49.7% Ag
|
|
(3)
|
Mining costs: $3.00/t incremented at $0.02/t/15 m and $0.015/t/1.5 m below and above 710 m elevation
respectively.
|
|
(4)
|
Processing costs: $36.55/t. Include process cost: $19.86/t, G&A: $8.92/t, sustaining capital:
$4.11/t closure cost: $1.00/t, and road toll: $2.66/t.
|
|
(5)
|
Treatment costs of $70/t Cu concentrate, $180/t Pb concentrate and $300/t Zn concentrate. Refining
costs of $0.07/lb Cu, $10/oz Au, $0.60/oz Ag. Transport cost of $149.96/t concentrate.
|
|
(6)
|
Fixed royalty percentage of 1%.
|
|
(7)
|
The Qualified Person for the Mineral Reserves is an employee of Amec Foster Wheeler, who visited
the project site in July 25, 2017 as part of the data verification process.
|
|
(8)
|
The effective date of mineral reserves estimate is October 10, 2017.
|
|
(9)
|
Mineral Reserves are reported on a 100% basis. Following the formation of the Joint Venture, Trilogy
and South32 each own 50% of the Arctic Project.
|
The scheduling constraints set the maximum
mining capacity at 32 Mt/year and the maximum process capacity at 10 kt/day. The production schedule results in a life of mine
(“LOM”) of 12 years. The mine will require two years of pre-production before the start of operations in the processing
plant.
Recovery Methods
The 10,000 t/d process plant design is
conventional for the industry, will operate two 12 hour shifts per day, 365 d/a with an overall plant availability of 92%. The
process plant will produce three concentrates: 1) copper concentrate, 2) zinc concentrate, and 3) lead concentrate. Gold and silver
are expected to be payable at a smelter and are recovered in both the copper and lead concentrates.
The mill feed will be hauled from the open
pit to a primary crushing facility where the material will be crushed by a jaw crusher to a particle size of 80% passing 125 mm.
The crushed material will be ground by
two stages of grinding, consisting of one SAG mill and one ball mill in closed circuit with hydrocyclones (SAB circuit). The hydrocyclone
overflow with a grind size of approximately 80% passing 70 pm will first undergo talc pre-flotation, and then be processed by conventional
bulk flotation (to recover copper, lead, and associated gold and silver), followed by zinc flotation. The rougher bulk concentrate
will be cleaned and followed by copper and lead separation to produce a lead concentrate and a copper concentrate. The final tailings
from the zinc flotation circuit will be pumped to a tailings management facility (“TMF”). Copper, lead, and zinc concentrates
will be thickened and pressure-filtered before being transported by truck to a port and shipped to smelters.
The LOM average mill feed is expected to
contain 2.32% Cu, 3.24% Zn, 0.57% Pb, 0.49 g/t Au, and 35.98 g/t Ag. Based on the mine plan developed for the PFS and metallurgical
test work results, the LOM average metal recoveries and concentrate grades will be:
|
o
|
recovery:
|
90.0% copper; 11.8% gold; 35.0% silver
|
|
o
|
recovery:
|
80.0% lead; 61.1% gold; 49.7% silver
|
The average annual dry concentrate production
is estimated as follows:
|
·
|
Copper concentrate:
|
246,723 t/a
|
|
·
|
Lead concentrate:
|
29,493 t/a
|
|
·
|
Zinc concentrate:
|
180,219 t/a.
|
Project Infrastructure
The Arctic project site is a remote, greenfields
site that requires construction of its own infrastructure to support the mining operation.
The Arctic Project site will be accessed
through a combination of State of Alaska owned highways (existing), an AIDEA owned private road (proposed) and Trilogy owned access
roads (proposed). The AMDIAP road is proposed by AIDEA to connect the Ambler mining district to the Dalton Highway. The AMDIAP
road is being permitted as a private road with restricted access for industrial use. To connect the Arctic Project site and the
existing exploration camp to the proposed AMDIAP road a 30.7 km access road (the Arctic access road) will need to be built.
The State of Alaska owned public Dahl Creek
Airport will require upgrades to support the planned regular transportation of crews to and from Fairbanks. Power generation will
be by six LNG generators, producing a supply voltage of 4.16 kV. The total connected load will be 17.5 MW with an average power
draw of 12.6 MW. LNG will be supplied via existing fuel supply networks near Port Mackenzie, Alaska.
The Arctic Project will require three different
self-contained camps, equipped with their own power and heat generation capabilities, water treatment plant, sewage treatment plant,
and garbage incinerator. The existing exploration camp will be used to start the construction of the Arctic access road. A construction
camp will be constructed at the intersection of the AMDIAP road and Arctic access road, and will be decommissioned once construction
is complete. The permanent camp will be constructed along the Arctic access road, closer to the planned processing facility. The
permanent camp will be constructed ahead of operations to support the peak accommodation requirements during construction.
Infrastructure that will be required for
the mining and processing operations will include:
|
·
|
Stockpiles and waste rock facilities
|
|
·
|
Truck workshop, truck wash, mine offices, mine dry facility and warehouse
|
|
·
|
Administration building
|
|
·
|
Plant workshop and warehouse
|
|
·
|
Primary crushing building
|
|
·
|
Fine ore stockpile building
|
|
·
|
Process plant and laboratory
|
|
·
|
Concentrate loadout building
|
|
·
|
Reagent storage and handling building
|
|
·
|
Raw water supply building.
|
|
·
|
Tailings management facility
|
|
·
|
Diversion and collection channels, culverts, and containment structures
|
|
·
|
Waste rock collection pond
|
|
·
|
Water treatment plants.
|
On-site communications comprise of inter-connected
mobile and fixed systems, including landline telephone network, radios and internet.
Compressed air will be supplied by screw
compressors and a duty plant air receiver. Fire protection will be supported by a firewater distribution network and standpipe
systems, water mist systems, sprinkler systems, and portable fire extinguishers. Gas detection will be provided to detect dangerous
levels of LNG gas within the generator room.
A large waste rock dump (“WRD”)
will be developed north of the Arctic pit in the upper part of the Arctic Valley. The waste rock storage facility will be designed
to store both waste rock and tailings in adjacent footprints. The total volume of waste rock is expected to be 145.6 Mm3
(296 Mt), however there is potential for expanded volume in the waste if placement density is less than 2.0 t/m3. The
dump will have a final height of 245 m to an elevation of 890 masl and is planned to be constructed in 20 m lifts with intermediary
bench widths at 23.5 m on average at the dump face, to achieve an overall slope of 2.7H:1V. Most of the waste rock is anticipated
to be potentially acid-generating (“PAG”) and there will be no separation of waste based on acid generation potential.
Rather, seepage from the WRD will be collected and treated.
There will also be two small overburden
stockpiles to store the stripped topsoil and overburden from the TMF footprint. The topsoil stockpile will be placed in between
the haul roads and will store up to 225,000 m3of material while the overburden stockpile will be located below the lower
haul road between the pit and the mill site with storage capacity up to 650,000 m3.
The tailings management facility (“TMF”)
will be located at the headwaters of the Sub-Arctic Creek, in the upper-most portion of the creek valley. The 58.6 ha footprint
of the TMF will be fully lined with an impermeable liner (“HDPE”). Tailings containment will be provided by an engineered
dam that will be buttressed by the WRD constructed immediately downstream of the TMF and the natural topography on the valley sides.
A starter dam will be constructed to elevation 830 m. Three subsequent raises will bring the final dam crest elevation to 890 m,
which is the same as the final elevation of the waste rock dump. The TMF is designed to store approximately 27.3 Mm3
(38.7 Mt) of tailings plus 3.0 Mm3 of water produced over the 12 year mine life as well as the PMF and still provide
2m of freeboard.
The tailings delivery system pipeline will
transport slurried tailings from processing plant to the TMF. The delivery system will be sized initially on the basis of a 10
kt/d operation. This pipeline will transport 1,050 m3/h of tailings to the TMF. The return water delivery system for
recycle water from the TMF has been sized on the basis of 770 m3/h of water being pumped from the TMF to the process
water pond, for the 10 kt/d operation.
The proposed mine development is located
in valley of Sub-Arctic Creek, a tributary to the Shungnak River. A surface water management system will be constructed to segregate
contact and non-contact water. Non-contact water will be diverted around mine infrastructure to Sub-Arctic Creek. Contact water
will be conveyed to treatment facilities prior to discharge to the receiving environment.
Market Studies
Trilogy provided Ausenco with the metal
price projections for use in the Pre-Feasibility Study on which the Technical Report is based. Trilogy established the pricing
using a combination of two year trailing actual metal prices, and market research and bank analyst forward price projections.
The long-term consensus metal price assumptions
to be used in the Pre-Feasibility Study are:
Smelter terms were applied for the delivery
of copper, zinc and lead concentrate. It was assumed that delivery of all concentrates would be to an East Asian smelter at currently
available freight rates. These terms are considered to be in line with current market conditions. Total transport costs for the
concentrate are estimated at $270.37/dmt.
Environmental, Permitting, Social
and Closure Considerations
Environmental Considerations
The Arctic Project area includes the Ambler
lowlands and Subarctic Creek within the Shungnak River drainage. To date, a moderate amount of baseline environmental data collection
has occurred in the area including surface water quality sampling, surface hydrology monitoring, wetlands mapping, stream flow
monitoring, aquatic life surveys, avian and mammal habitat surveys, cultural resource surveys, hydrogeology studies, meteorological
monitoring, and acid base accounting studies.
Permitting Considerations
Trilogy performs mineral exploration at
the Arctic deposit under State of Alaska and Northwest Arctic Borough (“NWAB”) permits. Trilogy is presently operating
under a State of Alaska Miscellaneous Land Use Permit (“APMA permit”) that expires at the end of 2022.
Mine development permitting will be largely
driven by the underlying land ownership; regulatory authorities vary depending on land ownership. The Arctic Project area includes
patented mining claims (private land under separate ownership by Trilogy and NANA), State of Alaska land, and NANA land (private
land). The open pit would situate mostly on patented land while the mill, tailings and waste rock facilities would be largely on
State land. Other facilities, such as the camps, would be on NANA land. Federal land would likely be part of any access road between
the Dalton Highway and the Arctic Project area. Permits associated with such an access road are being investigated in a separate
action by the State of Alaska.
Because the Arctic Project is situated
to a large extent on State land, it will likely be necessary to obtain a Plan of Operation Approval (which includes the Reclamation
Plan) from the ADNR. The Arctic Project will also require certificates to construct and then operate a dam(s) (tailings and
water storage) from the ADNR (Dam Safety Unit) as well as water use authorizations, an upland mining lease and a mill site lease,
as well as several minor permits including those that authorize access to construction material sites from ADNR.
The Alaska Department of Environmental
Conservation (“ADEC”) would authorize waste management under an integrated waste management permit, air emissions during
construction and then operations under an air permit, and require an APDES permit for any wastewater discharges to surface waters,
and a Multi-Sector General Permit for stormwater discharges. The ADEC would also be required to review the USACE Section 404
permit to certify that it complies with Section 401 of the CWA.
The Alaska Department of Fish and Game
would have to authorize any culverts or bridges that are required to cross fish-bearing streams or other impacts to fish-bearing
streams that result in the loss of fish habitat.
U.S. Army Corps of Engineers (“USACE”)
would require a CWA Section 404 permit for dredging and filling activities in Waters of the United States including jurisdictional
wetlands. The USACE Section 404 permitting action would require the USACE to comply with the Natural Environmental Policy
Act (“NEPA”) and, for a project of this magnitude, the development of an EIS. The USACE would likely be the lead federal
agency for the NEPA process. As part of the Section 404 permitting process, the Arctic Project will have to meet USACE wetlands
guidelines to avoid, minimize and mitigate impacts to wetlands.
The Arctic Project will also have to obtain
approval for a Master Plan from the NWAB. In addition, actions will have to be taken to change the borough zoning for the Arctic
Project area from Subsistence Conservation to Resource Development.
The overall timeline required for permitting
would be largely driven by the time required for the NEPA process, which is triggered by the submission of the 404 permit application
to the US Army Corp of Engineers. The timeline includes the development and publication of a draft and final EIS and ends with
a Record of Decision, and 404-permit issuance. In Alaska, the EIS and other State and Federal permitting processes are generally
coordinated so that permitting and environmental review occurs in parallel. The NEPA process could require between 1.5 to three
years to complete, and could potentially take longer.
Social Considerations
The Arctic Project is located approximately
40 km northeast of the native villages of Shungnak and Kobuk, and 64 km east-northeast of the native village of Ambler. The population
in these villages range from 156 in Kobuk (2016 Census) to 262 in Shungnak (2016 Census) to 284 in Ambler (2017 DCCED certified
population). Residents live a largely subsistence lifestyle with incomes supplemented by trapping, guiding, local development projects,
government aid and other work in, and outside of, the villages.
The Arctic Project has the potential to
significantly improve work opportunities for village residents. Trilogy is working directly with the villages to employ residents
in the ongoing exploration program as geotechnicians, drill helpers, and environmental technicians. Trilogy and NANA have established
a Workforce Development Committee to assist with developing a local workforce. In addition, Trilogy has existing contracts with
native-affiliated companies (such as NANA Management Services and WHPacific Inc.) that are providing camp catering and environmental
services for the Arctic Project, respectively.
Local community concerns will also be formally
recognized during the development of the project EIS. Early in the EIS process, the lead federal permitting agency will hold scoping
meetings in rural villages to hear and record the concerns of the local communities so that the more significant of these concerns
can be addressed during the development of the EIS. In addition, the lead federal agency would have government-to-government consultations
with the Tribal Councils in each of the villages, as part of the EIS process, to discuss the project and hear Council concerns.
Closure Planning
Mine reclamation and closure are largely
driven by State regulations that specify that a mine must be reclaimed concurrent with mining operations to the greatest extent
possible and then closed in a way that leaves the site stable in terms of erosion and avoids degradation of water quality from
acid rock drainage or metal leaching on the site. A detailed reclamation plan will be submitted to the State agencies for review
and approval in the future, during the formal mine permitting process.
Owing to the fact that the Arctic Project
is likely to have facilities on a combination of private (patented mining claims and native land) and State land, it is likely
that the reclamation plan will be submitted and approved as part of the plan of operations, which is approved by the ADNR. However,
since the reclamation plan must meet regulations of both ADNR and the ADEC, both agencies will review and approve the Reclamation
Plan. In addition, private land owners must formally concur with the portion of the reclamation plan for their lands so that it
is compatible with their intended post-mining land use.
The estimate cost of closure is based on
unit rates used by SRK. Long-term water treatment and maintenance of certain water management facilities were calculated separately,
and an NPV is provided for the first 200 years, at a discount rate of 4.3%.
Reclamation costs have been estimated to
be $65.3 million for this PFS, in 2017 undiscounted U.S. dollars. Annual costs associated with long-term operations of the water
treatment plant are estimated to be about $1.27 million for the first five years and $0.96 million thereafter.
Capital Costs
The capital cost estimate uses U.S. dollars
as the base currency. The total estimated initial capital cost for the design, construction, installation and commissioning of
the Arctic Project is estimated to be $779.6 million. A summary of the estimated capital cost is shown in Table 1-3.
Table 3: Initial Capital Costs
Cost Type
|
|
Description
|
|
US$M
|
Direct
|
|
Mine
|
|
281.1
|
|
|
Crushing
|
|
18.3
|
|
|
Process
|
|
113.8
|
|
|
Tailings
|
|
30.3
|
|
|
On-Site Infrastructure
|
|
84.5
|
|
|
Off-Site Infrastructure
|
|
15.6
|
|
|
Direct Subtotal
|
|
543.8
|
Indirect
|
|
Indirects
|
|
121.9
|
|
|
Contingency
|
|
92.0
|
|
|
Owners Costs
|
|
21.9
|
|
|
Indirect Total
|
|
235.8
|
Project Total
|
|
|
|
779.6
|
The total sustaining capital cost estimate
is $65.9 million for the 12 year LOM which includes equipment, tailings and other items. Closure costs were estimated to be $65.3
million. These costs are summarized in Table 1-4.
Table 4: Sustaining Capital and Closure
Costs
|
|
Sustaining Capital (US$M)
|
G&A
|
|
0.9
|
Tailings
|
|
19.9
|
Mining
|
|
45.1
|
Total Sustaining Capital
|
|
65.9
|
|
|
Closure Cost (US$M)
|
Closure Costs
|
|
65.3
|
Operating Costs
The operating cost estimates use U.S. dollars
as the base currency. An average operating cost was estimated for the Arctic Project based on the proposed mining schedule. These
costs included, mining, processing, G&A, surface services, and road toll costs. The average LOM operating cost for the Arctic
Project is estimated to be $46.81/ t milled. The breakdown of costs in Table 1-5 is estimated based on the average LOM mill feed
rate.
Table 5: Sustaining Capital and Closure
Costs
Description
|
|
LOM Average Unit
Operating Cost
($/ t milled)
|
|
Percentage of Total
Annual Operating Costs
|
|
Mining*
|
|
20.47
|
|
|
44
|
%
|
Processing
|
|
15.09
|
|
|
32
|
%
|
G&A
|
|
5.60
|
|
|
12
|
%
|
Surface Services
|
|
0.95
|
|
|
2
|
%
|
Road Toll
|
|
4.70
|
|
|
10
|
%
|
Total Operating Cost
|
|
46.81
|
|
|
100
|
%
|
*Excludes
pre-production costs
Economic Analysis
An economic analysis was undertaken to
determine the IRR, NPV and payback on initial investment of the Arctic Project. The Arctic Project consists of a three year pre-production
construction period, followed by 12 years of production.
The results of this economic analysis represents
forward-looking information. The results depend on the inputs that are subject to a number of known and unknown risks, uncertainties,
and other factors that may cause actual results to differ materially from those presented in this section. Information that is
forward looking includes mineral reserve estimates, commodity prices, the proposed mine production plan, construction schedule,
projected recovery rates, proposed capital and operating cost estimates, closure cost estimates, toll road cost estimates, and
assumptions on geotechnical, environmental, permitting, royalties, and hydrogeological information.
Ausenco developed a pre-tax cash flow model
for the Arctic Project and the NPV and IRR were calculated at the beginning of the construction period in Year -3.
The pre-tax financial model incorporated
the production schedule and smelter term assumptions to produce annual recovered payable metal, or gross revenue, in each concentrate
stream by year. Off-site costs, including the applicable refining and treatment costs, penalties, concentrate transportation charges,
marketing and representation fees, and royalties were then deducted from gross revenue to determine the NSR. The operating cash
flow was then produced by deducting annual mining, processing, G&A, surface services, and road toll charges from the NSR. Initial
and sustaining capital was deducted from the operating cash flow in the years they occur, to determine the net cash flow before
taxes. Initial capital cost includes all estimated expenditures in the construction period, from Year -3 to Year -1 inclusive.
First production occurs at the beginning of Year 1. Sustaining capital expenditure includes all capital expenditures purchased
after first production, including mine closure and rehabilitation. The model includes an allocation of a 1% NSR attributable to
NANA.
The pre-tax financial results are:
|
·
|
$1,935.2 million NPV at an 8% discount rate
|
|
·
|
1.9 year payback period, on the initial capital costs of $779.6 million
|
The following tax regimes were incorporated
in the post-tax analysis: U.S. Federal Income Tax, Alaska State Income Tax (AST), and Alaska Mining License Tax (AMLT). Taxes are
calculated based on currently enacted United States and State of Alaska tax laws and regulations, including the U.S. Federal enactment
of the Tax Cuts & Jobs Act (TCJA) on December 22, 2017. At the base case metal prices used for this study, the total
estimated taxes payable on the Arctic Project profits are $1,162.2 million over the 12-year mine life.
The post-tax financial results are:
|
·
|
$1,412.7 million NPV at an 8% discount rate
|
|
·
|
2.0 year payback period, on the initial capital costs of $779.6 million
|
Sensitivity Analysis
Ausenco investigated the sensitivity of
the Arctic Project’s pre-tax NPV, and IRR to several project variables, including metal prices (copper, lead, zinc, gold,
silver), capital costs, and operating costs (onsite and offsite). The metal grade is not presented in these findings because the
impacts of changes in the metal grade mirror the impact of changes in metal price.
The Arctic Project’s pre-tax NPV
at an 8% discount rate is most sensitive to changes in copper price, followed by zinc price, off-site operating costs, on-site
operating costs, capital costs, silver price, gold price, and lead price.
The Arctic Project’s pre-tax IRR
is most sensitive to changes in copper price and capital cost, followed by zinc price and off site operating costs, and in then
decreasing order, on-site operating costs, silver price, gold price, and lead price.
Interpretations and Conclusions
Under the assumptions presented in the
2018 Arctic Report, the Arctic Project shows positive economics.
The financial analysis excludes consideration
of the NANA Agreement, whereby NANA has the right, following a construction decision, to elect to purchase a 16% to 25% direct
interest in the Arctic Project or, alternatively, to receive a 15% Net Proceeds Royalty.
The financial analysis excludes consideration
of the South32 Option Agreement, whereby South32 had the right to form a 50/50 Joint Venture with Trilogy over Trilogy’s
Alaskan interests, including the Arctic Project, which South32 exercised in December 2019. See “Significant Developments
in 2019”.
The cost assumptions for the AMDIAP road
are estimates provided by Trilogy. There is a risk to the capital and operating cost estimates, the financial analysis, and the
Mineral Reserves if the toll road is not built in the time frame required for the Arctic Project, or if the toll charges are significantly
different from what was assumed.
Recommendations
A single-phase work program is recommended,
which will include: geotechnical investigations and studies; optimization of the plant and related service facilities and evaluation
of the power supply; examination of water management, water treatment, WRD and TSF designs; baseline studies and environmental
permitting activities; and additional metallurgical test work. The budget for this work is estimated at about $3.3 million.
Bornite Project, Ambler District, Alaska
Bornite Project
Except as otherwise stated, the scientific
and technical information relating to the Bornite Project contained in this Form 10-K is derived from, the 2018 Bornite Report
titled “NI 43-101 Technical Report on the Bornite Project, Northwest Alaska, USA” dated July 20, 2018 with an
effective date of June 5, 2018 prepared by BD Resource Consulting, Inc., SIM Geological Inc., and International Metallurgical &
Environmental Inc. The information regarding the Bornite Project is based on assumptions, qualifications and procedures which are
not fully described herein. Reference should be made to the full text of the 2018 Bornite Report which has been filed with certain
Canadian securities regulatory authorities pursuant to NI 43-101 and is available for review on SEDAR at www.sedar.com and on EDGAR
at www.sec.gov.
Bornite Project - Property Description
and Location
The property is located in the Ambler mining
district of the southern Brooks Range, in the NWAB of Alaska. The property is located in Ambler River A-2 quadrangle, Kateel River
Meridian T 19N, R 9E, sections 4, 5, 8 and 9. The Bornite Project is located 248 km east of the town of Kotzebue, 19 km north of
the village of Kobuk, 275 km west of the Dalton Highway, an all-weather state maintained public road, at geographic coordinates
N67.07° latitude and W156.94° longitude (Universal Transverse Mercator (UTM) North American Datum (NAD) 83, Zone 4W coordinates
7440449N, 589811E).
At the time of the formation of the
50/50 joint venture with South32, Trilogy transferred its Alaskan assets, including the Bornite project, to the newly formed
joint venture. See “Significant Developments in 2019”.
Bornite Project - Accessibility,
Climate, Local Resources, Infrastructure, and Physiography
Primary access to the Bornite Project is
by air, using both fixed wing aircraft and helicopters. There are four well maintained, approximately 1,500 m-long gravel airstrips
located near the property, capable of accommodating charter fixed wing aircraft. These airstrips are located 40 km west at Ambler,
23 km southwest at Shungnak, 19 km south at Kobuk, and 15 km south at Dahl Creek. There is daily commercial air service from Kotzebue
to the village of Kobuk, the closest community to the property. During the summer months, the Dahl Creek Camp airstrip is suitable
for larger aircraft, such as C-130 and DC-6. In addition to the four 1,500 m airstrips, there is a 700 m airstrip located at the
Bornite Camp. The airstrip at Bornite is suited to smaller aircraft, which support the Bornite Camp with personnel and supplies.
There is no direct water access to the
property. During spring runoff, river access is possible by barge from Kotzebue Sound to Ambler, Shungnak, and Kobuk via the Kobuk
River.
A two-lane, two-wheel drive gravel road
links the Bornite Project’s main camp to the 1,525 m Dahl Creek airstrip and village of Kobuk.
The climate in the region is typical of
a sub-arctic environment. Exploration is generally conducted from late May until late September. Weather conditions on the
Bornite Project can vary significantly from year to year and can change suddenly. During the summer exploration season, average
maximum temperatures range from 10°C to 20°C, while average lows range from -2°C to 7°C. By early October, unpredictable
weather limits safe helicopter travel to the property. During winter months, the property can be accessed by snow machine, track
vehicle, or fixed wing aircraft. Winter temperatures are routinely below -25°C and can exceed -50°C. Annual precipitation
in the region averages at 395 mm with the most rainfall occurring from June through September, and the most snowfall occurring
from November through January.
Drilling and mapping programs are seasonal
and have been supported out of the Main Bornite Camp and Dahl Creek Camp. The main Bornite Camp facilities are located on Ruby
Creek on the northern edge of the Cosmos Hills. The camp provides office space and accommodations for the geologists, drillers,
pilots, and support staff. There are four 2-person cabins installed by NANA prior to our tenure. In 2011, the main Bornite Camp
was expanded to 20 sleeping tents, 3 administrative tents, 2 shower/bathroom tents, 1 medical tent, and 1 dining/cooking tent.
With these additions, the camp capacity was increased to 49 beds. A 30 m by 9 m core logging facility was also built in summer
of 2011. An incinerator was installed near the Bornite airstrip to manage waste created by the Bornite Project. Power for the Bornite
Project is supplied by a 175 kW Caterpillar diesel generator. Water is provided by a permitted artesian well located 250 m from
the Bornite Camp. In 2012, the camp was further expanded with the addition of a laundry tent, a women's shower/washroom tent, a
recreation tent, several additional sleeping tents, and a 2 x enlargement of the kitchen tent. Camp capacity increased to 76 beds.
The septic field was upgraded to accommodate the increase in camp population. One of the two-person cabins was winterized for use
by the winter caretaker. A permitted landfill was established to allow for the continued cleanup and rehabilitation of the historic
shop facilities and surroundings. The Dahl Creek camp is a leased facility used as an overflow or alternative facility to the main
Bornite Camp. The Dahl Creek camp has a main cabin for dining and administrative duties, and a shower facility. Sleeping facilities
include two hard-sided sleeping cabins with seven beds (primarily used for staff), one 4-person sleeping tent, and three 2-person
sleeping tents for a total of 17 beds. There are support structures, including a shop and storage facilities.
The Bornite Project is located on Ruby
Creek on the northern edge of the Cosmos Hills. The Cosmos Hills are part of the southern flank of the Brooks Range in Northwest
Alaska. Topography in the area is moderately rugged. Maximum relief in the Cosmos Hills is approximately 1,000 masl with an average
of 600 masl. Talus covers the upper portions of the hills; glacial and fluvial sediments occupy valleys. The Kobuk Valley is located
at the transition between boreal forest and Arctic tundra. Spruce, birch, and poplar are found in portions of the valley, with
a ground cover of lichens (reindeer moss). Willow and alder thickets and isolated cottonwoods follow drainages, and alpine tundra
is found at higher elevations. Tussock tundra and low, heath-type vegetation covers most of the valley floor. Patches of permafrost
exist on the property. Wildlife in the property area is typical of Arctic and Subarctic fauna. Larger animals include caribou,
moose, Dall sheep, bears (grizzly and black), wolves, wolverines, coyotes, and foxes. Fish species include salmon, sheefish, arctic
char, and arctic grayling. The Kobuk River, which briefly enters the Upper Kobuk Mineral Projects on its southwest corner, is a
significant salmon spawning river. The caribou on the property belong to the Western Arctic herd that migrates twice a year –
south in August, from their summer range north of the Brooks Range, and north in March from their winter range along the Buckland
River.
Bornite Project - History
Kennecott and Bear Creek Mining Tenure
Regional exploration began in the early
1900s when gold prospectors noted copper occurrences in the hills north of Kobuk, Alaska. In 1947, local prospector Rhinehart “Rhiny”
Berg along with various partners traversing in the area located outcropping mineralization along Ruby Creek (Bornite) on the north
side of the Cosmos Hills. They subsequently staked claims over the Ruby Creek showings and constructed an airstrip for access.
In 1957, BCMC, Kennecott's exploration subsidiary, optioned the property from Berg. Exploration drilling in 1961 and 1962 culminated
in the discovery of the “No.1 Ore Body” where drill hole RC-34 cut 20 m of 24% copper (the “No.1 Ore Body”
is a historic term used by BCMC that does not connote economic viability in the present context; it is convenient to continue to
use the term to describe exploration work and historic resource estimation in a specific area of what is now generally known as
Ruby Creek Upper Reef). The discovery of the “No.1 Ore Body” led to the development of an exploration shaft in 1966.
The shaft, which reached a depth of 328 m, encountered a significant watercourse and was flooded near completion depth. The shaft
was subsequently dewatered and an exploration drift was developed to provide access for sampling and mapping, and to accommodate
underground drilling to further delineate mineralization. A total of 59 underground holes were drilled and, after the program,
the shaft was allowed to re-flood. The discovery of the Arctic Project in 1965 prompted a hiatus in exploration at Bornite, and
only limited drilling occurred up until 1976.
In the late 1990s, Kennecott resumed its
evaluation of the Bornite deposit and the mineralization in the Cosmos Hills with an intensive soil, stream, and rock chip geochemical
sampling program using 32 element ICP analyses. Grid soil sampling yielded 765 samples. Ridge and spur sampling resulted in an
additional 850 soil samples in the following year. Skeletonized core samples (85 samples) from key historic drill holes were also
analyzed using 32 element ICP analytical methods. Geochemical sampling identified multiple areas of elevated copper and zinc in
the Bornite region.
Kennecott completed numerous geophysical
surveys as an integral part of exploration throughout their tenure on the property. Various reports, notes, figures, and data files
stored in Kennecott’s Salt Lake City exploration office indicated that geophysical work included, but was not limited to,
the following:
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Airborne magnetic and EM surveys (fixed-wing INPUT) (1950s)
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Gravity, single point (“SP”), Audio-Frequency Magneto-Telluric (“AMT”),
EM, borehole and surface IP/resistivity surveys (1960s)
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Gravity, airborne magnetic, and CSAMT surveys (1990s)
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We have little information or documentation
associated with these geophysical surveys conducted prior to the 1990s. Where data are available in these earlier surveys, the
lack of details in data acquisition, coordinate systems, and data reduction procedures limit their usefulness. The only complete
geophysical report available concerns down-hole IP/resistivity results. Most notable is the 1996 gravity survey from the Bornite
deposit into the Ambler lowlands. The Bornite deposit itself is seen as a significant 3 milligal anomaly. Numerous 2 milligal to
> 6 milligal anomalies occur under cover in the Ambler lowlands and near the Aurora Mountain and Pardner Hill occurrences. In
addition to the geophysical surveys conducted by Kennecott, the ADNR completed an aeromagnetic survey of portions of the Ambler
mining district in 1974-1975.
Several studies have been undertaken reviewing
the geology and geochemistry of the Bornite deposit. Most notable is Murray Hitzman’s PhD dissertation at Stanford University
and Don Runnel’s PhD dissertation at Harvard University. Bernstein and Cox reported on mineralization of the “No. 1
Ore Body” in a 1986 paper in Economic Geology. In addition to the historical work, Ty Connor at the Colorado School of Mines
recently completed a Master’s thesis which reported on the timing of alteration and mineralization at the Bornite deposit.
Kennecott conducted two technical reviews
of the groundwater conditions and a summary of the findings related to the flooding of the exploration shaft. In 1961, Kennecott
collected 32 coarse reject samples from five drill holes to support preliminary metallurgical test work at Bornite. Samples targeted
high-grade (> 10%) copper mineralization from the Upper Reef at Ruby Creek.
Bornite Project - Geological Setting
and Mineralization
The Bornite Project is located within the
Arctic Alaska Terrane, a sequence of mostly Paleozoic continental margin rocks that make up the Brooks Range and North Slope of
Alaska. It is within the Phyllite Belt geologic subdivision, which together with the higher-grade Schist Belt, stretches almost
the entire length of the Brooks Range and is considered to represent the hinterland of the Jurassic Brooks Range orogeny. The southern
margin of the Phyllite Belt is marked by mélange and low angle faults associated with the Kobuk River fault zone, while
the northern boundary is thought to be gradational with the higher-grade metamorphic rocks of the Schist Belt.
The geology of the Bornite resource area
is composed of alternating beds of carbonate rocks (limestone and dolostone) and calcareous phyllite. Limestone transitions laterally
into dolostone, which hosts the majority of the mineralization and is considered to be hydrothermal in origin. Spatial relationships
and petrographic work establish dolomitization as genetically related to early stages of the copper mineralizing system.
Work by Trilogy in 2015 focused on furthering
the understanding of the distribution and nature of the various lithologic units and their context in a sedimentary depositional
model. The updated model, based on lithogeochemical signatures of the various units along with their historical visual logging,
shows stacked debris flows composed of basal non-argillaceous channelized debris flows breccias with a fining upward sequence of
increasingly argillaceous-rich breccias capped by high calcium (Ca) phyllites, confined laterally in channels between either massive
or thin-bedded platform carbonates. Two stacked debris flow sequences are apparent, the Lower and Upper reefs. The Upper Reef grades
vertically into capping argillaceous limestones instead of discrete high Ca phyllites indicating a shallowing upward or filling
of the debris flow channels. Based on this updated interpretation, a series individual debris flow cycles have been modeled. Low
calcium (Ca) phyllites, such as the Anirak Schist (QP) and the Beaver Creek Phyllite respectively underlie and cap the local stratigraphy
suggesting different sourcing than the locally derived high Ca phyllites of the debris flow dominated Bornite Carbonate sequence
stratigraphy. The Beaver Creek Phylite is in structural contact with the Bornite Carbonate Sequence while the contact with the
underlying Anirak Schist is an unconformity. In addition to the stacked sedimentary stratigraphy, a crosscutting breccia dubbed
the P-Breccia has been identified in and around the recently discovered South Reef mineralization. Though poorly defined by the
overall lack of drilling in the area, the body which contains excellent copper grade lies at or near the Iron Mountain discontinuity.
It remains unclear whether the P Breccia is a post-depositional structural, hydrothermal or solution-collapse induced breccia.
Structural fabrics observed on the property
include bedding and two separate foliations. Bedding (S0) can be measured only rarely where phyllite and carbonate are
interbedded and it is unclear to what extent it is transposed. The pervasive foliation (S1) is easily measured in phyllites
and may be reflected by colour banding and/or stylolamination (flaggy habit in outcrop) of the carbonates. Core logging shows that
S1 is folded gently on the 10 m scale and locally tightly folded at the decimetre scale. S2 axial planar cleavage is
locally developed in decimetre scale folds of S1. Both S1 and S2 foliations are considered to
be Jurassic in age. Owing to their greater strength, bodies of secondary dolostone have resisted strain and foliation development,
whereas the surrounding limestone and calc-phyllite appear in places to have been attenuated during deformation. This deformation,
presumably Jurassic, complicates sedimentological interpretations. Potentially the earliest and most prominent structural feature
in the resource area is the northeast-trending Iron Mountain discontinuity which is still problematic in its interpretation.
Mineralization at Bornite occurs as tabular
mineralized zones that coalesce into crudely stratiform bodies hosted in secondary dolomite. Two significant dolomitic horizons
that host mineralization have been mapped by drilling and include: 1) the Lower Reef, a thick 100 to 300 m thick dolomitized zone
lying immediately above the basal quartz phyllite unit of the Anirak Schist; and 2) the Upper Reef, a 100 to 150 m thick dolomite
horizon roughly 300 m higher in section.
The Lower Reef dolomite outcrops along
the southern margin of the Ruby Creek zone and is spatially extensive throughout the deposit area. It hosts a significant portion
of the shallow resources in the Ruby Creek zone as well as higher grade resources down dip and to the northeast in the South Reef.
The Upper Reef zone hosts relatively high-grade resources to the north in the Ruby Creek zone. The Upper reef zone appears to lie
at an important NE- trending facies transition to the NW of the main drilled area and locally appears to be at least partially
thrust over the Lower Reef stratigraphy to the southeast.
Drill results from 2013 show dolomitization
and copper mineralization in the Upper and Lower Reefs coalescing into a single horizon along the northern limits of current exploration.
The NE- trending Ruby Creek and South Reef zones also coalesce into a roughly 1000 m wide zone of >200 m thick dolomite containing
significant copper mineralization dipping north at roughly 5-10 degrees. The 2017 drill results show that the mineralized dolomite
horizon continues for at least another 700m down-dip to the northeast.
Bornite Project – Mineralization
Copper mineralization at Bornite is comprised
of chalcopyrite, bornite, and chalcocite distributed in stacked, roughly stratiform zones exploiting favourable stratigraphy within
the dolomitized limestone package. Mineralization occurs, in order of increasing grade, as disseminations, irregular and discontinuous
stringer-style veining, breccia matrix replacement, and stratiform massive sulphides. The distribution of copper mineral species
is zoned around the bottom-centre of each zone, with bornite-chalcocite-chalcopyrite at the core and progressing outward to chalcopyrite-pyrite.
Additional volumetrically minor copper species include carrollite, digenite, tennantite-tetrahedrite, and covellite. Stringer pyrite
and locally significant sphalerite occur above and around the copper zones, while locally massive pyrite and sparse pyrrhotite
occur in association with siderite alteration below copper mineralization in the Lower Reef.
In addition to the copper mineralization,
significant cobalt mineralization is found accompanying bornite-chalcocite mineralization. Cobalt occurs with high-grade copper
as both carrollite (Co2CuS4) and as cobaltiferous rims on recrystallized pyrite grains. Preliminary geometallurgical work by Trilogy
supports this observation and shows cobalt occurring primarily as cobaltiferious pyrite (approximately 80% of he contained cobalt)
and within other cobalt minerals such as carrollite, and cobaltite (CoAsS) present throughout the deposit (Upper Reef, Lower Reef,
and South Reed).
Appreciable silver values are also found
with bornite-rich mineralization in the South Reef and Ruby Creek zones.
Bornite Project – Exploration
Exploration in and around the Bornite Project
by Kennecott from 1957 to 1998 is summarized above. In addition to the extensive drilling completed during the more than 40-year
tenure of Kennecott in the district, Kennecott completed widespread surface geochemical sampling, regional and property scale mapping,
and numerous geophysical surveys employing a wide variety of techniques. The majority of this data has been acquired by us and
forms the basis for renewed exploration that targets Bornite-style mineralization in the Bornite carbonate sequence.
NovaGold as the precursor company to us
began to actively pursue an agreement to explore the Bornite Project with NANA in 2005 resulting in an initial airborne geophysical
survey in 2006. Negotiations on the consolidation and exploration of the entire Ambler district continued for the next several
years culminating in the NANA Agreement in October 2011.
With the NANA Agreement approaching completion,
NovaGold initiated work in 2010 to begin to characterize the exploration potential and depositional controls by re-logging and
re-analyzing select drill holes with a Niton portable x-ray fluorescence (“XRF”) to determine geochemical variability.
In 2011, NovaGold began an initial drill program to verify the historical database and exploration potential and conducted additional
geophysical surveys to provide better targeting tools for continued exploration in the district. In 2012, we expanded the IP geophysical
coverage completing a major district-wide survey that targeted the prospective Bornite Carbonate sequence. Subsequent resource
drilling between 2011 and 2013 based on the exploration targeting is discussed in the “Bornite Project - Mineral Resource
Estimates” section below.
2006 NovaGold Exploration
In 2006, NovaGold contracted Fugro Airborne
Surveys to complete a detailed helicopter DIGHEM magnetic, EM and radiometric survey of the Cosmos Hills. The survey covered a
rectangular block approximately 18 km by 49 km which totaled 2,852 line kilometres. The survey was flown at 300 m line spacing
with a line direction of N20E. The DIGHEM helicopter survey system produced detailed profile data of magnetics, EM responses and
radiometrics (total count, uranium, thorium, and potassium) and was processed into maps of magnetics, discrete EM anomalies, EM
apparent resistivity, and radiometric responses.
2010 NovaGold Exploration
In 2010, in anticipation of completing
the NANA Agreement, NANA granted NovaGold permission to begin low level exploration at Bornite; this consisted of re-logging and
re-analyzing select drill holes using a Niton portable XRF. In addition to the 2010 re-logging effort, NovaGold contracted a consulting
geophysicist, Lou O'Connor, to compile a unified airborne magnetic map for the Ambler mining district from Kennecott, Alaska DNR,
and NovaGold airborne geophysical surveys.
2011 NovaGold Exploration
In 2011, NovaGold contracted Zonge International
Inc. (“Zonge”) to conduct both dipole-dipole complex resistivity induced polarization (“CRIP”) and natural
source audio-magnetotelluric (“NSAMT”) surveys over the northern end of the prospect to develop tools for additional
exploration targeting under cover to the north.
NSAMT data were acquired along two lines
totaling 5.15 line-km, with one line oriented generally north-south through the centre of the survey area and one being the southernmost
east-west line in the survey area. CRIP data were acquired on five lines: four east-west lines and one north-south line, for a
total coverage of 14.1 line-km and 79 collected CRIP stations. The initial objective of the survey was to investigate geological
structures and the distribution of sulphides possibly associated with copper mineralization.
Results from the paired surveys show that
wide-spaced dipole-dipole resistivity is the most effective technique to directly target the mineralization package. Broad low
resistivity anomalies reflecting pyrite haloes and mineralization appear to define the limits of the fluid package. Well-defined
and often very strong chargeability anomalies are also present, but appear in part to be masked by phyllitic units which also have
strong chargeability signatures. The NSAMT show similar resistivity features as the IP, but are less well resolved.
2012 Trilogy Exploration
In light of the success of the 2011 geophysical
program, we contracted Zonge to conduct a major district-wide dipole/dipole IP survey, a down-hole IP radial array survey in the
South Reef area, and an extensive physical property characterization study of the various lithologies to better interpret the existing
historical geophysical data.
Zonge completed 48 line km of 200 m dipole/dipole
IP during 2012, infilling and expanding on the 2011 survey, and stretching across the most prospective part of the outcropping
permissive Bornite Carbonate sequence. The results show a well-defined low resistivity area associated with mineralization and
variable IP signatures attributed both to mineralization and the overlying Beaver Creek phyllite. Numerous target areas occur in
the immediate Bornite area with lesser targets occurring in the Aurora Mountain and Pardner Hill areas and in the far east of the
survey area. During the 2012 drill program at South Reef, a single drill hole was targeted on a low resistivity area approximately
500 m to 600 m southeast of the South Reef mineralization trend. Although the drill hole intersected some dolomite alteration in
the appropriate stratigraphy, no significant sulphides were encountered.
In addition to the extensive ground IP
survey, Zonge also completed 9 km of down-hole radial IP using an electrode placed in drill hole RC12-0197 to further delineate
the trend and potential in and around the South Reef. In addition to the 2012 ground geophysical surveys, extensive physical property
data including resistivity, chargeability, specific gravity, and magnetic susceptibility were captured for use in modelling the
existing ground IP and gravity surveys, and the airborne EM and magnetic surveys.
In addition to geophysical focused exploration,
a district wide geologic map was compiled integrating Kennecott’s 1970’s mapping of the Cosmos Hills with selective
Trilogy mapping in 2012.
2013 Trilogy Exploration
The emphasis of the 2013 program was to
further validate and refine the 2012 geologic map of the Cosmos Hills. A deep penetrating soil and vegetation geochemical
orientation survey was completed over the South Reef deposit, utilizing various partial leaches and pH methods. The initial, approximately
1 km, test lines suggest a good response for several of the partial leaches of the soils but little response in the vegetative
samples; further follow-up is warranted to the north of the deposit into the Ambler lowlands.
2014 Trilogy Exploration
During 2014, exploration work was limited
to a re-logging and re-sampling program of historical Kennecott drill core.
2015 Trilogy Exploration
As a follow-up to the 2013 field program,
a deep penetrating soil and vegetation geochemical survey was extended north of the deposit into the Ambler lowlands. Trilogy geologists
completed a lithogeochemical desktop study and a comprehensive update to the 3D lithology model; the updated domains have been
utilized in the most recent resource estimation.
2017 Trilogy Exploration
The 2017 field program extended the
2013 and 2015 Deep Penetrating Geochemical (DPG) soil survey another 500m to the northeast. The 2013 soil line was extended
1500m to the east to test over the covered projection of the Two Grey Hills carbonate section. The 3D lithology model was
updated to incorporate the 2017 drill program results, which are described in Section 10, Trilogy Metals also completed
a close spaced (100m station spacing) ground gravity survey over a 2 km by 4km grid covering the existing resource area and
extending northeast over the 2017 drill target area. The complete Bouguer Anomaly (CBA) residual plot (removes a strong
decreasing to the northeast regional gradient) shows good correlation with the Lower Reef mineralization that outcrops on
surface with the gravity high gradually decreasing down-dip to the northeast.
As part of the overall gravity program,
Mira Geosciences created a petrophysical model for the Bornite Deposit that synthesized the expected gravity response on surface
(forward model) for the 2017 gravity stations. This forward model matches very closely with the actual survey data over the deposit
area, but diverges on the south end where the expected response of gravity low is actually a strong gravity high that may reflect
shallow mineralization up-dip along the South Reef trend. Mira also completed a geologically constrained 3D inversion using the
2017 gravity data. Two areas of anomalously high densities (>2.9 g/cc) were identified. The first area extends up to 750m to
the east-northeast of RC17-0239, which was one of the more successful holes in 2017 and is coincident with the Iron Mountain structure.
The second anomaly is located just above the Anirak contact (Lower Reef) to the west of the 2017 target area and 700m to the north
of the closest drill hole (RC-53), which is weakly mineralized along that horizon. This area falls along the northwest-southeast
high grade thickness trend.
2018 Trilogy Exploration
The 2018 field 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
and was subsequently expanded to 10,000 meters with the addition of 2 more drill rigs. 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.
Bornite Project – Drilling
A total of 214 surface core holes and 51
underground core holes, totaling 104,587 meters have been drilled targeting the Bornite deposit during 23 different annual campaigns
dating from 1957 through 2019. All the drill campaigns, except for the 2011 NovaGold campaign and the 2012, 2013, 2017 to 2019
Trilogy campaigns were completed by Kennecott or their exploration subsidiary BCMC. All drill holes except RC13-230 and RC13-232
which have been reserved for metallurgical studies and the 2017 to 2019 drill holes were utilized in the estimation of the current
resource. The 2017 through 2018 drill holes were used for a resource estimation in early 2019 that was not materially different
for the current resource and was not disclosed.
The 2018 drill program consisted of 12
drill holes totaling 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 at 8,000 meters utilizing 3 drill rigs and was
subsequently expanded to 10,000 meters with the addition of 2 more drill rigs. 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.
In the 2017 drill campaign, nine holes
were initiated but two abandoned due to drilling problems. The seven drill holes completed in 2017 stepped-out between 250 to 400m
from the previous drill holes, distances considered too far to support the estimation of mineral resources. Additional, closer-spaced
drill holes are required in this area to provide the degree of confidence required to support resource estimation.
Sprague and Henwood, a Pennsylvania-based
drilling company, completed all of the Kennecott drilling, with the exception of the 1997 program (three drill holes) completed
by Tonto Drilling Services, Inc. (a NANA-Dynatech company). The 2011 thru 2013 NovaGold/Trilogy programs used Boart Longyear
Company as the drill contractor. The 2017 program used Tuuq Drilling, a NANA company, who sub-contracted Major Drilling.
In the initial years of drilling at Bornite,
Kennecott relied on AX core (1.1875 in or 30.2 mm diameter), but, as drilling migrated towards deeper targets, a change to BX core
(1.625 in or 41.3 mm diameter) was implemented to help limit deviation. From 1966 to 1967, drilling activity at Bornite moved underground
and EX diameter core (0.845 in or 21.5 mm diameter) was implemented to define the Ruby Creek Upper Reef zone “No.1 Ore Body”.
Drilling activity moved back to the surface in 1968, and, from 1968 to 1972, BX core was most commonly drilled. In later years,
core size increased to NX (2.125 in or 54.0 mm diameter) and finally, in 2011, core size increased to NQ (1.874 in or 47.6 mm diameter)
and HQ (2.5 in or 63.5 mm diameter). Progressively larger diameter drill rods have been continually used over the years in an attempt
to minimize drill hole deviation.
There is only partial knowledge of specific
drill core handling procedures used by Kennecott during their tenure at the Bornite Deposit. All of the drill data collected during
the Kennecott drilling programs (1958 to 1997) was logged on paper drill logs, copies of which are stored in the Kennecott office
in Salt Lake City, Utah. Electronic scanned copies of the paper logs, in PDF format, are held by Trilogy. Drill core was sawed
or split with a splitter, with half core submitted to various assay labs and the remainder stored in the Kennecott core storage
facility at the Bornite Deposit. In 1995, Kennecott entered the drill assay data, the geologic core logs, and the down hole collar
survey data into an electronic format. In 2009, NovaGold geologists verified the geologic data from the original paper logs against
the Kennecott electronic format and then merged the data into a Microsoft™ SQL database. Sampling of drill core by Kennecott
and BCMC focused primarily on the moderate to high grade mineralized zones. Intervals of visible sulphide mineralization containing
roughly >0.5 to 1% copper were selected for analysis by Union Assay Office Inc. of Salt Lake City, Utah. This approach left
numerous intervals containing weak to moderate copper mineralization un-sampled in the historic drill core. During the 2012 exploration
program, we began sampling a portion of this remaining drill core in select holes in the South Reef area. Trilogy extended this
sampling program to the Ruby Creek area in 2013 and 2014.
Throughout our tenure at Bornite, the following
core handling procedures have been implemented. Core is slung by helicopter, or transported by truck or ATV, from the drill rig
to the core-logging facility. Upon delivery, geologists and geotechnicians open and inspect the core boxes for any irregularities.
They first mark the location of each drilling block on the core box, and then convert footages on the blocks into metric equivalents.
Geotechnicians or geologists measure the intervals (or “from/to”) for each box of core and include this information,
together with the drill hole ID and box number, on a metal tag stapled to the end of each box. Geotechnicians then measure the
core to calculate percent recovery and rock quality designation (“RQD”). RQD is the sum of the total length of all
pieces of core over 12 cm in a run. The total length of core in each run is measured and compared to the corresponding run length
to determine percent recovery. Core is then logged with lithology and visual alteration features captured on observed interval
breaks. Mineralization data, including sulphide specie and abundance (recorded as percent), t and gangue and vein mineralogy are
collected for each sample interval with an average interval of approximately 2 m. Structural data is collected as point data. Geologists
then mark sample intervals to capture each lithology or other geologically appropriate intervals. Sample intervals of core are
typically between 1 m and 3 m in length but are not to exceed 3 m in length. Occasionally, if warranted by the need for better
resolution of geology or mineralization, smaller sample intervals have been employed. Geologists staple sample tags on the core
boxes at the start of each sample interval and mark the core itself with a wax pencil to designate sample intervals. This sampling
approach is considered sound and appropriate for this style of mineralization and alteration. Drill core is digitally photographed
prior to sampling. Drill core is cut in half using diamond core saws. Specific attention to core orientation is maintained during
core sawing to ensure that representative samples are obtained. One-half of the core is retained in the core box for storage on
site, or at our Fairbanks warehouse, and the other half bagged and labeled for analysis. Samples are selected for specific gravity
measurements.
In 2013, 33 historic drill holes in the
Ruby Creek area, and in 2014, 37 historic drill holes in the Ruby Creek Area were re-logged, re-sampled and re-assayed as these
holes had previously only been selectively sampled by Kennecott. Entire holes were re-logged utilizing Trilogy protocols discussed
above. Samples were submitted either as half-core, where previously sampled, or whole core where un-sampled (this was done to ensure
that a sufficient volume of material was provided for analysis). Sample intervals were matched to historic intervals whenever possible
or selected to reflect Trilogy sampling procedures described above. The objectives of the re-assay/re-logging program were threefold:
1) to implement a QA/QC program on intervals previously sampled by Kennecott in order to confirm the validity of their results;
2) to identify additional lower grade (0.2-0.5% copper), which was not previously sampled; and 3) to provide additional multi-element
ICP data to assist in the geologic interpretation of the deposit.
Bornite Project - Sample Preparation,
Analyses and Security
Sample preparation, analytical lab accreditation
and security measures taken during historical Kennecott and BCMC programs are unknown to us; however, we are not aware of any reason
to suspect that any of these samples have been tampered with. The 2011 to 2013 and 2017 samples were either in the custody of NovaGold
or Trilogy personnel or the assay laboratories at all times, and the chain of custody of the samples is well documented.
Once drill core was sawed, one half was
retained for future reference and the other half was sent to ALS Minerals (formerly ALS Chemex) in Vancouver for analyses. Shipment
of core samples from the Bornite camp occurred whenever backhaul capacity was available on the chartered aircraft, which was generally
5 to 6 days a week. Rice bags, containing two to four individual poly-bagged core samples, were marked and labeled with the ALS
Minerals address, project name (Bornite), drill hole number, bag number, and sample numbers enclosed. Rice bags were secured with
a pre-numbered plastic security tie, assembled into loads for transport by chartered flights on a commercial airline to Fairbanks,
and directly delivered by a contracted expeditor to the ALS Minerals preparation facility in Fairbanks. In addition to the core
samples, control samples were inserted into the shipments at thee rate of one standard, one blank and one duplicate per 17 core
samples. Samples were logged into a tracking system on arrival at ALS Minerals, and weighed. Samples were then crushed, dried,
and a 250 g split was pulverized to greater than 85% passing 75 μm.
Gold assays in 2011 and 2012 were determined
using fire analysis followed by an atomic absorption spectroscopy (“AAS”) finish; gold was not analyzed in 2013 or
2014. The lower detection limit was 0.005 ppm gold; the upper limit was 10 ppm gold. An additional 48-element suite was assayed
by inductively coupled plasma-mass spectrometry (“ICP-MS”) and ICPAES methodologies, following a four acid digest.
Over limit (>1.0%) copper and zinc analyses were completed by AA, following a four acid digest.
ALS Minerals has attained International
Organization for Standardization (ISO) 9001:2000 registration. In addition, the ALS Minerals laboratory in Vancouver is accredited
to ISO 17025 by Standards Council of Canada for a number of specific test procedures including fire assay of gold by AA, ICP
and gravimetric finish, multi-element ICP and AA assays for silver, copper, lead and zinc. Trilogy has no relationship with any
primary or check assay labs utilized.
During 2012, 2013, and 2014, Trilogy staff
performed continuous validation of the drill data; both while logging was in progress and after the field program was complete.
Trilogy also retained independent consultant Caroline Vallat, P.Geo. of GeoSpark Consulting Inc. to: 1) import digital drill data
to the master database and conduct QA/QC checks upon import, 2) conduct a QA/QC review of paired historical assays and Trilogy
2012, 2013 and 2014 re-assays; 3) monitor an independent check assay program for the 2012, 2013, and 2014 campaigns; and 4) generate
a QA/QC report for the 2012, 2013, and 2014 campaigns along with a 2017 review of the cobalt data.
Bornite Project - Mineral Resource
Estimates
The mineral resource estimate has been
prepared by BD Resource Consulting, and SIM Geological Inc. We have filed several previous NI 43-101 Technical Reports on the Bornite
Project dated March 18, 2014, February 5, 2013, July 18, 2012 and April 19, 2016. The effective date of this
resource is June 5, 2018.
During the summer of 2017, Trilogy drilled
seven drill holes testing the area down-dip continuity of the northern part of the Bornite deposit. These drill holes successfully
tested the mineralized target horizon but the spacing of these holes is considered too far to support the generation of additional
mineral resource estimates. As a result, the estimates of copper resources remain unchanged from those reported in April 2016.
During the period from 2011 through 2017,
Trilogy implemented an expanded program of re-sampling and re-assaying for an extended suite of elements including cobalt. This
report includes a description of the procedures used to estimate cobalt resources for the Bornite deposit.
The Bornite Project database comprises
a total of 243 diamond drill (core) holes totaling 86,5845 m; 173 holes target the Ruby Creek zone and 45 holes target the South
Reef zone. The remaining 25 holes in the database are exploratory in nature and test for satellite mineralization proximal to the
Bornite Deposit. The database contains a total of 32,138 samples that have been analyzed for copper content and 26,574 that have
been analyzed for cobalt content. During 2014, Trilogy geologists re-logged and sampled 37 Kennecott drill holes comprising approximately
13,000 meters with partial or no assays. The resource estimate incorporates the results from the 2014 field program as well as
advancements to the 3D geological model completed during 2015.
Mineralization in the Ruby Creek zone occurs
as two discrete strata bound lenses: a Lower Reef which outcrops and dips approximately 10-15 degrees to the northeast; and an
Upper Reef lying roughly 150+ meters above the Lower Reef stratigraphy and which includes a small high-grade zone historically
referred to as the "No.1 Orebody" by Kennecott. Mineralization is hosted by a Devonian age carbonate sequence containing
broad zones of dolomite alteration and associated sulfide mineralization including bornite, chalcopyrite, and chalcocite occurring
as disseminations and vein stockworks as well as crackle and mosaic breccia fillings and locally massive to semi-massive replacement
bodies. The geological and assay database have been reviewed and audited by BDRC and SGI. It is of the opinion of BDRC and SGI
that the current drilling information is sufficiently reliable to interpret with confidence the boundaries for copper mineralization
and that the assay data are sufficiently reliable to support mineral resource estimation. That estimation utilizes two-meter compositing
of assays from 216 drill holes completed between 1961 and 2013. Estimated blocks were 5 x 5 x 5 meters on a side.
Sixty domains were established for the
estimation, all of which were treated as hard boundaries with no mixing of data between the domains. A series of carbonate and
phyllite lithology domains together with grade probability shells at 2% copper and 0.2% copper thresholds were used to constrain
the estimates. Visual inspections of the probability shells show that they fit well with observed levels of bornite, chalcocite
and chalcopyrite mineralization.
Based on the interpreted local high-grade
nature of the mineralization, both capping and outlier restriction strategies were implemented to control the influence of high-grade
mineralization in the resource model. This methodology removed approximately 3% of the contained copper in the Ruby Creek area
and 7% of the contained copper in the South Reef area.
A total of 5,366 samples containing specific
gravity measurements were utilized to estimate densities in the block model. Specific gravity values were estimated into model
blocks using inverse distance squared moving averages using the domains described previously.
Copper and cobalt grades in model blocks
were estimated using ordinary kriging. A dynamic search orientation strategy was utilized, during both grade and specific gravity
interpolations, which is controlled by the interpreted trends of mineralization in the Upper, Lower and South Reef zones. The block
model has been validated through a combination of visual and statistical methods to ensure that the grade and density estimates
are an appropriate representation of the underlying sample data.
The Bornite deposit comprises several zones
of relatively continuous moderate- to high-grade copper mineralization that extends from surface to depths of more than 800 m below
surface. The deposit is potentially amenable to a combination of open pit and underground extraction methods. It is important to
recognize that these discussions of underground and surface mining parameters are used solely for the purpose of testing the “reasonable
prospects for economic extraction,” and do not represent an attempt to estimate mineral reserves. No mineral reserves have
been calculated for the Bornite Project.
Indicated Mineral Resources includes blocks
in the model that are potentially amenable to open pit extraction methods and are delineated by drilling with holes spaced at a
maximum distance of 75 meters and exhibit a relatively high degree of confidence in the grade and continuity of mineralization.
Resources in the Inferred category require a minimum of one drill hole within a maximum distance of 100 m and exhibit reasonable
confidence in the grade and continuity of mineralization.
In the opinion of the Qualified Persons,
the level of understanding of the geologic controls that influence the distribution of copper mineralization at the Bornite Deposit
is relatively good. The drilling, sampling and validation practices utilized by Trilogy during the various campaigns have been
conducted in a professional manner and adhere to accepted industry standards. The confidence in older, historic, drilling conducted
by Kennecott has been demonstrated through a series of validation checks and, overall, the underlying database is considered sufficient
for the estimation of Indicated and Inferred mineral resources. The mineral resources have been estimated in conformity with generally
accepted CIM Estimation of Mineral Resources and Mineral Reserves Best Practices Guidelines and are reported in accordance with
the Canadian Securities Administrators’ NI 43-101. Mineral resources are not mineral reserves and do not have demonstrated
economic viability. There is no certainty that all or any part of the mineral resource will be converted into mineral reserve.
The estimate of mineral resources for the Bornite Project are summarized in “Bornite Project – Mineral Resource
Statement”.
Bornite Project - Mineral Resource
Statement
Mineral Resources are classified in accordance
with the CIM Definition Standards for Mineral Resources and Mineral Reserves (May 2014).
Table 6: Indicated Resource Estimate
for the Bornite Project
See “Cautionary Note to United
States Investors”. This section uses the term “indicated resources”. We advise United States investors that
these terms are not recognized by the SEC. United States investors are cautioned not to assume that estimates of indicated mineral
resources are economically minable or will be upgraded into measured mineral resources. See “Risk Factors” and
“Cautionary Note to United States Investors”.
Estimate of Copper Mineral Resources
– Indicated
Type
|
|
|
Cut-off
(Cu %)
|
|
|
M tonnes
|
|
|
Grade
(Cu %)
|
|
|
Contained Metal
(Mlbs Cu)
|
|
Indicated
|
In-Pit(2)
|
|
|
|
0.5
|
|
|
|
40.5
|
|
|
|
1.02
|
|
|
|
913
|
|
Notes:
|
1.
|
These resource estimates have been prepared in accordance with NI 43-101 and the CIM Definition Standards. Mineral resources
that are not mineral reserves do not have demonstrated economic viability. See “Risk Factors” and “Cautionary
Note to United States Investors.”
|
|
2.
|
Resources stated as contained within a pit shell developed using a metal price of US$3.00/lb Cu, mining costs of US$2.00/tonne,
milling costs of US$11/tonne, G&A cost of US$5.00/tonne, 87% metallurgical recoveries and an average pit slope of 43 degrees.
|
|
3.
|
Rounding as required by reporting guidelines may result in apparent summation differences between tonnes, grade and contained
metal content.
|
|
4.
|
Tonnage and grade measurements are in metric units. Contained copper are reported as imperial pounds.
|
|
5.
|
All amounts are stated in U.S. dollars unless otherwise noted.
|
|
6.
|
Mineral resources are reported on a 100% basis. Following the formation of the Joint Venture, Trilogy and South32 each own
50% of the Bornite Project.
|
Table 7: Inferred Resource Estimate
for the Bornite Project
See “Cautionary Note to United
States Investors”. This section uses the term “inferred resources”. We advise United States investors that
these terms are not recognized by the SEC. The estimation of inferred resources involves far greater uncertainty as to their existence
and economic viability than the estimation of other categories of resources. See “Risk Factors” and “Cautionary
Note to United States Investors”.
Estimate of Copper Mineral Resources
– Inferred
Type
|
|
Cut-off
(Cu %)
|
|
|
M tonnes
|
|
|
Grade
(Cu %)
|
|
|
Contained Metal
(Mlbs Cu)
|
|
Inferred
|
In-Pit (2)
|
|
|
0.5
|
|
|
|
84.1
|
|
|
|
0.95
|
|
|
|
1,768
|
|
Below-Pit (3)
|
|
|
1.5
|
|
|
|
57.8
|
|
|
|
2.89
|
|
|
|
3,683
|
|
Total Inferred
|
|
|
|
|
|
|
141.9
|
|
|
|
1.74
|
|
|
|
5,450
|
|
Notes:
|
1.
|
These resource estimates have been prepared in accordance with NI 43-101 and the CIM Definition Standards. See “Risk
Factors” and “Cautionary Note to United States Investors.”
|
|
2.
|
Resources stated as contained within a pit shell developed using a metal price of US$3.00/lb Cu, mining costs of US$2.00/tonne,
milling costs of US$11/tonne, G&A cost of US$5.00/tonne, 87% metallurgical recoveries and an average pit slope of 43 degrees.
|
|
3.
|
Mineral resources at a 1.5% cut-off are considered as potentially economically viable in an underground mining scenario based
on an assumed projected copper price of $3.00/lb, underground mining costs of $65.00 per tonne, milling costs of $11.00 per tonne,
G&A of $5.00 per tonne, and an average metallurgical recovery of 87%.
|
|
4.
|
Rounding as required by reporting guidelines may result in apparent summation differences between tonnes, grade and contained
metal content.
|
|
5.
|
Tonnage and grade measurements are in metric units. Contained copper are reported as imperial pounds.
|
|
6.
|
All amounts are stated in U.S. dollars unless otherwise noted.
|
|
7.
|
Mineral resources are reported on a 100% basis. Following the formation of the Joint Venture, Trilogy and South32 each own
50% of the Bornite Project.
|
Estimate of Cobalt Mineral Resources
– Inferred
Class
|
|
Type
|
|
Cut-off
(Cu %)
|
|
|
Tonnes
(million)
|
|
|
Average
Grade
Co (%)
|
|
|
Contained
Metal
Co (Mlbs)
|
|
Inferred
|
|
In-Pit(1)
|
|
|
0.5
|
|
|
|
124.6
|
|
|
|
0.017
|
|
|
|
45
|
|
Inferred
|
|
Below-Pit
|
|
|
1.5
|
|
|
|
57.8
|
|
|
|
0.025
|
|
|
|
32
|
|
Inferred
|
|
Total
|
|
|
|
|
|
|
182.4
|
|
|
|
0.019
|
|
|
|
77
|
|
|
1.
|
Resources stated as contained within a pit shell developed using a metal price of US$3.00/lb Cu, mining costs of US$2.00/tonne,
milling costs of US$11/tonne, G&A cost of US$5.00/tonne, 87% metallurgical recoveries and an average pit slope of 43 degrees.
|
|
2.
|
Mineral Resources are not Mineral Reserves and do not have demonstrated economic viability. There is no certainty that all
or any part of the Mineral Resources will be converted into Mineral Reserves.
|
|
3.
|
It is reasonably expected that the majority of Inferred mineral resources could be upgraded to Indicated mineral resources
with additional exploration.
|
|
4.
|
Due to limited sample data, none of the cobalt resource meets the confidence for Indicated class resources. All cobalt resources
are considered in the Inferred category.
|
|
5.
|
Mineral resources are reported on a 100% basis. Following the formation of the Joint Venture, Trilogy and South32 each own
50% of the Bornite Project.
|
There are no known factors related to environmental,
permitting, legal, title, taxation, socio-economic, marketing or political issues which could materially affect the mineral resource.
Bornite Project – Metallurgy
Metallurgical test work to date indicates
that the Bornite Project can be treated using standard grinding and flotation methods to produce copper concentrates. Initial testing
indicates copper recoveries of approximately 87% resulting in concentrate grades of approximately 28% copper with very low potential
penalty elements. Further metallurgical test work is warranted to test these assumptions.
Bornite Project – Environmental
Considerations
The Bornite Project area includes NANA’s
Bornite and ANCSA lands, the Ruby Creek drainage (a tributary of the Shungnak River), the Shungnak River drainage, and portions
of the Ambler Lowlands. Since 2007, baseline environmental data collection has occurred in the area including archaeology, aquatic
life surveys, sediment sampling, wetlands mapping, surface water quality sampling, hydrology, meteorological monitoring, and subsistence.
Additional baseline environmental data in NANA’s Bornite and ANCSA lands, the Ruby Creek drainage, the Shungnak River drainage,
portions of the Ambler Lowlands, and downstream receiving environments will be required to support future mine design, development
of an EIS, permitting, construction and operations.
Bornite Project – Mining Operations
The Bornite Project is not currently in
production; for contemplated exploration or development activities see below.
Bornite Project – Exploration
and Development Permitting
Development of the Bornite Project will
require a significant number of permits and authorizations from state, federal, and regional organizations. Much of the groundwork
to support a successful permitting effort must be undertaken prior to submission of permit applications so that issues can be identified
and resolved, baseline data can be acquired, and regulators and stakeholders can become familiar with the proposed project. The
comprehensive permitting process for the Bornite Project can be divided into three categories:
|
1.
|
Exploration state/regional permitting: required to obtain approval for drilling, camp operations,
engineering, and environmental baseline studies.
|
|
2.
|
Pre-application phase: conducted in conjunction with engineering feasibility studies. This stage
includes the collection of environmental baseline data and interaction with stakeholders and regulators to facilitate the development
of a project that can be successfully permitted.
|
|
3.
|
The National Environmental Policy Act phase: formal agency review of the Federal and State requirements
for public and agency participation to determine if and how the Bornite Project can be done in an acceptable manner.
|
The permit review process will determine
the number of management plans required to address all aspects of the Project to ensure compliance with environmental design and
permit criteria. Each plan will describe the appropriate environmental engineering standard and the applicable operations requirements,
maintenance protocols, and response actions.