Trilogy Metals Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended February 28, 2023; balance-sheet figures are as of February 28, 2023. Amounts are in U.S. dollars unless noted. Trilogy is an exploration-stage company whose Upper Kobuk Mineral Projects are held through its 50%-owned Ambler Metals joint venture with South32.
Financial results and liquidity
| Metric | Q1 2023 | Q1 2022 / comparison |
|---|---|---|
| Revenue | No operating revenue reported | No recurring operating cash inflows |
| Total expenses | $3.606 million | $3.115 million |
| Net and comprehensive loss | $5.072 million | $5.023 million |
| Loss per share, basic and diluted | $0.03 | $0.03 |
| Cash used in operations | $0.885 million | $1.480 million |
| Cash at period end | $1.682 million | $4.847 million at February 28, 2022 |
Revenue and operating margins are not meaningful for this pre-production company. Loss increased slightly year over year. Higher stock-based compensation ($2.362 million versus $1.922 million) and professional fees ($570,000 versus $245,000) were partly offset by lower Ambler Metals equity-method losses ($1.485 million versus $1.910 million), investor relations costs, and salaries.
Working capital was approximately $1.0 million, down from $2.4 million at November 30, 2022. Total assets were $143.5 million, including the $141.4 million equity-method investment in Ambler Metals. Total liabilities were $846,000, including a $176,000 current lease liability; the filing reports no material borrowings. No cash-flow or profit margin was reported. Trilogy’s accumulated deficit was $71.9 million.
Material developments and outlook
- Ambler Metals had $76.5 million of cash and $74.9 million of working capital at quarter-end. The joint venture approved a $12.3 million 2023 budget for the Ambler Access Project, including field studies and permitting support. These are joint-venture funds, not Trilogy’s corporate cash.
- The Bureau of Land Management reaffirmed its expected schedule for a draft Supplemental Environmental Impact Statement in Q2 2023 and a final statement in Q4 2023. The access road’s permitting and development remain uncertain; the filing identifies suspension of right-of-way permits and related delays as risks.
- Trilogy expects to need additional financing for corporate and administrative costs, potentially through equity, debt, convertible debt, option exercises, or other means. Management states that financing is not assured and that these uncertainties raise substantial doubt about the Company’s ability to continue as a going concern.
- Management described cash-preservation measures, including reduced marketing and office spending and settling some director fees and management compensation in shares or units. On March 1, 2023, awards were issued in settlement of approximately $247,000 of fees and accrued salaries. About $155,000 of accrued salaries was settled through shares after quarter-end.
- The Company announced 2022-season drilling results and updated Arctic feasibility and Bornite resource information. No production guidance or revenue outlook is provided; the mineral projects are not in production or under development.
- Management reported effective disclosure controls and no material change in internal control over financial reporting. No material litigation or material changes to previously disclosed risk factors were reported.
Important facts for investors to verify
- Whether Trilogy can secure financing for its corporate costs, and how its cash use affects liquidity and going-concern risk.
- Progress, permitting outcomes, costs, and funding for the Ambler Access Project, including the BLM’s SEIS schedule and right-of-way status.
- Ambler Metals’ project spending and cash position, and whether its funding remains sufficient for planned work.
- Whether changes in project prospects or the access-road outlook could trigger an impairment of Trilogy’s $141.4 million investment in Ambler Metals.
- Potential share dilution: common shares outstanding were 148.7 million at quarter-end, with substantial options and share units also outstanding.