Disposition of Sunward Investments Ltd.

9 Months Ended

Aug. 31, 2016

Disposition of Sunward Investments Ltd. [Text Block]

3 Disposition of Sunward Investments Ltd.

On August 18, 2016, Trilogy announced the sale of Sunward Investments to Brazil Resources Inc. (“BRI”), a public company listed on the TSX-Venture exchange, of all of the issued and outstanding shares of Sunward Investments for consideration of 5,000,000 common shares of BRI and 1,000,000 warrants, with each warrant exercisable into one common share of BRI for a period of two years from the closing date on September 1, 2016 at an exercise price of Cdn$3.50. Sunward Investments, through a subsidiary, owns 100% of the Titiribi gold-copper exploration project located approximately 70 kilometers southwest of the city of Medellin, in Antioquia Department, Colombia. NovaCopper acquired Sunward Investments and the Titiribi project as part of its acquisition of Sunward in a business combination which closed on June 19, 2015.

Following the announcement, the Company classified the operations of Sunward Investments as discontinued operations, retrospectively.

The following assets and liabilities comprise the discontinued operations of Sunward Investments and substantially all of the Colombian segment of the Company for the periods noted.

		in thousands of dollars
	August 31, 2016	November 30, 2015
	$	$
Assets held for sale
Cash	75	75
Deposits and prepaid amounts	42	19
Plant and equipment	178	273
Mineral properties and development costs	3,264	3,264
Assets held for sale	3,559	3,631
Accounts payable and accrued liabilities	14	39
Liabilities held for sale	14	39

The following expenses comprise the discontinued operations of Sunward Investments and substantially all of the Colombian segment of the Company for the periods noted.

									in thousands of dollars
		For the three months ended					For the nine months ended
		August 31, 2016			August 31, 2015		August 31, 2016		August 31, 2015
		$			$		$		$
Amortization		31			31		95		31
Foreign exchange loss (gain)		(2	)		26		2		26
General and administrative		2			-		5		-
Mineral properties expense		171			141		459		141
Professional fees		151			-		151		-
Discontinued operations expense		353			198		712		198
Basic and diluted loss per share from discontinued operations	$	0.00		$	0.00	$	0.01	$	0.00

The disposal of Sunward Investments was completed on September 1, 2016, subsequent to quarter-end. The share and warrant consideration paid by BRI will be recorded at fair value as assets held for trading on September 1, 2016. The Company expects to realize a gain on the sale of Sunward Investments of approximately $4.4 million in the fourth quarter based on the fair value of the consideration received of approximately $8.1 million. The Company believes that it has sufficient tax pools to offset any taxes payable on the gain to be recognized. Also subsequent to quarter-end, Trilogy received a repayment of $0.05 million from BRI for funds advanced to Sunward Investments for payments related to ongoing operations following closing. This payment represents a portion of the cash held by the Colombian entity at closing for future operations.

As part of the acquisition of Sunward, the Company assumed two office leases in Colombia, expiring on November 30, 2016 and April 30, 2017 respectively, with a total remaining commitment of $0.06 million. The Company will no longer be responsible for the commitments under these leases as of September 1, 2016.