10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended February 29, 2020

OR

o       TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from to

Commission File Number: 1-35447

TRILOGY METALS INC.

(Exact Name of Registrant as Specified in Its Charter)

British Columbia	98-1006991
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)
Suite 1150, 609 Granville Street Vancouver, British Columbia Canada	V7Y 1G5
(Address of Principal Executive Offices)	(Zip Code)

(604) 638-8088

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Shares	TMQ	NYSE American Toronto Stock Exchange

  Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ¨ Accelerated filer x Non-accelerated filer ¨ Smaller reporting company x Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

As of April 7, 2020, the registrant had 140,665,733 Common Shares, no par value, outstanding.

TRILOGY METALS INC.

TABLE OF CONTENTS

	Page
PART I - FINANCIAL INFORMATION	2
Item 1.   Financial Statements	2
Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3.   Quantitative and Qualitative Disclosures about Market Risk	24
Item 4.   Controls and Procedures	24
PART II - OTHER INFORMATION	25
Item 1.   Legal Proceedings	25
Item 1A.   Risk Factors	25
Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds	26
Item 3.   Defaults Upon Senior Securities	26
Item 4.   Mine Safety Disclosures	26
Item 5.   Other Information.	26
Item 6.   Exhibits	26

ii

PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements

Trilogy Metals Inc.

Interim Consolidated Balance Sheets

(unaudited)

in thousands of US dollars

	February 29, 2020 $			November 30, 2019 $
Assets
Current assets
Cash and cash equivalents		15,217			19,174
Accounts receivable (note 3)		418			264
Deposits and prepaid amounts		300			719
		15,935			20,157
Rent deposit		-			114
Equity method investment (note 4)		175,822			-
Plant and equipment (note 5)		255			715
Right of use asset (note 8)		547			-
Mineral properties and development costs (note 6)		-			30,631
		192,559			51,617
Liabilities
Current liabilities
Accounts payable and accrued liabilities (note 7)		1,274			2,354
Current portion of lease liability		137			-
		1,411			2,354
Long-term portion of lease liability (note 8)		510			-
Mineral properties purchase option		-			31,000
		1,921			33,354
Shareholders’ equity
Share capital (note 9) – unlimited common shares authorized, no par value Issued -140,659,776 (2019 – 140,427,761)		178,307			177,971
Contributed surplus		122			122
Contributed surplus – options (note 9(a))		22,272			21,123
Contributed surplus – units (note 9(b))		1,470			1,759
Deficit		(11,533	)		(182,712	)
		190,638			18,263
		192,559			51,617

Commitments (note 11)

(See accompanying notes to the interim consolidated financial statements)

/s/ James Gowans, Director	/s/ Kalidas Madhavpeddi, Director
Approved on behalf of the Board of Directors

2

Trilogy Metals Inc.

Interim Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)

(unaudited)

in thousands of US dollars, except share and per share amounts

	For the three months ended
	February 29, 2020 $			February 28, 2019 $
Expenses
Amortization		42			37
Foreign exchange loss (gain)		23			(34	)
General and administrative		651			492
Investor relations		126			117
Mineral properties expense (note 6(a))		1,545			1,535
Professional fees		668			91
Salaries		224			281
Salaries – stock-based compensation		1,196			1,939
Total expenses		4,475			4,458
Other items
Gain on derecognition of assets contributed to joint venture (note 4(a))		(175,770	)		-
Share of loss on equity investment (note 4(b))		178			-
Interest and other income		(62	)		(122	)
Comprehensive earnings (loss) for the period		171,179			(4,336	)
Basic earnings (loss) per common share	$	1.22		$	(0.03	)
Diluted earnings (loss) per common share	$	1.16		$	(0.03	)
Basic weighted average number of common shares outstanding		140,616,672			131,916,941
Diluted weighted average number of common shares outstanding		147,649,507			131,916,941

(See accompanying notes to the interim consolidated financial statements)

3

Trilogy Metals Inc.

Interim Consolidated Statements of Changes in Shareholders’ Equity

(unaudited)

in thousands of US dollars, except share amounts

	Number of shares outstanding		Share capital $		Warrants $		Contributed surplus $		Contributed surplus – options $			Contributed surplus – units $			Deficit $			Total shareholders’ equity $
Balance – November 30, 2018		131,585,612		164,069		2,253		122		19,076			1,489			(154,807	)		32,202
Exercise of options		44,230		28		-		-		(28	)		-			-			-
Restricted Share Units		412,501		424		-		-		-			(424	)		-			-
Stock-based compensation		-		-		-		-		1,586			353			-			1,939
Loss for the period		-		-		-		-		-			-			(4,336	)		(4,336	)
Balance – February 28, 2019		132,042,343		164,521		2,253		122		20,634			1,418			(159,143	)		29,805
Balance – November 30, 2019		140,427,761		177,971		-		122		21,123			1,759			(182,712	)		18,263
Exercise of options		19,514		6		-		-		(6	)		-			-			-
Restricted Share Units		212,501		330		-		-		-			(330	)		-			-
Stock-based compensation		-		-		-		-		1,155			41			-			1,196
Earnings for the period		-		-		-		-		-			-			171,179			171,179
Balance – February 29, 2020		140,659,776		178,307		-		122		22,272			1,470			(11,533	)		190,638

(See accompanying notes to the interim consolidated financial statements)

4

Trilogy Metals Inc.

Interim Consolidated Statements of Cash Flows

(unaudited)

in thousands of US dollars

	For the three months ended
	February 29, 2020 $			February 28, 2019 $
Cash flows used in operating activities
Earnings (Loss) for the period		171,179			(4,336	)
Items not affecting cash
Amortization		42			37
Right of use asset amortization		60			-
Loss on working capital written-off upon joint venture formation		18			-
Gain on derecognition of assets (note 4(a))		(175,770	)		-
Loss on equity investment in Ambler Metals LLC. (note 4(b))		178			-
Unrealized foreign exchange loss (gain)		25			5
Stock-based compensation		1,196			1,939
Operating lease payments		(54	)		-
Net change in non-cash working capital
Increase in accounts receivable		(154	)		(6	)
Decrease (increase) in deposits and prepaid amounts		419			(280	)
Decrease in accounts payable and accrued liabilities		(1,080	)		(590	)
		(3,941	)		(3,231	)
Cash flows from investing activities
Mineral properties funding		-			10,200
		-			10,200
Increase in cash and cash equivalents		(3,941	)		6,969
Effect of exchange rate on cash and cash equivalents		(16	)		(5	)
Cash and cash equivalents – beginning of period		19,174			22,991
Cash and cash equivalents – end of period		15,217			29,955

(See accompanying notes to the interim consolidated financial statements)

5

Trilogy Metals Inc.

Notes to the Interim Consolidated Financial Statements

1) Nature of operations

Trilogy Metals Inc. (“Trilogy” or the “Company”) was incorporated in British Columbia under the Business Corporations Act (BC) on April 27, 2011. The Company is engaged in the exploration and development of mineral properties, through our equity investee (see note 4), with a focus on the Upper Kobuk Mineral Projects (“UKMP”), including the Arctic and Bornite Projects located in Northwest Alaska in the United States of America (“US”).

2) Summary of significant accounting policies

Basis of presentation

These interim consolidated financial statements have been prepared using accounting principles generally accepted in the United States (“U.S. GAAP”) and include the accounts of Trilogy and its wholly owned subsidiary, NovaCopper US Inc. (dba “Trilogy Metals US”). All significant intercompany transactions are eliminated on consolidation. For variable interest entities (“VIEs”) where Trilogy is not the primary beneficiary, we use the equity method of accounting.

All figures are in United States dollars unless otherwise noted. References to CAD$ refer to amounts in Canadian dollars.

The unaudited interim consolidated financial statements include all adjustments necessary for the fair presentation of the Company’s financial position as of February 29, 2020 and our results of operations and cash flows for the three months ended February 29, 2020 and February 28, 2019. The results of operations for the three months ended February 29, 2020 are not necessarily indicative of the results to be expected for the fiscal year ending November 30, 2020.

As these interim consolidated financial statements do not contain all of the disclosures required by U.S. GAAP for annual financial statements, these unaudited interim consolidated financial statements should be read in conjunction with the annual financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended November 30, 2019, filed with the U.S. Securities and Exchange Commission (“SEC”) and Canadian securities regulatory authorities on February 13, 2020.

These interim consolidated financial statements were approved by the Company’s Audit Committee on behalf of the Board of Directors for issue on April 7, 2020.

Accounting standards adopted

i. Leases

In February 2016, the FASB issued new accounting requirements for accounting for, presentation of, and classification of leases (“ASU 2016-02”) which, together with subsequent amendments, is included in ASC 842, Leases. ASC 842 became effective for the Company as of December 1, 2019.

The Company adopted ASC 842 using the modified retrospective transition method by applying the transition provision and recording our cumulative adjustment to opening deficit at the beginning of the period of adoption on December 1, 2019, rather than at the beginning of the comparative period presented. Therefore, in the comparative periods, we continue to apply the legacy guidance in ASC 840, including its disclosure requirements. We elected to apply all of the transition practical expedients available, including:

· the package of three practical expedients to (1) not reassess whether any expired or existing contracts are or contain leases, (2) not reassess the lease classification for any expired or existing leases, and (3) not reassess initial direct costs for any existing lease;

· the hindsight practical expedient to use hindsight when determining lease term and assessing impairment of right-of-use assets, if any; and

· the easements practical expedient to continue applying our current policy for accounting for any land easements expired before or existing as of December 1, 2019.

6

In addition, we elected to apply the short-term lease recognition exemption and elected to apply the practical expedient to not separate lease and non-lease components for all applicable leases on transition. The adoption of this new standard resulted in the recognition of right of use assets and lease liabilities of $786,000 as at December 1, 2019.

ii Investment in affiliates

Investments in unconsolidated ventures over which the Company has the ability to exercise significant influence, but does not control, are accounted for under the equity method and include the Company’s investment in the Ambler Metals project. We identified Ambler Metals LLC as a Variable Interest Entity (VIE) as the entity is dependent on funding from its owners. All funding, ownership, voting rights and power to exercise control is shared equally on a 50/50 basis between the owners of the VIE. Therefore, the Company has determined that it is not the primary beneficiary of the VIE. The Company’s maximum exposure to loss is its investment in Ambler Metals LLC.

Ambler Metals LLC is a non-publicly traded equity investee holding exploration and development projects. The Company reviews and evaluates its investment in affiliates for other than temporary impairment when events or changes in circumstances indicate that the related carrying amounts may not be recoverable. Events that could indicate impairment of an investment in affiliates include a significant decrease in long-term expected commodity prices, a significant increase in expected operating or capital costs, unfavorable exploration results or technical studies, a significant decrease in reserves, a loss of significant mineral claims or a change in the development plan or strategy for the project. Asset impairment is considered to exist if the total estimated future cash flows on an undiscounted basis are less than the carrying amount of the asset. If the underlying assets are not recoverable, an impairment loss is measured and recorded based on the difference between the carrying amount of the investee and its estimated fair value which may be determined using a discounted cash flow model.

3) Accounts receivable

in thousands of dollars

	February 29, 2020 $		November 30, 2019 $
GST input tax credits		37		42
Recoverable payments		22		222
Ambler Metals LLC		359		-
Accounts receivable		418		264

The balance due from Ambler Metals LLC (“Ambler Metals”) (see note 4 below) consists of $110 thousand for services rendered by Trilogy per a service agreement (the “Service Agreement”) between Trilogy and Ambler Metals, $120 thousand for additional staking costs and $130 thousand for invoices paid by Trilogy on behalf of Ambler Metals LLC, per the Service Agreement.

4) Equity method investment

(a) Formation of Ambler Metals LLC

On February 11, 2020, the Company completed the formation of a 50/50 joint venture named Ambler Metals with South32 Limited (“South32”). As part of the formation of the joint venture, Trilogy contributed all of its assets associated with the Upper Kobuk Mineral Projects (“UKMP”), including the Arctic and Bornite projects, while South32 contributed US$145 million, resulting in each party’s subsidiaries directly owning a 50% interest in Ambler Metals.

Ambler Metals is an independently operated company jointly controlled by Trilogy and South32 through a four-member board, of which two members are currently appointed by Trilogy based on its 50% equity interest. All significant decisions related to the UKMP require the approval of both companies. We determined that Ambler Metals is a VIE because it is expected to need additional funding from its owners for its significant activities. However, we concluded that we are not the primary beneficiary of Ambler Metals as the power to direct its activities, through its board, is shared under the Ambler Metals limited liability company agreement. As we have significant influence over Ambler Metals through our representation on its board, we use the equity method of accounting for our investment in Ambler Metals. Our investment in Ambler Metals was initially measured at its fair value of $176 million upon recognition. Our maximum exposure to loss in this entity is limited to the carrying amount of our investment in Ambler Metals, which totaled $176 million, as well as $0.4 million of amounts receivable per the Service Agreement. The following table summarizes the gain on recognition of the UKMP assets upon transfer to the Ambler Metals joint venture on February 11, 2020.

7

in thousands of dollars

	$
Fair value ascribed to Ambler Metals interest		176,000
Less: carrying value of contributed /eliminated assets
Mineral properties		(30,587	)
Property, plant and equipment		(618	)
Elimination of Fairbanks warehouse right of use asset		(93	)
Elimination of prepaid State of Alaska mining claim fees		(303	)
Add:
Demobilization costs of drills		278
Cancellation of Fairbanks warehouse lease liability		93
Fair value of mineral properties purchase option		31,000
Gain on derecognition		175,770

(b) Carrying value of equity method investment

During the three-month period ended February 29, 2020, Trilogy recognized, based on its 50% ownership interest in Ambler Metals, an equity pick-up equivalent to its pro rata share of Ambler Metals’ operating loss of $0.4 million for the period between February 11, 2020 (date of joint venture formation) to February 29, 2020. The carry value of Trilogy’s 50% investment in Ambler Metals as at February 29, 2020 is summarized on the following table.

in thousands of dollars

	$
February 11, 2020, fair value ascribed to Ambler Metals interest		176,000
Share of loss on equity investment		(178	)
February 29, 2020, equity method investment		175,822

(c) The following table summarizes Ambler Metals Balance Sheet as at February 29, 2020.

in thousands of dollars

	February 29, 2020 $
Current assets: Cash, deposits and prepaid expenses		145,049
Non - current assets: Property, equipment and mineral properties		31,454
Current liabilities: Accounts payable and accrued liabilities		(517	)
Non - current liabilities: Lease obligation		(91	)
Net assets		175,895

(d) The following table summarizes Ambler Metals comprehensive loss from the formation of the joint venture on February 11, 2020 to the end of the reporting period on February 29, 2020.

in thousands of dollars

	February 11- 29, 2020 $
Amortization		12
Mineral properties expense		167
General and administrative expense		219
Interest income		(43	)
Comprehensive loss		355

8

5) Plant and equipment

in thousands of dollars

	February 29, 2020
	Cost $		Accumulated amortization $			Assets derecognized note 4(a) $			Net $
British Columbia, Canada
Furniture and equipment		63		(33	)		-			30
Leasehold improvements		253		(30	)		-			223
Computer hardware and software		115		(113	)		-			2
Alaska, USA
Machinery, and equipment		3,667		(3,049	)		(618	)		-
Vehicles		348		(348	)		-			-
Computer hardware and software		4		(4	)		-			-
		4,450		(3,577	)		(618	)		255

in thousands of dollars

	November 30, 2019
	Cost $		Accumulated amortization $			Net $
British Columbia, Canada
Furniture and equipment		63		(29	)		34
Leasehold improvements		53		(17	)		36
Computer hardware and software		115		(112	)		3
Alaska, USA
Machinery, and equipment		3,667		(3,026	)		641
Vehicles		348		(348	)		-
Computer hardware and software		4		(3	)		1
		4,250		(3,535	)		715

6) Mineral properties and development costs

in thousands of dollars

	November 30, 2019 $		Acquisition costs reimbursable from Ambler Metals LLC			Assets derecognized note 4(a) $			February 29, 2020 $
Alaska, USA
Ambler (a)		26,631		(44	)		(26,587	)		-
Bornite (b)		4,000		-			(4,000	)		-
		30,631		(44	)		(30,587	)		-

in thousands of dollars

	November 30, 2018 $		Acquisition costs $		November 30, 2019 $
Alaska, USA
Ambler (a)		26,587		44		26,631
Bornite (b)		4,000		-		4,000
		30,587		44		30,631

9

(a) Mineral properties expense

The following table summarizes mineral properties expense for the noted periods.

In thousands of dollars

	Three months ended February 29, 2020 $		Three months ended February 28, 2019 $
Alaska, USA
Community		137		118
Drilling		-		-
Engineering		723		357
Environmental		99		165
Geochemistry and geophysics		12		165
Land and permitting		134		120
Project support		249		226
Other income		-		(1	)
Wages and benefits		191		385
		1,545		1,535

Mineral property expenses consist of direct drilling, personnel, community, resource reporting and other exploration expenses as outlined above, as well as indirect project support expenses such as fixed wing charters, helicopter support, fuel, and other camp operation costs. Expenses during the first quarter ended February 29, 2020 consisted mainly of engineering studies in preparation of the Arctic feasibility study and care and maintenance of the camp during the winter season. Cumulative mineral properties expense in Alaska from the initial earn-in agreement on the property in 2004 to February 29, 2020 is $115.3 million and cumulative acquisition costs were $30.6 million. Cumulative spend to date totaled $145.9 million through to February 29, 2020. On February 11, 2020, upon the formation of the joint venture with South 32, the acquisition costs of $30.6 million were derecognized upon the contribution of the mineral properties to Ambler Metals.

(b) Derecognition

As part of the formation of the joint venture with South32 on February 11, 2020, Trilogy contributed all of its assets associated with the UKMP, including the Arctic and Bornite projects. As a result, $0.62 million of machinery and equipment as well as $30.6 million of mineral properties related to the UKMP were derecognized in Trilogy on February 11, 2020.

7) Accounts payable and accrued liabilities

in thousands of dollars

	February 29, 2020 $		November 30, 2019 $
Trade accounts payable		528		902
Accrued liabilities		646		721
Accrued salaries and vacation		100		731
Accounts payable and accrued liabilities		1,274		2,354

8) Leases

(a) Right-of-Use asset

in thousands of dollars

	$
ASC 842 transition as at December 1, 2019		681
Amortization		(60	)
Lease accretion		19
Derecognition of Fairbanks warehouse lease		(93	)
		547

10

(b) Lease liabilities

The Company’s lease arrangements primarily consist of an operating lease for our office space ending in June 2024. There are no extension options.

Total lease expense recorded within general and administrative expenses was comprised of the following components:

in thousands of dollars

	Three months ended February 29, 2020 $
Operating lease costs		50
Variable lease costs		34
Total lease expense		84

Variable lease costs consist primarily of the Company’s portion of operating costs associated with the office space lease as the Company elected to apply the practical expedient not to separate lease and non-lease components.

As of February 29, 2020, the weighted-average remaining lease term was 4.3 years and the weighted-average discount rate is 8%. Significant judgment was used in the determination of the incremental borrowing rate which included estimating the Company’s credit rating.

Supplemental cash and non-cash information relating to our leases during the three months ended February 29, 2020 are as follows:

• Cash paid for amounts included in the measurement of lease liabilities was $54,134.

• No cash was paid upon termination of a lease for office and warehouse space and reassignment to Ambler Metals that resulted in the derecognition of the right-of-use asset of $92,974 and the operating lease liability of $93,006.

Future minimum payments relating to the lease recognized in our balance sheet as of February 29, 2020 are as follows:

in thousands of dollars

Fiscal year	February 29, 2020 $
2020		136
2021		189
2022		195
2023		200
2024		119
Total undiscounted lease payments		839
Effect of discounting		(192	)
Present value of lease payments recognized as lease liability		647

11

9) Share capital

Authorized:

unlimited common shares, no par value

in thousands of dollars, except share amounts

	Number of shares		Ascribed value $
November 30, 2018		131,585,612		164,069
Exercise of options		1,725,776		1,123
Restricted Share Units		412,501		424
Deferred Share Units		182,132		189
Exercise of warrants		6,521,740		12,166
November 30, 2019		140,427,761		177,971
Exercise of options		19,514		6
Restricted Share Units		212,501		330
February 29, 2020, issued and outstanding		140,659,776		178,307

On April 30, 2012, under the NovaGold Arrangement, Trilogy committed to issue common shares to satisfy holders of NovaGold deferred share units (“NovaGold DSUs”) on record as of the close of business April 27, 2012. When vested, Trilogy committed to deliver one common share to the holder for every six shares of NovaGold the holder is entitled to receive, rounded down to the nearest whole number. As of February 29, 2020, 11,927 NovaGold DSUs remained outstanding representing a right to receive 1,988 common shares in Trilogy, which will settle upon certain directors retiring from NovaGold’s board.

(a) Stock options

During the period ended February 29, 2020, the Company granted 2,050,000 options (2019 – 2,430,000 options) at a weighted-average exercise price of CAD$3.02 (2019 – CAD$2.94) to employees, consultants and directors exercisable for a period of five years with various vesting terms from immediate vesting to over a two-year period. The weighted-average fair value attributable to options granted in the period was $0.99 (2019 - $1.08).

For the period ended February 29, 2020, Trilogy recognized a stock-based compensation charge of $1.16 million (2019 – $1.59 million) for options granted to directors, employees and service providers, net of estimated forfeitures.

The fair value of the stock options recognized in the period has been estimated using the Black-Scholes option pricing model.

Assumptions used in the pricing model for the period are as provided below.

	February 29, 2020
Risk-free interest rates		1.64	%
Exercise price		CAD$3.10
Expected life		3.0 years
Expected volatility		63.1	%
Expected dividends		Nil

As of February 29, 2020, there were 1,453,338 non-vested options outstanding with a weighted average exercise price of $2.21; the non-vested stock option expense not yet recognized was $0.95 million. This expense is expected to be recognized over the next two years.

12

A summary of the Company’s stock option plan and changes during the period ended February 29, 2020 is as follows:

	February 29, 2020
	Number of options			Weighted average exercise price $
Balance – beginning of the period		9,205,600			1.08
Granted		2,050,000			2.25
Exercised		(26,667	)		0.54
Forfeited		(230,000	)		2.19
Balance – end of period		10,998,933			1.27

The following table summarizes information about the stock options outstanding at February 29, 2019.

Outstanding								Exercisable				Unvested
Range of price		Number of outstanding options		Weighted average years to expiry		Weighted average exercise price $		Number of exercisable options		Weighted average exercise price $		Number of unvested options
	$0.33 to $0.50		2,676,433		0.73		0.36		2,676,433		0.73		-
	$0.51 to $1.00		3,195,000		2.35		0.66		3,195,000		2.35		-
	$1.01 to $1.50		225,000		3.12		1.32		175,000		3.08		50,000
	$1.51 to $2.00		640,000		4.46		1.81		623,333		4.49		16,667
	$2.01 to $2.54		4,262,500		4.28		2.23		2,875,829		4.17		1,386,671
			10,998,933		2.84		1.27		9,545,595		2.60		1,453,338

The aggregate intrinsic value of vested share options (the market value less the exercise price) at February 29, 2020 was $5.9 million (2019 - $13 million) and the aggregate intrinsic value of exercised options for the three months ended February 29, 2020 was $0.04 million (2019 - $0.08 million).

(b) Restricted Share Units and Deferred Share Units

The Company has a Restricted Share Unit Plan (“RSU Plan”) and a Non-Executive Director Deferred Share Unit Plan (“DSU Plan”) to provide long-term incentives to employees, officers and directors. Awards under the RSU Plan and DSU Plan may be settled in cash and/or common shares of the Company at the Company’s election with each restricted share unit (“RSU”) and deferred share unit (“DSU”) entitling the holder to receive one common share of the Company or equivalent value. All units are accounted for as equity-settled awards.

A summary of the Company’s unit plans and changes during the period ended February 29, 2020 is as follows:

	Number of RSUs			Number of DSUs
Balance – beginning of the period		212,501			1,137,488
Granted		-			21,927
Vested/paid		(212,501	)		-
Balance – end of period		-			1,159,415

For the period ended February 29, 2020, Trilogy recognized a stock-based compensation charge of $0.04 million (2019- $0.35 million), net of estimated forfeitures.

No RSUs were granted as part of the annual incentive payout for the 2019 fiscal year to officers. The 225,000 RSUs granted for the annual incentive payout for the 2018 fiscal year vested half on the grant date and half on the first anniversary of the grant date. RSUs vesting in December 2019 were settled on December 17, 2019 through the issuance of 212,501 common shares.

13

10) Financial instruments

The Company is exposed to a variety of risks arising from financial instruments. These risks and management’s objectives, policies and procedures for managing these risks are disclosed as follows.

The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, deposits, and accounts payable and accrued liabilities. The fair value of the Company’s financial instruments approximates their carrying value due to the short-term nature of their maturity. The Company’s financial instruments initially measured at fair value and then held at amortized cost include cash and cash equivalents, accounts receivable, deposits, and accounts payable and accrued liabilities.

Financial risk management

The Company’s activities expose it to certain financial risks, including currency risk, credit risk, liquidity risk, interest risk and price risk.

(a) Currency risk

Currency risk is the risk of a fluctuation in financial asset and liability settlement amounts due to a change in foreign exchange rates. The Company operates in the United States and Canada. The Company’s exposure to currency risk at February 29, 2020 is limited to the Canadian dollar consisting of cash of CDN$540,000, accounts receivable of CDN$49,000 and accounts payable of CDN$865,000. Based on a 10% change in the US-Canadian exchange rate, assuming all other variables remain constant, the Company’s net loss would change by approximately $21,000.

(b) Credit risk

Credit risk is the risk of an unexpected loss if a customer or third party to a financial instrument fails to meet its contractual obligations. The Company holds cash and cash equivalents with Canadian Chartered financial institutions. The Company’s accounts receivable consists of Canadian Goods and Services Tax receivable from the Federal Government of Canada and other receivables for recoverable expenses. The Company’s exposure to credit risk is equal to the balance of cash and cash equivalents and accounts receivable as recorded in the financial statements.

(c) Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulties raising funds to meet its financial obligations as they fall due. The Company is in the exploration stage and does not have cash inflows from operations; therefore, the Company manages liquidity risk through the management of its capital structure and financial leverage.

Contractually obligated cash flow requirements as at February 29, 2020 are as follows:

in thousands of dollars

	Total $		<1 Year $		1–2 Years $		2–5 Years $		Thereafter $
Accounts payable and accrued liabilities		1,274		1,274		-		-		-
		1,274		1,274		-		-		-

(d) Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company is exposed to interest rate risk with respect to interest earned on cash and cash equivalents. Based on balances as at February 29, 2020, a 1% change in interest rates would result in a change in net loss of $0.1 million, assuming all other variables remain constant.

14

11) Commitment

The Company has commitments with respect to an office lease requiring future minimum lease payments as summarized in note 8(b) above.

15

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

Trilogy Metals Inc.

Management’s Discussion and Analysis

(expressed in US dollars)

Cautionary notes

Forward-looking statements

This Management’s Discussion and Analysis contains “forward-looking information” and “forward-looking statements” within the meaning of Section 27A of the U.S. Securities Act of 1933, as amended, Section 21E of the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”), and other applicable securities laws. These forward-looking statements may include statements regarding the Company’s work programs and budgets; perceived merit of properties, exploration results and budgets, the Company and Ambler Metals’ funding requirements, mineral reserves and resource estimates, work programs, capital expenditures, operating costs, cash flow estimates, production estimates and similar statements relating to the economic viability of a project, timelines, strategic plans, statements regarding Ambler Metals’ plans and expectations relating to its Upper Kobuk Mineral Projects, sufficiency of the $145 million subscription price to fund the UKMP through feasibility and the permitting of the first mine; impact of COVID-19 on the upcoming field season; market prices for precious and base metals, or other statements that are not statements of fact. These statements relate to analyses and other information that are based on forecasts of future results, estimates of amounts not yet determinable and assumptions of management. Statements concerning mineral resource estimates may also be deemed to constitute “forward-looking statements” to the extent that they involve estimates of the mineralization that will be encountered if the property is developed.

Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance (often, but not always, identified by words or phrases such as “expects”, “is expected”, “anticipates”, “believes”, “plans”, “projects”, “estimates”, “assumes”, “intends”, “strategy”, “goals”, “objectives”, “potential”, “possible” or variations thereof or stating that certain actions, events, conditions or results “may”, “could”, “would”, “should”, “might” or “will” be taken, occur or be achieved, or the negative of any of these terms and similar expressions) are not statements of historical fact and may be forward-looking statements.

Forward-looking statements are based on the beliefs, expectations and opinions of management on the date the statements are made, as well as on a number of material assumptions, which could prove to be significantly incorrect, including about:

· our ability to achieve production at the Upper Kobuk Mineral Projects;

· the accuracy of our mineral resource and reserve estimates;

· the results, costs and timing of future exploration drilling and engineering;

· timing and receipt of approvals, consents and permits under applicable legislation;

· the adequacy of our financial resources;

· the receipt of third party contractual, regulatory and governmental approvals for the exploration, development, construction and production of our properties;

· our expected ability to develop adequate infrastructure and that the cost of doing so will be reasonable;

· continued good relationships with South32, our joint venture partner, as well as local communities and other stakeholders;

· there being no significant disruptions affecting operations, whether relating to labor, supply, power damage to equipment or other matter;

· expected trends and specific assumptions regarding metal prices and currency exchange rates;

· the potential impact of the novel coronavirus (COVID-19); and

· prices for and availability of fuel, electricity, parts and equipment and other key supplies remaining consistent with current levels.

We have also assumed that no significant events will occur outside of our normal course of business. Although we have attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. We believe that the assumptions inherent in the forward-looking statements are reasonable as of the date of this MD&A. However, forward-looking statements are not guarantees of future performance and, accordingly, undue reliance should not be put on such statements due to the inherent uncertainty therein.

16

Forward-looking statements are subject to a variety of known and unknown risks, uncertainties and other factors that could cause actual events or results to differ from those reflected in the forward-looking statements, including, without limitation:

· risks related to inability to define proven and probable reserves;

· risks related to our ability to finance the development of our mineral properties through external financing, strategic alliances, the sale of property interests or otherwise;

· uncertainty as to whether there will ever be production at the Company’s mineral exploration and development properties;

· risks related to our ability to commence production and generate material revenues or obtain adequate financing for our planned exploration and development activities;

· risks related to lack of infrastructure including but not limited to the risk whether or not the Ambler Mining District Industrial Access Project, or AMDIAP, will receive the requisite permits and, if it does, whether the Alaska Industrial Development and Export Authority will build the AMDIAP;

· risks related to inclement weather which may delay or hinder exploration activities at our mineral properties;

· risks related to our dependence on a third party for the development of our projects;

· commodity price fluctuations;

· our history of losses and expectation of future losses;

· uncertainties relating to the assumptions underlying our resource estimates, such as metal pricing, metallurgy, mineability, marketability and operating and capital costs;

· uncertainty related to inferred mineral resources;

· mining and development risks, including risks related to infrastructure, accidents, equipment breakdowns, labor disputes or other unanticipated difficulties with or interruptions in development, construction or production;

· risks related to market events and general economic conditions;

· risks related to the outbreak of the coronavirus (COVID-19);

· risks and uncertainties relating to the interpretation of drill results, the geology, grade and continuity of our mineral deposits;

· risks related to governmental regulation and permits, including environmental regulation, including the risk that more stringent requirements or standards may be adopted or applied due to circumstances unrelated to the Company and outside of our control;

· the risk that permits and governmental approvals necessary to develop and operate mines at our mineral properties will not be available on a timely basis or at all;

· risks related to the need for reclamation activities on our properties and uncertainty of cost estimates related thereto;

· uncertainty related to title to our mineral properties;

· risks related to the acquisition and integration of operations or projects;

· risks related to increases in demand for equipment, skilled labor and services needed for exploration and development of mineral properties, and related cost increases;

· our need to attract and retain qualified management and technical personnel;

· risks related to conflicts of interests of some of our directors and officers;

· risks related to potential future litigation;

· risks related to the voting power of our major shareholders and the impact that a sale by such shareholders may have on our share price;

· risks related to global climate change;

· risks related to adverse publicity from non-governmental organizations;

· uncertainty as to our ability to maintain the adequacy of internal control over financial reporting as per the requirements of Section 404 of the Sarbanes-Oxley Act;

· increased regulatory compliance costs, associated with rules and regulations promulgated by the United States Securities and Exchange Commission, Canadian Securities Administrators, the NYSE American, the Toronto Stock Exchange, and the Financial Accounting Standards Boards, and more specifically, our efforts to comply with the Dodd-Frank Wall Street Reform and Consumer Protection Act;

· uncertainty as to the volatility in the price of the Company’s common shares;

· the Company’s expectation of not paying cash dividends; and

· adverse federal income tax consequences for U.S. shareholders should the Company be a passive foreign investment company.

This list is not exhaustive of the factors that may affect any of the Company’s forward-looking statements. Forward-looking statements are statements about the future and are inherently uncertain, and actual achievements of the Company or other future events or conditions may differ materially from those reflected in the forward-looking statements due to a variety of risks, uncertainties and other factors, including, without limitation, those referred to in Trilogy’s Form 10-K dated February 13, 2020, filed with the Canadian securities regulatory authorities and the SEC, and other information released by Trilogy and filed with the appropriate regulatory agencies.

17

The Company’s forward-looking statements are based on the beliefs, expectations and opinions of management on the date the statements are made, and the Company does not assume any obligation to update forward-looking statements if circumstances or management’s beliefs, expectations or opinions should change, except as required by law. For the reasons set forth above, investors should not place undue reliance on forward-looking statements.

Cautionary note to United States investors

Reserve and resource estimates

This Management’s Discussion and Analysis has been prepared in accordance with the requirements of the securities laws in effect in Canada, which differ from the requirements of U.S. securities laws. Unless otherwise indicated, all resource and reserve estimates included in this Management’s Discussion and Analysis have been prepared in accordance with National Instrument 43-101 Standards of Disclosure for Mineral Projects (“NI 43-101”) and the Canadian Institute of Mining, Metallurgy, and Petroleum Definition Standards on Mineral Resources and Mineral Reserves. NI 43-101 is a rule developed by the Canadian Securities Administrators which establishes standards for all public disclosure an issuer makes of scientific and technical information concerning mineral projects. Canadian standards, including NI 43-101, differ significantly from the requirements of the SEC, and resource and reserve information contained herein may not be comparable to similar information disclosed by U.S. companies. In particular, and without limiting the generality of the foregoing, the term “resource” does not equate to the term “reserves”. Under U.S. standards, mineralization may not be classified as a “reserve” unless the determination has been made that the mineralization could be economically and legally produced or extracted at the time the reserve determination is made. The SEC’s disclosure standards normally do not permit the inclusion of information concerning “measured mineral resources”, “indicated mineral resources” or “inferred mineral resources” or other descriptions of the amount of mineralization in mineral deposits that do not constitute “reserves” by U.S. standards in documents filed with the SEC. Investors are cautioned not to assume that any part or all of mineral deposits in these categories will ever be converted into reserves. U.S. investors should also understand that “inferred mineral resources” have a great amount of uncertainty as to their existence and great uncertainty as to their economic and legal feasibility. It cannot be assumed that all or any part of an “inferred mineral resource” will ever be upgraded to a higher category. Under Canadian rules, estimated “inferred mineral resources” may not form the basis of feasibility or pre-feasibility studies except in rare cases. Investors are cautioned not to assume that all or any part of an “inferred mineral resource” exists or is economically or legally mineable. Disclosure of “contained ounces” in a resource is permitted disclosure under Canadian regulations; however, the SEC normally only permits issuers to report mineralization that does not constitute “reserves” by SEC standards as in-place tonnage and grade without reference to unit measures. The requirements of NI 43-101 for identification of “reserves” are also not the same as those of the SEC, and reserves reported by the Company in compliance with NI 43-101 may not qualify as “reserves” under SEC standards. Accordingly, information concerning mineral deposits set forth herein may not be comparable with information made public by companies that report in accordance with U.S. standards.

General

This Management’s Discussion and Analysis (“MD&A”) of Trilogy Metals Inc. (“Trilogy”, “Trilogy Metals”, “the Company” or “we”) is dated April 7, 2020 and provides an analysis of our unaudited interim financial results for the quarter ended February 29, 2020 compared to the quarter ended February 28, 2019.

The following information should be read in conjunction with our February 29, 2020 unaudited interim condensed consolidated financial statements and related notes which were prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”). The MD&A should also be read in conjunction with our audited consolidated financial statements and related notes for the year ended November 30, 2019. A summary of the U.S. GAAP accounting policies is outlined in note 2 of the audited consolidated financial statements. All amounts are in United States dollars unless otherwise stated. References to “Canadian dollars” and “C$” and “CDN$” are to the currency of Canada and references to “U.S. dollars”, “$” or “US$” are to the currency of the United States.

Andrew W. West, P.Geo., an employee and Exploration Manager, is a Qualified Person under National Instrument 43-101 - Standards of Disclosure for Mineral Projects (“NI 43-101”), and has approved the scientific and technical information in this MD&A.

Trilogy’s shares are listed on the Toronto Stock Exchange (“TSX”) and the NYSE American Stock Exchange (“NYSE American”) under the symbol “TMQ”. Additional information related to Trilogy, including our annual report on Form 10-K, is available on SEDAR at www.sedar.com and on EDGAR at www.sec.gov.

18

Description of business

We are a base metals exploration company focused on exploring and developing our mineral holdings in the Ambler mining district located in Alaska, U.S.A. We conduct our operations through a wholly owned subsidiary, NovaCopper US Inc. which is doing business as Trilogy Metals US (“Trilogy Metals US”). Our Upper Kobuk Mineral Projects, (“UKMP” or “UKMP Projects”) were contributed into a 50/50 joint venture named Ambler Metals LLC (‘Ambler Metals”) between Trilogy and South32 Limited (‘South32”) on February 11, 2020 (see below). The projects contributed to the joint venture consist of: i) the Ambler lands which host the Arctic copper-zinc-lead-gold-silver project (the “Arctic Project”); and ii) the Bornite lands being explored under a collaborative long-term agreement with NANA Regional Corporation, Inc. (“NANA”), a regional Alaska Native Corporation, which host the Bornite carbonate-hosted copper project (the “Bornite Project”) and related assets.

Corporate developments

Long-term incentives

On December 19, 2019, the Board of Directors approved the granting of 2,050,000 stock options to employees and directors with various vesting terms.

Project Activities

2020 Operating Budget for the Upper Kobuk Mineral Projects

In a press release dated February 26, 2020, the Company announced that Ambler Metals had approved a 2020 program budget of $22.8 million for the advancement of the UKMP. The budget is 100% funded by Ambler Metals. The 2020 program budget includes 10,000 meters of drilling at the Arctic Project, 2,500 meters of drilling within the Ambler Volcanogenic massive Sulphide (“VMS”) Belt and geological mapping and geochemical soil sampling at the Bornite Project. However, the timing of these programs may be delayed, see “Impact of Coronavirus (COVID-19)” below.

Arctic Project

Activities at the Arctic Project will continue to focus on advancing studies and preparing for permit applications. Ambler Metals plans to conduct a 10,000-meter drilling program at the Arctic Project during the summer field season to gather additional drill data for the conversion of resources to the measured category, the next phase of metallurgical studies, including pilot plant testing, and geotechnical drilling for infrastructure placement. The drill program is expected to commence in mid-June and finish at the end of August. Studies are expected to continue throughout the year.

Bornite Project

The 2020 field program at the Bornite Project will consist of geological mapping and geochemical soil sampling over the northern Cosmos Hills and review of drill core and surface exposures to determine controls on high grade zones of copper mineralization. Although there is no planned drilling at the Bornite Project in 2020, the Bornite geological database will be updated and the team will identify priority drill targets for the 2021 field season.

Regional Exploration Project

Following up from the 2019 work performed by Trilogy along the 70-mile (100 kilometer) Ambler VMS belt, Ambler Metals will continue exploration efforts within the Ambler VMS belt to discover and define potential deposits that can provide additional feed to a future Arctic mill. Ambler Metals plans to conduct a 2,500-meter drill campaign in the VMS belt, following up from last year’s drilling at the Sunshine prospect and at other identified targets. The drill program is expected to commence in mid-July and finish at the end of August. The drilling will be preceded by detailed geologic mapping, geochemical soil sampling, and ground geophysics.

Impact of Coronavirus (COVID-19)

With respect to the outbreak of the novel coronavirus (COVID-19), Trilogy recognizes that the situation is extremely fluid and is monitoring the State of Alaska Health Department recommendations and restrictions on travel. These recommendations and restrictions may significantly impact our ability to conduct the planned work programs during the upcoming field season. So, although the work programs discussed above are still currently scheduled to commence as originally planned, our highest priority is the health, safety and welfare of our employees, contractors and community members. As a result, we and our joint venture partner, through Ambler Metals, will make the necessary adjustments to the work programs, including extending the timeline or scope for the remainder of the programs, or even cancelling the planned exploration activities at the UKMP for this season, if it is determined to be necessary or prudent to do so.

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Joint Venture

Option agreement

On April 10, 2017, Trilogy and Trilogy Metals US entered into an Option Agreement to form a Joint Venture with South32 Group Operations Pty Ltd., a wholly-owned subsidiary of South32, which agreement was later assigned by South32 Operations to its affiliate, South32 USA Exploration Inc. on the UKMP (“Option Agreement”). Under the terms of the Option Agreement, as amended, Trilogy Metals US granted South32 the right to form a 50/50 joint venture to hold all of Trilogy Metals US’ Alaskan assets which South32 exercised on December 19, 2019.

Formation of joint venture

On February 11, 2020, Trilogy completed the 50/50 joint venture with South32. Trilogy contributed all of its assets associated with the 172,675-hectare UKMP, including the Arctic and Bornite projects, while South32 contributed a subscription price of US$145 million (the “Subscription Price”), resulting in each party owning a 50% interest in Ambler Metals. The Subscription Price will be used to advance the Arctic and Bornite Projects, along with exploration in the Ambler mining district. With Ambler Metals being well funded, with access to $145 million, Trilogy does not expect to fund programs and budgets to advance the UKMP until the Subscription Price is spent by Ambler Metals.

Ambler Metals is an independently operated company controlled by Trilogy and South32 through a four-member board of which two members are currently appointed by Trilogy based on its 50% equity interest. All significant decisions related to the UKMP require the approval of both companies. We determined that Ambler Metals is a variable interest entity, or VIE, because it is expected to need additional funding from its owners for its significant activities. However, we concluded that we are not the primary beneficiary of Ambler Metals as the power to direct its activities, through its board, is shared under the limited liability company agreement. As we have significant influence over Ambler Metals through our representation on its board, we use the equity method of accounting for our investment in Ambler Metals. Our investment in Ambler Metals was initially measured at its fair value of $176 million upon recognition. Our maximum exposure to loss in this entity is limited to the carrying amount of our investment in Ambler Metals, which totaled $176 million as well as $0.4 million of amounts receivable per a Service Agreement between Trilogy and Ambler Metals.

Subsequent to the end of the first quarter, Ambler Metals loaned US$57.5 million back to South32 and retained $87.5 million. The loan has a 7-year maturity date, but Ambler Metals can demand earlier repayment in installments as required to advance development studies, resource drilling and regional exploration programs. The loan is secured by South32’s membership interest in the LLC and guaranteed by South32 International Investment Holdings Pty Ltd. Trilogy currently estimates that the Subscription Price, which includes the funds to be repaid under the loan, will fund the UKMP through feasibility and the permitting of the first mine to be developed in the Ambler mining district. Once the full amount of the Subscription Price payment of $145 million is expended, the parties will contribute funding pro rata, as contemplated by the operating agreement which governs Ambler Metals.

20

Summary of results

in thousands of dollars,
except for per share amounts

	Three months ended
Selected expenses	February 29, 2020 $			February 28, 2019 $
General and administrative		651			492
Mineral properties expense		1,545			1,535
Professional fees		668			91
Salaries		224			281
Salaries – stock-based compensation		1,196			1,939
Total expenses		4,475			4,458
Gain on derecognition of assets contributed to joint venture		(175,770	)		-
Equity in investee		178			-
Comprehensive earnings (loss) for the period		171,179			(4,336	)
Basic earnings (loss) per common share	$	1.22		$	(0.03	)
Diluted earnings (loss) per common share	$	1.16		$	(0.03	)

For the three months ended February 29, 2020, Trilogy reported net earnings of $171 million (or $1.22 basic and $1.16 diluted earnings per common share). For the comparable period in 2019, we reported a net loss of $4.3 million (or $0.03 basic and diluted loss per common share). The first quarter 2020 differences, when compared to the first quarter 2019, are primarily due to the gain of $176 million recognized from the contribution of mineral property assets to the joint venture with South32 upon formation of the joint venture on February 11, 2020. This gain was slightly offset by $0.18 million in loss from equity investee, consisting of Trilogy’s 50% share of Ambler Metals’ operating loss for the first quarter of 2020, for which there is no comparable amount in the first quarter of 2019.

Other variances noted for the comparable period were i) an increase in general and administrative expenses of $0.16 million primarily due to an additional $0.07 million in regulatory fees due mostly to the filing of the base shelf prospectus and $0.1 million in executive recruiting fees; ii) an increase in professional fees of $0.58 million mainly consisting of $0.12 million for consulting fees for the research and implementation of new accounting standards, legal fees of $0.25 million related to the formation of the joint venture, valuation and loan capacity analysis fees of $0.07 million related to the formation of the joint venture, and consulting fees of $0.1 million for Rick Van Nieuwenhuyse who remained as a consultant to Trilogy through to February 29, 2020; iii) a decrease of $0.06 million in salaries due to reductions in head office staffing levels; and iv) a decrease in stock-based compensation driven primarily by a 0.38 million reduction in the number of stock options granted during the first quarter versus the comparative period as well as no vesting of RSUs during the period, resulting in stock based compensation savings of approximately $0.74 million and $0.33 million, respectively.

Mineral property expenses for the three months ended February 29, 2020 were consistent with the comparative period and mainly include engineering costs related to the Company’s Arctic feasibility study.

Selected financial data

Quarterly information

in thousands of dollars,

except per share amounts

	Q1 2020		Q4 2019			Q3 2019			Q2 2019			Q1 2019			Q4 2018			Q3 2018			Q2 2018
	02/28/19 $		11/30/19 $			08/31/19 $			05/31/19 $			02/28/19 $			11/30/18 $			08/31/18 $			05/31/18 $
Interest and other income		62		91			137			150			122			117			135			77
Mineral property expenses		1,545		3,819			10,951			2,906			1,535			3,833			9,051			2,475
Earnings (loss) for the period		171,179		(6,525	)		(12,535	)		(4,509	)		(4,336	)		(5,319	)		(9,920	)		(3,664	)
Earnings (loss) per common share – basic		1.22		(0.05	)		(0.09	)		(0.04	)		(0.03	)		(0.04	)		(0.08	)		(0.03	)
Earnings (loss) per common share – diluted		1.16		(0.05	)		(0.09	)		(0.04	)		(0.03	)		(0.04	)		(0.08	)		(0.03	)

Factors that can cause fluctuations in our quarterly results include the length of the exploration field season at the properties, the type of program conducted, stock option vesting, and issuance of shares. Other factors that have caused fluctuations in the quarterly results that would not be expected to re-occur include the acquisition and disposition of assets and financing activities.

21

For the first quarter of 2020, we reported comprehensive earnings of $171 million which consisted of a gain of $176 million arising from the derecognition of our Alaskan mineral properties upon contribution to the joint venture with South32, offset by Trilogy’s 50% share of the joint venture’s operating loss for the period from February 11, 2020 to February 29, 2020 and total expenses of $4.5 million for the period. There are no prior period comparatives for the gain on contribution of Alaskan assets or the pro rata share of the joint venture’s operating loss. The remaining difference between the expense of $4.4 million incurred for the current quarter and the loss of $6.5 million for the fourth quarter of 2019 was primarily due to a $2.3 million reduction in mineral property expenses and reflects the seasonal nature of this cost.

The loss of $6.5 million for the fourth quarter ended November 30, 2019 is higher when compared to the net loss of $5.3 million incurred in the fourth quarter ended November 30, 2018. The primary drivers for the difference were $0.7 million higher stock-based compensation, $0.6 million higher professional fees and $0.1 million increase in general and administrative expenses, all offset by $0.2 million in decreased salaries and benefits in the fourth quarter 2019.

Our net loss for the third quarter ended August 31, 2019 of $12.5 million was significantly higher versus the comparative loss of $9.9 million for the same quarter in the prior year. The $2.6 million increase is primarily due to an increase in mineral properties expenditures due to the size of the 2019 field program which included the new regional exploration program which did not exist in the comparative period.

Our net loss for the second quarter ended May 31, 2019 of $4.5 million is $0.9 million higher when compared to the comparative second quarter ended May 31, 2018. The difference is primarily due to an increase in mineral properties expenses related to the new regional exploration program commencing in the period with district-wide airborne geophysical surveys completed in the quarter and an increase in stock-based compensation.

Liquidity and capital resources

At February 29, 2020, we had $15.2 million in cash and cash equivalents and working capital of $14.5 million, which is sufficient to fund our ongoing operations for at least the next 12 months. The projects will be funded by Ambler Metals and we do not anticipate needing to fund our 50% share of future expenditures to advance the projects until the approximately $145 million is spent.

Contractual obligations

Contractual obligated undiscounted cash flow requirements as at February 29, 2020 are as follows.

In thousands of dollars

	Total $		<1 Year $		1–2 Years $		2–5 Years $		Thereafter $
Accounts payable and accrued liabilities		1,274		1,274		-		-		-
Office lease		839		136		384		319		-
		2,113		1,410		384		319		-

Off-balance sheet arrangements

We have no material off-balance sheet arrangements.

Outstanding share data

At April 7, 2020, we had 140,665,733 common shares issued and outstanding. At April 7, 2020, we had outstanding, 10,983,933 stock options with a weighted-average exercise price of $1.21 as well as 1,182,391 deferred share units (“DSUs”) and 11,927 NovaGold DSUs for which the holder is entitled to receive one common share for every six NovaGold shares received. Upon exercise of all the foregoing convertible securities, the Company would be required to issue aggregate of 12,168,312 common shares.

New accounting pronouncements

Certain recent accounting pronouncements have been included under note 2 in our February 29, 2020 unaudited interim consolidated financial statements.

22

Critical accounting estimates

The most critical accounting estimates upon which our financial status depends are those requiring estimates of the recoverability of our capitalized mineral properties, impairment of long-lived assets, equity method investment, income taxes and valuation of stock-based compensation.

Mineral properties and development costs

All direct costs related to the acquisition of mineral property interests are capitalized. The acquisition of title to mineral properties is a complicated and uncertain process. The Company has taken steps, in accordance with industry standards, to verify the title to mineral properties in which it has an interest. Although the Company has made efforts to ensure that legal title to its mining assets is properly recorded, there can be no assurance that such title will be secured indefinitely.

Impairment of long-lived assets

Management assesses the possibility of impairment in the carrying value of its long-lived assets whenever events or circumstances indicate that the carrying amounts of the asset or asset group may not be recoverable. Significant judgments are made in assessing the possibility of impairment. Management considers several factors in considering if an indicator of impairment has occurred, including but not limited to, indications of value from external sources, significant changes in the legal, business or regulatory environment, and adverse changes in the use of physical condition of the asset. These factors are subjective and require consideration at each period end. If an indicator of impairment is determined to exist, management calculates the estimated undiscounted future net cash flows relating to the asset or asset group using estimated future prices, mineral resources, and operating, capital and reclamation costs. When the carrying value of an asset exceeds the related undiscounted cash flows, the asset is written down to its estimated fair value, which is usually determined using discounted future cash flows. Management’s estimates of mineral prices, mineral resources, foreign exchange rates, production levels and operating capital and reclamation costs are subject to risk and uncertainties that may affect the determination of the recoverability of the long-lived asset.

Income taxes

We must make estimates and judgments in determining the provision for income tax expense, deferred tax assets and liabilities, and liabilities for unrecognized tax benefits including interest and penalties. We are subject to income tax law in the United States and Canada. The evaluation of tax liabilities involving uncertainties in the application of complex tax regulation is based on factors such as changes in facts or circumstances, changes in tax law, new audit activity, and effectively settled issues. The evaluation of an uncertain tax position requires significant judgment, and a change in such recognition would result in an additional charge to the income tax expense and liability.

Stock-based compensation

Compensation expense for options granted to employees, directors and certain service providers is determined based on estimated fair values of the options at the time of grant using the Black-Scholes option pricing model, which takes into account, as of the grant date, the fair market value of the shares, expected volatility, expected life, expected forfeiture rate, expected dividend yield and the risk-free interest rate over the expected life of the option. The use of the Black-Scholes option pricing model requires input estimation of the expected life of the option, volatility, and forfeiture rate which can have a significant impact on the valuation model, and resulting expense recorded.

Investment in affiliates

Investments in unconsolidated ventures over which the Company has the ability to exercise significant influence, but does not control, are accounted for under the equity method and include the Company’s investment in the Ambler Metals project. We identified Ambler Metals LLC as a Variable Interest Entity (VIE) as the entity is dependent on funding from its owners. All funding, ownership, voting rights and power to exercise control is shared equally on a 50/50 basis between the owners of the VIE. Therefore, the Company has determined that it is not the primary beneficiary of the VIE. The Company’s maximum exposure to loss is its investment in Ambler Metals LLC.

Ambler Metals LLC is a non-publicly traded equity investee holding exploration and development projects. The Company reviews and evaluates its investment in affiliates for other than temporary impairment when events or changes in circumstances indicate that the related carrying amounts may not be recoverable. Events that could indicate impairment of an investment in affiliates include a significant decrease in long-term expected gold price, a significant increase in expected operating or capital costs, unfavorable exploration results or technical studies, a significant decrease in reserves, a loss of significant mineral claims or a change in the development plan or strategy for the project. Asset impairment is considered to exist if the total estimated future cash flows on an undiscounted basis are less than the carrying amount of the asset. If the underlying assets are not recoverable, an impairment loss is measured and recorded based on the difference between the carrying amount of the investee and its estimated fair value which may be determined using a discounted cash flow model.

23

Additional information

Additional information regarding the Company, including our annual report on Form 10-K, is available on SEDAR at www.sedar.com and EDGAR at www.sec.gov and on our website at www.trilogymetals.com. Information contained on our website is not incorporated by reference.

Item 3.  Quantitative and Qualitative Disclosures about Market Risk

Our financial instruments consist of cash and cash equivalents, accounts receivable, deposits, and accounts payable and accrued liabilities. The fair value of the financial instruments approximates their carrying value due to the short-term nature of their maturity. Our financial instruments initially measured at fair value and then held at amortized cost include cash and cash equivalents, accounts receivable, deposits, and accounts payable and accrued liabilities.

(a) Currency risk

Currency risk is the risk of a fluctuation in financial asset and liability settlement amounts due to a change in foreign exchange rates. We operate in the United States and Canada. Our exposure to currency risk at February 29, 2020 is limited to the Canadian dollar consisting of cash of CDN$540,000, accounts receivable of CDN$49,000 and accounts payable of CDN$865,000. Based on a 10% change in the US-Canadian exchange rate, assuming all other variables remain constant, our net loss would change by approximately $21,000.

(b) Credit risk

Credit risk is the risk of an unexpected loss if a customer or third party to a financial instrument fails to meet its contractual obligations. We hold cash and cash equivalents with Canadian Chartered financial institutions. Our accounts receivable consists of Canadian Goods and Services Tax receivable from the Federal Government of Canada and other receivables for recoverable expenses. Our exposure to credit risk is equal to the balance of cash and cash equivalents and accounts receivable as recorded in the financial statements.

(c) Liquidity risk

Liquidity risk is the risk that we will encounter difficulties raising funds to meet our financial obligations as they fall due. We are in the exploration stage and do not have cash inflows from operations; therefore, we manage liquidity risk through the management of the capital structure and financial leverage. Future financing may be obtained through debt financing, equity financing, sales of investments, convertible debt, exercise of options, or other means. Continued operations are dependent on our ability to obtain additional financing or to generate future cash flows. Our contractually obligated cash flow is disclosed under the section titled “Contractual Obligations.”

(d) Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. We are exposed to interest rate risk with respect to interest earned on cash and cash equivalents. Based on balances as at February 29, 2020, a 1% change in interest rates would result in a change in net loss of $0.1 million, assuming all other variables remain constant.

As we are currently in the exploration phase, none of our financial instruments are exposed to commodity price risk; however, our ability to obtain long-term financing and its economic viability could be affected by commodity price volatility.

24

Item 4.  Controls and Procedures

Disclosure controls and procedures

Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted by the Company under U.S. and Canadian securities legislation is recorded, processed, summarized and reported within the time periods specified in those rules, including providing reasonable assurance that material information is gathered and reported to senior management, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), as appropriate, to permit timely decisions regarding public disclosure. Management, including the CEO and CFO, has evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures, as defined in Rule 13a-15(e) and 15d-15(e) of the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”) and the rules of Canadian Securities Administration, as of February 29, 2020. Based on this evaluation, the CEO and CFO have concluded that the Company’s disclosure controls and procedures were effective.

Internal control over financial reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act and National Instrument 52-109 Certification of Disclosure in Issuer’s Annual and Interim filings. Any system of internal control over financial reporting, no matter how well designed, has inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

Changes in internal control over financial reporting

Except for the implementation of certain internal controls over the formation of the Ambler joint venture and the adoption of new lease accounting requirements under ASC 842, there have been no changes in our internal controls over financial reporting during the three-month period ended February 29, 2020, which have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting. We continue to evaluate our internal control over financial reporting on an ongoing basis to identify improvements. In connection with the joint venture, Ambler Metals LLC, in February 2020, and the adoption of the new lease accounting requirements, we will continue to modify our internal control over financial reporting over the next few months to reflect the impact of both the formation of the joint venture and adoption of ASC 842 lease accounting rules.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we are a party to routine litigation and proceedings that are considered part of the ordinary course of its business. We are not aware of any material current, pending, or threatened litigation.

Item 1A. Risk Factors

Trilogy and its future business, operations and financial condition are subject to various risks and uncertainties due to the nature of its business and the present stage of exploration of its mineral properties and the formation of the joint venture. Except as set forth below, certain of these risks and uncertainties are under the heading “Risk Factors” under Trilogy’s Form 10-K dated February 13, 2020 which is available on SEDAR at www.sedar.com, EDGAR at www.sec.gov and on our website at www.trilogymetals.com.

The outbreak of the coronavirus (COVID-19) may affect our operations

The Company faces risks related to health epidemics and other outbreaks of communicable diseases, which could significantly disrupt its operations and may materially and adversely affect its business and financial conditions.

The Company’s business could be adversely impacted by the effects of the coronavirus or other epidemics. In December 2019, a novel strain of the coronavirus emerged in China and the virus has now spread to several other countries, including Canada and the U.S., and infections have been reported globally. The extent to which the coronavirus impacts the Company’s business, including exploration and development activities at Ambler Metals and the market for its securities, will depend on future developments, which are highly uncertain and cannot be predicted at this time, and include the duration, severity and scope of the outbreak and the actions taken to contain or treat the coronavirus outbreak. In particular, the continued spread of the coronavirus and travel and other restrictions established to curb the spread of the coronavirus, could materially and adversely impact the Company’s business including without limitation, the planned exploration programs at Ambler Metals during the upcoming field season, employee health, workforce productivity, increased insurance premiums, limitations on travel, the availability of industry experts and personnel, the timing to process drill and other metallurgical testing, and other factors that will depend on future developments beyond the Company’s control, which may have a material and adverse effect on the its business, financial condition and results of operations.

25

There can be no assurance that the Company's personnel will not be impacted by these pandemic diseases and ultimately see its workforce productivity reduced or incur increased medical costs or insurance premiums as a result of these health risks.

In addition, a significant outbreak of coronavirus could result in a widespread global health crisis that could adversely affect global economies and financial markets resulting in an economic downturn that could have an adverse effect on the demand for precious metals and our future prospects.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

These disclosures are not applicable to us.

Item 5. Other Information.

None.

Item 6. Exhibits

Exhibits

Exhibit No.	Description
2.1	Contribution Agreement, dated February 11, 2020, between NovaCopper US Inc., Trilogy Metals Inc. and Ambler Metals LLC (incorporated by reference Exhibit 2.1 to the Current Report on Form 8-K filed on February 18, 2020)
3.1	Certificate of Incorporation, dated April 27, 2011 (incorporated by reference Exhibit 99.2 to the Registration Statement on Form 40-F as filed on March 1, 2012, File No. 001-35447)
3.2	Articles of Trilogy Metals Inc., effective April 27, 2011, as altered March 20, 2011 (incorporated by reference to Exhibit 99.3 to Amendment No. 1 to the Registration Statement on Form 40-F as filed on April 19, 2012, File No. 001-35447)
3.3	Notice of Articles and Certificate of Change of Name, dated September 1, 2016 (incorporated by reference to Exhibit 3.1 to the Form 8-K dated September 8, 2016)
10.1	Amended and Restated Limited Liability Company Agreement of Ambler Metals LLC, dated February 11, 2020 (incorporated by reference Exhibit 2.1 to the Current Report on Form 8-K filed on February 18, 2020)
31.1	Certification of the Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a)
31.2	Certification of the Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a)
32.1	Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350
32.2	Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350
101	Interactive Data Files
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

26

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: April 8, 2020	TRILOGY METALS INC.
	By:	/s/ James Gowans
		James Gowans
		President and Chief Executive Officer

By:	/s/ Elaine M. Sanders
	Elaine M. Sanders
	Vice President and Chief Financial Officer

27

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO

RULE 13a-14 OF THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, James Gowans, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Trilogy Metals Inc.

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	April 8, 2020
By:	/s/ James Gowans
	James Gowans
	Interim President and Chief Executive Officer
	(principal executive officer)

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO

RULE 13a-14 OF THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Elaine Sanders, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Trilogy Metals Inc.

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	April 8, 2020
By:	/s/ Elaine Sanders
	Elaine Sanders
	Vice President and Chief Financial Officer
	(principal financial officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. §1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Trilogy Metals Inc. (the “Registrant”) for the period ended February 29, 2020, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, James Gowans, Interim President and Chief Executive Officer of the Registrant, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:	April 8, 2020
By:	/s/ James Gowans
	James Gowans
	Interim President and Chief Executive Officer
	(principal executive officer)

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. §1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Trilogy Metals Inc. (the “Registrant”) for the period ended February 29, 2020, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Elaine Sanders, Vice President and Chief Financial Officer of the Registrant, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:	April 8, 2020
By:	/s/ Elaine Sanders
	Elaine Sanders
	Vice President and Chief Financial Officer
	(principal financial officer)

XML

Commitment

3 Months Ended

Feb. 29, 2020

Commitment

Commitment

11)Commitment

The Company has commitments with respect to an office lease requiring future minimum lease payments as summarized in note 8(b) above.

XML

Accounts receivable

3 Months Ended

Feb. 29, 2020

Accounts receivable

Accounts receivable

3)Accounts receivable

		in thousands of dollars
	February 29, 2020	November 30, 2019
	$	$
GST input tax credits	37	42
Recoverable payments	22	222
Ambler Metals LLC	359	—
Accounts receivable	418	264

The balance due from Ambler Metals LLC (“Ambler Metals”) (see note 4 below) consists of $110 thousand for services rendered by Trilogy per a service agreement (the “Service Agreement”) between Trilogy and Ambler Metals, $120 thousand for additional staking costs and $130 thousand for invoices paid by Trilogy on behalf of Ambler Metals LLC, per the Service Agreement.

XML

Accounts payable and accrued liabilities

3 Months Ended

Feb. 29, 2020

Accounts payable and accrued liabilities

Accounts payable and accrued liabilities

7)Accounts payable and accrued liabilities

	in thousands of dollars
	February 29, 2020	November 30, 2019
	$	$
Trade accounts payable	528	902
Accrued liabilities	646	721
Accrued salaries and vacation	100	731
Accounts payable and accrued liabilities	1,274	2,354

XML

Interim Consolidated Statements of Changes in Shareholders' Equity - USD ($) $ in Thousands	Share capital [Member]	Warrants [Member]	Contributed surplus [Member]	Contributed surplus - options [Member]	Contributed surplus - units [Member]	Deficit [Member]	Total
Beginning Balance at Nov. 30, 2018	$ 164,069	$ 2,253	$ 122	$ 19,076	$ 1,489	$ (154,807)	$ 32,202
Beginning Balance (Shares) at Nov. 30, 2018	131,585,612
Exercise of options	$ 28	0	0	(28)	0	0	0
Exercise of options (Shares)	44,230
Restricted Share Units	$ 424	0	0	0	(424)	0	0
Restricted Share Units (Shares)	412,501
Stock-based compensation	$ 0	0	0	1,586	353	0	1,939
Earnings (Loss) for the period	0	0	0	0	0	(4,336)	(4,336)
Ending Balance at Feb. 28, 2019	$ 164,521	2,253	122	20,634	1,418	(159,143)	29,805
Ending Balance (Shares) at Feb. 28, 2019	132,042,343
Beginning Balance at Nov. 30, 2019	$ 177,971	0	122	21,123	1,759	(182,712)	18,263
Beginning Balance (Shares) at Nov. 30, 2019	140,427,761
Exercise of options	$ 6	0	0	(6)	0	0	0
Exercise of options (Shares)	19,514
Restricted Share Units	$ 330	0	0	0	(330)	0	0
Restricted Share Units (Shares)	212,501
Stock-based compensation	$ 0	0	0	1,155	41	0	1,196
Earnings (Loss) for the period	0	0	0	0	0	171,179	171,179
Ending Balance at Feb. 29, 2020	$ 178,307	$ 0	$ 122	$ 22,272	$ 1,470	$ (11,533)	$ 190,638
Ending Balance (Shares) at Feb. 29, 2020	140,659,776

XML

Document and Entity Information - shares	3 Months Ended
	Feb. 29, 2020	Apr. 07, 2020
Document and Entity Information
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Feb. 29, 2020
Document Fiscal Year Focus	2020
Entity Current Reporting Status	Yes
Document Fiscal Period Focus	Q1
Entity Registrant Name	Trilogy Metals Inc.
Entity Central Index Key	0001543418
Current Fiscal Year End Date	--11-30
Entity Interactive Data Current	Yes
Entity Filer Category	Accelerated Filer
Title of 12(b) Security	Common Shares
Trading Symbol	TMQ
Security Exchange Name	NYSE
Entity Common Stock, Shares Outstanding		140,665,733
Entity Emerging Growth Company	false
Entity Small Business	true
Entity Shell Company	false

XML

Equity method investment (Details) - USD ($) $ in Thousands		3 Months Ended
	Feb. 11, 2020	Feb. 29, 2020	Feb. 28, 2019	Feb. 10, 2020
Table summarizes the gain on recognition of the UKMP assets upon transfer to the Ambler Metals joint venture
Fair value ascribed to Ambler Metals interest		$ 175,822
Less: carrying value of contributed /eliminated assets
Property, plant and equipment		(618)
Add:
Gain on derecognition		175,770	$ 0
Ambler Metals LLC
Table summarizes the gain on recognition of the UKMP assets upon transfer to the Ambler Metals joint venture
Fair value ascribed to Ambler Metals interest	$ 176,000	$ 175,822		$ 176,000
Less: carrying value of contributed /eliminated assets
Mineral properties	(30,587)
Property, plant and equipment	(618)
Elimination of Fairbanks warehouse right of use asset	(93)
Elimination of prepaid State of Alaska mining claim fees	(303)
Add:
Demobilization costs of drills	278
Cancellation of Fairbanks warehouse lease liability	93
Fair value of mineral properties purchase option	31,000
Gain on derecognition	$ 175,770
South32 | Ambler Metals LLC
Schedule of Equity Method Investments [Line Items]
Percentage of ownership	50.00%
Equity method investment contribution	$ 145,000
Equity method investment fair value	176,000
Equity method investment service agreement	$ 400

XML

Mineral Properties and development costs (Details) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Feb. 29, 2020	Nov. 30, 2019	Nov. 30, 2018
Mineral properties and development costs		$ 30,631
Alaska, USA [Member]
Reimbursable Acquisition Costs	$ (44)
Acquisition costs		44
Mineral properties and development costs	0	30,631	$ 30,587
Assets derecognized	(30,587)
Ambler Properties [Member] | Alaska, USA [Member]
Reimbursable Acquisition Costs	(44)
Acquisition costs		44
Mineral properties and development costs	0	26,631	26,587
Assets derecognized	(26,587)
Bornite Properties [Member] | Alaska, USA [Member]
Reimbursable Acquisition Costs	0
Acquisition costs		0
Mineral properties and development costs	0	$ 4,000	$ 4,000
Assets derecognized	$ (4,000)

XML

Leases - Right of Use Asset (Details) - USD ($) $ in Thousands	3 Months Ended
	Feb. 29, 2020	Feb. 28, 2019
Leases
Amortization	$ (60)	$ 0
Lease accretion	19
Derecognition of Fairbanks warehouse lease	(93)
Right of use asset as at February 29, 2020	$ 547

XML

Leases - Future minimum payments (Details) $ in Thousands	Feb. 29, 2020 USD ($)
Lessee, Operating Lease, Liability, Payment, Due [Abstract]
2020	$ 136
2021	189
2022	195
2023	200
2024	119
Total undiscounted lease payments	839
Effect of discounting	(192)
Present Value of Lease Payments Recognized as Lease Liability	$ 647

XML

Share capital - Stock options plans and changes (Details)	3 Months Ended
	Feb. 29, 2020 $ / shares shares	Feb. 29, 2020 $ / shares shares	Feb. 28, 2019 $ / shares	Feb. 28, 2019 $ / shares
Weighted average exercise price, Granted	$ 3.02		$ 2.94
Weighted average exercise price, Exercised		$ 0.99		$ 1.08
Balance - End of Period, Number of stock options | shares	10,998,933	10,998,933
Balance - End of Period, Weighted average exercise price		$ 1.27
Stock option [Member]
Balance - beginning of the year, Number of stock Options | shares	9,205,600	9,205,600
Balance - beginning of the year, Weighted average exercise price		$ 1.08
Number of options, Granted | shares	2,050,000	2,050,000
Weighted average exercise price, Granted		$ 2.25
Number of options, Exercised | shares	(26,667)	(26,667)
Weighted average exercise price, Exercised		$ 0.54
Number of options, Forfeited | shares	(230,000)	(230,000)
Weighted average exercise price, Forfeited		$ 2.19
Balance - End of Period, Number of stock options | shares	10,998,933	10,998,933
Balance - End of Period, Weighted average exercise price		$ 1.27

XML

Financial instruments - Contractually obligated cash flow requirements (Details) - USD ($)	Feb. 29, 2020	Aug. 31, 2019
Total	$ 1,274,000
Within 1 Year	1,274,000
1 - 2 Years	0
2 - 5 Years	0
Thereafter		$ 0
Accounts payable and accrued liabilities [Member]
Total	1,274,000
Within 1 Year	1,274,000
1 - 2 Years	0
2 - 5 Years	0
Thereafter	$ 0

XML

Accounts receivable (Details) - USD ($) $ in Thousands	Feb. 29, 2020	Nov. 30, 2019
Accounts receivable
GST input tax credits	$ 37	$ 42
Recoverable Payments	22	222
Ambler Metals LLC	359
Accounts Receivable, Net, Current, Total	$ 418	$ 264

XML

Share capital (Tables)

3 Months Ended

Feb. 29, 2020

Share capital

Schedule of common stock outstanding roll forward

	in thousands of dollars, except share amounts
		Ascribed value
	Number of shares	$
November 30, 2018	131,585,612	164,069
Exercise of options	1,725,776	1,123
Restricted Share Units	412,501	424
Deferred Share Units	182,132	189
Exercise of warrants	6,521,740	12,166
November 30, 2019	140,427,761	177,971
Exercise of options	19,514	6
Restricted Share Units	212,501	330
February 29, 2020, issued and outstanding	140,659,776	178,307

Schedule of assumptions used in the pricing model

	February 29, 2020
Risk-free interest rates		1.64	%
Exercise price	CAD$	3.10
Expected life		3.0 years
Expected volatility		63.1	%
Expected dividends		Nil

Summary of the company's stock option plan

	February 29, 2020
		Weighted average
		exercise price
	Number of options	$
Balance – beginning of the period	9,205,600	1.08
Granted	2,050,000	2.25
Exercised	(26,667)	0.54
Forfeited	(230,000)	2.19
Balance – end of period	10,998,933	1.27

Summary of information about stock options

	Outstanding			Exercisable		Unvested
			Weighted		Weighted
	Number of	Weighted	average	Number of	average	Number of
	outstanding	average years	exercise price	exercisable	exercise price	unvested
Range of price	options	to expiry	$	options	$	options
$0.33 to $0.50	2,676,433	0.73	0.36	2,676,433	0.73	—
$0.51 to $1.00	3,195,000	2.35	0.66	3,195,000	2.35	—
$1.01 to $1.50	225,000	3.12	1.32	175,000	3.08	50,000
$1.51 to $2.00	640,000	4.46	1.81	623,333	4.49	16,667
$2.01 to $2.54	4,262,500	4.28	2.23	2,875,829	4.17	1,386,671
	10,998,933	2.84	1.27	9,545,595	2.60	1,453,338

Schedule of restricted share Units and deferred share units plans

	Number of RSUs	Number of DSUs
Balance – beginning of the period	212,501	1,137,488
Granted	—	21,927
Vested/paid	(212,501)	—
Balance – end of period	—	1,159,415

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Plant and equipment (Tables)

3 Months Ended

Feb. 29, 2020

Plant and equipment

Schedule of plant and equipment

	in thousands of dollars
	February 29, 2020
			Assets
		Accumulated	derecognized
	Cost	amortization	note 4(a)	Net
	$	$	$	$
British Columbia, Canada
Furniture and equipment	63	(33)	—	30
Leasehold improvements	253	(30)	—	223
Computer hardware and software	115	(113)	—	2
Alaska, USA
Machinery, and equipment	3,667	(3,049)	(618)	—
Vehicles	348	(348)	—	—
Computer hardware and software	4	(4)	—	—
	4,450	(3,577)	(618)	255

	in thousands of dollars
	November 30, 2019
			Accumulated
		Cost	amortization	Net
		$	$	$
British Columbia, Canada
Furniture and equipment		63	(29)	34
Leasehold improvements		53	(17)	36
Computer hardware and software		115	(112)	3
Alaska, USA
Machinery, and equipment		3,667	(3,026)	641
Vehicles		348	(348)	—
Computer hardware and software		4	(3)	1
		4,250	(3,535)	715

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Share capital - Additional information (Details) $ / shares in Units, $ in Thousands	3 Months Ended				12 Months Ended
	Feb. 29, 2020 $ / shares	Feb. 29, 2020 USD ($) $ / shares shares	Feb. 28, 2019 USD ($) $ / shares	Feb. 28, 2019 USD ($) $ / shares shares	Nov. 30, 2019 shares	Nov. 30, 2018 shares	Feb. 29, 2020 USD ($) $ / shares shares
Stock options granted, weighted average exercise price | $ / shares	$ 3.02		$ 2.94
Stock options granted, weighted average exercise price | $ / shares		$ 0.99		$ 1.08
Stock-based compensation | $		$ (1,196)		$ (1,939)
Non-vested stock options outstanding | shares							10,998,933
Weighted average exercise price options outstanding | $ / shares							$ 1.27
Aggregate intrinsic value, vested options | $			$ 13,000	13,000			$ 5,900
Aggregate intrinsic value, options exercised | $		40		80
Share capital [Member]
Stock-based compensation | $		0		0
Nonvested Options [Member]
Non-vested stock options outstanding | shares							1,453,338
Weighted average exercise price options outstanding | $ / shares	$ 2.21
Number of DSU's [Member]
Common stock committed for issuance | shares							11,927
Class of Warrant or Right, Number of Securities Called by Warrants or Rights | shares							1,988
Stock Compensation Plan [Member]
Stock-based compensation | $		$ 40		$ 350
RSUs [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Vested in Period | shares		212,501
Granted units | shares					0	225,000
Approximations [Member] | Nonvested Options [Member]
Stock option expense | $		$ 950
New Employees [Member]
Stock options granted | shares		2,050,000		2,430,000
Directors, Employees and Services Providers [Member]
Stock-based compensation | $		$ 1,160		$ 1,590

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Share capital - Stock options outstanding (Details)	3 Months Ended
	Feb. 29, 2020 $ / shares shares
Number of outstanding options | shares	10,998,933
Weighted average years to expiry	2 years 10 months 2 days
Weighted average exercise price options outstanding	$ 1.27
Number of exercisable options | shares	9,545,595
Weighted average exercise price exercisable	$ 2.60
Number of unvested options | shares	1,453,338
Range 1 [Member]
Exercise price lower range limit	$ 0.33
Exercise price upper range limit	$ 0.50
Number of outstanding options | shares	2,676,433
Weighted average years to expiry	8 months 23 days
Weighted average exercise price options outstanding	$ 0.36
Number of exercisable options | shares	2,676,433
Weighted average exercise price exercisable	$ 0.73
Number of unvested options | shares	0
Range 2 [Member]
Exercise price lower range limit	$ 0.51
Exercise price upper range limit	$ 1.00
Number of outstanding options | shares	3,195,000
Weighted average years to expiry	2 years 4 months 6 days
Weighted average exercise price options outstanding	$ 0.66
Number of exercisable options | shares	3,195,000
Weighted average exercise price exercisable	$ 2.35
Number of unvested options | shares	0
Range 3 [Member]
Exercise price lower range limit	$ 1.01
Exercise price upper range limit	$ 1.50
Number of outstanding options | shares	225,000
Weighted average years to expiry	3 years 1 month 13 days
Weighted average exercise price options outstanding	$ 1.32
Number of exercisable options | shares	175,000
Weighted average exercise price exercisable	$ 3.08
Number of unvested options | shares	50,000
Range 4 [Member]
Exercise price lower range limit	$ 1.51
Exercise price upper range limit	$ 2.00
Number of outstanding options | shares	640,000
Weighted average years to expiry	4 years 5 months 16 days
Weighted average exercise price options outstanding	$ 1.81
Number of exercisable options | shares	623,333
Weighted average exercise price exercisable	$ 4.49
Number of unvested options | shares	16,667
Range 5 [Member]
Exercise price lower range limit	$ 2.01
Exercise price upper range limit	$ 2.54
Number of outstanding options | shares	4,262,500
Weighted average years to expiry	4 years 3 months 11 days
Weighted average exercise price options outstanding	$ 2.23
Number of exercisable options | shares	2,875,829
Weighted average exercise price exercisable	$ 4.17
Number of unvested options | shares	1,386,671

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Leases (Tables)

3 Months Ended

Feb. 29, 2020

Leases

Schedule of right-of-use asset

	in thousands of dollars
	$
ASC 842 transition as at December 1, 2019	681
Amortization	(60)
Lease accretion	19
Derecognition of Fairbanks warehouse lease	(93)
	547

Schedule of lease expenses

	in thousands of dollars
	Three months ended
	February 29, 2020
	$
Operating lease costs	50
Variable lease costs	34
Total lease expense	84

Schedule of future minimum payments

	in thousands of dollars
	February 29, 2020
Fiscal year	$
2020	136
2021	189
2022	195
2023	200
2024	119
Total undiscounted lease payments	839
Effect of discounting	(192)
Present value of lease payments recognized as lease liability	647

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Equity method investment (Tables)

3 Months Ended

Feb. 29, 2020

Equity method investment

Schedule of gain on transfer of assets

	in thousands of dollars
	$
Fair value ascribed to Ambler Metals interest	176,000
Less: carrying value of contributed /eliminated assets
Mineral properties	(30,587)
Property, plant and equipment	(618)
Elimination of Fairbanks warehouse right of use asset	(93)
Elimination of prepaid State of Alaska mining claim fees	(303)
Add:
Demobilization costs of drills	278
Cancellation of Fairbanks warehouse lease liability	93
Fair value of mineral properties purchase option	31,000
Gain on derecognition	175,770

Schedule of equity investment

The carry value of Trilogy’s 50% investment in Ambler Metals as at February 29, 2020 is summarized on the following table.

	in thousands of dollars
	$
February 11, 2020, fair value ascribed to Ambler Metals interest	176,000
Share of loss on equity investment	(178)
February 29, 2020, equity method investment	175,822

(a) The following table summarizes Ambler Metals Balance Sheet as at February 29, 2020.

	in thousands of dollars
	February 29, 2020
	$
Current assets: Cash, deposits and prepaid expenses	145,049
Non - current assets: Property, equipment and mineral properties	31,454
Current liabilities: Accounts payable and accrued liabilities	(517)
Non - current liabilities: Lease obligation	(91)
Net assets	175,895

(b) The following table summarizes Ambler Metals comprehensive loss from the formation of the joint venture on February 11, 2020 to the end of the reporting period on February 29, 2020.

	in thousands of dollars
	February 11- 29, 2020
	$
Amortization	12
Mineral properties expense	167
General and administrative expense	219
Interest income	(43)
Comprehensive loss	355

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Accounts receivable - Additional information (Details) $ in Thousands	Feb. 29, 2020 USD ($)
Accounts receivable
Service agreement cost	$ 110
Staking cost	120
invoices paid on behalf of Ambler Metals LLC	$ 130

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Interim Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) - USD ($) $ in Thousands	3 Months Ended
	Feb. 29, 2020	Feb. 28, 2019
Expenses
Amortization	$ 42	$ 37
Foreign exchange loss (gain)	23	(34)
General and administrative	651	492
Investor relations	126	117
Mineral properties expense (note 6(a))	1,545	1,535
Professional fees	668	91
Salaries	224	281
Salaries - stock-based compensation	1,196	1,939
Total expenses	4,475	4,458
Other items
Gain on derecognition of assets contributed to joint venture (note 4(a))	(175,770)	0
Loss on equity investment in Ambler Metals LLC. (note 4(b))	178	0
Interest and other income	(62)	(122)
Comprehensive earnings (loss) for the period	$ 171,179	$ (4,336)
Basic earnings (loss) per common share	$ 1.22	$ (0.03)
Diluted earnings (loss) per common share	$ 1.16	$ (0.03)
Basic weighted average number of common shares outstanding	140,616,672	131,916,941
Diluted weighted average number of common shares outstanding	147,649,507	131,916,941

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Financial instruments

3 Months Ended

Feb. 29, 2020

Financial instruments

Financial instruments

10)Financial instruments

The Company is exposed to a variety of risks arising from financial instruments. These risks and management’s objectives, policies and procedures for managing these risks are disclosed as follows.

The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, deposits, and accounts payable and accrued liabilities. The fair value of the Company’s financial instruments approximates their carrying value due to the short-term nature of their maturity. The Company’s financial instruments initially measured at fair value and then held at amortized cost include cash and cash equivalents, accounts receivable, deposits, and accounts payable and accrued liabilities. 

Financial risk management

The Company’s activities expose it to certain financial risks, including currency risk, credit risk, liquidity risk, interest risk and price risk.

(a) Currency risk

Currency risk is the risk of a fluctuation in financial asset and liability settlement amounts due to a change in foreign exchange rates. The Company operates in the United States and Canada. The Company’s exposure to currency risk at February 29, 2020 is limited to the Canadian dollar consisting of cash of CDN$540,000, accounts receivable of CDN$49,000 and accounts payable of CDN$865,000. Based on a 10% change in the US Canadian exchange rate, assuming all other variables remain constant, the Company’s net loss would change by approximately $21,000.

(b) Credit risk

Credit risk is the risk of an unexpected loss if a customer or third party to a financial instrument fails to meet its contractual obligations. The Company holds cash and cash equivalents with Canadian Chartered financial institutions. The Company’s accounts receivable consists of Canadian Goods and Services Tax receivable from the Federal Government of Canada and other receivables for recoverable expenses. The Company’s exposure to credit risk is equal to the balance of cash and cash equivalents and accounts receivable as recorded in the financial statements.

(c) Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulties raising funds to meet its financial obligations as they fall due. The Company is in the exploration stage and does not have cash inflows from operations; therefore, the Company manages liquidity risk through the management of its capital structure and financial leverage.

Contractually obligated cash flow requirements as at February 29, 2020 are as follows:

	in thousands of dollars
	Total	< 1 Year	1–2 Years	2–5 Years	Thereafter
	$	$	$	$	$
Accounts payable and accrued liabilities	1,274	1,274	—	—	—
	1,274	1,274	—	—	—

(d)Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company is exposed to interest rate risk with respect to interest earned on cash and cash equivalents. Based on balances as at February 29, 2020, a 1% change in interest rates would result in a change in net loss of $0.1 million, assuming all other variables remain constant.

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Summary of significant accounting policies

3 Months Ended

Feb. 29, 2020

Summary of significant accounting policies

Summary of significant accounting policies

2)Summary of significant accounting policies

Basis of presentation

These interim consolidated financial statements have been prepared using accounting principles generally accepted in the United States (“U.S. GAAP”) and include the accounts of Trilogy and its wholly owned subsidiary, NovaCopper US Inc. (dba “Trilogy Metals US”). All significant intercompany transactions are eliminated on consolidation. For variable interest entities (“VIEs”) where Trilogy is not the primary beneficiary, we use the equity method of accounting.

All figures are in United States dollars unless otherwise noted. References to CAD$ refer to amounts in Canadian dollars.

The unaudited interim consolidated financial statements include all adjustments necessary for the fair presentation of the Company’s financial position as of February 29, 2020 and our results of operations and cash flows for the three months ended February 29, 2020 and February 28, 2019. The results of operations for the three months ended February 29, 2020 are not necessarily indicative of the results to be expected for the fiscal year ending November 30, 2020.

As these interim consolidated financial statements do not contain all of the disclosures required by U.S. GAAP for annual financial statements, these unaudited interim consolidated financial statements should be read in conjunction with the annual financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended November 30, 2019, filed with the U.S. Securities and Exchange Commission (“SEC”) and Canadian securities regulatory authorities on February 13, 2020.

These interim consolidated financial statements were approved by the Company’s Audit Committee on behalf of the Board of Directors for issue on April 7, 2020.

Accounting standards adopted

i.          Leases

In February 2016, the FASB issued new accounting requirements for accounting for, presentation of, and classification of leases (“ASU 2016-02”) which, together with subsequent amendments, is included in ASC 842, Leases. ASC 842 became effective for the Company as of December 1, 2019.

The Company adopted ASC 842 using the modified retrospective transition method by applying the transition provision and recording our cumulative adjustment to opening deficit at the beginning of the period of adoption on December 1, 2019, rather than at the beginning of the comparative period presented. Therefore, in the comparative periods, we continue to apply the legacy guidance in ASC 840, including its disclosure requirements. We elected to apply all of the transition practical expedients available, including:

· the package of three practical expedients to (1) not reassess whether any expired or existing contracts are or contain leases, (2) not reassess the lease classification for any expired or existing leases, and (3) not reassess initial direct costs for any existing lease;

· the hindsight practical expedient to use hindsight when determining lease term and assessing impairment of right-of-use assets, if any; and

· the easements practical expedient to continue applying our current policy for accounting for any land easements expired before or existing as of December 1, 2019.

In addition, we elected to apply the short-term lease recognition exemption and elected to apply the practical expedient to not separate lease and non-lease components for all applicable leases on transition. The adoption of this new standard resulted in the recognition of right of use assets and lease liabilities of $786,000 as at December 1, 2019.

iiInvestment in affiliates

Investments in unconsolidated ventures over which the Company has the ability to exercise significant influence, but does not control, are accounted for under the equity method and include the Company’s investment in the Ambler Metals project. We identified Ambler Metals LLC as a Variable Interest Entity (VIE) as the entity is dependent on funding from its owners. All funding, ownership, voting rights and power to exercise control is shared equally on a 50/50 basis between the owners of the VIE. Therefore, the Company has determined that it is not the primary beneficiary of the VIE. The Company’s maximum exposure to loss is its investment in Ambler Metals LLC.

Ambler Metals LLC is a non-publicly traded equity investee holding exploration and development projects. The Company reviews and evaluates its investment in affiliates for other than temporary impairment when events or changes in circumstances indicate that the related carrying amounts may not be recoverable. Events that could indicate impairment of an investment in affiliates include a significant decrease in long-term expected commodity prices, a significant increase in expected operating or capital costs, unfavorable exploration results or technical studies, a significant decrease in reserves, a loss of significant mineral claims or a change in the development plan or strategy for the project. Asset impairment is considered to exist if the total estimated future cash flows on an undiscounted basis are less than the carrying amount of the asset. If the underlying assets are not recoverable, an impairment loss is measured and recorded based on the difference between the carrying amount of the investee and its estimated fair value which may be determined using a discounted cash flow model.

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Mineral properties and development costs

3 Months Ended

Feb. 29, 2020

Mineral properties and development costs

Mineral properties and development costs

6)Mineral properties and development costs

	in thousands of dollars
		Acquisition costs	Assets
		reimbursable	derecognized	February 29,
	November 30, 2019	from Ambler	note 4(a)	2020
	$	Metals LLC	$	$
Alaska, USA
Ambler (a)	26,631	(44)	(26,587)	—
Bornite (b)	4,000	—	(4,000)	—
	30,631	(44)	(30,587)	—

	in thousands of dollars
	November 30, 2018	Acquisition costs	November 30, 2019
	$	$	$
Alaska, USA
Ambler (a)	26,587	44	26,631
Bornite (b)	4,000	—	4,000
	30,587	44	30,631

(a) Mineral properties expense

The following table summarizes mineral properties expense for the noted periods.

		In thousands of dollars
	Three months ended	Three months ended
	February 29, 2020	February 28, 2019
	$	$
Alaska, USA
Community	137	118
Drilling	—	0
Engineering	723	357
Environmental	99	165
Geochemistry and geophysics	12	165
Land and permitting	134	120
Project support	249	226
Other income	—	(1)
Wages and benefits	191	385
	1,545	1535

Mineral property expenses consist of direct drilling, personnel, community, resource reporting and other exploration expenses as outlined above, as well as indirect project support expenses such as fixed wing charters, helicopter support, fuel, and other camp operation costs. Expenses during the first quarter ended February 29, 2020 consisted mainly of engineering studies in preparation of the Arctic feasibility study and care and maintenance of the camp during the winter season.  Cumulative mineral properties expense in Alaska from the initial earn-in agreement on the property in 2004 to February 29, 2020 is $115.3 million and cumulative acquisition costs were $30.6 million. Cumulative spend to date totaled $145.9 million through to February 29, 2020. On February 11, 2020, upon the formation of the joint venture with South 32, the acquisition costs of $30.6 million were derecognized upon the contribution of the mineral properties to Ambler Metals.

(b)Derecognition

As part of the formation of the joint venture with South32 on February 11, 2020, Trilogy contributed all of its assets associated with the UKMP, including the Arctic and Bornite projects. As a result, $0.62 million of machinery and equipment as well as $30.6 million of mineral properties related to the UKMP were derecognized in Trilogy on February 11, 2020.

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Leases - Lease liabilities (Details) - Office and Warehouse Space [Member] $ in Thousands	3 Months Ended
	Feb. 29, 2020 USD ($)
Lessee, Lease, Description [Line Items]
Option to terminate	false
Operating lease costs	$ 50
Variable lease costs	34
Total lease expense	$ 84

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Equity method investment - Financail information (Details) - USD ($) $ in Thousands	1 Months Ended	3 Months Ended
	Feb. 29, 2020	Feb. 29, 2020	Feb. 28, 2019
Summarizes on Equity Method Investment
Share of loss on equity investment		$ (178)	$ 0
February 29, 2020, equity method investment	$ 175,822	175,822
Summarized Financial Information, Income Statement
Amortization		42	37
General and administrative expense		651	$ 492
Ambler Metals LLC
Schedule of Equity Method Investments [Line Items]
Operating loss	400
Summarizes on Equity Method Investment
February 11, 2020, fair value ascribed to Ambler Metals interest	176,000
Share of loss on equity investment	(178)
February 29, 2020, equity method investment	175,822	175,822
Summarized Financial Information, Balance Sheet
Current assets: Cash, deposits and prepaid expenses	145,049	145,049
Non - current assets: Property, equipment and mineral properties	31,454	31,454
Current liabilities: Accounts payable and accrued liabilities	(517)	(517)
Non - current liabilities: Lease obligation	(91)	(91)
Net assets	175,895	$ 175,895
Summarized Financial Information, Income Statement
Amortization	12
Mineral properties expense	167
General and administrative expense	219
Interest income	(43)
Comprehensive loss	$ 355

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Mineral properties and development costs - Mineral property expenses (Details) - USD ($) $ in Thousands	3 Months Ended
	Feb. 29, 2020	Feb. 28, 2019
Mineral property expense	$ 1,545	$ 1,535
Alaska, USA [Member]
Community	137	118
Drilling		0
Engineering	723	357
Environmental	99	165
Geochemistry and geophysics	12	165
Land and permitting	134	120
Project support	249	226
Other income		(1)
Wages and benefits	191	385
Mineral property expense	$ 1,545	$ 1,535

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Share capital - Assumptions used in the pricing model (Details)	3 Months Ended
	Feb. 29, 2020 $ / shares
Share capital
Risk-free interest rates	1.64%
Exercise price	$ 3.10
Expected life	3 years
Expected volatility	63.10%
Expected dividends	0.00%

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Financial instruments - Additional information (Details)	3 Months Ended
	Feb. 29, 2020 USD ($)	Feb. 29, 2020 CAD ($)	Feb. 29, 2020 USD ($)	Nov. 30, 2019 USD ($)
Accounts receivable			$ 418,000	$ 264,000
Interest rate loss	$ 100,000
Canadian Limit Due to Currency Risk [Member]
Cash		$ 540,000
Accounts receivable		49,000
Accounts payable		$ 865,000
Change in foreign exchange rate		10.00%	10.00%
Foreign exchange (gain) loss	$ 21,000
Change in interest rate	1.00%

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Financial instruments (Tables)

3 Months Ended

Feb. 29, 2020

Financial instruments

Schedule of contractually obligated cash flow requirements

	in thousands of dollars
	Total	< 1 Year	1–2 Years	2–5 Years	Thereafter
	$	$	$	$	$
Accounts payable and accrued liabilities	1,274	1,274	—	—	—
	1,274	1,274	—	—	—

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Mineral properties and development costs (Tables)

3 Months Ended

Feb. 29, 2020

Mineral properties and development costs

Schedule of mineral properties and development costs

	in thousands of dollars
		Acquisition costs	Assets
		reimbursable	derecognized	February 29,
	November 30, 2019	from Ambler	note 4(a)	2020
	$	Metals LLC	$	$
Alaska, USA
Ambler (a)	26,631	(44)	(26,587)	—
Bornite (b)	4,000	—	(4,000)	—
	30,631	(44)	(30,587)	—

	in thousands of dollars
	November 30, 2018	Acquisition costs	November 30, 2019
	$	$	$
Alaska, USA
Ambler (a)	26,587	44	26,631
Bornite (b)	4,000	—	4,000
	30,587	44	30,631

Schedule of mineral property expenses

		In thousands of dollars
	Three months ended	Three months ended
	February 29, 2020	February 28, 2019
	$	$
Alaska, USA
Community	137	118
Drilling	—	0
Engineering	723	357
Environmental	99	165
Geochemistry and geophysics	12	165
Land and permitting	134	120
Project support	249	226
Other income	—	(1)
Wages and benefits	191	385
	1,545	1535

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Mineral properties and development costs - Additional information (Details) - USD ($) $ in Thousands	3 Months Ended		195 Months Ended
	Feb. 29, 2020	Feb. 28, 2019	Feb. 29, 2020	Feb. 11, 2020
Mineral properties expense	$ 1,545	$ 1,535
Derecognition on machinery and equipment	$ 618		$ 618
Approximations [Member]
Payments for mineral property			145,900
Acquisition costs			30,600
Mineral properties expense			$ 115,300
Upper Kobuk Mineral Projects
Derecognition on machinery and equipment				$ 620
Derecogninition of mineral properties				$ 30,600

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Leases - Additional information (Details) - USD ($)	3 Months Ended
	Feb. 29, 2020	Feb. 28, 2019
Leases
Weighted-average remaining lease term	4 years 3 months 18 days
Weighted-average discount rate	8.00%
Operating Lease, Payments	$ 54,000	$ 0
Derecognition of Fairbanks warehouse lease	(93,000)
Operating Lease, Liability	$ 93,006

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Summary of significant accounting policies (Policies)

3 Months Ended

Feb. 29, 2020

Summary of significant accounting policies

Basis of presentation

Basis of presentation

These interim consolidated financial statements have been prepared using accounting principles generally accepted in the United States (“U.S. GAAP”) and include the accounts of Trilogy and its wholly owned subsidiary, NovaCopper US Inc. (dba “Trilogy Metals US”). All significant intercompany transactions are eliminated on consolidation. For variable interest entities (“VIEs”) where Trilogy is not the primary beneficiary, we use the equity method of accounting.

All figures are in United States dollars unless otherwise noted. References to CAD$ refer to amounts in Canadian dollars.

The unaudited interim consolidated financial statements include all adjustments necessary for the fair presentation of the Company’s financial position as of February 29, 2020 and our results of operations and cash flows for the three months ended February 29, 2020 and February 28, 2019. The results of operations for the three months ended February 29, 2020 are not necessarily indicative of the results to be expected for the fiscal year ending November 30, 2020.

As these interim consolidated financial statements do not contain all of the disclosures required by U.S. GAAP for annual financial statements, these unaudited interim consolidated financial statements should be read in conjunction with the annual financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended November 30, 2019, filed with the U.S. Securities and Exchange Commission (“SEC”) and Canadian securities regulatory authorities on February 13, 2020.

These interim consolidated financial statements were approved by the Company’s Audit Committee on behalf of the Board of Directors for issue on April 7, 2020.

Accounting standards adopted

Accounting standards adopted

i.          Leases

In February 2016, the FASB issued new accounting requirements for accounting for, presentation of, and classification of leases (“ASU 2016-02”) which, together with subsequent amendments, is included in ASC 842, Leases. ASC 842 became effective for the Company as of December 1, 2019.

The Company adopted ASC 842 using the modified retrospective transition method by applying the transition provision and recording our cumulative adjustment to opening deficit at the beginning of the period of adoption on December 1, 2019, rather than at the beginning of the comparative period presented. Therefore, in the comparative periods, we continue to apply the legacy guidance in ASC 840, including its disclosure requirements. We elected to apply all of the transition practical expedients available, including:

· the package of three practical expedients to (1) not reassess whether any expired or existing contracts are or contain leases, (2) not reassess the lease classification for any expired or existing leases, and (3) not reassess initial direct costs for any existing lease;

· the hindsight practical expedient to use hindsight when determining lease term and assessing impairment of right-of-use assets, if any; and

· the easements practical expedient to continue applying our current policy for accounting for any land easements expired before or existing as of December 1, 2019.

In addition, we elected to apply the short-term lease recognition exemption and elected to apply the practical expedient to not separate lease and non-lease components for all applicable leases on transition. The adoption of this new standard resulted in the recognition of right of use assets and lease liabilities of $786,000 as at December 1, 2019.

iiInvestment in affiliates

Investments in unconsolidated ventures over which the Company has the ability to exercise significant influence, but does not control, are accounted for under the equity method and include the Company’s investment in the Ambler Metals project. We identified Ambler Metals LLC as a Variable Interest Entity (VIE) as the entity is dependent on funding from its owners. All funding, ownership, voting rights and power to exercise control is shared equally on a 50/50 basis between the owners of the VIE. Therefore, the Company has determined that it is not the primary beneficiary of the VIE. The Company’s maximum exposure to loss is its investment in Ambler Metals LLC.

Ambler Metals LLC is a non-publicly traded equity investee holding exploration and development projects. The Company reviews and evaluates its investment in affiliates for other than temporary impairment when events or changes in circumstances indicate that the related carrying amounts may not be recoverable. Events that could indicate impairment of an investment in affiliates include a significant decrease in long-term expected commodity prices, a significant increase in expected operating or capital costs, unfavorable exploration results or technical studies, a significant decrease in reserves, a loss of significant mineral claims or a change in the development plan or strategy for the project. Asset impairment is considered to exist if the total estimated future cash flows on an undiscounted basis are less than the carrying amount of the asset. If the underlying assets are not recoverable, an impairment loss is measured and recorded based on the difference between the carrying amount of the investee and its estimated fair value which may be determined using a discounted cash flow model.

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Interim Consolidated Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended
	Feb. 29, 2020	Feb. 28, 2019
Cash flows used in operating activities
Earnings (Loss) for the period	$ 171,179	$ (4,336)
Items not affecting cash
Amortization	42	37
Right of use asset amortization	60	0
Loss on working capital written-off upon joint venture formation	18	0
Gain on derecognition of assets contributed to joint venture (note 4(a))	(175,770)	0
Loss on equity investment in Ambler Metals LLC. (note 4(b))	178	0
Unrealized foreign exchange loss (gain)	25	5
Stock-based compensation	1,196	1,939
Operating lease payments	(54)	0
Net change in non-cash working capital
Increase in accounts receivable	(154)	(6)
Decrease (increase) in deposits and prepaid amounts	419	(280)
Decrease in accounts payable and accrued liabilities	(1,080)	(590)
Net Cash Provided by (Used in) Operating Activities	(3,941)	(3,231)
Cash flows from investing activities
Mineral properties funding (note 4)	0	10,200
Net Cash Provided by (Used in) Investing Activities	0	10,200
Increase in cash and cash equivalents	(3,941)	6,969
Effect of exchange rate on cash and cash equivalents	(16)	(5)
Cash and cash equivalents - beginning of year	19,174	22,991
Cash and cash equivalents - end of year	$ 15,217	$ 29,955

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Interim Consolidated Balance Sheets - USD ($) $ in Thousands	Feb. 29, 2020	Nov. 30, 2019
Current assets
Cash and cash equivalents	$ 15,217	$ 19,174
Accounts receivable (note 3)	418	264
Deposits and prepaid amounts	300	719
Total Current Assets	15,935	20,157
Rent deposit		114
Equity method investment (note 4)	175,822
Plant and equipment (note 5)	255	715
Right of use asset (note 8)	547
Mineral properties and development costs (note 6)		30,631
Total Assets	192,559	51,617
Current liabilities
Accounts payable and accrued liabilities (note 7)	1,274	2,354
Current portion of lease liability	137
Current liabilities	1,411	2,354
Long-term portion of lease liability (note 8)	510
Mineral properties purchase option		31,000
Total Liabilities	1,921	33,354
Shareholders' equity
Share capital (note 9) - unlimited common shares authorized, no par value Issued -140,659,776 (2019 - 140,427,761)	178,307	177,971
Contributed surplus	122	122
Contributed surplus - options (note 9(a))	22,272	21,123
Contributed surplus - units (note 9(b))	1,470	1,759
Deficit	(11,533)	(182,712)
Total Stockholders' Equity	190,638	18,263
Total Liabilities and Stockholders' Equity	$ 192,559	$ 51,617

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Leases

3 Months Ended

Feb. 29, 2020

Leases

Leases

8)Leases

(a)Right-of-Use asset

	in thousands of dollars
	$
ASC 842 transition as at December 1, 2019	681
Amortization	(60)
Lease accretion	19
Derecognition of Fairbanks warehouse lease	(93)
	547

(a) Lease liabilities

The Company’s lease arrangements primarily consist of an operating lease for our office space ending in June 2024. There are no extension options.

Total lease expense recorded within general and administrative expenses was comprised of the following components:

	in thousands of dollars
	Three months ended
	February 29, 2020
	$
Operating lease costs	50
Variable lease costs	34
Total lease expense	84

Variable lease costs consist primarily of the Company’s portion of operating costs associated with the office space lease as the Company elected to apply the practical expedient not to separate lease and non-lease components.

As of February 29, 2020, the weighted-average remaining lease term was 4.3 years and the weighted-average discount rate is 8%. Significant judgment was used in the determination of the incremental borrowing rate which included estimating the Company’s credit rating.

Supplemental cash and non-cash information relating to our leases during the three months ended February 29, 2020 are as follows:

· Cash paid for amounts included in the measurement of lease liabilities was $54,134.

· No cash was paid upon termination of a lease for office and warehouse space and reassignment to Ambler Metals that resulted in the derecognition of the right-of-use asset of $92,974 and the operating lease liability of $93,006.

Future minimum payments relating to the lease recognized in our balance sheet as of February 29, 2020 are as follows:

	in thousands of dollars
	February 29, 2020
Fiscal year	$
2020	136
2021	189
2022	195
2023	200
2024	119
Total undiscounted lease payments	839
Effect of discounting	(192)
Present value of lease payments recognized as lease liability	647

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Equity method investment

3 Months Ended

Feb. 29, 2020

Equity method investment

Equity method investment

4)Equity method investment

(a) Formation of Ambler Metals LLC

On February 11, 2020, the Company completed the formation of a 50/50 joint venture named Ambler Metals with South32 Limited (“South32”). As part of the formation of the joint venture, Trilogy contributed all of its assets associated with the Upper Kobuk Mineral Projects (“UKMP”), including the Arctic and Bornite projects, while South32 contributed US$145 million, resulting in each party’s subsidiaries directly owning a 50% interest in Ambler Metals.

Ambler Metals is an independently operated company jointly controlled by Trilogy and South32 through a four-member board, of which two members are currently appointed by Trilogy based on its 50% equity interest. All significant decisions related to the UKMP require the approval of both companies. We determined that Ambler Metals is a VIE because it is expected to need additional funding from its owners for its significant activities. However, we concluded that we are not the primary beneficiary of Ambler Metals as the power to direct its activities, through its board, is shared under the Ambler Metals limited liability company agreement. As we have significant influence over Ambler Metals through our representation on its board, we use the equity method of accounting for our investment in Ambler Metals. Our investment in Ambler Metals was initially measured at its fair value of $176 million upon recognition. Our maximum exposure to loss in this entity is limited to the carrying amount of our investment in Ambler Metals, which totaled $176 million, as well as $0.4 million of amounts receivable per the Service Agreement. The following table summarizes the gain on recognition of the UKMP assets upon transfer to the Ambler Metals joint venture on February 11, 2020.

	in thousands of dollars
	$
Fair value ascribed to Ambler Metals interest	176,000
Less: carrying value of contributed /eliminated assets
Mineral properties	(30,587)
Property, plant and equipment	(618)
Elimination of Fairbanks warehouse right of use asset	(93)
Elimination of prepaid State of Alaska mining claim fees	(303)
Add:
Demobilization costs of drills	278
Cancellation of Fairbanks warehouse lease liability	93
Fair value of mineral properties purchase option	31,000
Gain on derecognition	175,770

(b) Carrying value of equity method investment

During the three-month period ended February 29, 2020, Trilogy recognized, based on its 50% ownership interest in Ambler Metals, an equity pick-up equivalent to its pro rata share of Ambler Metals’ operating loss of $0.4 million for the period between February 11, 2020 (date of joint venture formation) to February 29, 2020. The carry value of Trilogy’s 50% investment in Ambler Metals as at February 29, 2020 is summarized on the following table.

	in thousands of dollars
	$
February 11, 2020, fair value ascribed to Ambler Metals interest	176,000
Share of loss on equity investment	(178)
February 29, 2020, equity method investment	175,822

(c) The following table summarizes Ambler Metals Balance Sheet as at February 29, 2020.

	in thousands of dollars
	February 29, 2020
	$
Current assets: Cash, deposits and prepaid expenses	145,049
Non - current assets: Property, equipment and mineral properties	31,454
Current liabilities: Accounts payable and accrued liabilities	(517)
Non - current liabilities: Lease obligation	(91)
Net assets	175,895

(d) The following table summarizes Ambler Metals comprehensive loss from the formation of the joint venture on February 11, 2020 to the end of the reporting period on February 29, 2020.

	in thousands of dollars
	February 11- 29, 2020
	$
Amortization	12
Mineral properties expense	167
General and administrative expense	219
Interest income	(43)
Comprehensive loss	355

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Plant and equipment (Details) - USD ($) $ in Thousands	Feb. 29, 2020	Nov. 30, 2019
Cost	$ 4,450	$ 4,250
Accumulated amortization	(3,577)	(3,535)
Assets derecognized	(618)
Net	255	715
Furniture and equipment [Member] | British Columbia, Canada [Member]
Cost	63	63
Accumulated amortization	(33)	(29)
Net	30	34
Leasehold improvements [Member] | British Columbia, Canada [Member]
Cost	253	53
Accumulated amortization	(30)	(17)
Net	223	36
Machinery and equipment[Member] | Alaska, USA [Member]
Cost	3,667	3,667
Accumulated amortization	(3,049)	(3,026)
Assets derecognized	(618)
Net		641
Vehicles [Member] | Alaska, USA [Member]
Cost	348	348
Accumulated amortization	(348)	(348)
Computer hardware and software [Member] | British Columbia, Canada [Member]
Cost	115	115
Accumulated amortization	(113)	(112)
Net	2	3
Computer hardware and software [Member] | Alaska, USA [Member]
Cost	4	4
Accumulated amortization	$ (4)	(3)
Net		$ 1

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Accounts payable and accrued liabilities (Details) - USD ($) $ in Thousands	Feb. 29, 2020	Nov. 30, 2019
Accounts payable and accrued liabilities
Trade accounts payable	$ 528	$ 902
Accrued liabilities	646	721
Accrued salaries and vacation	100	731
Accounts payable and accrued liabilities	$ 1,274	$ 2,354

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Share capital

3 Months Ended

Feb. 29, 2020

Share capital

Share capital

9)Share capital

Authorized:

unlimited common shares, no par value

	in thousands of dollars, except share amounts
		Ascribed value
	Number of shares	$
November 30, 2018	131,585,612	164,069
Exercise of options	1,725,776	1,123
Restricted Share Units	412,501	424
Deferred Share Units	182,132	189
Exercise of warrants	6,521,740	12,166
November 30, 2019	140,427,761	177,971
Exercise of options	19,514	6
Restricted Share Units	212,501	330
February 29, 2020, issued and outstanding	140,659,776	178,307

On April 30, 2012, under the NovaGold Arrangement, Trilogy committed to issue common shares to satisfy holders of NovaGold deferred share units (“NovaGold DSUs”) on record as of the close of business April 27, 2012. When vested, Trilogy committed to deliver one common share to the holder for every six shares of NovaGold the holder is entitled to receive, rounded down to the nearest whole number. As of February 29, 2020, 11,927 NovaGold DSUs remained outstanding representing a right to receive 1,988 common shares in Trilogy, which will settle upon certain directors retiring from NovaGold’s board.

(a) Stock options

During the period ended February 29, 2020, the Company granted 2,050,000 options (2019 – 2,430,000 options) at a weighted-average exercise price of CAD$3.02 (2019 – CAD$2.94) to employees, consultants and directors exercisable for a period of five years with various vesting terms from immediate vesting to over a two-year period. The weighted-average fair value attributable to options granted in the period was $0.99 (2019 - $1.08).

For the period ended February 29, 2020, Trilogy recognized a stock-based compensation charge of $1.16 million (2019– $1.59 million) for options granted to directors, employees and service providers, net of estimated forfeitures.

The fair value of the stock options recognized in the period has been estimated using the Black-Scholes option pricing model.

Assumptions used in the pricing model for the period are as provided below.

	February 29, 2020
Risk-free interest rates		1.64	%
Exercise price	CAD$	3.10
Expected life		3.0 years
Expected volatility		63.1	%
Expected dividends		Nil

As of February 29, 2020, there were 1,453,338 non-vested options outstanding with a weighted average exercise price of $2.21; the non-vested stock option expense not yet recognized was $0.95 million. This expense is expected to be recognized over the next two years.

A summary of the Company’s stock option plan and changes during the period ended February 29, 2020 is as follows:

	February 29, 2020
		Weighted average
		exercise price
	Number of options	$
Balance – beginning of the period	9,205,600	1.08
Granted	2,050,000	2.25
Exercised	(26,667)	0.54
Forfeited	(230,000)	2.19
Balance – end of period	10,998,933	1.27

The following table summarizes information about the stock options outstanding at February 29, 2019.

	Outstanding			Exercisable		Unvested
			Weighted		Weighted
	Number of	Weighted	average	Number of	average	Number of
	outstanding	average years	exercise price	exercisable	exercise price	unvested
Range of price	options	to expiry	$	options	$	options
$0.33 to $0.50	2,676,433	0.73	0.36	2,676,433	0.73	—
$0.51 to $1.00	3,195,000	2.35	0.66	3,195,000	2.35	—
$1.01 to $1.50	225,000	3.12	1.32	175,000	3.08	50,000
$1.51 to $2.00	640,000	4.46	1.81	623,333	4.49	16,667
$2.01 to $2.54	4,262,500	4.28	2.23	2,875,829	4.17	1,386,671
	10,998,933	2.84	1.27	9,545,595	2.60	1,453,338

The aggregate intrinsic value of vested share options (the market value less the exercise price) at February 29, 2020 was $5.9 million (2019 - $13 million) and the aggregate intrinsic value of exercised options for the three months ended February 29, 2020 was $0.04 million (2019 - $0.08 million).

(b) Restricted Share Units and Deferred Share Units

The Company has a Restricted Share Unit Plan (“RSU Plan”) and a Non-Executive Director Deferred Share Unit Plan (“DSU Plan”) to provide long-term incentives to employees, officers and directors. Awards under the RSU Plan and DSU Plan may be settled in cash and/or common shares of the Company at the Company’s election with each restricted share unit (“RSU”) and deferred share unit (“DSU”) entitling the holder to receive one common share of the Company or equivalent value. All units are accounted for as equity-settled awards.

A summary of the Company’s unit plans and changes during the period ended February 29, 2020 is as follows:

	Number of RSUs	Number of DSUs
Balance – beginning of the period	212,501	1,137,488
Granted	—	21,927
Vested/paid	(212,501)	—
Balance – end of period	—	1,159,415

For the period ended February 29, 2020, Trilogy recognized a stock-based compensation charge of $0.04 million (2019‑ $0.35 million), net of estimated forfeitures.

No RSUs were granted as part of the annual incentive payout for the 2019 fiscal year to officers. The 225,000 RSUs  granted for the annual incentive payout for the 2018 fiscal year vested half on the grant date and half on the first anniversary of the grant date. RSUs vesting in December 2019 were settled on December 17, 2019 through the issuance of 212,501 common shares.

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Plant and equipment

3 Months Ended

Feb. 29, 2020

Plant and equipment

Plant and equipment

5)Plant and equipment

	in thousands of dollars
	February 29, 2020
			Assets
		Accumulated	derecognized
	Cost	amortization	note 4(a)	Net
	$	$	$	$
British Columbia, Canada
Furniture and equipment	63	(33)	—	30
Leasehold improvements	253	(30)	—	223
Computer hardware and software	115	(113)	—	2
Alaska, USA
Machinery, and equipment	3,667	(3,049)	(618)	—
Vehicles	348	(348)	—	—
Computer hardware and software	4	(4)	—	—
	4,450	(3,577)	(618)	255

	in thousands of dollars
	November 30, 2019
			Accumulated
		Cost	amortization	Net
		$	$	$
British Columbia, Canada
Furniture and equipment		63	(29)	34
Leasehold improvements		53	(17)	36
Computer hardware and software		115	(112)	3
Alaska, USA
Machinery, and equipment		3,667	(3,026)	641
Vehicles		348	(348)	—
Computer hardware and software		4	(3)	1
		4,250	(3,535)	715

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Accounts receivable (Tables)

3 Months Ended

Feb. 29, 2020

Accounts receivable

Schedule of account receivable

		in thousands of dollars
	February 29, 2020	November 30, 2019
	$	$
GST input tax credits	37	42
Recoverable payments	22	222
Ambler Metals LLC	359	—
Accounts receivable	418	264

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Nature of operations

3 Months Ended

Feb. 29, 2020

Nature of operations

Nature of operations

1)Nature of operations

Trilogy Metals Inc. (“Trilogy” or the “Company”) was incorporated in British Columbia under the Business Corporations Act (BC) on April 27, 2011. The Company is engaged in the exploration and development of mineral properties, through our equity investee (see note 4), with a focus on the Upper Kobuk Mineral Projects (“UKMP”), including the Arctic and Bornite Projects located in Northwest Alaska in the United States of America (“US”).

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Interim Consolidated Balance Sheets (Parenthetical) - $ / shares	Feb. 29, 2020	Nov. 30, 2019
Interim Consolidated Balance Sheets
Common Stock, No Par Value	$ 0	$ 0
Common Stock, Shares, Issued	140,659,776	140,427,761

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Share capital - Common shares issued and outstanding (Details) - Share capital [Member] - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Feb. 29, 2020	Nov. 30, 2019
Number of shares	140,427,761	131,585,612
Ascribed value	$ 177,971	$ 164,069
Exercise of options (shares)	19,514	1,725,776
Exercise of options	$ 6	$ 1,123
Restricted share units (Shares)	212,501	412,501
Restricted share units	$ 330	$ 424
Deferred share units (Shares)		182,132
Deferred share units		189,000
Exercise of warrants		$ 12,166
Exercise of warrants (Shares)		6,521,740
Number of shares	140,659,776	140,427,761
Ascribed value	$ 178,307	$ 177,971

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Share capital - Stock units plans and changes (Details)	3 Months Ended
	Feb. 29, 2020 shares
Number of RSU's [Member]
Balance - beginning of the year	212,501
Vested/paid	(212,501)
Number of DSU's [Member]
Balance - beginning of the year	1,137,488
Granted	21,927
Vested/paid	0
Balance - end of period	1,159,415

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Summary of significant accounting policies (Narrative) (Details) - USD ($)		3 Months Ended
	Dec. 01, 2019	Feb. 29, 2020
Likelihood Of Tax Benefit Being Realized Upon Settlement		50.00%
Lease, Practical Expedients, Package [true false]	true
Lease, Practical Expedient, Use of Hindsight [true false]	true
Lease, Practical Expedient, Land Easement [true false]	true
Operating Lease, Right-of-Use Asset	$ 681,000	$ 547,000
Operating Lease, Liability		$ 93,006
ASU 2016-02 [Member] | Restatement Adjustment [Member]
Operating Lease, Right-of-Use Asset	786,000
Operating Lease, Liability	$ 786,000

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Accounts payable and accrued liabilities (Tables)

3 Months Ended

Feb. 29, 2020

Accounts payable and accrued liabilities

Schedule of accounts payable and accrued liabilities

	in thousands of dollars
	February 29, 2020	November 30, 2019
	$	$
Trade accounts payable	528	902
Accrued liabilities	646	721
Accrued salaries and vacation	100	731
Accounts payable and accrued liabilities	1,274	2,354