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 LLC with South32 Limited (“South32”). As part of the formation of the joint venture, Trilogy contributed all its assets associated with the 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 LLC.

Ambler Metals LLC 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 LLC 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 LLC as the power to direct its activities, through its board, is shared under the Ambler Metals LLC limited liability company agreement. As we have significant influence over Ambler Metals LLC through our representation on its board, we use the equity method of accounting for our investment in Ambler Metals LLC. Our investment in Ambler Metals LLC 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 LLC, which totaled $176 million, as well as $668 thousand of amounts receivable per a service agreement. The following table summarizes the gain on recognition of the UKMP assets upon transfer to the Ambler Metals LLC joint venture on February 11, 2020.


		in thousands of dollars
		$
Fair value ascribed to Ambler Metals LLC 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 six-month period ended May 31, 2020, Trilogy recognized, based on its 50% ownership interest in Ambler Metals LLC, an equity loss equivalent to its pro rata share of Ambler Metals LLC's comprehensive loss of $1.48 million for the period between February 11, 2020 (date of joint venture formation) to May 31, 2020. The carrying value of Trilogy’s 50% investment in Ambler Metals LLC as at May 31, 2020 is summarized on the following table.


		in thousands of dollars
		$
February 11, 2020, fair value ascribed to Ambler Metals LLC interest		176,000
Share of loss on equity investment for the six-month period ended May 31, 2020		(739)
May 31, 2020, equity method investment		175,261

(c)The following table summarizes Ambler Metals LLC's Balance Sheet as at May 31, 2020.


		in thousands of dollars
		May 31, 2020
		$
Current assets: Cash, deposits and prepaid expenses		86,490
Non - current assets: Property, equipment and mineral properties		31,359
Loan receivable from South32		57,876
Current liabilities: Accounts payable and accrued liabilities		(917)
Non - current liabilities: Lease obligation		(79)
Net assets		174,729

(d)The following table summarizes Ambler Metals LLC's comprehensive loss from the formation of the joint venture on February 11, 2020 to the end of the reporting period on May 31, 2020.


		in thousands of dollars
		February 11 - May 31, 2020
		$
Amortization		50
Mineral properties expense		1,080
General and administrative expense		904
Interest income		(557)
Comprehensive loss		1,477