10-Q

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

FORM 10-Q

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

For the Quarterly Period Ended August 31, 2019

OR

¨ 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 October 8, 2019, the registrant had 140,003,741 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	14
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	23
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	25
Item 3.	Defaults Upon Senior Securities	25
Item 4.	Mine Safety Disclosures	25
Item 5.	Other Information	25
Item 6.	Exhibits	25

 ii

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Trilogy Metals Inc.

Consolidated Balance Sheets

(unaudited)

in thousands of US dollars

	August 31, 2019 $			November 30, 2018 $
Assets
Current assets
Cash and cash equivalents		26,852			22,991
Accounts receivable		359			23
Deposits and prepaid amounts		520			619
		27,731			23,633
Rent deposit		114			114
Plant and equipment (note 3)		820			325
Mineral properties and development costs (note 4)		30,587			30,587
		59,252			54,659
Liabilities
Current liabilities
Accounts payable and accrued liabilities (note 5)		4,512			1,657
		4,512			1,657
Mineral properties purchase option (note 4(c))		31,000			20,800
		35,512			22,457
Shareholders’ equity
Share capital (note 6) – unlimited common shares authorized, no par value Issued -138,905,097 (2018 – 131,585,612)		176,970			164,069
Warrants (note 6(c))		-			2,253
Contributed surplus		122			122
Contributed surplus – options (note 6(a))		21,183			19,076
Contributed surplus – units (note 6(b))		1,652			1,489
Deficit		(176,187	)		(154,807	)
		23,740			32,202
		59,252			54,659

Commitments and contingencies (note 8)

(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.

Consolidated Statements of Loss and Comprehensive Loss

(unaudited)

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

	For the three months ended						For the nine months ended
	August 31, 2019 $			August 31, 2018 $			August 31, 2019 $			August 31, 2018 $
Expenses
Amortization		31			39			106			122
Foreign exchange loss (gain)		3			15			(26	)		(29	)
General and administrative		435			376			1,363			1,175
Investor relations		164			59			456			261
Mineral properties expense (note 4(d))		10,951			9,051			15,392			12,657
Professional fees		414			13			658			286
Salaries		272			286			835			738
Salaries – stock-based compensation		402			204			3,005			1,277
Total expenses		12,672			10,043			21,789			16,487
Other items
Loss on held for trading investments		-			12			-			272
Interest and other income		(137	)		(135	)		(409	)		(229	)
Loss and comprehensive loss for the period		12,535			9,920			21,380			16,530
Basic and diluted loss per common share	$	0.09		$	0.08		$	0.16		$	0.14
Weighted average number of common shares outstanding		136,981,179			131,470,146			133,677,437			118,530,242

(See accompanying notes to the interim consolidated financial statements)

3

Trilogy Metals Inc.

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, 2017		105,684,523		136,525			2,163			124			18,402			1,319			(132,868	)		25,665
Exercise of options		50,753		29			-			-			(29	)		-			-			-
Restricted share units		800,000		457			-			-			-			(457	)		-			-
Stock-based compensation		-		-			-			-			484			438			-			922
Loss for the period		-		-			-			-			-			-			(2,946	)		(2,946	)
Balance – February 28, 2018		106,535,276		137,011			2,163			124			18,857			1,300			(135,814	)		23,641
Bought deal financing		24,784,482		28,750			90			-			-			-			(90	)		28,750
Share issuance costs		-		(1,819	)		-			-			-			-			-			(1,819	)
Exercise of options		28,700		5			-			-			(5	)		-			-			-
Stock-based compensation		-		-			-			-			90			61			-			151
Loss for the period		-		-			-			-			-			-			(3,664	)		(3,664	)
Balance – May 31, 2018		131,348,458		163,947			2,253			124			18,942			1,361			(139,568	)		47,059
Share issuance costs		-		14			-			-			-			-			-			14
Exercise of options		184,475		71			-			-			(71	)		-			-			-
Novagold deferred share units		1,020		2			-			(2	)		-			-			-			-
Stock-based compensation		-		-			-			-			140			64			-			204
Loss for the period		-		-			-			-			-			-			(9,920	)		(9,920	)
Balance – August 31, 2018		131,533,953		164,034			2,253			122			19,011			1,425			(149,488	)		37,357
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
Exercise of options		101,064		53			-			-			(53	)		-			-			-
Stock-based compensation		-		-			-			-			355			309			-			664
Loss for the period		-		-			-			-			-			-			(4,509	)		(4,509	)
Balance – May 31, 2019		132,143,407		164,574			2,253			122			20,936			1,727			(163,652	)		25,960
Exercise of options		57,818		41			-			-			(41	)		-			-			-
Stock-based compensation		-		-			-			-			288			114			-			402
Deferred share units		182,132		189			-			-			-			(189	)		-			-
Exercise of warrants		6,521,740		12,166			(2,253	)		-			-			-			-			9,913
Loss for the period		-		-			-			-			-			-			(12,535	)		(12,535	)
Balance – August 31, 2019		138,905,097		176,970			-			122			21,183			1,652			(176,187	)		23,740

(See accompanying notes to the interim consolidated financial statements)

4 

Trilogy Metals Inc.

Consolidated Statements of Cash Flows

(unaudited)

	in thousands of US dollars
	For the nine months ended
	August 31, 2019 $			August 31, 2018 $
Cash flows used in operating activities
Loss for the period		(21,380	)		(16,530	)
Items not affecting cash
Amortization		106			122
Loss on held for trading investments		-			272
Unrealized foreign exchange loss (gain)		3			(52	)
Stock-based compensation		3,005			1,277
Net change in non-cash working capital
(Increase) Decrease in accounts receivable		(336	)		413
Decrease in deposits and prepaid amounts		99			191
Increase (Decrease) in accounts payable and accrued liabilities		2,748			(285	)
		(15,755	)		(14,592	)
Cash flows from (used in) financing activities
Proceeds from exercise of warrants		9,913			-
Proceeds from bought deal financing		-			28,750
Share issuance cost		-			(1,805	)
		9,913			26,945
Cash flows from investing activities
Acquisition of plant & equipment		(494	)		(7	)
Mineral properties funding (note 4 (c))		10,200			10,435
Proceeds from the sale of investments, net of fees		-			2,297
		9,706			12,725
Increase in cash and cash equivalents		3,864			25,078
Effect of exchange rate on cash and cash equivalents		(3	)		(1	)
Cash and cash equivalents – beginning of period		22,991			5,391
Cash and cash equivalents – end of period		26,852			30,468

(See accompanying notes to the interim consolidated financial statements)

5

Trilogy Metals Inc.

Notes to the Consolidated Financial Statements

1 Nature of operations

Trilogy Metals Inc. (“Trilogy” or the “Company”) was incorporated in British Columbia under the Business Corporations Act (British Columbia) on April 27, 2011. The Company is engaged in the exploration and development of mineral properties 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 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.

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

These unaudited interim consolidated financial statements include all adjustments of a normal recurring nature necessary for the fair presentation of the Company’s financial position as of August 31, 2019 and our results of operations and cash flows for the nine months ended August 31, 2019 and August 31, 2018. The results of operations for the nine months ended August 31, 2019 are not necessarily indicative of the results to be expected for the fiscal year ending November 30, 2019.

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, 2018 filed with the U.S. Securities and Exchange Commission (“SEC”) on February 11, 2019.

These financial statements were approved by the Company’s Audit Committee on behalf of the Board of Directors for issue on October 8, 2019.

Accounting standards adopted

i. Financial instruments

In March 2016, the Financial Accounting Standards Board (“FASB”) issued new guidance on classifying and measuring financial instruments (“ASU 2016-01”). This update is effective for annual reporting periods beginning after December 15, 2017. The Company adopted the provisions of this guidance effective December 1, 2018. As the Company’s investments in equity instruments were previously classified at fair value with the change in fair value recorded to the statement of loss and comprehensive loss, the new guidance does not impact the Company’s accounting or reported results.

Recent accounting pronouncements

ii. Leases

In February 2016, the FASB issued new accounting requirements for accounting for, presentation of, and classification of leases (“ASU 2016-02”). This will result in most leases being capitalized as a right of use asset with a related liability on the balance sheets. The requirements of the new standard are effective for annual reporting periods beginning after December 15, 2018, and interim periods within those annual periods, which for Trilogy is the first quarter of the fiscal year ending November 30, 2020. We expect the adoption will have an impact as we expect to capitalize leases and recognize lease obligations, specifically for our office leases which are not currently recognized on the balance sheets. We are in the process of analyzing the quantitative impact of this guidance on our results of operations and financial position.

6

3 Plant and equipment

in thousands of dollars

	August 31, 2019
	Cost $		Accumulated amortization $			Net $
British Columbia, Canada
Furniture and equipment		63		(26	)		37
Leasehold improvements		53		(16	)		37
Computer hardware and software		115		(111	)		4
Alaska, USA
Machinery and equipment		3,779		(3,038	)		741
Vehicles		348		(347	)		1
Computer hardware and software		35		(35	)		-
		4,393		(3,573	)		820

in thousands of dollars

	November 30, 2018
	Cost $		Accumulated amortization $			Net $
British Columbia, Canada
Furniture and equipment		63		(17	)		46
Leasehold improvements		53		(10	)		43
Computer hardware and software		115		(109	)		6
Alaska, USA
Machinery and equipment		3,178		(2,964	)		214
Vehicles		348		(333	)		15
Computer hardware and software		35		(34	)		1
		3,792		(3,467	)		325

4 Mineral properties and development costs

in thousands of dollars

	November 30, 2018 $		Acquisition costs $		August 31, 2019 $
Alaska, USA
Ambler (a)		26,587		-		26,587
Bornite (b)		4,000		-		4,000
		30,587		-		30,587

in thousands of dollars

	November 30, 2017 $		Acquisition costs $		November 30, 2018 $
Alaska, USA
Ambler (a)		26,587		-		26,587
Bornite (b)		4,000		-		4,000
		30,587		-		30,587

(a) Ambler

On January 11, 2010, NovaGold Resources Inc. (“NovaGold”), through Alaska Gold Company (“AGC”), at the time a wholly-owned NovaGold subsidiary, purchased 100% of the Ambler lands in Northwest Alaska, which contains the copper-zinc-lead-gold-silver Arctic Project and other mineralized targets within the volcanogenic massive sulfide belt, through a series of cash and share payments. Total fair value of the consideration was $26.6 million. The vendor retained a 1% net smelter return royalty that the Company can purchase at any time for a one-time payment of $10.0 million.

7

The Ambler lands were acquired on October 17, 2011 by Trilogy Metals US through a purchase and sale agreement with AGC. On October 24, 2011, NovaGold transferred its ownership of Trilogy Metals US to the Company, then itself a wholly owned subsidiary of NovaGold, which was subsequently spun-out to NovaGold shareholders and publicly listed on April 30, 2012 (“NovaGold Arrangement”).

(b) Bornite

On October 19, 2011, Trilogy Metals US acquired the exclusive right to explore and the non-exclusive right to access and enter on the Bornite lands, and lands deeded to NANA Regional Corporation, Inc. (“NANA”) through the Alaska Native Claims Settlement Act, located adjacent to the Ambler lands in Northwest Alaska. As consideration, Trilogy Metals US paid $4 million to acquire the right to explore and develop the combined Upper Kobuk Mineral Projects through an Exploration Agreement and Option to Lease with NANA. Upon a decision to proceed with construction of a mine on the lands, NANA maintains the right to purchase between a 16%-25% ownership interest in the mine or retain a 15% net proceeds royalty which is payable after Trilogy Metals US has recovered certain historical costs, including capital and cost of capital. Should NANA elect to purchase an ownership interest, consideration will be payable equal to all historical costs incurred on the properties at the elected percentage purchased less $40 million, not to be less than zero. The parties would form a joint venture and be responsible for all future costs, including capital costs of the mine based on their pro-rata share.

NANA would also be granted a net smelter return royalty of between 1% and 2.5% upon the execution of a mining lease or a surface use agreement, the amount of which is determined by the classification of land from which production originates.

(c) 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 Limited, which agreement was later assigned by South32 Operations to its affiliate, South32 USA Exploration Inc. (“South32”) 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. Upon exercise of the option, Trilogy Metals US will transfer its Alaskan assets, including the UKMP, and South32 will contribute a minimum of $150 million, to a newly formed and jointly held, limited liability company (“LLC”).

To maintain the option in good standing, South32 is required to fund a minimum of $10 million per year for up to a three-year period, which funds will be used to execute a mutually agreed upon program at the UKMP. The funds provided by South32 may only be expended in accordance with an approved program by a technical committee with equal representation from Trilogy and South32. South32 may exercise its option at any time over the three-year period to enter into the 50/50 joint venture. To subscribe for 50% of the JV, South32 must contribute a minimum of $150 million, plus (i) any amounts Trilogy spends on matched parallel funding to a maximum of $16 million over the three year period and (ii) $5 million if the option had been exercised between April 1, 2018 and March 31, 2019 or $10 million if the option is exercised between April 1, 2019 and the expiration date of the option, less the amount of the initial funding contributed by South32 (the “Subscription Price”). South32 has now funded the full three-year option period. South32 has until the end of January 2020 to exercise the option to form the JV LLC and make the subscription payment. Should South32 not make its annual minimum payment or elect to withdraw, the option will lapse and South32 will have no claim to property ownership or to the funds already spent.

During the year ended November 30, 2017, the Company received the first payment of $10.0 million and these funds were expended on the year 1 program at the Bornite Project. In October 2017, the Company received $0.4 million as a first instalment towards the year 2 program and budget to begin preparatory work. During the year ended November 30, 2018, the Company received payments totaling $10.4 million following the approval of the year 2 program and budget in January 2018, including a $0.80 million advance on South32’s year three funding obligation per the Option Agreement. During the quarter ended February 28, 2019, the Company received payments totaling $10.2 million following the approval of the year 3 program and budget, including an additional $1 million of funding for the approved regional exploration program. The receipt of the year 3 funding represents receipt of the final tranche of funding from South32. The Company is responsible for the disbursement of these funds in accordance with the approved program and budget and accordingly has not classified the funds as restricted cash.

8

As the initial option payments are credited against the future subscription price upon exercise, the Company has accounted for the payments received from South32 as deferred consideration for the purchase of the UKMP interest. At such time as the option is exercised, the $31.0 million of payments received will be recognized as part of the consideration received for the Company’s contribution of the UKMP into JV LLC. If South32 withdraws from the Option Agreement, the consideration will be recognized as income in the statement of loss at that time.

The option to form the JV LLC is recognized as a financial instrument at inception of the arrangement with an initial fair value of $nil. This option is required to be re-measured at fair value at each reporting date with any changes in fair value recorded in loss for the period. The Company determined that the fair value of the option remains $nil as at August 31, 2019.

(d) Mineral properties expense

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

In thousands of dollars

	Three months ended August 31, 2019 $		Three months ended August 31, 2018 $		Nine months ended August 31, 2019 $			Nine months ended August 31, 2018 $
Alaska, USA
Community		164		81		428			324
Drilling		4,760		3,624		4,933			3,804
Engineering		663		245		1,287			750
Environmental		153		313		424			482
Geochemistry and geophysics		252		420		1,010			1,066
Land and permitting		163		145		523			504
Project support		3,062		2,703		4,066			3,381
Other income		-		-		(1	)		(20	)
Wages and benefits		1,734		1,520		2,722			2,366
Mineral property expense		10,951		9,051		15,392			12,657

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. Cumulative mineral properties expense in Alaska from the initial earn-in agreement on the property in 2004 to August 31, 2019 is $110.0 million and cumulative acquisition costs are $30.6 million totaling $140.6 million spent to date.

5 Accounts payable and accrued liabilities

in thousands of dollars

	August 31, 2019 $		November 30, 2018 $
Trade accounts payable		3,271		400
Accrued liabilities		901		503
Accrued salaries and vacation		340		746
Due to related parties		-		8
Accounts payable and accrued liabilities		4,512		1,657

9

6 Share capital

Authorized:

unlimited common shares, no par value

in thousands of dollars, except share amounts

	Number of shares		Ascribed value $
November 30, 2017		105,684,523		136,525
Bought deal financing		24,784,482		28,750
Share issuance costs		-		(1,805	)
Exercise of options		315,148		140
Restricted share units		800,000		457
NovaGold DSU conversion		1,459		2
November 30, 2018		131,585,612		164,069
Exercise of options		203,112		122
Restricted share units		412,501		424
Deferred share units		182,132		189
Exercise of warrants		6,521,740		12,166
August 31, 2019, issued and outstanding		138,905,097		176,970

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 on 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 August 31, 2019, there remains 11,927 NovaGold DSUs outstanding representing a right to receive 1,988 Common Shares in Trilogy, which will settle upon certain directors retiring from NovaGold’s board.

On April 20, 2018, the Company completed a bought-deal financing for gross proceeds of $28.7 million by issuing 24,784,482 common shares at $1.16 per common share. Expenses including bank commissions, legal fees, stock exchange and other fees totaled $1.8 million for net proceeds of $26.9 million.

(a) Stock options

During the nine - months ended August 31, 2019, the Company granted 2,527,500 options (2018 – 2,395,000 options) at a weighted-average exercise price of CAD$2.96 (2018 – CAD$1.15) 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 $1.08 (2018 - $0.43).

For the nine - month period ended August 31, 2019, Trilogy recognized a stock-based compensation charge of $2.23 million (2018 – $0.71 million) for options granted to directors, employees and service providers, net of estimated forfeitures.

The recognized fair value of the stock options granted during the nine - month period ended August 31, 2019 has been estimated using the Black-Scholes option pricing model.

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

	August 31, 2019
Risk-free interest rates		2.03	%
Exercise price		CAD$2.97
Expected life		3.0 years
Expected volatility		75.0	%
Expected dividends		Nil

As of August 31, 2019, there were 1,775,005 non-vested options outstanding with a weighted average exercise price of $1.82; the non-vested stock option expense not yet recognized was $0.63 million. This expense is expected to be recognized over the next two years.

10

A summary of the Company’s stock option plan and changes during the nine - month period ended August 31, 2019 is as follows:

	August 31, 2019
	Number of options			Weighted average exercise price $
Balance – beginning of the period		8,821,434			0.60
Granted		2,527,500			2.22
Exercised		(306,432	)		0.84
Balance – end of period		11,042,502			0.97

The following table summarizes information about the stock options outstanding at August 31, 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		3,876,433		0.97		0.39		3,876,433		0.39		-
$0.51 to $1.00		4,333,569		2.21		0.72		3,885,233		0.71		448,336
$1.01 to $1.50		225,000		3.62		1.32		175,000		1.29		50,000
$1.51 to $2.00		90,000		3.87		1.83		73,333		1.82		16,667
$2.01 to $2.52		2,517,500		4.27		2.21		1,257,498		2.22		1,260,002
		11,042,502		2.29		0.96		9,267,497		0.80		1,775,005

The aggregate intrinsic value of vested share options (the market value less the exercise price) at August 31, 2019 was $10.6 million (2018 - $9.2 million) and the aggregate intrinsic value of exercised options for the nine - month period ended August 31, 2019 was $0.5 million (2018 - $0.4 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 nine - month period ended August 31, 2019 is as follows:

	Number of RSUs			Number of DSUs
Balance – beginning of the period		400,002			1,182,106
Granted		225,000			119,139
Vested/paid		(412,501	)		(182,132	)
Balance – end of period		212,501			1,119,113

For the nine - month period ended August 31, 2019, Trilogy recognized a stock-based compensation charge of $0.78 million (2018 - $0.56 million), net of estimated forfeitures.

As part of the annual incentive payout for the 2018 fiscal year, 225,000 RSUs were granted to officers during the three – month period ended February 28, 2019, vesting half on the grant date and half on the first anniversary of the grant date. RSUs vesting in December 2018 were settled on December 21, 2018 through the issuance of 412,501 common shares.

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(c) Share Purchase Warrants

During the three - month period ended August 31, 2019, all the outstanding warrants were exercised in advance of the July 2, 2019 expiry date.  As a result of the warrants exercised, the Company issued a total of 6,521,740 common shares and received cash proceeds of approximately $9.9 million.

7 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. The Company’s investments were held for trading and were marked-to-market at each period end with changes in fair value recorded to the statement of loss.

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 August 31, 2019 is limited to the Canadian dollar consisting of cash of CDN$205,000, accounts receivable of CDN$62,000 and accounts payable of CDN$1,283,000. 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 $76,000.

(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 August 31, 2019 are as follows:

in thousands of dollars

	Total $		<1 Year $		1–2 Years $		2–5 Years $		Thereafter $
Accounts payable and accrued liabilities		4,512		4,512		-		-		-
		4,512		4,512		-		-		-

(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 August 31, 2019, a 1% change in interest rates would result in a change in net loss of $0.2 million, assuming all other variables remain constant.

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8 Commitment

The Company has commitments with respect to office and warehouse leases requiring future minimum lease payments as follows:

in thousands of dollars

	August 31, 2019 $
One year		237
Years 2 through 5		452
Beyond 5 years		372
Total		1,061

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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 perceived merit of properties, the timing and filing of updated technical reports, the timing of permitting, exploration results and budgets, 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 the Company’s plans and expectations relating to its Upper Kobuk Mineral Projects, 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 a number of material assumptions, including those listed below, which could prove to be significantly incorrect:

· assumptions made in the interpretation of drill results, and of the geology, grade and continuity of the Company’s mineral deposits;

· our ability to achieve production at any of the Company’s mineral exploration and development properties;

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

· assumptions that all necessary permits and governmental approvals will be obtained;

· estimated capital costs, operating costs, production and economic returns;

· estimated metal pricing, metallurgy, mineability, marketability and operating and capital costs, together with other assumptions underlying the Company’s resource and reserve estimates;

· continued good relationships with local communities and other stakeholders;

· our expectations regarding demand for equipment, skilled labour and services needed for exploration and development of mineral properties;

· assumptions regarding the merit of litigation; and

· that our activities will not be adversely disrupted or impeded by development, operating or regulatory risks.

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;

· none of the Company’s mineral properties are in production or are under development;

· uncertainty as to whether South32 will exercise its option under the Option Agreement;

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

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

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

· uncertainty as to estimates of capital costs, operating costs, production and economic returns;

· 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 future sales or issuances of equity securities decreasing the value of existing Trilogy common shares, diluting voting power and reducing future earnings per share;

· risks related to market events and general economic conditions;

· uncertainty related to inferred mineral resources;

· uncertainty related to the economic projections derived from the Pre-Feasibility Study titled “Arctic Project, Northwest Alaska, USA, NI 43-101 technical report on Pre-Feasibility Study” dated effective February 20, 2018;

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

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

· 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;

· 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;

· commodity price fluctuations;

· 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 its control;

· 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;

· our history of losses and expectation of future losses;

· 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 the volatility in the price of the Company’s shares;

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

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

· 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; and

· increased regulatory compliance costs, associated with rules and regulations promulgated by the United States Securities and Exchange Commission (the “SEC”), Canadian Securities Administrators, the NYSE American, the TSX, and the Financial Accounting Standards Boards, and more specifically, our efforts to comply with the Dodd-Frank Wall Street Reform and Consumer Protection Act and the newly adopted SEC mining disclosure rules.

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 11, 2019, filed with the Canadian securities regulatory authorities and the SEC, and other information released by Trilogy and filed with the appropriate regulatory agencies.

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.

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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 October 8, 2019 and provides an analysis of our unaudited interim financial results for the quarter ended August 31, 2019 compared to the quarter ended August 31, 2018.

The following information should be read in conjunction with our August 31, 2019 unaudited interim 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, 2018. 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 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.

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”), consist of: i) the 100% owned 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”).

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Corporate developments

Appointment of Interim CEO

In a press release dated September 5, 2019, we announced the resignation of Rick Van Nieuwenhuyse as CEO, President and director of Trilogy Metals and the appointment of James Gowans as President and CEO on an interim basis. Mr. Van Nieuwenhuyse will remain as a consultant to the Company until January 31, 2020 and will assist with transitional matters and with advancing the Company’s interests in Alaska. Mr. Gowans is a director of the Company and was President and CEO of Arizona Mining Inc. from 2016 to 2018 when Arizona Mining was purchased by South32 Limited. Previously he was a Senior Advisor to the Chairman, Co-President and EVP and COO at Barrick Gold Corporation from 2014 to 2015. Mr. Gowans has extensive experience in Alaska. He completed the feasibility study for the Red Dog Mine, oversaw the design and construction of that mine and then operated Red Dog for three years after commissioning.

Exercise of Warrants

During the three-month period ended August 31, 2019, all our outstanding warrants were exercised.  Three of the Company’s largest shareholders exercised 6,521,740 in outstanding warrants. As a result of the warrant exercise, we issued a total of 6,521,740 common shares of the Company and received cash proceeds of approximately $9.9 million. 

Outlook & Project activities

Ambler Mining District Industrial Access Project (“AMDIAP”)

In a press release dated August 23, 2019, we announced the public release of the draft Environmental Impact Statement (“EIS”) for the Ambler access road by the United States Bureau of Land Management (“BLM”). This is a critical milestone for the permitting of the AMDIAP in relation to further exploration and development of the Ambler Mining District. The BLM, which is the lead agency for the permitting of the AMDIAP, has now completed the draft EIS which has been posted on the BLM website. The next step is a public comment period. Comments on the draft EIS will be accepted through October 29, 2019.

Arctic Project

During the third quarter ended August 31, 2019, we drilled 11 holes at the Arctic Project resulting in approximately 2,411 meters drilled, utilizing two rigs from Tuuq Drilling LLC (“Tuuq”). Tuuq is owned by NANA Development Corporation. We anticipate announcing drill results from the 2019 Arctic drill program during the fourth quarter of 2019. Work at the Arctic deposit commenced in late June with a view of completing feasibility level geotechnical and hydrology work. The main goal of this year’s work program was to complete engineering and environmental studies to prepare a NI 43-101 compliant feasibility study which results are anticipated to be released in the first half of 2020. Work is also being done to prepare the Arctic Project for permitting, which we expect to commence in 2020. The permitting preparation work being carried out will support Federal, State and Borough permitting requirements.

Bornite Project

The main goal of the 2019 drill program was to drill approximately 8,000 meters within 12 holes, including both infill and expansion drilling. Exploration activities commenced at the beginning of June with 7,598 meters of drilling completed through to August 31, 2019. In a press release dated September 10, 2019, we announced assay results on 4 holes comprising approximately 3,014 meters from the recently completed 7,610-meter drill campaign. We anticipate announcing further drill results from the 2019 Bornite drill program during the fourth quarter of 2019.

Regional Exploration

District-wide Versatile Time Domain Electromagnetic (“VTEM”) and Z – Axis Tipper Electromagnetic (“ZTEM”) helicopter airborne geophysical surveys were completed this spring along the entire 100-kilometer long belt of the favorable stratigraphy hosting known polymetallic volcanogenic-massive sulphide (“VMS”) deposits, as well as the areas around the Bornite deposit and the surrounding Cosmos Hills area. The surveys were flown by Geotech Ltd. and the data is currently being re-processed by Resource Potential PTY Ltd. The new VTEM and ZTEM surveys have been integrated into our dataset of historical drilling accumulated over a 40-year period of exploration, all of which have been geo-referenced into an integrated GIS database.

17

The exploration drilling completed during the field season targeted the Sunshine prospect, which is approximately eight miles (13 kilometers) from the Arctic Project. In a press release dated September 10, 2019, we announced assay results for one drill hole from the Sunshine prospect comprising 161 meters of the 1,357 meter, six-hole drill campaign at this prospect. We anticipate announcing further drill results from the 2019 regional exploration program during the fourth quarter of 2019.

Property review

Our principal assets, the UKMP Projects, are located in the Ambler mining district in Northwest Alaska. Our UKMP Projects comprise approximately 355,400 acres (143,825 hectares) consisting of the Ambler and Bornite lands.

Arctic Project

The Ambler lands, which host several deposits, including the high-grade copper-zinc-lead-gold-silver Arctic Project, and other mineralized targets within a 100-kilometer-long VMS belt, are owned by NovaCopper US. The Ambler lands are in Northwestern Alaska and consist of 114,500 acres (46,337 hectares) of Federal patented mining claims and State of Alaska mining claims, within which VMS mineralization has been found.

We have recorded the Ambler lands as a mineral property with acquisition costs capitalized and exploration costs expensed in accordance with our accounting policies.

Bornite Project

On October 19, 2011, Trilogy Metals US and NANA signed a collaborative agreement to explore and develop the Ambler mining district. Under the Exploration Agreement and Option to Lease (the “NANA Agreement”), we acquired, in exchange for, among other things, a $4.0 million cash payment to NANA, the exclusive right to explore the Bornite property and lands deeded to NANA through the Alaska Native Claims Settlement Act (“ANCSA”), located adjacent to the Arctic Project, and the non-exclusive right to access and entry onto NANA’s lands. The agreement establishes a framework for any future development of either the Bornite Project or the Arctic Project. Both projects are included as part of a larger area of interest set forth in the NANA Agreement. The agreement with NANA created a total land package incorporating our Ambler lands with the adjacent Bornite and ANCSA lands with a total area of approximately 355,400 acres (143,825 hectares).

Upon the decision to proceed with development of a mine within the area of interest, NANA maintains the right to purchase an ownership interest in the mine equal to a range between 16%-25% or retain a 15% net proceeds royalty which is payable after we have recovered certain historical costs, including capital and cost of capital. Should NANA elect to purchase an ownership interest in the mine, consideration will be payable based on the elected percentage purchased and all the costs incurred on the properties less $40.0 million, not to be less than zero. The parties would form a joint venture and be responsible for all future costs incurred in connection with the mine, including capital costs of the mine, based on each party’s pro-rata share.

NANA would also be granted a net smelter return royalty between 1% and 2.5% upon the execution of a mining lease or a surface use agreement, the amount of which is determined by the particular area of land from which production originates.

We have accounted for the Bornite property as a mineral property with acquisition costs capitalized and exploration costs expensed in accordance with our accounting policies.

South32 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 Limited, which agreement was later assigned by South32 Operations to its affiliate, South32 USA Exploration Inc. (“South32”) 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. Upon exercise of the option, Trilogy Metals US will transfer its Alaskan assets, including the UKMP, and South32 will contribute a minimum of $150 million, to a newly formed and jointly held, limited liability company (“LLC”).

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To maintain the option in good standing, South32 is required to fund a minimum of $10 million per year for up to a three-year period, which funds will be used to execute a mutually agreed upon program at the UKMP. The funds provided by South32 may only be expended in accordance with an approved program by a technical committee with equal representation from Trilogy and South32. South32 may exercise its option at any time over the three-year period to enter into the 50/50 joint venture. To subscribe for 50% of the JV, South32 must contribute a minimum of $150 million, plus (i) any amounts Trilogy spends on matched parallel funding to a maximum of $16 million over the three year period and (ii) $5 million if the option is exercised between April 1, 2018 and March 31, 2019 or $10 million if the option is exercised between April 1, 2019 and the expiration date of the option, less the amount of the initial funding contributed by South32 (the “Subscription Price”). South32 has now funded the full three-year option period. South32 has until the end of January 2020 to exercise the option to form the JV LLC and make the subscription payment.

Option Funding Phase

Provided that all the exploration data and information has been made available to South32 by no later than December 31 of each year, South32 must decide by the end of January of the following year whether; (i) to fund a further tranche of a minimum of $10 million, or (ii) to withdraw and not provide any further annual funding. In years 1 and 2, if the election to fund a further tranche is not made in January, South32 has until the end of March to exercise the option to form the LLC and make the subscription payment. If South32 elects to exercise the option, the Subscription Price shall be paid in one tranche within 45 business days. Should South32 not make its annual minimum payment or elect to withdraw, the option will lapse and South32 will have no claim to ownership or the funds it had already spent. The option payment for the first year was paid by South32 in April 2017 and expended on the Year 1 exploration program at the Bornite Project. Early in December 2017, South32 committed to fund the $10 million 2018 program for the Bornite Project. The funds, which represent the second tranche, maintain the Option Agreement in good standing, and were fully received on January 24, 2018. An additional $0.80 million was received during the year ended November 30, 2018 from South32 as an advance on the year three funding.

On January 31, 2019, we announced the 2019 program and budgets with South32 committing to fund the $9.2 million budget for the Bornite Project. The funds, which represent the third and final tranche, maintain the Option Agreement in good standing, and were fully received during the quarter ended February 28, 2019.

Subscription Funding Phase

At any time during the option funding phase of the agreement, South32 may elect to subscribe for a 50% interest in a newly formed LLC which will take transfer of, and hold, Trilogy Metals US’ Alaskan assets. As part of the Subscription Price, South32 will match any spending expended by us at the Arctic Project over 3 years (2017, 2018 and 2019), to a cumulative maximum of $16 million. Depending on when the option is exercised, certain amounts of the Initial Funding will be deducted from the Subscription Price.

Trilogy currently estimates that the Subscription Price would 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 payment of approximately $150 million is expended, the parties will contribute funding pro rata, as contemplated by the operating agreement which will govern the LLC (the “LLC Agreement”). The LLC Agreement anticipates a General Manager, Chief Financial Officer and Chief Operating and Technical Officer to be appointed by the LLC’s Board, which will have equal representation from Trilogy and South32.

As the initial option payments received to date are credited against the future subscription price upon exercise, we have accounted for the payments received as deferred consideration. At such time as the option is exercised, the initial payments received to that date will be recognized as part of the consideration received for our contribution of the Alaska assets, including the UKMP, into the joint venture. If South 32 withdraws from the Option Agreement, the consideration will be recognized in the statement of loss at that time.

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Summary of results

in thousands of dollars,

except for per share amounts

	Three months ended				Nine months ended
Selected expenses	August 31, 2019 $		August 31, 2018 $		August 31, 2019 $		August 31, 2018 $
General and administrative		435		376		1,363		1,175
Mineral properties expense		10,951		9,051		15,392		12,657
Professional fees		414		13		658		286
Salaries		272		286		835		738
Salaries – stock-based compensation		402		204		3,005		1,277
Investor relations		164		59		456		261
Loss and comprehensive loss for the period		12,535		9,920		21,380		16,530
Basic and diluted loss per common share	$	0.09	$	0.08	$	0.16	$	0.14

For the three - month period ended August 31, 2019, Trilogy reported a net loss of $12.5 million (or $0.09 basic and diluted loss per common share) which was higher than the net loss of $9.9 million for the comparative period in 2018 (or $0.08 basic and diluted loss per common share). This variance was primarily due to an increase in mineral properties expense due to the size, scope and timing of the field program versus the comparative three – month period.

The $1.9 million difference in mineral properties expense consists of the following changes. During the three months ended August 31, 2019, we completed 2,411 meters (2018 – 593 meters) of drilling at the Arctic project, 7,598 meters (2018 – 7,707 meters) at the Bornite project and executed a new regional exploration drilling program of approximately 1,357 meters. As a result, we incurred increased drilling costs of $1.1 million and increased project supporting costs of $0.6 million (including camp operation, logistics and personnel). The remaining variance in mineral properties expense consists of an increase of $0.4 million in engineering costs related to the feasibility study and the geotechnical study for the Arctic project, an increase of $0.1 million in geochemistry costs associated with drill assay testing, all offset by a $0.3 million decrease in geophysics and environment related costs.

Other differences noted for the comparable periods were: i) a slight increase in general and administrative expenses in the current period; ii) an increase of $0.4 million in professional fees due to increased legal fees; iii) an increase of $0.2 million in stock-based compensation due to a higher share price contributing to a higher fair value vesting for previously granted stock options, RSUs and DSUs; and iv) an increase of $0.1 million in investor relations expenses due to our increased level of marketing activity including attendance at more investor conferences and meetings in the current period.

For the nine - month period ended August 31, 2019, Trilogy reported a net loss of $21.4 million (or $0.16 basic and diluted loss per common share) compared to a net loss of $16.5 million for the corresponding period in 2018 (or $0.14 basic and diluted loss per common share).

The $2.7 million increase in mineral properties expense in relation to the comparative nine - month period ended August 31, 2018 consist of the following changes. Due to the increased size and scope of the 2019 field program, we drilled 3,066 more meters for the nine - months ended August 31, 2019 in contrast to the comparative period, resulting in an increase of $1.1 million in drilling costs. Project support and personnel costs increased by $1.1 million and includes $0.5 million in VTEM and ZTEM airborne survey costs, for which there are no prior year comparatives. The remaining variance in mineral properties expense consists of an increase of $0.5 million in engineering costs and an increase of $0.3 million in geochemistry costs, all offset by a decrease of $0.3 million in geophysics costs.

Other differences noted for the comparable periods were: i) an increase of $0.2 million in general and administration costs primarily due to increased stock exchange fees, office computer hardware and software, and travel costs; ii) a slight increase in salaries; iii) an increase of $0.2 million in investor relations expenses due to our increased level of marketing activity including attendance at more investor conferences and meetings during the nine - month period ended August 31, 2019; iv) an increase of $0.4 million in professional fees due to increased legal fees; and v) an increase of $1.7 million in stock-based compensation due to a higher share price contributing to a greater fair value amortization of stock options, RSUs and DSUs granted during the nine - month period ended August 31, 2019.

20

Selected financial data

Quarterly information

in thousands of dollars,

except per share amounts

	Q3 2019			Q2 2019			Q1 2019			Q4 2018			Q3 2018			Q2 2018			Q1 2018			Q4 2017
	08/31/19 $			05/31/19 $			02/28/19 $			11/30/18 $			08/31/18 $			05/31/18 $			02/28/17 $			11/30/17 $
Interest and other income		137			150			122			117			135			77			17			13
Mineral property expenses		10,951			2,906			1,535			3,833			9,051			2,475			1,131			4,693
Earnings (loss) for the period		(12,535	)		(4,509	)		(4,336	)		(5,319	)		(9,920	)		(3,664	)		(2,946	)		(6,726	)
Earnings (loss) per common share – basic and diluted		(0.09	)		(0.04	)		(0.03	)		(0.04	)		(0.08	)		(0.03	)		(0.03	)		(0.06	)

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 disposition of Gold Mining Inc. (“GMI”) shares (which were not fully disposed of in fiscal 2018) and financing activities.

Our loss of $12.5 million during the third quarter ended August 31, 2019 is significantly higher than the second quarter ended May 31, 2019, primarily due to mineral property expenditures. During the quarter ended August 31, 2019, mineral properties expense increased by $8.0 million when compared to the prior quarter, reflecting the increased activity at the projects as the 2019 drilling program became fully operational. The current period loss is $2.6 million higher than the third quarter ended August 31, 2018, primarily due to an increase in the size and scope of the 2019 field season resulting in an increase in mineral properties expenditures of $1.9 million and $0.4 million additional professional fees in the current period.

During the quarter ended May 31, 2019, mineral property expense increased by $1.4 million when compared to the prior quarter as we prepared for the commencement of the 2019 drill program and field season. Our loss of $4.5 million for the quarter ended May 31, 2019 is consistent with the prior quarter as the increase in the second quarter mineral property expenses were offset by higher first quarter stock-based compensation due to the fair value amortization of new option grants during the first quarter. The loss during the three - month period ended May 31, 2019 was $0.9 million higher when compared to the loss for the comparative three - month period ended May 31, 2018 of $3.7 million, due mostly to an increase in mineral properties expense and stock-based compensation.

Our loss for the first quarter ended February 28, 2019 of $4.3 million was lower when compared to the two prior quarterly periods and reflects the seasonality of the mineral property expenses which are mostly incurred during the summer and fall season. The $1.4 million increase in loss when compared to the first quarter ended February 28, 2018 is primarily due to higher first quarter 2019 stock-based compensation from the higher fair value amortization of new option grants during the first quarter of 2019.

During the fourth quarter of 2018, we had a loss of $5.3 million compared to a loss of $6.7 million in the fourth quarter of 2017. The primary drivers for the difference were $0.9 million lower mineral properties expenses, loss on disposition of investments of $0.8 million in the fourth quarter of 2017 for which the comparative is nil in the fourth quarter 2018, all offset by $0.5 million in increased salaries benefits in the fourth quarter 2018. We incurred $3.8 million of mineral property expenses in the fourth quarter of 2018 compared to $4.7 million of mineral property expenses in the fourth quarter of 2017 as the camp closed earlier in the 2018 program (October 13, 2018) versus the 2017 program (October 31, 2017).

21

Liquidity and capital resources

At August 31, 2019, we had $26.9 million in cash and cash equivalents and working capital of $23.2 million. During the three-month period ended August 31, 2019, we received proceeds of approximately $9.9 million as a result of an exercise of 6,521,740 warrants.

The increase in cash was a result of fully receiving the $9.2 million Year 3 funding from South32, an additional $1.0 million for the regional exploration program and $9.9 million upon exercise of all warrants. These cash inflows were offset by $15.4 million in mineral properties expense, $3.3 million in cumulative general and administrative expenses, investor relations, professional fees, salaries and $2.5 million in cash savings from changes in net non-cash working capital. The increase in working capital for the period was a result of higher accounts payable and prepaid balances, offset by a higher accounts receivable balance as at August 31, 2019.

We expended $15.8 million on operating activities during the nine months ended August 31, 2019 compared with $14.6 million for operating activities for the same period in 2018. Most cash spent on operating activities during all periods was expended on mineral property expenses, general and administrative costs, salaries and professional fees.

We continue to fund our cash expenditures through our working capital. As we are not currently in production, we will need to raise additional funds to support our operations and administration expenses in the future. Future sources of liquidity may include debt financing, equity financing, convertible debt, exercise of options, or other means. Our continued operations are dependent on our ability to obtain additional financing or to generate future cash flows.

All cash generated from investing activities during the nine months ended August 31, 2019 were from the South 32 Option Agreement funding of $10.2 million (2018 - $10.4 million) and there were no proceeds from the sale of investments (2018 - $2.3 million) as all GMI shares were full disposed during fiscal 2018. During the nine months ended August 31, 2019, $9.9 million in cash was generated from financing activities (2018 - $26.9 million).

Contractual obligations

Contractual obligated undiscounted cash flow requirements as at August 31, 2019 are as follows.

In thousands of dollars

	Total $		<1 Year $		1–2 Years $		2–5 Years $		Thereafter $
Accounts payable and accrued liabilities		4,512		4,512		-		-		-
Office lease		936		179		385		372		-
Office and warehouse lease		125		57		68		-		-
		5,573		4,748		453		372		-

Off-balance sheet arrangements

We have no material off-balance sheet arrangements. We have lease commitments for office and warehouse spaces with a remaining total commitment of $1.1 million.

Outstanding share data

At October 8, 2019, we had 140,003,741 common shares issued and outstanding. At October 8, 2019, we had outstanding 9,295,600 stock options with a weighted-average exercise price of $1.02. We also had, 1,137,485 deferred share units (“DSUs”), 11,927 NovaGold deferred share units entitling the holder to receive one common share for every six NovaGold shares received, and 212,501 RSUs. Upon exercise of all the foregoing convertible securities, the Company would be required to issue aggregate of 10,647,468 common shares.

New accounting pronouncements

Certain recent accounting pronouncements have been included under note 2 in our August 31, 2019 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, 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. We have taken steps, in accordance with industry standards, to verify the title to mineral properties in which it has an interest. Although we have made efforts to ensure that legal title to our 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 or 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.

South32 Option Agreement

The option to form the JV LLC is recognized as a financial instrument at inception of the arrangement with an initial fair value of $nil. This option is required to be re-measured at fair value at each reporting date with any changes in fair value recorded in loss for the period.

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.

23

(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 August 31, 2019 is limited to the Canadian dollar consisting of cash of CDN$205,000, accounts receivable of CDN$62,000 and accounts payable of CDN$1,283,000. Based on a 10% change in the US-Canadian exchange rate, assuming all other variables remain constant, our net loss would change by approximately $76,000.

(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 August 31, 2019, a 1% change in interest rates would result in a change in net loss of $0.2 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.

Item 4. Controls and Procedures

Management, with the participation of our President and Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of August 31, 2019. On the basis of this review, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective to ensure that the information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and to ensure that information required to be disclosed in the reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our President and Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

There have not been any changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) promulgated by the SEC under the Exchange Act) during the Company’s most recently completed fiscal quarter that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.

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.

24

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. Certain of these risks and uncertainties are under the heading “Risk Factors” under Trilogy’s Form 10-K dated February 11, 2019, which is available on SEDAR www.sedar.com and EDGAR at www.sec.gov and on our website at www.trilogymetals.com.

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

See Exhibit Index.

25

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: October 9, 2019	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

26

EXHIBIT INDEX

Exhibit No.	Description
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)
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.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document

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:	October 9, 2019
By:	/s/ James Gowans
	James Gowans
	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:	October 9, 2019
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 August 31, 2019, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, James Gowans, 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:	October 9, 2019
By:	/s/ James Gowans
	James Gowans
	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 August 31, 2019, 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:	October 9, 2019
By:	/s/ Elaine Sanders
	Elaine Sanders
	Vice President and Chief Financial Officer
	(principal financial officer)

XML

Share capital - Stock units plans and changes (Details)	9 Months Ended
	Aug. 31, 2019 shares
Number of RSU's [Member]
Balance - beginning of the year	400,002
Granted	225,000
Vested/paid	(412,501)
Balance - end of period	212,501
Number of DSU's [Member]
Balance - beginning of the year	1,182,106
Granted	119,139
Vested/paid	(182,132)
Balance - end of period	1,119,113

XML

Share capital (Tables)

9 Months Ended

Aug. 31, 2019

Share capital

Schedule of common stock outstanding roll forward

Authorized:

unlimited common shares, no par value

	in thousands of dollars, except share amounts
		Ascribed value
	Number of shares	$
November 30, 2017	105,684,523	136,525
Bought deal financing	24,784,482	28,750
Share issuance costs	—	(1,805)
Exercise of options	315,148	140
Restricted share units	800,000	457
NovaGold DSU conversion	1,459	2
November 30, 2018	131,585,612	164,069
Exercise of options	203,112	122
Restricted share units	412,501	424
Deferred share units	182,132	189
Exercise of warrants	6,521,740	12,166
August 31, 2019, issued and outstanding	138,905,097	176,970

Schedule of assumptions used in the pricing model

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

	August 31, 2019
Risk-free interest rates		2.03	%
Exercise price	CAD$	2.97
Expected life		3.0 years
Expected volatility		75.0	%
Expected dividends		Nil

Summary of the company's stock option plan

A summary of the Company’s stock option plan and changes during the nine - month period ended August 31, 2019 is as follows:

	August 31, 2019
		Weighted average
		exercise price
	Number of options	$
Balance – beginning of the period	8,821,434	0.60
Granted	2,527,500	2.22
Exercised	(306,432)	0.84
Balance – end of period	11,042,502	0.97

Summary of information about stock options

The following table summarizes information about the stock options outstanding at August 31, 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	3,876,433	0.97	0.39	3,876,433	0.39	—
$0.51 to $1.00	4,333,569	2.21	0.72	3,885,233	0.71	448,336
$1.01 to $1.50	225,000	3.62	1.32	175,000	1.29	50,000
$1.51 to $2.00	90,000	3.87	1.83	73,333	1.82	16,667
$2.01 to $2.52	2,517,500	4.27	2.21	1,257,498	2.22	1,260,002
	11,042,502	2.29	0.96	9,267,497	0.80	1,775,005

Schedule of restricted share Units and deferred share units plans

A summary of the Company’s unit plans and changes during the nine - month period ended August 31, 2019 is as follows:

	Number of RSUs	Number of DSUs
Balance – beginning of the period	400,002	1,182,106
Granted	225,000	119,139
Vested/paid	(412,501)	(182,132)
Balance – end of period	212,501	1,119,113

XML

Summary of significant accounting policies (Policies)

9 Months Ended

Aug. 31, 2019

Summary of significant accounting policies

Basis of presentation

Basis of presentation

These 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.

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

These unaudited interim consolidated financial statements include all adjustments of a normal recurring nature necessary for the fair presentation of the Company’s financial position as of August 31, 2019 and our results of operations and cash flows for the nine months ended August 31, 2019 and August 31, 2018. The results of operations for the nine months ended August 31, 2019 are not necessarily indicative of the results to be expected for the fiscal year ending November 30, 2019.

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, 2018 filed with the U.S. Securities and Exchange Commission (“SEC”) on February 11, 2019.

These financial statements were approved by the Company’s Audit Committee on behalf of the Board of Directors for issue on October 8, 2019.

Accounting standards adopted

Accounting standards adopted

i.Financial instruments

In March 2016, the Financial Accounting Standards Board (“FASB”) issued new guidance on classifying and measuring financial instruments (“ASU 2016‑01”). This update is effective for annual reporting periods beginning after December 15, 2017. The Company adopted the provisions of this guidance effective December 1, 2018. As the Company’s investments in equity instruments were previously classified at fair value with the change in fair value recorded to the statement of loss and comprehensive loss, the new guidance does not impact the Company’s accounting or reported results.

Recent accounting pronouncements

Recent accounting pronouncements

ii.Leases

In February 2016, the FASB issued new accounting requirements for accounting for, presentation of, and classification of leases (“ASU 2016‑02”). This will result in most leases being capitalized as a right of use asset with a related liability on the balance sheets. The requirements of the new standard are effective for annual reporting periods beginning after December 15, 2018, and interim periods within those annual periods, which for Trilogy is the first quarter of the fiscal year ending November 30, 2020. We expect the adoption will have an impact as we expect to capitalize leases and recognize lease obligations, specifically for our office leases which are not currently recognized on the balance sheets. We are in the process of analyzing the quantitative impact of this guidance on our results of operations and financial position.

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Accounts payable and accrued liabilities

9 Months Ended

Aug. 31, 2019

Accounts payable and accrued liabilities

Accounts payable and accrued liabilities

5Accounts payable and accrued liabilities

	in thousands of dollars
	August 31, 2019	November 30, 2018
	$	$
Trade accounts payable	3,271	400
Accrued liabilities	901	503
Accrued salaries and vacation	340	746
Due to related parties	—	8
Accounts payable and accrued liabilities	4,512	1,657

XML

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, 2017	$ 136,525	$ 2,163	$ 124	$ 18,402	$ 1,319	$ (132,868)	$ 25,665
Beginning Balance (Shares) at Nov. 30, 2017	105,684,523
Exercise of options	$ 29	0	0	(29)	0	0	0
Exercise of options (Shares)	50,753
Restricted Share Units	$ 457	0	0	0	(457)	0	0
Restricted Share Units (Shares)	800,000
Stock-based compensation	$ 0	0	0	484	438	0	922
Loss for the period	0	0	0	0	0	(2,946)	(2,946)
Ending Balance at Feb. 28, 2018	$ 137,011	2,163	124	18,857	1,300	(135,814)	23,641
Ending Balance (Shares) at Feb. 28, 2018	106,535,276
Beginning Balance at Nov. 30, 2017	$ 136,525	2,163	124	18,402	1,319	(132,868)	25,665
Beginning Balance (Shares) at Nov. 30, 2017	105,684,523
Loss for the period							(16,530)
Ending Balance at Aug. 31, 2018	$ 164,034	2,253	122	19,011	1,425	(149,488)	37,357
Ending Balance (Shares) at Aug. 31, 2018	131,533,953
Beginning Balance at Nov. 30, 2017	$ 136,525	2,163	124	18,402	1,319	(132,868)	25,665
Beginning Balance (Shares) at Nov. 30, 2017	105,684,523
Bought deal financing	$ 28,750
Bought deal financing (Shares)	24,784,482
Share issuance costs	$ (1,805)
NovaGold DSU conversion	$ 2
NovaGold DSU conversion (Shares)	1,459
Ending Balance at Nov. 30, 2018	$ 164,069	2,253	122	19,076	1,489	(154,807)	32,202
Ending Balance (Shares) at Nov. 30, 2018	131,585,612
Beginning Balance at Feb. 28, 2018	$ 137,011	2,163	124	18,857	1,300	(135,814)	23,641
Beginning Balance (Shares) at Feb. 28, 2018	106,535,276
Exercise of options	$ 5	0	0	(5)	0	0	0
Exercise of options (Shares)	28,700
Bought deal financing	$ 28,750	90	0	0	0	(90)	28,750
Bought deal financing (Shares)	24,784,482
Share issuance costs	$ (1,819)	0	0	0	0	0	(1,819)
Stock-based compensation	0	0	0	90	61	0	151
Loss for the period	0	0	0	0	0	(3,664)	(3,664)
Ending Balance at May. 31, 2018	$ 163,947	2,253	124	18,942	1,361	(139,568)	47,059
Ending Balance (Shares) at May. 31, 2018	131,348,458
Exercise of options	$ 71	0	0	(71)	0	0	0
Exercise of options (Shares)	184,475
Share issuance costs	$ 14	0	0	0	0	0	14
NovaGold DSU conversion	$ 2	0	(2)	0	0	0	0
NovaGold DSU conversion (Shares)	1,020
Stock-based compensation	$ 0	0	0	140	64	0	204
Loss for the period	0	0	0	0	0	(9,920)	(9,920)
Ending Balance at Aug. 31, 2018	$ 164,034	2,253	122	19,011	1,425	(149,488)	37,357
Ending Balance (Shares) at Aug. 31, 2018	131,533,953
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
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, 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 warrants	$ 12,166
Exercise of warrants (Shares)	6,521,740
Loss for the period							(21,380)
Ending Balance at Aug. 31, 2019	$ 176,970	0	122	21,183	1,652	(176,187)	23,740
Ending Balance (Shares) at Aug. 31, 2019	138,905,097
Beginning Balance at Feb. 28, 2019	$ 164,521	2,253	122	20,634	1,418	(159,143)	29,805
Beginning Balance (Shares) at Feb. 28, 2019	132,042,343
Exercise of options	$ 53	0	0	(53)	0	0	0
Exercise of options (Shares)	101,064
Stock-based compensation	$ 0	0	0	355	309	0	664
Loss for the period	0	0	0	0	0	(4,509)	(4,509)
Ending Balance at May. 31, 2019	$ 164,574	2,253	122	20,936	1,727	(163,652)	25,960
Ending Balance (Shares) at May. 31, 2019	132,143,407
Exercise of options	$ 41	0	0	(41)	0	0	0
Exercise of options (Shares)	57,818
Deferred Share Units	$ 189	0	0	0	(189)	0	0
Deferred Share Units (Shares)	182,132
Exercise of warrants	$ 12,166	(2,253)	0	0	0	0	9,913
Exercise of warrants (Shares)	6,521,740
Stock-based compensation	$ 0	0	0	288	114	0	402
Loss for the period	0	0	0	0	0	(12,535)	(12,535)
Ending Balance at Aug. 31, 2019	$ 176,970	$ 0	$ 122	$ 21,183	$ 1,652	$ (176,187)	$ 23,740
Ending Balance (Shares) at Aug. 31, 2019	138,905,097

XML

Document and Entity Information - shares	9 Months Ended
	Aug. 31, 2019	Oct. 08, 2019
Document and Entity Information [Abstract]
Document Type	10-Q
Entity Interactive Data Current	Yes
Amendment Flag	false
Document Period End Date	Aug. 31, 2019
Document Fiscal Year Focus	2019
Entity Current Reporting Status	Yes
Document Fiscal Period Focus	Q3
Entity Registrant Name	Trilogy Metals Inc.
Entity Central Index Key	0001543418
Current Fiscal Year End Date	--11-30
Entity Filer Category	Accelerated Filer
Title of 12(b) Security	Common Shares
Trading Symbol	TMQ
Security Exchange Name	NYSE
Entity Common Stock, Shares Outstanding		140,003,741
Entity Emerging Growth Company	false
Entity Small Business	true
Entity Shell Company	false

XML

Plant and equipment

9 Months Ended

Aug. 31, 2019

Plant and equipment

Plant and equipment

3Plant and equipment

	in thousands of dollars
	August 31, 2019
		Accumulated
	Cost	amortization	Net
	$	$	$
British Columbia, Canada
Furniture and equipment	63	(26)	37
Leasehold improvements	53	(16)	37
Computer hardware and software	115	(111)	4
Alaska, USA
Machinery and equipment	3,779	(3,038)	741
Vehicles	348	(347)	1
Computer hardware and software	35	(35)	—
	4,393	(3,573)	820

	in thousands of dollars
	November 30, 2018
		Accumulated
	Cost	amortization	Net
	$	$	$
British Columbia, Canada
Furniture and equipment	63	(17)	46
Leasehold improvements	53	(10)	43
Computer hardware and software	115	(109)	6
Alaska, USA
Machinery and equipment	3,178	(2,964)	214
Vehicles	348	(333)	15
Computer hardware and software	35	(34)	1
	3,792	(3,467)	325

XML

Share capital - Additional information (Details) $ / shares in Units, $ in Thousands	1 Months Ended	3 Months Ended						9 Months Ended				12 Months Ended
	Apr. 20, 2018 USD ($) $ / shares shares	Aug. 31, 2019 USD ($) shares	May 31, 2019 USD ($)	Feb. 28, 2019 USD ($)	Aug. 31, 2018 USD ($)	May 31, 2018 USD ($) shares	Feb. 28, 2018 USD ($)	Aug. 31, 2019 $ / shares	Aug. 31, 2019 USD ($) $ / shares shares	Aug. 31, 2018 USD ($) $ / shares	Aug. 31, 2018 USD ($) $ / shares shares	Nov. 30, 2018 USD ($) shares	Aug. 31, 2019 USD ($) $ / shares shares
Stock options granted, weighted average exercise price | $ / shares								$ 2.96		$ 1.15
Stock options granted, weighted average exercise price | $ / shares									$ 1.08		$ 0.43
Stock-based compensation		$ (402)	$ (664)	$ (1,939)	$ (204)	$ (151)	$ (922)
Non-vested stock options outstanding | shares													11,042,502
Weighted average exercise price options outstanding | $ / shares													$ 0.96
Aggregate intrinsic value, vested options					9,200					$ 9,200	$ 9,200		$ 10,600
Aggregate intrinsic value, options exercised									$ 500		400
Stock Issued During Period, Value, New Issues						28,750
Legal Fees	$ 1,800
Proceeds from Issuance of Common Stock	26,900								0		(1,805)
Cash proceeds									$ 9,913		0
Share capital [Member]
Stock-based compensation		$ 0	$ 0	0	$ 0	0	$ 0
Stock Issued During Period, Value, New Issues	$ 28,700					$ 28,750						$ 28,750
Stock Issued During Period, Shares, New Issues | shares	24,784,482					24,784,482						24,784,482
Shares Issued, Price Per Share | $ / shares	$ 1.16
Warrants exercised | shares		6,521,740							6,521,740
Nonvested Options [Member]
Non-vested stock options outstanding | shares													1,775,005
Weighted average exercise price options outstanding | $ / shares								$ 1.82
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
Granted Units | shares									119,139
Number of RSU's [Member]
Granted Units | shares									225,000
Stock Compensation Plan [Member]
Stock-based compensation									$ 780		$ 560
Restricted Stock Units (RSUs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Vested in Period | shares												412,501
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period | shares												225,000
Approximationss [Member] | Nonvested Options [Member]
Stock option expense				$ 630
New Employees [Member]
Stock options granted | shares									2,527,500		2,395,000
Directors, Employees and Services Providers [Member]
Stock-based compensation									$ 2,230		$ 710

XML

Mineral properties and development costs - Additional information (Details) - USD ($) $ in Thousands			1 Months Ended		3 Months Ended			9 Months Ended		12 Months Ended		177 Months Ended
	Apr. 10, 2017	Jan. 11, 2010	Oct. 31, 2017	Oct. 19, 2011	Aug. 31, 2019	Feb. 28, 2019	Aug. 31, 2018	Aug. 31, 2019	Aug. 31, 2018	Nov. 30, 2018	Nov. 30, 2017	Aug. 31, 2019
Payments for mineral property								$ 31,000
Mineral properties expense					$ 10,951		$ 9,051	15,392	$ 12,657
Maximum Subscription Price	$ 150,000
Cost, Maintenance	10,000
Mineral properties funding (note 4 (c))								$ 10,200	$ 10,435
Payments to Acquire Projects	$ 5,000
Subscription of Options Description	To subscribe for 50% of the JV, South32 must contribute a minimum of $150 million, plus (i) any amounts Trilogy spends on matched parallel funding to a maximum of $16 million over the three year period and (ii) $5 million if the option had been exercised between April 1, 2018 and March 31, 2019 or $10 million if the option is exercised between April 1, 2019 and the expiration date of the option, less the amount of the initial funding contributed by South32
Approximationss [Member]
Payments for mineral property												$ 140,600
Acquisition costs												30,600
Mineral properties expense												$ 110,000
Titiribi Property [Member]
Mineral properties funding (note 4 (c))			$ 400			$ 10,200				$ 10,400	$ 10,000
Proceeds From Advances from Affiliates										$ 800
Regional Exploration Program Budget Funding						$ 1,000
Bornite Property [Member]
Payments for mineral property				$ 4,000
Net proceeds royalty				15.00%
Discount on consideration				$ 40,000
Bornite Property [Member] | Minimum [Member]
Mineral property interest percentage				16.00%
Net smelter return royalty				1.00%
Bornite Property [Member] | Maximum [Member]
Mineral property interest percentage				25.00%
Net smelter return royalty				2.50%
Ambler Property [Member]
Mineral property interest percentage		100.00%
Mineral property, fair value of consideration		$ 26,600
Net smelter return royalty		1.00%
Purchase price of the net smelter royalty		$ 10,000

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Summary of significant accounting policies

9 Months Ended

Aug. 31, 2019

Summary of significant accounting policies

Summary of significant accounting policies

2Summary of significant accounting policies

Basis of presentation

These 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.

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

These unaudited interim consolidated financial statements include all adjustments of a normal recurring nature necessary for the fair presentation of the Company’s financial position as of August 31, 2019 and our results of operations and cash flows for the nine months ended August 31, 2019 and August 31, 2018. The results of operations for the nine months ended August 31, 2019 are not necessarily indicative of the results to be expected for the fiscal year ending November 30, 2019.

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, 2018 filed with the U.S. Securities and Exchange Commission (“SEC”) on February 11, 2019.

These financial statements were approved by the Company’s Audit Committee on behalf of the Board of Directors for issue on October 8, 2019.

Accounting standards adopted

i.Financial instruments

In March 2016, the Financial Accounting Standards Board (“FASB”) issued new guidance on classifying and measuring financial instruments (“ASU 2016‑01”). This update is effective for annual reporting periods beginning after December 15, 2017. The Company adopted the provisions of this guidance effective December 1, 2018. As the Company’s investments in equity instruments were previously classified at fair value with the change in fair value recorded to the statement of loss and comprehensive loss, the new guidance does not impact the Company’s accounting or reported results.

Recent accounting pronouncements

ii.Leases

In February 2016, the FASB issued new accounting requirements for accounting for, presentation of, and classification of leases (“ASU 2016‑02”). This will result in most leases being capitalized as a right of use asset with a related liability on the balance sheets. The requirements of the new standard are effective for annual reporting periods beginning after December 15, 2018, and interim periods within those annual periods, which for Trilogy is the first quarter of the fiscal year ending November 30, 2020. We expect the adoption will have an impact as we expect to capitalize leases and recognize lease obligations, specifically for our office leases which are not currently recognized on the balance sheets. We are in the process of analyzing the quantitative impact of this guidance on our results of operations and financial position.

XML

Consolidated Statements of Loss and Comprehensive Loss - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Aug. 31, 2019	Aug. 31, 2018	Aug. 31, 2019	Aug. 31, 2018
Expenses
Amortization	$ 31	$ 39	$ 106	$ 122
Foreign exchange loss (gain)	3	15	(26)	(29)
General and administrative	435	376	1,363	1,175
Investor relations	164	59	456	261
Mineral properties expense (note 4(d))	10,951	9,051	15,392	12,657
Professional fees	414	13	658	286
Salaries	272	286	835	738
Salaries - stock-based compensation	402	204	3,005	1,277
Total expenses	12,672	10,043	21,789	16,487
Other items
Loss on held for trading investments		12	0	272
Interest and other income	(137)	(135)	(409)	(229)
Loss and comprehensive loss for the period	$ 12,535	$ 9,920	$ 21,380	$ 16,530
Basic and diluted loss per common share	$ 0.09	$ 0.08	$ 0.16	$ 0.14
Weighted average number of common shares outstanding	136,981,179,000	131,470,146,000	133,677,437	118,530,242

XML

Accounts payable and accrued liabilities (Details) - USD ($) $ in Thousands	Aug. 31, 2019	Nov. 30, 2018
Accounts payable and accrued liabilities
Trade accounts payable	$ 3,271	$ 400
Accrued liabilities	901	503
Accrued salaries and vacation	340	746
Due to related parties	0	8
Accounts payable and accrued liabilities	$ 4,512	$ 1,657

XML

Plant and equipment (Details) - USD ($) $ in Thousands	Aug. 31, 2019	Nov. 30, 2018
Cost	$ 4,393	$ 3,792
Accumulated amortization	(3,573)	(3,467)
Net	820	325
Furniture and equipment [Member] | British Columbia, Canada [Member]
Cost	63	63
Accumulated amortization	(26)	(17)
Net	37	46
Leasehold improvements [Member] | British Columbia, Canada [Member]
Cost	53	53
Accumulated amortization	(16)	(10)
Net	37	43
Machinery and equipment[Member] | Alaska, USA [Member]
Cost	3,779	3,178
Accumulated amortization	(3,038)	(2,964)
Net	741	214
Vehicles [Member] | Alaska, USA [Member]
Cost	348	348
Accumulated amortization	(347)	(333)
Net	1	15
Computer hardware and software [Member] | British Columbia, Canada [Member]
Cost	115	115
Accumulated amortization	(111)	(109)
Net	4	6
Computer hardware and software [Member] | Alaska, USA [Member]
Cost	35	35
Accumulated amortization	$ (35)	(34)
Net		$ 1

XML

Financial instruments - Additional information (Details)	9 Months Ended
	Aug. 31, 2019 USD ($)	Aug. 31, 2019 CAD ($)	Aug. 31, 2019 USD ($)	Nov. 30, 2018 USD ($)
Accounts receivable			$ 359,000	$ 23,000
Interest rate loss	$ 200,000
Canadian Limit Due to Currency Risk [Member]
Cash		$ 205,000
Accounts receivable		62,000
Accounts payable		$ 1,283,000
Change in foreign exchange rate		10.00%	10.00%
Foreign exchange (gain) loss	$ 76,000
Change in interest rate	1.00%

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Commitment

9 Months Ended

Aug. 31, 2019

Commitment

Commitment

8Commitment

The Company has commitments with respect to office and warehouse leases requiring future minimum lease payments as follows:

	in thousands of dollars
	August 31, 2019
	$
One year	237
Years 2 through 5	452
Beyond 5 years	372
Total	1,061

XML

Mineral properties and development costs

9 Months Ended

Aug. 31, 2019

Mineral properties and development costs

Mineral properties and development costs

4Mineral properties and development costs

	in thousands of dollars
	November 30, 2018	Acquisition costs	August 31, 2019
	$	$	$
Alaska, USA
Ambler (a)	26,587	—	26,587
Bornite (b)	4,000	—	4,000
	30,587	—	30,587

	in thousands of dollars
	November 30, 2017	Acquisition costs	November 30, 2018
	$	$	$
Alaska, USA
Ambler (a)	26,587	—	26,587
Bornite (b)	4,000	—	4,000
	30,587	—	30,587

(a)Ambler

On January 11, 2010, NovaGold Resources Inc. (“NovaGold”), through Alaska Gold Company (“AGC”), at the time a wholly-owned NovaGold subsidiary, purchased 100% of the Ambler lands in Northwest Alaska, which contains the copper-zinc-lead-gold-silver Arctic Project and other mineralized targets within the volcanogenic massive sulfide belt, through a series of cash and share payments. Total fair value of the consideration was $26.6 million. The vendor retained a 1% net smelter return royalty that the Company can purchase at any time for a one-time payment of $10.0 million.

The Ambler lands were acquired on October 17, 2011 by Trilogy Metals US through a purchase and sale agreement with AGC. On October 24, 2011, NovaGold transferred its ownership of Trilogy Metals US to the Company, then itself a wholly owned subsidiary of NovaGold, which was subsequently spun-out to NovaGold shareholders and publicly listed on April 30, 2012 (“NovaGold Arrangement”).

(b)Bornite

On October 19, 2011, Trilogy Metals US acquired the exclusive right to explore and the non-exclusive right to access and enter on the Bornite lands, and lands deeded to NANA Regional Corporation, Inc. (“NANA”) through the Alaska Native Claims Settlement Act, located adjacent to the Ambler lands in Northwest Alaska. As consideration, Trilogy Metals US paid $4 million to acquire the right to explore and develop the combined Upper Kobuk Mineral Projects through an Exploration Agreement and Option to Lease with NANA. Upon a decision to proceed with construction of a mine on the lands, NANA maintains the right to purchase between a 16%‑25% ownership interest in the mine or retain a 15% net proceeds royalty which is payable after Trilogy Metals US has recovered certain historical costs, including capital and cost of capital. Should NANA elect to purchase an ownership interest, consideration will be payable equal to all historical costs incurred on the properties at the elected percentage purchased less $40 million, not to be less than zero. The parties would form a joint venture and be responsible for all future costs, including capital costs of the mine based on their pro-rata share.

NANA would also be granted a net smelter return royalty of between 1% and 2.5% upon the execution of a mining lease or a surface use agreement, the amount of which is determined by the classification of land from which production originates.

(c)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 Limited, which agreement was later assigned by South32 Operations to its affiliate, South32 USA Exploration Inc. (“South32”) 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. Upon exercise of the option, Trilogy Metals US will transfer its Alaskan assets, including the UKMP, and South32 will contribute a minimum of $150 million, to a newly formed and jointly held, limited liability company (“LLC”).

To maintain the option in good standing, South32 is required to fund a minimum of $10 million per year for up to a three-year period, which funds will be used to execute a mutually agreed upon program at the UKMP. The funds provided by South32 may only be expended in accordance with an approved program by a technical committee with equal representation from Trilogy and South32. South32 may exercise its option at any time over the three-year period to enter into the 50/50 joint venture. To subscribe for 50% of the JV, South32 must contribute a minimum of $150 million, plus (i) any amounts Trilogy spends on matched parallel funding to a maximum of $16 million over the three year period and (ii) $5 million if the option had been exercised between April 1, 2018 and March 31, 2019 or $10 million if the option is exercised between April 1, 2019 and the expiration date of the option, less the amount of the initial funding contributed by South32 (the “Subscription Price”). South32 has now funded the full three-year option period. South32 has until the end of January 2020 to exercise the option to form the JV LLC and make the subscription payment. Should South32 not make its annual minimum payment or elect to withdraw, the option will lapse and South32 will have no claim to property ownership or to the funds already spent.

During the year ended November 30, 2017, the Company received the first payment of $10.0 million and these funds were expended on the year 1 program at the Bornite Project. In October 2017, the Company received $0.4 million as a first instalment towards the year 2 program and budget to begin preparatory work. During the year ended November 30, 2018, the Company received payments totaling $10.4 million following the approval of the year 2 program and budget in January 2018, including a $0.80 million advance on South32’s year three funding obligation per the Option Agreement. During the quarter ended February 28, 2019, the Company received payments totaling $10.2 million following the approval of the year 3 program and budget, including an additional $1 million of funding for the approved regional exploration program. The receipt of the year 3 funding represents receipt of the final tranche of funding from South32. The Company is responsible for the disbursement of these funds in accordance with the approved program and budget and accordingly has not classified the funds as restricted cash.

As the initial option payments are credited against the future subscription price upon exercise, the Company has accounted for the payments received from South32 as deferred consideration for the purchase of the UKMP interest. At such time as the option is exercised, the $31.0 million of payments received will be recognized as part of the consideration received for the Company’s contribution of the UKMP into JV LLC. If South32 withdraws from the Option Agreement, the consideration will be recognized as income in the statement of loss at that time.

The option to form the JV LLC is recognized as a financial instrument at inception of the arrangement with an initial fair value of $nil. This option is required to be re-measured at fair value at each reporting date with any changes in fair value recorded in loss for the period. The Company determined that the fair value of the option remains $nil as at August 31, 2019.

(d)Mineral properties expense

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

	In thousands of dollars
	Three months ended	Three months ended	Nine months ended	Nine months ended
	August 31, 2019	August 31, 2018	August 31, 2019	August 31, 2018
	$	$	$	$
Alaska, USA
Community	164	81	428	324
Drilling	4,760	3,624	4,933	3,804
Engineering	663	245	1,287	750
Environmental	153	313	424	482
Geochemistry and geophysics	252	420	1,010	1,066
Land and permitting	163	145	523	504
Project support	3,062	2,703	4,066	3,381
Other income	—	—	(1)	(20)
Wages and benefits	1,734	1,520	2,722	2,366
Mineral property expense	10,951	9,051	15,392	12,657

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. Cumulative mineral properties expense in Alaska from the initial earn-in agreement on the property in 2004 to August 31, 2019 is $110.0 million and cumulative acquisition costs are $30.6 million totaling $140.6 million spent to date.

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Accounts payable and accrued liabilities (Tables)

9 Months Ended

Aug. 31, 2019

Accounts payable and accrued liabilities

Schedule of accounts payable and accrued liabilities

	in thousands of dollars
	August 31, 2019	November 30, 2018
	$	$
Trade accounts payable	3,271	400
Accrued liabilities	901	503
Accrued salaries and vacation	340	746
Due to related parties	—	8
Accounts payable and accrued liabilities	4,512	1,657

XML

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	9 Months Ended
	Aug. 31, 2019	Aug. 31, 2018
Cash flows used in operating activities
Loss for the period	$ (21,380)	$ (16,530)
Items not affecting cash
Amortization	106	122
Loss on held for trading investments	0	272
Unrealized foreign exchange loss (gain)	3	(52)
Stock-based compensation	3,005	1,277
Net change in non-cash working capital
(Increase) Decrease in accounts receivable	(336)	413
Decrease in deposits and prepaid amounts	99	191
Increase (Decrease) in accounts payable and accrued liabilities	2,748	(285)
Net Cash Provided by (Used in) Operating Activities	(15,755)	(14,592)
Cash flows from (used in) financing activities
Proceeds from exercise of warrants	9,913	0
Proceeds from bought deal financing	0	28,750
Share issuance costs	0	(1,805)
Net Cash Provided by (Used in) Financing Activities	9,913	26,945
Cash flows from investing activities
Acquisition of plant & equipment	(494)	(7)
Mineral properties funding (note 4 (c))	10,200	10,435
Proceeds from the sale of investments, net of fees	0	2,297
Net Cash Provided by (Used in) Investing Activities	9,706	12,725
Increase in cash and cash equivalents	3,864	25,078
Effect of exchange rate on cash and cash equivalents	(3)	(1)
Cash and cash equivalents - beginning of period	22,991	5,391
Cash and cash equivalents - end of period	$ 26,852	$ 30,468

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Aug. 31, 2019	Nov. 30, 2018
Current assets
Cash and cash equivalents	$ 26,852	$ 22,991
Accounts receivable	359	23
Deposits and prepaid amounts	520	619
Total Current Assets	27,731	23,633
Rent deposit	114	114
Plant and equipment (note 3)	820	325
Mineral properties and development costs (note 4)	30,587	30,587
Total Assets	59,252	54,659
Current liabilities
Accounts payable and accrued liabilities (note 5)	4,512	1,657
Current liabilities	4,512	1,657
Mineral properties purchase option (note 4(c))	31,000	20,800
Total Liabilities	35,512	22,457
Shareholders' equity
Share capital (note 6) - unlimited common shares authorized, no par value Issued -138,905,097 (2018 - 131,585,612)	176,970	164,069
Warrants (note 6(c))		2,253
Contributed surplus	122	122
Contributed surplus - options (note 6(a))	21,183	19,076
Contributed surplus - units (note 6(b))	1,652	1,489
Deficit	(176,187)	(154,807)
Total Stockholders' Equity	23,740	32,202
Total Liabilities and Stockholders' Equity	$ 59,252	$ 54,659

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Share capital - Common shares issued and outstanding (Details) - USD ($) $ in Thousands	1 Months Ended	3 Months Ended			9 Months Ended	12 Months Ended
	Apr. 20, 2018	Aug. 31, 2019	Aug. 31, 2018	May 31, 2018	Aug. 31, 2019	Nov. 30, 2018
Bought deal financing				$ 28,750
Share issuance costs			$ 14	$ (1,819)
NovaGold DSU conversion			0
Deferred share units (Shares)					182,132
Deferred share units					189,000
Exercise of warrants		$ 9,913
Number of shares		138,905,097			138,905,097
Ascribed value		$ 176,970			$ 176,970
Share capital [Member]
Number of shares					131,585,612	105,684,523
Ascribed value					$ 164,069	$ 136,525
Bought deal financing (Shares)	24,784,482			24,784,482		24,784,482
Bought deal financing	$ 28,700			$ 28,750		$ 28,750
Share issuance costs			$ 14	$ (1,819)		$ (1,805)
Exercise of options (shares)					203,112	315,148
Exercise of options					$ 122	$ 140
Restricted share units (Shares)					412,501	800,000
Restricted share units					$ 424	$ 457
NovaGold DSU conversion (Shares)			1,020			1,459
NovaGold DSU conversion			$ 2			$ 2
Exercise of warrants		$ 12,166			$ 12,166
Exercise of warrants (Shares)		6,521,740			6,521,740
Number of shares						131,585,612
Ascribed value						$ 164,069

XML

Mineral Properties and development costs (Details) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Aug. 31, 2019	Nov. 30, 2018	Nov. 30, 2017
Mineral properties and development costs	$ 30,587	$ 30,587
Alaska, USA [Member]
Acquisition costs	0	0
Mineral properties and development costs	30,587	30,587	$ 30,587
Ambler Propertyss [Member] | Alaska, USA [Member]
Acquisition costs	0	0
Mineral properties and development costs	26,587	26,587	26,587
Bornite Propertys [Member] | Alaska, USA [Member]
Acquisition costs	0	0
Mineral properties and development costs	$ 4,000	$ 4,000	$ 4,000

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Financial instruments (Tables)

9 Months Ended

Aug. 31, 2019

Financial instruments

Schedule of contractually obligated cash flow requirements

Contractually obligated cash flow requirements as at August 31, 2019 are as follows:

	in thousands of dollars
	Total	< 1 Year	1–2 Years	2–5 Years	Thereafter
	$	$	$	$	$
Accounts payable and accrued liabilities	4,512	4,512	—	—	—
	4,512	4,512	—	—	—

XML

Plant and equipment (Tables)

9 Months Ended

Aug. 31, 2019

Plant and equipment

Schedule of plant and equipment

	in thousands of dollars
	August 31, 2019
		Accumulated
	Cost	amortization	Net
	$	$	$
British Columbia, Canada
Furniture and equipment	63	(26)	37
Leasehold improvements	53	(16)	37
Computer hardware and software	115	(111)	4
Alaska, USA
Machinery and equipment	3,779	(3,038)	741
Vehicles	348	(347)	1
Computer hardware and software	35	(35)	—
	4,393	(3,573)	820

	in thousands of dollars
	November 30, 2018
		Accumulated
	Cost	amortization	Net
	$	$	$
British Columbia, Canada
Furniture and equipment	63	(17)	46
Leasehold improvements	53	(10)	43
Computer hardware and software	115	(109)	6
Alaska, USA
Machinery and equipment	3,178	(2,964)	214
Vehicles	348	(333)	15
Computer hardware and software	35	(34)	1
	3,792	(3,467)	325

XML

Share capital

9 Months Ended

Aug. 31, 2019

Share capital

Share capital

6Share capital

Authorized:

unlimited common shares, no par value

	in thousands of dollars, except share amounts
		Ascribed value
	Number of shares	$
November 30, 2017	105,684,523	136,525
Bought deal financing	24,784,482	28,750
Share issuance costs	—	(1,805)
Exercise of options	315,148	140
Restricted share units	800,000	457
NovaGold DSU conversion	1,459	2
November 30, 2018	131,585,612	164,069
Exercise of options	203,112	122
Restricted share units	412,501	424
Deferred share units	182,132	189
Exercise of warrants	6,521,740	12,166
August 31, 2019, issued and outstanding	138,905,097	176,970

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 on 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 August 31, 2019, there remains 11,927 NovaGold DSUs outstanding representing a right to receive 1,988 Common Shares in Trilogy, which will settle upon certain directors retiring from NovaGold’s board.

On April 20, 2018, the Company completed a bought-deal financing for gross proceeds of $28.7 million by issuing 24,784,482 common shares at $1.16 per common share. Expenses including bank commissions, legal fees, stock exchange and other fees totaled $1.8 million for net proceeds of $26.9 million.

(a) Stock options

During the nine – months ended August 31, 2019, the Company granted 2,527,500 options (2018 – 2,395,000 options) at a weighted-average exercise price of CAD$2.96 (2018 – CAD$1.15) 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 $1.08 (2018 - $0.43).

For the nine - month period ended August 31, 2019, Trilogy recognized a stock-based compensation charge of $2.23 million (2018– $0.71 million) for options granted to directors, employees and service providers, net of estimated forfeitures.

The recognized fair value of the stock options granted during the nine - month period ended August 31, 2019 has been estimated using the Black-Scholes option pricing model.

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

	August 31, 2019
Risk-free interest rates		2.03	%
Exercise price	CAD$	2.97
Expected life		3.0 years
Expected volatility		75.0	%
Expected dividends		Nil

As of August 31, 2019, there were 1,775,005 non-vested options outstanding with a weighted average exercise price of $1.82; the non-vested stock option expense not yet recognized was $0.63 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 nine - month period ended August 31, 2019 is as follows:

	August 31, 2019
		Weighted average
		exercise price
	Number of options	$
Balance – beginning of the period	8,821,434	0.60
Granted	2,527,500	2.22
Exercised	(306,432)	0.84
Balance – end of period	11,042,502	0.97

The following table summarizes information about the stock options outstanding at August 31, 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	3,876,433	0.97	0.39	3,876,433	0.39	—
$0.51 to $1.00	4,333,569	2.21	0.72	3,885,233	0.71	448,336
$1.01 to $1.50	225,000	3.62	1.32	175,000	1.29	50,000
$1.51 to $2.00	90,000	3.87	1.83	73,333	1.82	16,667
$2.01 to $2.52	2,517,500	4.27	2.21	1,257,498	2.22	1,260,002
	11,042,502	2.29	0.96	9,267,497	0.80	1,775,005

The aggregate intrinsic value of vested share options (the market value less the exercise price) at August 31, 2019 was $10.6 million (2018 - $9.2 million) and the aggregate intrinsic value of exercised options for the nine - month period ended August 31, 2019 was $0.5 million (2018 - $0.4 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 nine - month period ended August 31, 2019 is as follows:

	Number of RSUs	Number of DSUs
Balance – beginning of the period	400,002	1,182,106
Granted	225,000	119,139
Vested/paid	(412,501)	(182,132)
Balance – end of period	212,501	1,119,113

For the nine - month period ended August 31, 2019, Trilogy recognized a stock-based compensation charge of $0.78 million (2018‑ $0.56 million), net of estimated forfeitures.

As part of the annual incentive payout for the 2018 fiscal year, 225,000 RSUs were granted to officers during the three - month period ended February 28, 2019, vesting half on the grant date and half on the first anniversary of the grant date. RSUs vesting in December 2018 were settled on December 21, 2018 through the issuance of 412,501 common shares.

(c) Share Purchase Warrants

During the three - month period ended August 31, 2019, all the outstanding warrants were exercised in advance of the July 2, 2019 expiry date.  As a result of the warrants exercised, the Company issued a total of 6,521,740 common shares and received cash proceeds of approximately $9.9 million.

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Share capital - Stock options outstanding (Details)	9 Months Ended
	Aug. 31, 2019 $ / shares shares
Number of outstanding options | shares	11,042,502
Weighted average years to expiry	2 years 3 months 15 days
Weighted average exercise price options outstanding	$ 0.96
Number of exercisable options | shares	9,267,497
Weighted average exercise price exercisable	$ 0.80
Number of unvested options | shares	1,775,005
Range 1 [Member]
Exercise price lower range limit	$ 0.33
Exercise price upper range limit	$ 0.50
Number of outstanding options | shares	3,876,433
Weighted average years to expiry	11 months 19 days
Weighted average exercise price options outstanding	$ 0.39
Number of exercisable options | shares	3,876,433
Weighted average exercise price exercisable	$ 0.39
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	4,333,569
Weighted average years to expiry	2 years 2 months 16 days
Weighted average exercise price options outstanding	$ 0.72
Number of exercisable options | shares	3,885,233
Weighted average exercise price exercisable	$ 0.71
Number of unvested options | shares	448,336
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 7 months 13 days
Weighted average exercise price options outstanding	$ 1.32
Number of exercisable options | shares	175,000
Weighted average exercise price exercisable	$ 1.29
Number of unvested options | shares	50,000
Range Four [Member]
Exercise price lower range limit	$ 1.51
Exercise price upper range limit	$ 2.00
Number of outstanding options | shares	90,000
Weighted average years to expiry	3 years 10 months 13 days
Weighted average exercise price options outstanding	$ 1.83
Number of exercisable options | shares	73,333
Weighted average exercise price exercisable	$ 1.82
Number of unvested options | shares	16,667
Range Five [Member]
Exercise price lower range limit	$ 2.01
Exercise price upper range limit	$ 2.52
Number of outstanding options | shares	2,517,500
Weighted average years to expiry	4 years 3 months 7 days
Weighted average exercise price options outstanding	$ 2.21
Number of exercisable options | shares	1,257,498
Weighted average exercise price exercisable	$ 2.22
Number of unvested options | shares	1,260,002

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Commitment (Details) $ in Thousands	Aug. 31, 2019 USD ($)
Commitment
One year	$ 237
Years 2 through 5	452
Beyond 5 years	372
Total	$ 1,061

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Mineral properties and development costs (Tables)

9 Months Ended

Aug. 31, 2019

Mineral properties and development costs

Schedule of mineral properties and development costs

	in thousands of dollars
	November 30, 2018	Acquisition costs	August 31, 2019
	$	$	$
Alaska, USA
Ambler (a)	26,587	—	26,587
Bornite (b)	4,000	—	4,000
	30,587	—	30,587

	in thousands of dollars
	November 30, 2017	Acquisition costs	November 30, 2018
	$	$	$
Alaska, USA
Ambler (a)	26,587	—	26,587
Bornite (b)	4,000	—	4,000
	30,587	—	30,587

(a)Ambler

On January 11, 2010, NovaGold Resources Inc. (“NovaGold”), through Alaska Gold Company (“AGC”), at the time a wholly-owned NovaGold subsidiary, purchased 100% of the Ambler lands in Northwest Alaska, which contains the copper-zinc-lead-gold-silver Arctic Project and other mineralized targets within the volcanogenic massive sulfide belt, through a series of cash and share payments. Total fair value of the consideration was $26.6 million. The vendor retained a 1% net smelter return royalty that the Company can purchase at any time for a one-time payment of $10.0 million.

The Ambler lands were acquired on October 17, 2011 by Trilogy Metals US through a purchase and sale agreement with AGC. On October 24, 2011, NovaGold transferred its ownership of Trilogy Metals US to the Company, then itself a wholly owned subsidiary of NovaGold, which was subsequently spun-out to NovaGold shareholders and publicly listed on April 30, 2012 (“NovaGold Arrangement”).

(b)Bornite

On October 19, 2011, Trilogy Metals US acquired the exclusive right to explore and the non-exclusive right to access and enter on the Bornite lands, and lands deeded to NANA Regional Corporation, Inc. (“NANA”) through the Alaska Native Claims Settlement Act, located adjacent to the Ambler lands in Northwest Alaska. As consideration, Trilogy Metals US paid $4 million to acquire the right to explore and develop the combined Upper Kobuk Mineral Projects through an Exploration Agreement and Option to Lease with NANA. Upon a decision to proceed with construction of a mine on the lands, NANA maintains the right to purchase between a 16%‑25% ownership interest in the mine or retain a 15% net proceeds royalty which is payable after Trilogy Metals US has recovered certain historical costs, including capital and cost of capital. Should NANA elect to purchase an ownership interest, consideration will be payable equal to all historical costs incurred on the properties at the elected percentage purchased less $40 million, not to be less than zero. The parties would form a joint venture and be responsible for all future costs, including capital costs of the mine based on their pro-rata share.

NANA would also be granted a net smelter return royalty of between 1% and 2.5% upon the execution of a mining lease or a surface use agreement, the amount of which is determined by the classification of land from which production originates.

Schedule of mineral property expenses

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

	In thousands of dollars
	Three months ended	Three months ended	Nine months ended	Nine months ended
	August 31, 2019	August 31, 2018	August 31, 2019	August 31, 2018
	$	$	$	$
Alaska, USA
Community	164	81	428	324
Drilling	4,760	3,624	4,933	3,804
Engineering	663	245	1,287	750
Environmental	153	313	424	482
Geochemistry and geophysics	252	420	1,010	1,066
Land and permitting	163	145	523	504
Project support	3,062	2,703	4,066	3,381
Other income	—	—	(1)	(20)
Wages and benefits	1,734	1,520	2,722	2,366
Mineral property expense	10,951	9,051	15,392	12,657

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Financial instruments

9 Months Ended

Aug. 31, 2019

Financial instruments

Financial instruments

7Financial 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. The Company’s investments were held for trading and were marked-to-market at each period end with changes in fair value recorded to the statement of loss.

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 August 31, 2019 is limited to the Canadian dollar consisting of cash of CDN$205,000, accounts receivable of CDN$62,000 and accounts payable of CDN$1,283,000. 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 $76,000.

(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 August 31, 2019 are as follows:

	in thousands of dollars
	Total	< 1 Year	1–2 Years	2–5 Years	Thereafter
	$	$	$	$	$
Accounts payable and accrued liabilities	4,512	4,512	—	—	—
	4,512	4,512	—	—	—

(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 August 31, 2019, a 1% change in interest rates would result in a change in net loss of $0.2 million, assuming all other variables remain constant.

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Share capital - Stock options plans and changes (Details)	9 Months Ended
	Aug. 31, 2019 $ / shares shares	Aug. 31, 2019 $ / shares shares	Aug. 31, 2018 $ / shares	Aug. 31, 2018 $ / shares
Weighted average exercise price, Granted	$ 2.96		$ 1.15
Weighted average exercise price, Exercised		$ 1.08		$ 0.43
Balance - End of Period, Number of stock options | shares	11,042,502	11,042,502
Balance - End of Period, Weighted average exercise price		$ 0.96
Stock option [Member]
Balance - beginning of the year, Number of stock Options | shares	8,821,434	8,821,434
Balance - beginning of the year, Weighted average exercise price		$ 0.60
Number of options, Granted | shares	2,527,500	2,527,500
Weighted average exercise price, Granted		$ 2.22
Number of options, Exercised | shares	(306,432)	(306,432)
Weighted average exercise price, Exercised		$ 0.84
Balance - End of Period, Number of stock options | shares	11,042,502	11,042,502
Balance - End of Period, Weighted average exercise price		$ 0.97

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Financial instruments - Contractually obligated cash flow requirements (Details)	Aug. 31, 2019 USD ($)
Total	$ 4,512,000
Within 1 Year	4,512,000
1 - 2 Years	0
2 - 5 Years	0
Thereafter	0
Accounts payable and accrued liabilities [Member]
Total	4,512,000
Within 1 Year	4,512,000
1 - 2 Years	0
2 - 5 Years	0
Thereafter	$ 0

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Nature of operations

9 Months Ended

Aug. 31, 2019

Nature of operations

Nature of operations

1Nature of operations

Trilogy Metals Inc. (“Trilogy” or the “Company”) was incorporated in British Columbia under the Business Corporations Act (British Columbia) on April 27, 2011. The Company is engaged in the exploration and development of mineral properties 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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Consolidated Balance Sheets (Parenthetical) - $ / shares	Aug. 31, 2019	Nov. 30, 2018
Consolidated Balance Sheets
Common Stock, No Par Value	$ 0	$ 0
Common Stock, Shares, Issued	138,905,097	131,585,612

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Mineral properties and development costs - Mineral property expenses (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Aug. 31, 2019	Aug. 31, 2018	Aug. 31, 2019	Aug. 31, 2018
Mineral property expense	$ 10,951	$ 9,051	$ 15,392	$ 12,657
Alaska, USA [Member]
Community	164	81	428	324
Drilling	4,760	3,624	4,933	3,804
Engineering	663	245	1,287	750
Environmental	153	313	424	482
Geochemistry and geophysics	252	420	1,010	1,066
Land and permitting	163	145	523	504
Project support	3,062	2,703	4,066	3,381
Other income			(1)	(20)
Wages and benefits	$ 1,734	$ 1,520	$ 2,722	$ 2,366

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Commitment (Tables)

9 Months Ended

Aug. 31, 2019

Commitment

Schedule of future minimum lease payments

The Company has commitments with respect to office and warehouse leases requiring future minimum lease payments as follows:

	in thousands of dollars
	August 31, 2019
	$
One year	237
Years 2 through 5	452
Beyond 5 years	372
Total	1,061

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Share capital - Assumptions used in the pricing model (Details)	9 Months Ended
	Aug. 31, 2019 $ / shares
Share capital
Risk-free interest rates	2.03%
Exercise price	$ 2.97
Expected life	3 years
Expected volatility	75.00%
Expected dividends	0.00%