Investment in Ambler Metals LLC

12 Months Ended

Nov. 30, 2020

Investment in Ambler Metals LLC

Investment in Ambler Metals LLC

4)    Investment in Ambler Metals LLC

(a) Formation of Ambler Metals LLC

On February 11, 2020, the Company completed the formation of a 50/50 joint venture named Ambler Metals LLC with South32 Limited (“South32”). As part of the formation of the joint venture, Trilogy contributed all its assets associated with the UKMP, including the Arctic and Bornite Projects, while South32 contributed US$145 million, resulting in each party’s subsidiaries directly owning a 50% interest in Ambler Metals LLC. To assist Ambler Metals during the initial set up phase, Trilogy was paying all of Ambler Metals’ invoices and being reimbursed pursuant to a services agreement (the “Services Agreement”) between Trilogy and Ambler Metals until the back office is fully transitioned to a new permanenet team employed by the joint venture. The Services Agreement ended on December 31, 2020.

Ambler Metals LLC is an independently operated company jointly controlled by Trilogy and South32 through a four-member board, of which two members are currently appointed by Trilogy based on its 50% equity interest. All significant decisions related to the UKMP require the approval of both companies. We determined that Ambler Metals LLC is a VIE because it is expected to need additional funding from its owners for its significant activities. However, we concluded that we are not the primary beneficiary of Ambler Metals LLC as the power to direct its activities, through its board, is shared under the Ambler Metals LLC limited liability company agreement. As we have significant influence over Ambler Metals LLC through our representation on its board, we use the equity method of accounting for our investment in Ambler Metals LLC. Our investment in Ambler Metals LLC was initially measured at its fair value of $176 million upon recognition. Our maximum exposure to loss in this entity is limited to the carrying amount of our investment in Ambler Metals LLC, which totaled $173 million, as well as approximately $114,000 of amounts receivable per the Services Agreement. The following table summarizes the gain on recognition of the UKMP assets upon transfer to the Ambler Metals LLC joint venture on February 11, 2020.

	in thousands of dollars
	$
Fair value ascribed to Ambler Metals LLC interest	176,000
Less: carrying value of contributed /eliminated assets
Mineral properties	(30,631)
Property, plant and equipment	(618)
Elimination of Fairbanks warehouse right of use asset	(93)
Elimination of prepaid State of Alaska mining claim fees	(303)
Add:
Reimbursement of claims staking	44
Demobilization costs of drills	278
Cancellation of Fairbanks warehouse lease liability	93
Fair value of mineral properties purchase option	31,000
Gain on derecognition	175,770

(b) Carrying value of investment in Ambler Metals LLC

During the year ended November 30, 2020, Trilogy recognized, based on its 50% ownership interest in Ambler Metals LLC, an equity loss equivalent to its pro rata share of Ambler Metals LLC's net loss of $5.7 million for the period between

February 11, 2020 (date of joint venture formation) to November 30, 2020. The carrying value of Trilogy’s 50% investment in Ambler Metals LLC as at November 30, 2020 is summarized on the following table.

	in thousands of dollars
	$
February 11, 2020, fair value ascribed to Ambler Metals LLC interest	176,000
Share of loss on equity investment from February 11, 2020 to November 30, 2020	(2,855)
November 30, 2020, equity method investment	173,145

(c) The following table summarizes Ambler Metals LLC's Balance Sheet as at November 30, 2020.

	in thousands of dollars
	November 30, 2020
	$
Current assets: Cash, deposits and prepaid expenses	82,226
Non - current assets: Property, equipment and mineral properties	31,287
Loan receivable from South32	58,478
Current liabilities: Accounts payable and accrued liabilities	(1,445)
Non - current liabilities: Lease obligation	(51)
Net assets	170,495

(d) The following table summarizes Ambler Metals LLC's net loss from the formation of the joint venture on February 11, 2020 to the end of the reporting period on November 30, 2020.

	in thousands of dollars
	Period ending
	November 30, 2020
	$
Amortization	95
Mineral properties expense	3,619
General and administrative expense	3,177
Interest income	(1,181)
Comprehensive loss	5,710

(e) Related party transactions - services agreement income

The Company charged $0.9 million of expenses related to technical services, including geological, engineering, environmental and human resources and accounting services in connection with the Services Agreement. In addition, the Company received payments of $2.8 million related to operating expenses paid on behalf of Ambler Metals from February 11, 2020 to November 30, 2020 pursuant to the Services Agreement.