Income taxes

12 Months Ended

Nov. 30, 2020

Income taxes

Income taxes

12)    Income taxes

Income tax expense differs from the amount that would result from applying the Canadian federal and provincial income tax rates to earnings before income taxes. These differences result from the following items:

					in thousands of dollars
	November 30, 2020		November 30, 2019		November 30, 2018
	$		$		$
Combined federal and provincial statutory tax rate	27.00	%	27.00	%	26.92	%
Income tax (recovery) at statutory rate	43,677		(7,534)		(5,882)
Difference in foreign tax rates	2,424		(281)		(424)
Impact of change in tax rate	—		—		23,582
Effect of foreign exchange changes	(4)		—		—
Non-deductible expenditures	1,009		4,061		3,018
Income from option payments applied as proceeds of sale	(8,812)		—		—
Return to provision adjustments	(6)		193		1,319
Impact of new lease accounting rules (ASC 842 adoption)	(28)		—		—
Expiry of Losses	—		277		—
Change in valuation allowance	(38,260)		3,284		(21,613)
Income tax recovery (expense)	—		—		—

Deferred income taxes arise from temporary differences in the recognition of income and expenses for financial reporting and tax purposes. The significant components of deferred income tax assets and liabilities at November 30, 2020 and 2019 are as follows:

		in thousands of dollars
	November 30, 2020	November 30, 2019
	$	$
Deferred income tax assets
Non-capital losses	51,250	48,968
Mineral property interest	—	11,351
Deferred interest	6,251	6,251
Property, plant and equipment	88	70
Lease liability	153	—
Share issuance costs	267	351
Capital Loss	—	186
Investments	—	—
Other deductible temporary differences	223	345
Total deferred tax assets	58,232	67,522
Valuation allowance	(29,259)	(67,519)
Net deferred income tax assets	28,973	3
Deferred income tax liabilities
Investment in Ambler Metals LLC	(28,844)	—
Right of use asset	(129)	—
Other taxable temporary differences	—	(3)
Deferred income tax liabilities	(28,973)	(3)
Net deferred income tax assets	—	—

The Company has loss carry-forwards of approximately $182.6 million that may be available for tax purposes. Certain of these losses occurred prior to the incorporation of the Company and are accounted for in the financial statements as if they were incurred by the Company. Prior to the NovaGold Arrangement, the Company undertook a tax reorganization in order to preserve the future deductibility of these losses for the Company, subject to the limitations below. Deferred tax assets have been recognized to the extent of future taxable income and the future taxable amounts related to taxable temporary differences for which a deferred tax liability is recognized can be offset. A valuation allowance has been provided against deferred income tax assets where it is not more likely than not that the Company will realize those benefits.

The losses expire as follows in the following jurisdictions:

		in thousands of dollars
	Non-capital losses	Operating losses
	Canada	United States
	$	$
2021	—	1
2022	—	366
2023	—	960
2024	—	569
Thereafter	46,965	119,598
	46,965	121,494

Future use of U.S. loss carry-forwards is subject to certain limitations under provisions of the Internal Revenue Code including limitations subject to Section 382, which relates to a 50% change in control over a three-year period and are further dependent upon the Company attaining profitable operations. An ownership change under Section 382 occurred on January 22, 2009 regarding losses incurred by AGC, of which the attributes of those losses were transferred to Trilogy Metals US with the purchase of the mineral property in October 2011. Therefore, approximately $39.4 million of the U.S. losses above are subject to limitation under Section 382. Accordingly, the Company’s ability to use these losses may be limited. Furthermore, tax reform provisions under section 172 allow federal net operating losses arising in tax years subsequent to December 31, 2017 to be carried forward indefinitely. As at November 30, 2020 the Company has $14.2 million in operating losses that can be carried forward indefinitely.

An additional change in control may have occurred after November 30, 2011 which may further limit the availability of losses prior to the date of change in control.

On June 19, 2015, we completed the Sunward acquisition which resulted in an acquisition of control of Sunward Resources ULC under of the Income Tax Act in Canada. Therefore, the Company’s ability to use approximately $15.2 million of losses in Canada may be limited.