Investment in Ambler Metals LLC

9 Months Ended

Aug. 31, 2023

Investment in Ambler Metals LLC

Investment in Ambler Metals LLC

3)    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 (“Ambler Metals”) 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 cash of $145 million, resulting in each party’s subsidiaries directly owning a 50% interest in Ambler Metals.

Ambler Metals is an independently operated company jointly controlled by Trilogy and South32 through a four-member board, of which two members are appointed by Trilogy based on its 50% equity interest. All significant decisions related to the UKMP require the approval of both companies. We determined that Ambler Metals is a VIE because it is expected to need additional funding from its owners for its significant activities. However, we concluded that we are not the primary beneficiary of Ambler Metals as the power to direct its activities, through its board, is shared under the Ambler Metals LLC limited liability company agreement. As we have significant influence over Ambler Metals through our representation on its board, we use the equity method of accounting for our investment in Ambler Metals. Our investment in Ambler Metals was initially measured at its fair value of $176 million upon recognition. Our maximum exposure to loss in this entity is limited to the carrying amount of our investment in Ambler Metals, which, as at August 31, 2023, totaled $136.9 million.

(b) Carrying value of equity method investment

Trilogy recognized, based on its 50% ownership interest in Ambler Metals, an equity loss equivalent to its pro rata share of Ambler Metals’ comprehensive loss of $5.8 million for the three-month period ending August 31, 2023 (2022 - $17.9 million) and $12.0 million for the nine-month period ending August 31, 2023 (2022 - $26.6 million).  During the nine-month period ending August 31, 2023, Trilogy made a $111,000 equity contribution to Ambler Metals through the issuance of 143,505 common shares of the Company as part of the long-term incentive compensation for Ambler Metals executives. Likewise, South32 made an equivalent equity contribution to Ambler Metals for $111,000 in cash for their 50% share. The carrying value of Trilogy’s 50% investment in Ambler Metals as at August 31, 2023 is summarized on the following table.

	in thousands of dollars
	$
November 30, 2022, Investment in Ambler Metals	142,754
Joint venture equity contribution	111
Share of loss on equity investment for the nine-month period ending August 31, 2023	(5,998)
August 31, 2023, Investment in Ambler Metals	136,867

(c) The following table summarizes Ambler Metals’ Balance Sheet as at August 31, 2023.

	in thousands of dollars
	August 31, 2023	November 30, 2022
	$	$
Total assets	102,140	114,049
Cash	66,866	80,755
Mineral properties	30,899	30,899
Total liabilities	(4,200)	(4,335)
Accounts payable and accrued liabilities	(3,707)	(3,664)
Members' equity (total assets less total liabilities)	97,940	109,714

Members’ cash is held at one bank, the majority of cash is uninsured as at August 31, 2023.

(d) The following table summarizes Ambler Metals' loss for the nine-month period ending August 31, 2023.

			in thousands of dollars
	Three months ended			Nine months ended
	August 31, 2023	August 31, 2022		August 31, 2023	August 31, 2022
	$	$		$	$
Depreciation	38	32		113	77
Corporate salaries and wages	478	477		1,417	1,437
General and administrative	43	158		389	560
Mineral property expense	5,210	17,120		10,002	24,527
Professional fees	181	125		397	626
Foreign exchange (gain)/loss	(6)	10		(3)	5
Interest and other income	(125)	(72)		(319)	(642)
Comprehensive loss	5,819	17,850		11,996	26,590