Investment in Ambler Metals LLC

3 Months Ended

Feb. 29, 2024

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 February 29, 2024, totaled $134 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 $1.6 million for the three-month period ending February 29, 2024 (2023 - $3.0 million).  During the three-month period ending February 29, 2024, Trilogy made a $112,000 equity contribution to Ambler Metals through the issuance of 143,507 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 $112,000 in cash for their 50% share. The carrying value of Trilogy’s 50% investment in Ambler Metals as at February 29, 2024 is summarized on the following table.

	in thousands of dollars
	$
November 30, 2023, Investment in Ambler Metals	135,021
Joint venture equity contribution	112
Share of loss on equity investment for the three month period ending February 29, 2024	(793)
February 29, 2024, Investment in Ambler Metals	134,340

(c) The following table summarizes Ambler Metals’ Balance Sheet as at February 29, 2024.

	in thousands of dollars
	February 29, 2024	November 30, 2023
	$	$
Total assets	94,090	97,180
Cash and cash equivalents	61,331	63,829
Mineral properties	30,899	30,899
Total liabilities	(1,204)	(2,931)
Accounts payable and accrued liabilities	(835)	(2,500)
Members' equity (total assets less total liabilities)	92,886	94,249

Members’ cash and cash equivalents are held at one bank, the majority of cash and cash equivalent is uninsured as at February 29, 2024.

(d) The following table summarizes Ambler Metals' loss for the three-month period ending February 29, 2024 and February 28, 2023.

	in thousands of dollars
		Three months ended
		February 29, 2024	February 28, 2023
		$	$
Depreciation		38	37
Corporate salaries and wages		234	444
General and administrative		127	133
Mineral property expense		1,094	2,285
Professional fees		177	159
Foreign exchange loss		2	—
Interest and other income		(87)	(89)
Comprehensive loss		1,585	2,969

(e) Related party transactions

During the three-month period ended February 29, 2024, the Company charged $10,000 (2023 - $Nil) related to human resources and accounting services in connection with the Service Agreement. In addition, the company received payments of $16,000 (2023 - $Nil) related to operating expenses paid on behalf of Ambler Metals pursuant to the Service Agreement.