Investment in Ambler Metals LLC

9 Months Ended

Aug. 31, 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 $145.0 million, resulting in each party’s subsidiaries directly owning a 50% interest in Ambler Metals.

Ambler Metals is a 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 maximum exposure to loss in this entity is limited to the carrying amount of our investment in Ambler Metals, which, as of August 31, 2024, totaled $108.1 million (2023 - $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 $1.2 million for the three-month period ending August 31, 2024 (2023 - $5.8 million) and $4.0 million for the nine-month period ending August 31, 2024 (2023 - $12.0 million).  During the nine-month period ending August 31, 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 August 31, 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
Return of capital	(25,000)
Share of loss on equity investment for the nine-month period ending August 31, 2024	(2,019)
August 31, 2024, Investment in Ambler Metals	108,114

(c) The following table summarizes Ambler Metals’ Balance Sheet as at August 31, 2024.

	in thousands of dollars
	August 31, 2024	November 30, 2023
	$	$
Total assets	41,888	97,180
Cash and cash equivalents	9,848	63,829
Mineral properties	30,899	30,899
Total liabilities	(1,455)	(2,931)
Accounts payable and accrued liabilities	(1,209)	(2,500)
Members' equity (total assets less total liabilities)	40,433	94,249

Ambler Metals’ cash and cash equivalents are held at one bank of which the majority is uninsured.  During the second and third quarters, Ambler Metals returned $50 million of excess cash to the members.  

(d) The following table summarizes Ambler Metals' loss for the three-month and nine-month periods ended August 31, 2024 and August 31, 2023.

			in thousands of dollars
	Three months ended			Nine months ended
	August 31, 2024	August 31, 2023		August 31, 2024	August 31, 2023
	$	$		$	$
Depreciation	38	38		113	113
Corporate salaries and wages	49	478		411	1,417
General and administrative	93	43		343	389
Mineral property expense	1,024	5,210		3,348	10,002
Professional fees	325	181		755	397
Foreign exchange loss	—	(6)		2	(3)
Interest and other income	(281)	(125)		(933)	(319)
Comprehensive loss	1,248	5,819		4,039	11,996

(e) Related party transactions

During the nine-month period ended August 31, 2024, the Company charged $47,000 (2023 - $Nil) related to human resources and accounting services in connection with a service agreement between the Company and Ambler Metals. In addition, the Company received payments of $64,000 (2023 - $Nil) related to operating expenses paid on behalf of Ambler Metals pursuant to the service agreement.