Executive Summary / Key Takeaways

• Trilogy Metals is an exploration-stage company focused on advancing the high-potential Upper Kobuk Mineral Projects (UKMP) in Alaska, primarily the Arctic (polymetallic) and Bornite (copper-cobalt) deposits, through a 50/50 joint venture with South32 Limited , Ambler Metals LLC.
• Recent financial results for the quarter ended May 31, 2025, reflect increased corporate expenses driven by strategic funding initiatives (Base Shelf Prospectus, ATM Program) and technical study costs (Bornite PEA), alongside Trilogy's share of Ambler Metals' exploration and engineering losses.
• A positive Preliminary Economic Assessment (PEA) for the Bornite project outlines robust potential economics, including 1.9 billion pounds of copper over a 17-year mine life and attractive NPV/IRR figures, highlighting the project's technical and economic viability.
• The company has proactively secured future funding flexibility through a $50 million Base Shelf Prospectus and a $25 million At-The-Market (ATM) program, essential for covering corporate costs and future joint venture contributions required for project advancement.
• Key risks include significant future capital requirements, uncertainty surrounding the Ambler Access Project infrastructure, commodity price volatility, and dependence on the joint venture partner for project decisions and funding.

Setting the Stage: Alaskan Ambition and Strategic Partnership

Trilogy Metals Inc. is an exploration and development company singularly focused on unlocking the potential of the Upper Kobuk Mineral Projects (UKMP) in Northwest Alaska. Founded in 2004 and incorporated in British Columbia in 2011 (originally as NovaCopper Inc.), the company's journey has centered on these promising mineral assets. Unlike diversified mining giants, Trilogy operates with a concentrated strategy: proving the economic viability of its Alaskan deposits and advancing them towards potential production.

A pivotal moment in Trilogy's history was the formation of a 50/50 joint venture with global mining major South32 Limited in February 2020, creating Ambler Metals LLC. Trilogy contributed its UKMP assets, while South32 injected $145 million in cash. This structure fundamentally shifted Trilogy's role from direct operator to a 50% equity investor, sharing control and funding obligations. Ambler Metals now holds the reins for advancing the Arctic copper-zinc-lead-gold-silver project and the Bornite carbonate-hosted copper-cobalt project. This partnership is central to Trilogy's strategy, leveraging South32's financial strength and technical expertise while allowing Trilogy to maintain significant influence through equal board representation.

The UKMP deposits themselves represent a key differentiator. The Arctic project is a high-grade volcanogenic massive sulfide (VMS) deposit, while Bornite hosts large-scale carbonate-hosted copper-cobalt mineralization. The geological nature of these deposits dictates the potential mining and processing methods, which are assessed through rigorous technical studies like the Arctic Feasibility Study and the recent Bornite PEA. These studies, while not representing proprietary process technology in the traditional sense, are critical technical blueprints that define the potential for economic extraction and represent the application of geological understanding and engineering expertise to these specific ore bodies.

In the broader competitive landscape, Trilogy Metals operates as an exploration-stage entity, positioning it distinctly from large, established copper producers like Freeport-McMoRan (FCX), Rio Tinto (RIO), BHP Group (BHP), and Teck Resources (TECK). These global players boast significant operational scale, lower per-unit operating costs driven by economies of scale and advanced processing technologies, and diversified asset portfolios. Trilogy, in contrast, is focused on a niche, high-potential region. While its Alaskan deposits, particularly Bornite with its cobalt component, may offer potentially higher yields of specific critical minerals or unique geological advantages compared to some competitor assets, Trilogy currently lacks the financial scale, operational efficiency, and global reach of these majors. Its competitive position is defined by the potential value of its undeveloped resources and its strategic partnership, rather than current production metrics or cost leadership. Barriers to entry in the mining sector, such as high capital costs and complex regulatory processes, offer some defense for established players and advanced projects like the UKMP, but also pose significant hurdles for Trilogy to overcome. Indirect competitors, such as battery recycling firms and advancements in renewable energy technologies that could alter future metal demand dynamics, also present a long-term competitive consideration, potentially impacting future pricing and market size.

Advancing the Projects: Technical Milestones and Strategic Funding

Progress at the UKMP is primarily driven by Ambler Metals LLC, guided by the joint venture partners. A significant recent milestone was the announcement of positive results from the Bornite Preliminary Economic Assessment (PEA) Study on January 15, 2025. This study evaluated the technical and economic viability of establishing an underground mining operation at Bornite.

The Bornite PEA highlights the potential for a 17-year mine life, producing an estimated 1.9 billion pounds of copper. Key economic metrics from the study include a pre-tax Net Present Value (NPV) at an 8% discount rate of $552 million and an Internal Rate of Return (IRR) of 23.6%. On an after-tax basis, the PEA estimates an NPV (8%) of $394 million and an IRR of 20.0%. The study contemplates an initial capital expenditure of approximately $1.18 billion and estimates cash costs of $0.72 per pound of payable copper, with total all-in cash costs projected at $1.61 per pound. Importantly, the PEA assumes the potential to extend the overall mine activity for the UKMP to over 30 years by repurposing infrastructure initially developed for the Arctic Project after its depletion. These figures provide a concrete, albeit preliminary, economic framework for the Bornite project and are crucial indicators for investors assessing the potential value creation.

To support its ongoing corporate activities and prepare for potential future funding requirements related to the joint venture, Trilogy has taken steps to enhance its financial flexibility. On April 14, 2025, the company filed a final short form base shelf prospectus and a corresponding registration statement, allowing for the potential future issuance of up to $50 million in various securities. Following this, on May 27, 2025, Trilogy entered into an At-The-Market (ATM) equity distribution agreement, providing the option to sell up to $25 million of common shares at prevailing market prices. As of the filing date of the latest quarterly report (July 10, 2025), the ATM program had not been utilized. These initiatives are strategic moves to ensure Trilogy has access to capital markets to fund its share of Ambler Metals' expenditures and cover its corporate overhead as the projects advance.

Ambler Metals' activities are guided by an approved budget. For the 2025 fiscal year, the Ambler Metals budget totals $5.8 million, allocated to external and community affairs, maintaining mineral claims, and asset maintenance. Additionally, a supplemental budget of $0.6 million was approved to support the Ambler Access Project. This proposed 211-mile industrial-use-only road is critical infrastructure required to enable the development and potential future operation of the UKMP. Updates regarding the Ambler Access Project, including actions by government agencies aimed at advancing it, are closely monitored as they directly impact the project timeline and feasibility.

Financial Performance and Liquidity

Trilogy Metals' financial results reflect its stage as an exploration and development company, characterized by ongoing expenses and no revenue from mining operations. For the three months ended May 31, 2025, the company reported a net loss of $2.2 million, an increase compared to the $1.8 million net loss for the same period in 2024. This higher loss was primarily attributable to increased regulatory expenses and legal fees associated with establishing the Base Shelf Prospectus and ATM Program, as well as fees related to the Bornite PEA.

For the six-month period ended May 31, 2025, the net loss totaled $5.8 million, compared to $5.4 million for the corresponding period in 2024. The increase was driven by the same factors: approximately $0.7 million in costs for the funding initiatives and $0.2 million for the Bornite PEA. Corporate salaries also increased in the recent period as executives began receiving 100% cash compensation starting March 1, 2025, a shift from the prior year when a portion was paid in Restricted Share Units (RSUs) and recorded as stock-based compensation. This change in compensation structure resulted in a corresponding decrease in stock-based compensation expense, offsetting some of the salary increase impact on the total loss.

Trilogy's share of the loss from its equity investment in Ambler Metals LLC was $764,000 for the three months ended May 31, 2025, up from $602,000 in the prior year quarter. For the six-month period, the share of loss was $1.345 million, comparable to $1.395 million in the prior year. The increase in the second quarter loss share was mainly due to higher professional consulting fees incurred by Ambler Metals for engineering activities, partially offset by reduced activity on the Ambler Access Project.

As of May 31, 2025, Trilogy held $24.6 million in cash and cash equivalents and reported working capital of $23.8 million. The company's cash used in operating activities for the six months ended May 31, 2025, was $1.4 million, primarily covering corporate salaries, professional fees for the PEA, and regulatory costs for the funding programs. These outflows were partially offset by $0.4 million in interest income earned. Management has stated that the current cash position is sufficient to fund the approved fiscal 2025 cash budget of $3.1 million and meet working capital requirements for the next 12 months. The successful establishment of the shelf prospectus and ATM program provides a pathway for accessing additional capital to support future joint venture contributions and corporate needs.

Risks and Outlook

Investing in Trilogy Metals carries significant risks inherent to the mineral exploration and development sector. The most prominent risk is the substantial funding required to advance the UKMP projects through feasibility, permitting, construction, and into production. While the company has secured flexibility through its shelf prospectus and ATM program, future capital raises will likely be necessary, potentially leading to shareholder dilution.

The development of the Ambler Access Project road is another critical factor and a significant uncertainty. The project requires numerous permits and governmental approvals, and there is no guarantee it will be built on a timely basis or at all. Without this essential infrastructure, the economic viability of the UKMP projects is severely impacted. Furthermore, changes in U.S. laws and policies regulating international trade, including potential tariffs, could adversely affect the company by impacting metal prices, operational costs, and even the certainty of resource estimates. Worldwide economic uncertainty also makes projecting the availability and cost of future funding challenging.

Dependence on the joint venture partner, South32 , is also a key consideration. All significant decisions at Ambler Metals require the approval of both partners, meaning Trilogy does not have unilateral control over project advancement, work programs, or budgets. Commodity price fluctuations for copper, cobalt, zinc, lead, gold, and silver will directly influence the potential economics of the projects. Other risks include uncertainties in resource estimates, mining and development challenges, environmental regulations, and maintaining relationships with local communities and stakeholders.

Despite these risks, the outlook for Trilogy Metals is tied to the successful advancement of the UKMP. The positive Bornite PEA provides a technical and economic foundation for that project, complementing the existing Arctic Feasibility Study. The company's strategic partnership with South32 provides technical and financial backing that a junior explorer might otherwise lack. The efforts to secure funding flexibility through the shelf prospectus and ATM program demonstrate a proactive approach to managing future capital needs. The 2025 budgets for both Trilogy and Ambler Metals reflect a focus on essential activities, including maintaining claims, community relations, and supporting the critical Ambler Access Project process.

Conclusion

Trilogy Metals represents a focused investment thesis centered on the potential of the high-grade Arctic and Bornite deposits in Alaska, advanced through a strategic 50/50 joint venture with South32 (S32). The recent Bornite PEA results underscore the significant resource potential and favorable preliminary economics of this key project, suggesting a pathway to potentially extend the overall mine life of the UKMP district.

While the company has taken prudent steps to manage its current liquidity and secure future funding options, the path to production for the UKMP is long and capital-intensive. The successful development of the Ambler Access Project remains a critical dependency, subject to external regulatory and political factors. Investors in Trilogy Metals are betting on the long-term realization of value from these significant Alaskan mineral resources, a prospect that hinges on continued technical progress, favorable market conditions for base and precious metals, successful infrastructure development, and effective management of the joint venture partnership and associated risks. The investment is best characterized as a high-potential, high-risk play on the future of a major new mining district in a favorable jurisdiction.