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Investment in Ambler Metals LLC

12 Months Ended

Nov. 30, 2021

Investment in Ambler Metals LLC

Investment in Ambler Metals LLC

4) 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 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 $145 million, resulting in each party’s subsidiaries directly owning a 50% interest in Ambler Metals. To assist Ambler Metals during the initial set up phase, Trilogy paid all of Ambler Metals’ invoices and was being reimbursed pursuant to a services agreement (the “Services Agreement”) between Trilogy and Ambler Metals until the back office transitioned to a new permanent team employed by the joint venture. The Services Agreement ended on December 31, 2020.

Ambler Metals is an independently operated company jointly controlled by Trilogy and South32 through a four-member board, of which two members are currently 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 totaled $160.1 million at November 30, 2021. The following table summarizes the gain on derecognition of the UKMP assets upon transfer to the Ambler Metals joint venture on February 11, 2020.


		in thousands of dollars
		$
Fair value ascribed to Ambler Metals LLC interest		176,000
Less: carrying value of contributed /eliminated assets
Mineral properties		(30,631)
Property, plant and equipment located in Alaska		(618)
Elimination of Fairbanks warehouse right of use asset		(93)
Elimination of prepaid State of Alaska mining claim fees		(303)
Add:
Reimbursement of claims staking		44
Demobilization costs of drills		278
Cancellation of Fairbanks warehouse lease liability		93
Fair value of mineral properties purchase option		31,000
Gain on derecognition		175,770

(b)	Carrying value of investment in Ambler Metals

During the year ended November 30, 2021, Trilogy recognized, based on its 50% ownership interest in Ambler Metals, an equity loss equivalent to its pro rata share of Ambler Metals' net loss of $26.2 million for the year ended November 30, 2021 ( 2020 - $5.7 million). The carrying value of Trilogy’s 50% investment in Ambler Metals as at November 30, 2021 is summarized on the following table.


		in thousands of dollars
		$
February 11, 2020, fair value ascribed to Ambler Metals interest		176,000
Share of loss on equity investment from February 11, 2020 to November 30, 2020		(2,855)
November 30, 2020, investment in Ambler Metals		173,145
Share of loss on equity investment for the year ending November 30, 2021		(13,082)
November 30, 2021, investment in Ambler Metals		160,063

(c)	The following table summarizes Ambler Metals’ Balance Sheet as at November 30, 2021.


		in thousands of dollars
		November 30, 2021			November 30, 2020
		$			$
Total assets		149,374			171,991
Cash		61,205			81,673
Loan receivable from South32 (current and long-term)		55,355			58,478
Mineral properties		30,757			30,705
Total liabilities		(5,043)			(1,496)
Accounts payable and accrued liabilities		(4,148)			(1,445)
Members' equity (Total assets less Total liabilities)		144,331			170,495

(d)

The following table summarizes Ambler Metals’ net loss for the year ended November 30, 2021 and from the formation of the joint venture on February 11, 2020 to the end of the reporting period on November 30, 2020. For the prior year comparative, $0.3 million has been reclassed from general and administrative expense to mineral properties expense in order to reflect the current year presentation.


	in thousands of dollars
		Year ended			February 11, 2020 to
		November 30, 2021			November 30, 2020
		$			$
Depreciation		77			95
Corporate salaries and wages		2,421			614
General and administrative		756			653
Lease expense		276			48
Mineral property expense		22,639			3,488
Professional fees		1,047			1,990
Foreign exchange (gain)/loss		6			3
Interest income		(1,058)			(1,180)
Comprehensive loss		26,164			5,711

(e)	Related party transactions - services agreement income

During the fiscal year, the Company charged approximately $22,000 (2020 - $0.9 million) of expenses related to technical services, including geological, engineering, environmental and human resources and accounting services in connection with the Services Agreement. In addition, the Company received payments of approximately $4,000 (2020 - $2.8 million) related to operating expenses paid on behalf of Ambler Metals for the year ended November 30, 2021.