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Investment in Ambler Metals LLC | 6 Months Ended
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May 31, 2022
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 US$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 May 31, 2022, totaled $155.7million.
(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 $4.9 million for the three-month period ending May 31, 2022 (2021 - $3.4 million) and $8.7 million for the six-month period ending May 31, 2022 (2021 - $5.6 million). During the six-month period ending May 31, 2022, Trilogy made a $51,000 equity contribution to Ambler Metals through the issuance of 31,469 common shares of the Company as part of the long-term incentive compensation for an Ambler Metals executive. Likewise, South32 made an equivalent equity contribution to Ambler Metals for $51,000 in cash for their 50% share. The carrying value of Trilogy’s 50% investment in Ambler Metals as at May 31, 2022 is summarized on the following table. ​
​ | ​ | ​ | ​
​ |  | in thousands of dollars
​ |  | $ |
November 30, 2021, Investment in Ambler Metals | ​ | 160,063 | ​
Joint venture equity contribution | ​ | 51 | ​
Share of loss on equity investment for the six-month period ending May 31, 2022 | ​ | (4,370) | ​
May 31, 2022, Investment in Ambler Metals | ​ | 155,744 | ​
​
(c) | The following table summarizes Ambler Metals’ Balance Sheet as at May 31, 2022.
​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | in thousands of dollars
​ | ​ | May 31, 2022 | ​ | ​ | November 30, 2021 | ​
​ |  | $ |  |  | $ |
Total assets | ​ | 139,683 | ​ | ​ | 149,374 | ​
Cash | ​ | 52,810 | ​ | ​ | 61,205 | ​
Loan receivable from South32 (current and long-term) | ​ | 53,475 | ​ | ​ | 55,355 | ​
Mineral properties | ​ | 30,757 | ​ | ​ | 30,757 | ​
Total liabilities | ​ | (3,990) | ​ | ​ | (5,043) | ​
Accounts payable and accrued liabilities | ​ | (3,206) | ​ | ​ | (4,148) | ​
Members' equity (total assets less total liabilities) | ​ | 135,693 | ​ | ​ | 144,331 | ​
​ The loan receivable from South32 is repaid through a quarterly demand notice prepared by Ambler Metals, thirty days prior to the beginning of the following calendar quarter. The demand notice amount is based on Ambler Metals’ expected expenditures, pursuant to their approved program and operating budget (South32’s 50% share) for the applicable calendar quarter. During the six-month period ending May 31, 2022, Ambler Metals received $2.4 million (2021 - $1.1) in loan repayments from South32, consisting of $0.3 million (2021 - $1.1 million) in interest and $2.1 million (2021 - $nil) in principal. (d) The following table summarizes Ambler Metals' loss for the three and six-month period ending May 31, 2022. ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | in thousands of dollars
​ | ​ | Three months ended | ​ | ​ | Six months ended | ​
​ | ​ | May 31, 2022 | ​ | ​ | May 31, 2021 | ​ | ​ | May 31, 2022 | ​ | ​ | May 31, 2021 | ​
​ |  | $ |  |  | $ |  |  | $ |  |  | $ |
Depreciation | ​ | 22 | ​ | ​ | 17 | ​ | ​ | 45 | ​ | ​ | 33 | ​
Corporate salaries and wages | ​ | 486 | ​ | ​ | 692 | ​ | ​ | 960 | ​ | ​ | 1,209 | ​
General and administrative | ​ | 169 | ​ | ​ | 259 | ​ | ​ | 401 | ​ | ​ | 494 | ​
Mineral property expense | ​ | 4,367 | ​ | ​ | 2,531 | ​ | ​ | 7,407 | ​ | ​ | 3,970 | ​
Professional fees | ​ | 205 | ​ | ​ | 162 | ​ | ​ | 502 | ​ | ​ | 460 | ​
Foreign exchange (gain)/loss | ​ | (7) | ​ | ​ | 14 | ​ | ​ | (5) | ​ | ​ | 20 | ​
Interest income | ​ | (322) | ​ | ​ | (275) | ​ | ​ | (570) | ​ | ​ | (547) | ​
Comprehensive loss | ​ | 4,920 | ​ | ​ | 3,400 | ​ | ​ | 8,740 | ​ | ​ | 5,639 | ​
​

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- Definition The entire disclosure for equity method investments and joint ventures. Equity method investments are investments that give the investor the ability to exercise significant influence over the operating and financial policies of an investee. Joint ventures are entities owned and operated by a small group of businesses as a separate and specific business or project for the mutual benefit of the members of the group. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 323 -URI http://asc.fasb.org/topic&trid=2196965 + Details
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