PART I -FINANCIAL INFORMATION

~~Item 1.~~

~~Financial Statements~~

Item 1. Financial Statements

Trilogy Metals Inc.

Interim Consolidated Balance Sheets

(unaudited)


		in thousands of US dollars
	May 31, 2023		November 30, 2022
	$		$
Assets
Current assets
Cash	4,166		2,573
Accounts receivable	16		17
Deposits and prepaid amounts	58		320
Total current assets	4,240		2,910

Investment in Ambler Metals LLC (note 3)	139,777		142,754
Fixed assets	8		12
Right of use asset (note 5 (a))	233		319
Total assets	144,258		145,995

Liabilities
Current liabilities
Accounts payable and accrued liabilities (note 4)	598		345
Current portion of lease liability	130		189
Total current liabilities	728		534

Long-term portion of lease liability (note 5(b))	—		33
Total liabilities	728		567

Shareholders’ equity
Share capital (note 6) – unlimited common shares authorized, no par value issued – 155,269,296 (2022 – 145,851,247)	187,570		182,178
Contributed surplus	121		122
Contributed surplus – options (note 6(b))	27,986		27,352
Contributed surplus – units (note 6(c))	2,590		2,638
Deficit	(74,737)		(66,862)
Total shareholders' equity	143,530		145,428
Total liabilities and shareholders' equity	144,258		145,995

~~in thousands of US dollars~~

August 31, 2017
$

November 30, 2016
$

Assets
Current assets
Cash and cash equivalents 10,205 7,340
Accounts receivable 341 47
Deposits and prepaid amounts 864 724
Current investments (note 3) 4,571 7,538
15,981 15,649

Investments (note 3) 81 297
Plant and equipment 399 215
Mineral properties and development costs (note 4) 30,587 30,586
47,048 46,747
Liabilities
Current liabilities
Accounts payable and accrued liabilities (note 5) 4,759 593
4,759 593

Mineral properties purchase option (note 4) 10,000 -
14,759 593
Shareholders’ equity
Share capital (note 6)– unlimited common shares authorized, no par value; Issued –105,667,125 (2016 – 105,286,469) 136,494 136,357
Warrants (note 6(d)) 2,163 2,163
Contributed surplus 124 124
Contributed surplus – options (note 6(a, b)) 18,392 18,134
Contributed surplus – units (note 6(c)) 1,258 1,140
Deficit (126,142 ) (111,764 )
32,289 46,154
47,048 46,747

Commitments ~~and contingencies~~(~~notes 4, 5 and~~note 8)

(See accompanying notes to the interim consolidated financial statements)

/s/ Tony Giardini, President, CEO and Director

/s/ ~~Rick Van Nieuwenhuyse,~~Diana Walters, Director
		~~/s/ Kalidas Madhavpeddi, Director~~
Approved on behalf of the Board of Directors

~~Approved on behalf~~


	Trilogy Metals Inc. For the Quarter Ended May 31, 2023	3

Table of ~~the Board of Directors~~contents

Trilogy Metals Inc.

Interim Consolidated Statements of Loss

and Comprehensive Loss

(unaudited)

~~in thousands of US dollars, except share and per share amounts~~

For the three months ended For the nine months ended

August 31, 2017
$

August 31, 2016
$

August 31, 2017
$

August 31, 2016
$

Expenses
Amortization 27 17 66 59
Foreign exchange (gain) loss (592 ) 3 (542 ) 8
General and administrative 273 311 1,050 1,030
Investor relations 107 30 263 80
Mineral properties expense (note 4(d)) 8,471 3,077 10,407 4,067
Professional fees 86 84 404 430
Salaries 218 250 683 719
Salaries – stock-based compensation 104 146 603 544
Total expenses 8,694 3,918 12,934 6,937
Other items
Unrealized loss on held for trading investments 83 - 1,252 -
Loss on sale of investments 230 - 230 -
Loss on disposal of equipment 8 - 8 -
Interest and other income (23 ) (16 ) (46 ) (52 )
Loss from continuing operations for the period 8,992 3,902 14,378 6,885

Loss from discontinued operations - 353 - 712
Loss from discontinued operations for the period - 353 - 712
Loss and comprehensive loss for the period
8,992 4,255 14,378 7,597

Basic and diluted loss per common share $ 0.09 $ 0.04 $ 0.14 $ 0.07
Weighted average number of common shares outstanding 105,581,406 105,213,320 105,524,598 105,046,854


in thousands of US dollars, except share and per share amounts
	For the three months ended			For the six months ended
	May 31, 2023		May 31, 2022		May 31, 2023	May 31, 2022
	$		$		$	$
Expenses
Amortization		2	5		4	11
Exploration expenses		—	—		1	—
Foreign exchange (gain) loss		2	1		(2)	4
General and administrative		328	338		736	735
Investor relations		23	38		53	137
Professional fees		188	192		758	437
Salaries		193	261		430	675
Salaries and directors expense – stock-based compensation		491	662		2,853	2,584
Total expenses		1,227	1,497		4,833	4,583
Other items
Interest and other income		(27)	(2)		(46)	(4)
Share of loss on equity investment (note 3(b))		1,603	2,460		3,088	4,370
Write off mineral properties		—	119		—	148
Loss and comprehensive loss for the period		(2,803)	(4,074)		(7,875)	(9,097)
Basic loss per common share		(0.02)	(0.03)		(0.05)	(0.06)
Diluted loss per common share		(0.02)	(0.03)		(0.05)	(0.06)
Basic weighted average number of common shares outstanding		151,315,185	145,507,982		149,561,449	145,398,436
Diluted weighted average number of common shares outstanding		151,315,185	145,507,982		149,561,449	145,398,436

(See accompanying notes to the interim consolidated financial statements)

3
	Trilogy Metals Inc. For the Quarter Ended May 31, 2023	4

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Trilogy Metals Inc.

Interim Consolidated Statements of Changes in Shareholders’ Equity

(unaudited)

in thousands of US dollars, except share amounts

Number of
shares
outstanding

Share
capital
$

Warrants
$

Contributed
surplus
$

Contributed
surplus –
options
$

Contributed
surplus –
units
$

Deficit
$

Total
shareholders’
equity
$

Balance – November 30, 2015 104,796,421 136,040 2,163 124 17,841 1,164 (106,902 ) 50,430
Restricted Share Units 108,399 34 - - - (63 ) - (29 )
Deferred Share Units 218,795 218 - - - (218 ) - -
Exercise of options 143,889 56 - - (56 ) - - -
Stock-based compensation - - - - 326 218 - 544
Loss for the period - - - - - - (7,597 ) (7,597 )
Balance – August 31, 2016 105,267,504 136,348 2,163 124 18,111 1,101 (114,499 ) 43,348

Balance – November 30, 2016 105,286,469 136,357 2,163 124 18,134 1,140 (111,764 ) 46,154
Exercise of options 171,458 54 - - (54 ) - - -
Restricted Share Units 209,198 83 - - - (173 ) - (90 )
Stock-based compensation - - - - 312 291 - 603
Loss for the period - - - - - - (14,378 ) (14,378 )
Balance – August 31, 2017 105,667,125 136,494 2,163 124 18,392 1,258 (126,142 ) 32,289


				Contributed	Contributed		Total
			Contributed	surplus –	surplus –		shareholders’
	Number of shares	Share capital	surplus	options	units	Deficit	equity
	outstanding	$	$	$	$	$	$
Balance – November 30, 2021	145,009,811	180,820	122	25,990	1,712	(42,605)	166,039
Exercise of options	31,674	50	—	(32)	—	—	18
Restricted Share Units	391,332	650	—	—	(650)	—	—
Joint venture contribution	31,469	51	—	—	—	—	51
Stock-based compensation	—	—	—	864	1,001	—	1,865
Loss for the period	—	—	—	—	—	(5,023)	(5,023)
Balance – February 28, 2022	145,464,286	181,571	122	26,822	2,063	(47,628)	162,950
Exercise of options	276,961	26	—	10	—	—	36
Restricted Share Units	110,000	113	—	—	(113)	—	—
Stock-based compensation	—	—	—	274	229	—	503
Loss for the period	—	—	—	—	—	(4,074)	(4,074)
Balance – May 31, 2022	145,851,247	181,710	122	27,106	2,179	(51,702)	159,415

Balance – November 30, 2022	146,225,035	182,178	122	27,352	2,638	(66,862)	145,428
Exercise of options	—	—	—	—	—	—	—
Restricted Share Units	2,346,366	1,538	(1)	—	(1,537)	—	—
Joint venture contribution	143,505	111	—	—	—	—	111
Services settled by common shares	7,793	4	—	—	—	—	4
Stock-based compensation	—	—	—	520	1,700	—	2,220
Loss for the period	—	—	—	—	—	(5,072)	(5,072)
Balance – February 28, 2023	148,722,699	183,831	121	27,872	2,801	(71,934)	142,691
Shares issued for private placement, net of share issue cost	5,854,545	3,115	—	—	—	—	3,115
Exercise of options	—	—	—	—	—	—	—
Restricted Share Units	213,463	121	—	—	—	—	121
Deferred Share Units conversion	415,056	468	—	—	(468)	—	—
Services settled by common shares	63,533	35	—	—	—	—	35
Stock-based compensation	—	—	—	114	257	—	371
Loss for the period	—	—	—	—	—	(2,803)	(2,803)
Balance – May 31, 2023	155,269,296	187,570	121	27,986	2,590	(74,737)	143,530

(See accompanying notes to the interim consolidated financial statements)

4
	Trilogy Metals Inc. For the Quarter Ended May 31, 2023	5

Table of contents

Trilogy Metals Inc.

Interim Consolidated Statements of Cash Flows

(unaudited)

~~in thousands of US dollars~~

For nine months ended

August 31, 2017
$

August 31, 2016
$

Cash flows used in operating activities
Loss for the period (14,378 ) (7,597 )
Items not affecting cash
Amortization 66 154
Loss on disposal of equipment 8 -
Loss on sale of held for trading investments 172 -
Unrealized loss on held for trading investments 1,252 -
Unrealized foreign exchange gain (472 ) -
Stock-based compensation 603 514
Net change in non-cash working capital
Increase in accounts receivable (294 ) (23 )
(Increase)/decrease in deposits and prepaid amounts (140 ) 132
Increase in accounts payable and accrued liabilities 4,116 104
(9,067 ) (6,716 )
Cash flows from (used in) financing activities
Settlement of Restricted Share Units (90 ) -
(90 ) -
Cash flows from (used in) investing activities
Acquisition of plant & equipment (209 ) (121 )
Mineral properties funding (note 4) 10,000 -
Proceeds from the sale of investments, net of fees 2,180 -
11,971 (121 )
Increase (decrease) in cash and cash equivalents 2,814 (6,837 )
Effect of exchange rate on cash and cash equivalents 51 -
Cash and cash equivalents – beginning of period 7,340 16,139
Cash and cash equivalents – end of period 10,205 9,302
Less cash and cash equivalents of discontinued operations – end of period - (75 )
Cash and cash equivalents of continuing operations – end of period 10,205 9,227


	in thousands of US dollars
	For the six months ended
		May 31, 2023		May 31, 2022
			$		$
Cash flows used in operating activities
Loss for the period			(7,875)		(9,097)
Adjustments to reconcile net loss to cash flows in operating activities
Amortization			4		11
Professional fees settled by common shares			56		—
Office lease accounting			(5)		(8)
Loss on equity investment in Ambler Metals LLC (note 4(b))			3,088		4,370
Unrealized foreign exchange loss			2		3
Stock-based compensation			2,853		2,368
Write off mineral properties			—		148
Net change in non-cash working capital
Decrease in accounts receivable			1		7
Decrease (increase) in deposits and prepaid amounts			262		(370)
Increase (decrease) in accounts payable and accrued liabilities			97		(299)
Total cash flows used in operating activities			(1,517)		(2,867)
Cash flows from financing activities
Issuance of common shares, net of share issue cost (note 6(a))			3,115		—
Proceeds from exercise of options			—		54
Total cash flows from financing activities			3,115		54
Cash flows from investing activities
Total cash flows from investing activities			—		—
Increase (decrease) in cash			1,598		(2,813)
Effect of exchange rate on cash			(5)		2
Cash – beginning of the period			2,573		6,308
Cash – end of the period			4,166		3,497

(See accompanying notes to the interim consolidated financial statements)

5
	Trilogy Metals Inc. For the Quarter Ended May 31, 2023	6

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Trilogy Metals Inc.

Notes to the Interim Consolidated Financial Statements

1)Nature of operations

~~Nature of operations~~

Trilogy Metals Inc.~~, formerly NovaCopper Inc.,~~ (“Trilogy”, or the “Company”~~, or “we”~~) was incorporated in British Columbia under theBusiness Corporations Act (BC) on April 27, 2011. ~~The Company changed its name from NovaCopper Inc. to Trilogy Metals Inc. on September 1, 2016 to better reflect its diversified metals resource base.~~ The Company is engaged in the exploration and development of mineral properties, through our equity investee (see note 3), with a focus on the Upper Kobuk Mineral Projects (“UKMP”), including the Arctic and Bornite Projects located in Northwest Alaska in the United States of America (“US”). The Company also conducts early-stage exploration through a wholly owned subsidiary, 995 Exploration Inc.

2) Summary of significant accounting policies

~~Summary of significant accounting policies~~

Basis of presentation

These interim consolidated financial statements have been prepared using accounting principles generally accepted in the United States (“U.S. GAAP”) and include the accounts of Trilogy and its ~~wholly-owned subsidiary,~~wholly owned subsidiaries, NovaCopper US Inc.~~, doing business as Trilogy Metals US (“Trilogy~~ (dba “Trilogy Metals US”)~~. These consolidated financial statements included the accounts of Sunward Resources Ltd. (“Sunward”), Sunward Investments Ltd. (“Sunward Investments”)~~ and Sunward Resources Limited (“Sunward BVI”) for the period June 19, 2015 to September 1, 2016, inclusive. Sunward BVI has registered a branch, Sunward Resources Sucursal Colombia, to do business in Colombia.995 Exploration Inc. All ~~significant~~ intercompany transactions are eliminated on consolidation.

~~On June 19, 2015,~~ For variable interest entities (“VIEs”) where Trilogy is not the primary beneficiary, we ~~completed~~use the ~~acquisition~~equity method of Sunward, which held 100% ownership in the Titiribi gold-copper exploration project in Colombia through Sunward Investments. Sunward was converted to Sunward Resources Unlimited Liability Company on June 19, 2015 and wound-up on February 29, 2016. On September 1, 2016, we completed the sale of Sunward Investments and the Titiribi project.~~The Company classified the operations of Sunward Investments as discontinued operations, retrospectively.~~

accounting.

All figures are in United States dollars unless otherwise noted. References to CDN$ refer to amounts in Canadian dollars.

~~The unaudited~~These interim consolidated financial statements include all adjustments ~~of a normal recurring nature~~ necessary for the fair presentation of ~~our~~the Company’s financial position as of ~~August~~May 31, ~~2017,~~2023 and our results of operations ~~for the three months~~ and ~~nine months ended August 31, 2017 and 2016 and our~~ cash flows for the ~~nine months~~six-month period ended ~~August~~May 31, ~~2017~~2023 and ~~2016.~~May 31, 2022. The results of operations for the ~~three and nine months~~six-month period ended ~~August~~May 31, ~~2017~~2023 are not necessarily indicative of the results to be expected for the fiscal year ending November 30, ~~2017.~~

2023.

As these interim consolidated financial statements do not contain all of the disclosures required by U.S. GAAP for annual financial statements, these ~~unaudited~~ interim consolidated financial statements should be read in conjunction with the annual financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended November 30, ~~2016~~2022, filed with the U.S. Securities and Exchange Commission (“SEC”) and Canadian securities regulatory authorities on February ~~3, 2017.~~

14, 2023.

These interim consolidated financial statements were approved by the Company’s Audit Committee on behalf of the Board of Directors for issue on ~~October 4, 2017.~~July 13, 2023.

~~Recent accounting pronouncements~~

~~Statement of cash flows~~

Use of estimates and measurement uncertainties

~~In November 2016,~~The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions of future events that affect the ~~FASB issued guidance regarding~~reported amount of assets and liabilities and disclosure of contingent liabilities at the ~~presentation~~date of ~~restricted cash~~the financial statements, and the reported amounts of expenditures during the period. Significant judgments include the assessment of potential indicators of equity method investments where key judgement is the delay on the Ambler Access Project is temporary and the delay was considered when assessing indicators of impairment. Significant estimates include the measurement of income taxes, and the valuation of stock-based compensation. Actual results could differ materially from those reported.

Management assesses the possibility of impairment in the ~~statement~~carrying value of ~~cash flows (“ASU 2016-18”). This update is effective for annual reporting periods beginning after December 15, 2017, and early adoption is permitted. The Company has analyzed~~its equity method investment in Ambler Metals whenever events or circumstances indicate that the ~~impact~~carrying amount of the ~~update and determined~~investment may not be recoverable. Significant judgments are made in assessing the possibility of impairment. Factors that ~~the clarification will not affect the Company’s presentation on its statement~~may be indicative of ~~cash flows. The Company early adopted the standard~~an impairment include a loss in the ~~second quarter~~value of ~~2017. As there was no impact on~~an investment that is not temporary. Management considers several factors in considering if an indicator of impairment has occurred, including but not limited to, sustained losses by the ~~Company’s statement of cash flows, there were no changes as a result of adopting~~investment, the ~~standard.~~

~~ii.~~

~~Leases~~

In February 2016, the FASB issued new accounting requirements for accounting for, presentation of, and classification of leases (“ASU 2016-02”). This will result in most leases being capitalized as a right of use asset with a related liability on our balance sheets. The requirementsabsence of the ~~new standard are effective for annual reporting periods beginning after December 15, 2018, and interim periods within those annual periods, which for us is~~ability to recover the first quarter of fiscal year 2020. We expect the adoption will have an impact as we expect to capitalize leases, specifically our office leases that are not currently recognized on the balance sheet and are in the process of analyzing the quantitative impact of this guidance on our results of operations and financial position.

~~iii.~~

~~Stock-based compensation~~

In March 2016, the FASB issued new guidance simplifying the accounting for stock-based compensation transactions, including income tax consequences, classification of awards as equity or liabilities, forfeitures, and classification on the statement of cash flows (“ASU 2016-09”). This update is effective for annual reporting periods beginning after December 15, 2016, and early adoption is permitted. The Company has analyzed the impactcarrying amount of the update and determined that the simplification applied to accounting for forfeitures will affect the results of operations and financial position as it will alter the timing of recognition of forfeitures. The Company is currently considering its policy choice. The remaininginvestment, significant changes in the ~~update do not have~~legal, business or regulatory environment, significant adverse changes impacting the investee and internal reporting indicating the economic performance of an ~~effect on the Company’s accounting for stock-based compensation.~~investment is, or will be, worse than expected.

	~~iv.~~	~~Business combinations~~
	Trilogy Metals Inc. For the Quarter Ended May 31, 2023	7

Table of contents

~~In January 2017,~~Trilogy Metals Inc.

Notes to the FASB issued new guidance to assist in determining if a set of assets and activities being acquired or sold is a business (“ASU 2017-01”). It also provided a framework to assist entities in evaluating whether both an input and a substantive process are present, which at a minimum, must be present to be considered a business. This update is effective for annual reporting periods beginning after December 15, 2017, and early adoption is permitted in most circumstances. It expects there could be an impact to how the Company accounts for assets acquired in the future.Interim Consolidated Financial Statements

~~Investments~~

On September 1, 2016, Trilogy completed the sale to GoldMining Inc. (“GMI”), formerly Brazil Resources Inc., a public company listed on the TSX-Venture exchange, of all of the issued and outstanding shares of Sunward Investments for consideration of 5,000,000 common shares of GMI valued at $7.8 million and 1,000,000 warrants, with each warrant exercisable into one common share of GMI for a period of two years at an exercise price of CDN$3.50, valued at $0.3 million, for total consideration of $8.1 million. Of the common shares received, 2,500,000 common shares were saleable immediately with the remaining 2,500,000 common shares saleable six months following the close. Sunward Investments, through a subsidiary, owns 100% of the Titiribi gold-copper exploration project.

~~The common shares and warrants received have been designated as held-for-trading financial assets, with the classification as current investments and long-term investments, respectively.~~

~~in thousands of dollars~~

August 31, 2017
$

November 30, 2016
$

Current investments 4,571 7,538
Long-term investments 81 297
Investments 4,652 7,835

~~The~~These factors are subjective and require consideration at each period end. If an indicator of impairment is determined to exist, the fair value of the ~~common shares~~impaired investment is determined based on the ~~closing price at each period end. The~~valuation of cohort companies with similar projects or upon the present value of expected future cash flows using discount rates and other assumptions believed to be consistent with those used by principal market participants and observed market earnings multiples of comparable companies.

Management calculates the estimated undiscounted future net cash flows relating to the asset or asset group using estimated future prices, proven and probable reserves and other mineral resources, and operating, capital and reclamation costs. When the carrying value of an asset exceeds the related undiscounted cash flows, the asset is written down to its estimated fair value, which is usually determined using discounted future cash flows. Management’s estimates of mineral prices, mineral resources, foreign exchange rates, production levels operating, capital and reclamation costs are subject to risk and uncertainties that may affect the determination of the ~~BRI warrants~~recoverability of the long-lived asset. It is ~~determined using the Black-Scholes option pricing model at each period end.~~possible that material changes could occur that may adversely affect management’s estimates.

~~During the nine months ended August 31, 2017,~~3)Investment in Ambler Metals LLC

(a)	Formation of Ambler Metals LLC

On February 11, 2020, the Company ~~sold 1,519,000 common shares~~completed the formation of GMI during the period for proceeds of $2.2 million and realized a loss on sale of $0.2 million. For the nine months ended August 31, 2017, the Company recorded an unrealized loss on the common shares and warrants of GMI of $1.3 million.

~~Mineral properties and development costs~~

~~in thousands of dollars~~

November 30, 2016
$

Acquisition costs
$

August 31, 2017
$

Alaska, USA
Ambler (a) 26,586 1 26,587
Bornite (b) 4,000 - 4,000
30,586 1 30,587

~~in thousands of dollars~~

November 30, 2015
$

Acquisition costs
$

November 30, 2016
$

Alaska, USA
Ambler (a) 26,586 - 26,586
Bornite (b) 4,000 - 4,000
30,586 - 30,586

~~(a)~~

~~Ambler~~

On January 11, 2010, NovaGold Resources Inc. (“NovaGold”), through Alaska Gold Company (“AGC”), at the time a wholly-owned subsidiary, purchased 100% of the Ambler lands in Northwest Alaska, which contains the copper-zinc-lead-gold-silver Arctic Project and other mineralized targets within the volcanogenic massive sulfide belt, through a series of cash and share payments. Total fair value of the consideration was $26.6 million. The vendor retained a 1% net smelter return royalty that the owner of the property can purchase at any time for a one-time payment of $10.0 million.

The Ambler lands were acquired on October 17, 2011 by Trilogy Metals US through a purchase and sale agreement with AGC. On October 24, 2011, NovaGold transferred its ownership of Trilogy Metals US to the Company, then a wholly owned subsidiary of NovaGold, which was subsequently spun-out to NovaGold shareholders and publicly listed on April 30, 2012 (“NovaGold Arrangement”).

~~(b)~~

~~Bornite~~

On October 19, 2011, Trilogy Metals US acquired the exclusive right to explore and the non-exclusive right to access and enter on the Bornite lands, and lands deeded to NANA Regional Corporation, Inc. (“NANA”) through the Alaska Native Claims Settlement Act, located adjacent to the Ambler lands in Northwest Alaska. As consideration, Trilogy Metals US paid $4 million to acquire the right to explore and develop the combined Upper Kobuk Mineral Projects through an Exploration Agreement and Option to Lease with NANA. Upon a decision to proceed with construction of a mine on the lands, NANA maintains the right to purchase between a 16%-25% ownership interest in the mine or retain a 15% net proceeds royalty which is payable after Trilogy Metals US has recovered certain historical costs, including capital and cost of capital. Should NANA elect to purchase an ownership interest, consideration will be payable equal to all historical costs incurred on the properties at the elected percentage purchased less $40 million, not to be less than zero. The parties would form a joint venture and be responsible for all future costs, including capital costs of the mine based on their pro-rata share.

NANA would also be granted a net smelter return royalty of between 1% and 2.5% upon the execution of a mining lease or a surface use agreement, the amount of which is determined by the classification of land from which production originates.

~~(c)~~

~~Option Agreement~~

On April 10, 2017, Trilogy and Trilogy Metals US entered into an Option Agreement to Form a Joint Venture with South32 Group Operations Pty Ltd. (“South32”) on the UKMP (“Option Agreement”). Trilogy Metals US has granted South32 the right to form a 50/50 joint venture ~~to hold all of Trilogy~~named Ambler Metals ~~US’ Alaskan assets. Upon exercise~~LLC (“Ambler Metals”) with South32 Limited (“South32”). As part of the ~~option,~~formation of the joint venture, Trilogy ~~Metals US will transfer~~contributed all its ~~Alaskan~~ assets associated with the UKMP, including the ~~UKMP,~~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 ~~will contribute~~through a ~~minimum~~four-member board, of ~~$150 million~~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 ~~newly formed~~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 ~~(“JV LLC”), plus any amounts Trilogy~~agreement. As we have significant influence over Ambler Metals ~~US spends~~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 ~~Arctic Project over the next three years to a maximum of $5 million per year (the “Subscription Price”), less an~~carrying amount of ~~the initial funding contributed by South32.~~

~~To maintain the option~~our investment in ~~good standing, South32 is required to fund a minimum of $10 million per year for up to a three year period,~~Ambler Metals, which, ~~funds will be used to execute a mutually agreed upon program~~as at ~~the UKMP. The funds provided by South32 may only be expended~~May 31, 2023, totaled $139.8 million.

(b)	Carrying value of equity method investment

Trilogy recognized, based on ~~the approved program. Provided that all the exploration data and information has been made available~~its 50% ownership interest in Ambler Metals, an equity loss equivalent to ~~South32 by no later than December 31~~its pro rata share of ~~each year, South32 must decide by the end~~Ambler Metals’ comprehensive loss of January of the following year whether: (i) to fund a further tranche of a minimum of $10 million, or (ii) to withdraw and not provide any further annual funding. If the election to fund a further tranche is not made in January, South32 has until the end of March to exercise the option to form the JV LLC and make the subscription payment.

~~The Company received $10.0~~$1.6 million for the ~~first payment following~~three-month period ending May 31, 2023 (2022 - $2.5 million) and $3.1 million for the ~~approval~~six-month period ending May 31, 2023 (2022 - $4.4 million). During the six-month period ending May 31, 2023, Trilogy made a $111,000 equity contribution to Ambler Metals through the issuance of 143,505 common shares of the ~~year 1 program and budget in April 2017. As at August 31, 2017, the~~ Company held $2.7 million in a segregated bank account for spending on the approved year 1 program at Bornite. The Company is responsible for the disbursement of these funds in accordance with the approved program and budget and accordingly has not classified the funds as restricted cash.

As the initial option payments are credited against the future subscription price upon exercise, the Company has accounted for the payment received as deferred consideration. At such time as the option is exercised, the initial payments received to that date will be recognized as part of the ~~consideration received~~long-term incentive compensation for ~~the Company’s~~Ambler Metals executives. Likewise, South32 made an equivalent equity contribution ~~of the UKMP into the JV LLC. If South 32 withdraws from the Option Agreement, the consideration will be recognized~~to Ambler Metals for $111,000 in ~~the statement of loss at that time.~~

cash for their 50% share. The ~~option to form the JV LLC is recognized as a financial instrument at inception of the arrangement with an initial fair~~carrying value of ~~$nil. This option~~Trilogy’s 50% investment in Ambler Metals as at May 31, 2023 is ~~required to be re-measured at fair value at each reporting date with any changes in fair value recorded in loss for~~summarized on the ~~period.~~following table.

	~~(d)~~	~~Mineral properties expense~~
	Trilogy Metals Inc. For the Quarter Ended May 31, 2023	8

Table of contents

Trilogy Metals Inc.

Notes to the Interim Consolidated Financial Statements


		in thousands of dollars
		$
November 30, 2022, Investment in Ambler Metals		142,754
Joint venture equity contribution		111
Share of loss on equity investment for the six month period ending May 31, 2023		(3,088)
May 31, 2023, Investment in Ambler Metals		139,777

(c)	The following table summarizes Ambler Metals’ Balance Sheet as at May 31, 2023.


	in thousands of dollars
	May 31, 2023	November 30, 2022
	$	$
Total assets	106,365	114,049
Cash	72,785	80,755
Mineral properties	30,899	30,899
Total liabilities	(2,606)	(4,335)
Accounts payable and accrued liabilities	(2,053)	(3,664)
Members' equity (total assets less total liabilities)	103,759	109,714

Members’ cash is held at one bank, the majority of cash is uninsured as at May 31, 2023.

(d) The following table summarizes ~~mineral properties expense~~Ambler Metals' loss for the ~~noted periods~~six-month period ending May 31, 2023.


			in thousands of dollars
	Three months ended			Six months ended
	May 31, 2023	May 31, 2022		May 31, 2023	May 31, 2022
	$	$		$	$
Depreciation	38	22		75	45
Corporate salaries and wages	495	486		939	960
General and administrative	213	169		346	401
Mineral property expense	2,507	4,367		4,792	7,407
Professional fees	57	205		216	502
Foreign exchange (gain)/loss	3	(7)		3	(5)
Interest income	(105)	(322)		(194)	(570)
Comprehensive loss	3,208	4,920		6,177	8,740


	Trilogy Metals Inc. For the Quarter Ended May 31, 2023	9

Table of contents

Trilogy Metals Inc.

Notes to the Interim Consolidated Financial Statements

4)Accounts payable and ~~includes expenditures funded by South32.~~accrued liabilities

~~In thousands~~

in thousands of dollars

May 31, 2023

November 30, 2022


$


$

Trade accounts payable

188

188

Accrued liabilities

129

36

Accrued salaries and vacation

281

121

Accounts payable and accrued liabilities

598

345

Of the accrued salaries and vacation approximately $155,000 was settled, subsequent to the end of ~~dollars~~the second quarter, on June 1, 2023 through the issuance of common shares of the Company.

Three months
ended August
31, 2017
$

Three months
ended August
31, 2016
$

Nine months
ended August
31, 2017
$

Nine months
ended August
31, 2016
$

Alaska, USA
Community 67 63 201 184
Drilling 3,194 712 3,284 712
Engineering 1,085 191 1,508 410
Environmental 122 212 181 235
Geochemistry and geophysics 146 28 151 41
Land and permitting 215 113 667 322
Other income (26 ) (34 ) (26 ) (34 )
Project support 2,307 1,030 2,641 1,136
Wages and benefits 1,361 762 1,800 1,061
Mineral property expense 8,471 3,077 10,407 4,067

5) Leases

9 (a)

Right-of-use asset


		in thousands of dollars
		$
Balance as at November 30, 2022		319
Net amortization		(86)
Balance as at May 31, 2023		233

~~Mineral property expenses~~

(b)	Lease liabilities

The Company’s lease arrangements primarily consist of ~~direct drilling, personnel, community, resource reporting~~an operating lease for our office space ending in June 2024. There are no extension options.

Total lease expense recorded within general and ~~other exploration~~administrative expenses was comprised of the following components:


	in thousands of dollars
	Six months ended	Six months ended
	May 31, 2023	May 31, 2022
	$	$
Operating lease costs	93	93
Variable lease costs	71	82
Total lease expense	164	175

Variable lease costs consist primarily of the Company’s portion of operating costs associated with the office space lease as ~~outlined above,~~the Company elected to apply the practical expedient not to separate lease and non-lease components.

As at May 31, 2023, the weighted-average remaining lease term is 0.9 years and the weighted-average discount rate is 8%. Significant judgment was used in the determination of the incremental borrowing rate which included estimating the Company’s credit rating.

Supplemental cash and non-cash information relating to our leases during the six-month period ending May 31, 2023 are as well as indirect project support expenses such as fixed wing charters, helicopter support, fuel, and other camp operation costs. Cumulative mineral properties expense in Alaska from the initial earn-in agreement on the property in 2004 to August 31, 2017 is $73.4 million and cumulative acquisition costs are $30.6 million totaling $104.0 million spent to date.

follows:

5●

~~Accounts payable and accrued~~Cash paid for amounts included in the measurement of lease liabilities was $98,298.


	Trilogy Metals Inc. For the Quarter Ended May 31, 2023	10

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Trilogy Metals Inc.

Notes to the Interim Consolidated Financial Statements

Future minimum payments relating to the lease recognized in ~~thousands~~our balance sheet as of ~~dollars~~May 31, 2023 are as follows:

August 31, 2017
$

November 30, 2016
$

Trade accounts payable 2,179 160
Accrued liabilities 2,494 281
Accrued salaries and vacation 86 152
Accounts payable and accrued liabilities 4,759 593

~~Share capital~~


		in thousands of dollars
		May 31, 2023
Fiscal year		$
2023		117
2024		16
2025		—
Total undiscounted lease payments		133
Effect of discounting		(3)
Present value of lease payments recognized as lease liability		130

6)Share capital

Authorized:

unlimited common shares, no par value


	in thousands of dollars, except share amounts
	Number of shares	Ascribed value
		$
November 30, 2022	146,225,035	182,178
Private Placement, net of share issue cost	5,854,545	3,115
Restricted Share Units	2,559,829	1,659
Deferred Share Units	415,056	468
Services settled by common shares	71,326	39
Joint venture equity contribution (note 4(b))	143,505	111
May 31, 2023, issued and outstanding	155,269,296	187,570

~~in thousands of dollars, except share amounts~~

Number of shares
Ascribed value
$

November 30, 2015 104,796,421 136,040
Exercise of options 162,854 65
Restricted Share Units 108,399 34
Deferred Share Units 218,795 218
November 30, 2016 105,286,469 136,357
Exercise of options 171,458 54
Restricted Share Units 209,198 83
August 31, 2017, issued and outstanding 105,667,125 136,494

On April 30, 2012, under the NovaGold Arrangement, Trilogy committed to issue common shares ~~once vested,~~ to satisfy holders of NovaGold deferred share units (“NovaGold DSUs”), once vested, on record as of the close of business April 27, 2012. When vested, Trilogy committed to deliver one common share to the holder for every six shares of NovaGold the holder is entitled to receive, rounded down to the nearest whole number. As at May 31, 2023, a total of ~~August 31, 2017, 20,685~~9,293 NovaGold DSUs remain outstanding representing a right to receive ~~3,447 common shares~~1,549 Common Shares in Trilogy, which will settle upon certain directors retiring from NovaGold’s board.

(a)	Common shares issuance

On April 25, 2023, the Company completed a non-brokered private placement of 5,854,545 common shares of the Company (the “Common Share”) at a price of $0.55 per Common Share for gross proceeds of $3.2 million and net proceeds of $3.1 million. Financing costs consisted of legal and stock exchange fees.

(b)

~~(a)~~

Stock options

During the ~~nine month~~three-month period ended ~~August 31, 2017, 1,695,000~~February 28, 2023, the Company granted 3,230,000 stock options ~~(August 31, 2016 – 1,785,000~~(2022 - 1,734,500 stock options) at ~~a weighted-average~~an exercise price of CDN$~~0.72 (August 31, 2016 –~~0.78 (2022 - CDN$~~0.44) were granted~~2.21) to employees, consultants and directors exercisable for a period of five years with various vesting terms ~~between nil and two years.~~from immediate vesting to vesting over a two-year period. The ~~weighted-average~~ fair value attributable to this option grants was CDN$0.37 (2022 - CDN$0.90). There were no stock options granted induring the three-month period ~~was $0.22 per option.~~ended May 31, 2023.


	Trilogy Metals Inc. For the Quarter Ended May 31, 2023	11

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Trilogy Metals Inc.

Notes to the Interim Consolidated Financial Statements

For the ~~nine month~~six-month period ended ~~August~~May 31, ~~2017,~~2023, Trilogy recognized a stock-based compensation charge of ~~$0.31~~$0.6 million ~~(August 31, 2016– $0.33~~(2022 - $1.2 million) for options granted to directors, employees and service providers, net of estimated forfeitures.

The fair value of the stock options recognized in the period has been estimated using the Black-Scholes option pricing model.

Assumptions used in the pricing model for the six-month period ended May 31, 2023 are as provided below.

	~~August 31, 2017~~
	May 31, 2023
Risk-free interest rates		~~0.89~~	% 3.49%
Exercise price		CDN$~~0.72~~	0.78
Expected life		~~3.0~~ 3 years
Expected volatility		~~74.3~~	% 67.7%
Expected dividends		Nil

As ~~of August~~at May 31, ~~2017,~~2023, there were ~~1,405,843~~2,131,757 non-vested options outstanding with a weighted average exercise price of ~~$0.48;~~CDN$1.02; the non-vested stock option expense not yet recognized was ~~$0.1~~$0.36 million. This expense is expected to be recognized over the next ~~two years.~~

19 months.

A summary of the Company’s stock option ~~plan~~outstanding and changes during the ~~nine month~~six-month period ended May 31, 2023 is as follows:

August 31, 2017

Number of options

Weighted average
exercise price
$

Balance – beginning of period 6,049,433 0.50
Granted 1,695,000 0.57
Exercised (362,477 ) 0.40
Forfeited (169,329 ) 0.50
Balance – end of period 7,212,627 0.56


		May 31, 2023
		Weighted average
		exercise price
	Number of options	CDN$
Balance – beginning of the period	11,225,400	2.49
Granted	3,230,000	0.78
Cancelled	(286,000)	2.70
Expired	(1,120,000)	1.38
Balance – end of the period	13,049,400	2.16

There were no stock options exercised during the six-month period ended May 31, 2023.

The following table summarizes information about the stock options outstanding at ~~August~~May 31, ~~2017.~~2023.

Outstanding Exercisable Unvested
Range of price Number of
outstanding
options Weighted
average
years to
expiry
Weighted
average
exercise
price
$
Number of
exercisable
options
Weighted
average
exercise
price
$
Number of
unvested
options
$0.35 to $0.50 4,267,627 2.95 0.41 3,588,457 0.42 679,170
$0.51 to $1.00 2,890,000 3.30 0.75 2,163,327 0.81 726,673
$1.01 to $1.47 55,000 0.67 1.59 55,000 1.59 -
7,212,627 3.07 0.56 5,806,784 0.58 1,405,843


	Outstanding			Exercisable		Unvested
			Weighted		Weighted
	Number of	Weighted	average	Number of	average	Number of
	outstanding	average years	exercise price	exercisable	exercise price	unvested
Range of exercise price - CDN	options	to expiry	CDN$	options	CDN$	options
$0.75 to $1.00	3,230,000	4.52	0.78	1,463,328	0.78	1,766,672
$2.00 to $2.50	2,270,250	2.81	2.27	1,905,165	2.28	365,085
$2.51 to $3.00	6,091,650	1.96	2.63	6,091,650	2.64	—
$3.01 to $3.41	1,457,500	1.56	3.03	1,457,500	3.03	—
	13,049,400	2.69	2.16	10,917,643	2.38	2,131,757

The aggregate intrinsic value of vested ~~share~~stock options (the market value less the exercise price) at ~~August~~May 31, ~~2017~~2023 was ~~$2.8 million (August 31, 2016~~$Nil (2022 - ~~$0.49~~$0.13 million) and the aggregate intrinsic value of exercised options for the ~~nine months ended August~~six-month period ending May 31, ~~2017~~2023 was ~~$0.15 million (August 31, 2016~~$Nil (2022 - ~~$0.09~~$0.05 million).

	~~(b)~~	~~NovaGold Arrangement Options~~
	Trilogy Metals Inc. For the Quarter Ended May 31, 2023	12

Table of contents

~~Under~~Trilogy Metals Inc.

Notes to the NovaGold Arrangement, holders of NovaGold stock options received one option in Trilogy for every six options held in NovaGold (“NovaGold Arrangement Options”). All NovaGold Arrangement Options remaining expired during the nine months ended August 31, 2017.Interim Consolidated Financial Statements

(c)

~~A summary of the NovaGold Arrangement Options and changes during the nine month period ended is as follows:~~

August 31, 2017

Number of options

Weighted average
exercise price
$

Balance – beginning of period 312,195 4.26
Expired (312,195 ) 4.26
Balance – end of period - -

~~(c)~~

Restricted Share Units and Deferred Share Units

The Company has a Restricted Share Unit Plan (“RSU Plan”) to provide long-term incentives to employees and consultants and a Non-Executive Director Deferred Share Unit Plan (“DSU Plan”) to ~~provide long-term incentives~~offset cash payments for fees to ~~employees, officers and~~ directors. ~~The~~Awards under the RSU Plan and DSU Plan ~~may be~~have been settled in ~~cash and/or Common Shares at~~common shares of the ~~Company’s election~~Company with each ~~RSU~~restricted share unit (“RSU”) and ~~DSU~~deferred share unit (“DSU”) entitling the holder to receive one common share of the ~~Company or equivalent value.~~Company. All units are accounted for as equity-settled awards.

A summary of the Company’s unit plans and changes during the ~~nine month~~six-month period ~~ended August~~ending May 31, ~~2017~~2023 is as follows:

Number of RSUs Number of DSUs
Balance – beginning of period 400,001 925,390
Granted 600,000 98,554
Vested/paid (399,999 ) -
Balance – end of period 600,002 1,023,944


	Number of RSUs	Number of DSUs
Balance – beginning of the period	257,268	1,560,734
Granted	3,984,086	944,753
Vested/Converted	(2,630,716)	(415,056)
Balance – end of the period	1,610,638	2,090,431

For the ~~nine months ended August~~six-month period ending May 31, ~~2017,~~2023, Trilogy recognized a combined RSU and DSU stock-based compensation charge of ~~$0.29~~$1.8 million ~~(August 31, 2016- $0.22~~(2022 - $1.2 million), net of estimated forfeitures.

On December 15, 2016, 600,000 RSUs were granted to officers vesting one third immediately, one third on the first anniversary of the grant date, and one third on the second anniversary. On December 23, 2016, 399,999 RSUs vested and were settled through the issuance of 209,198 shares and a cash payment of $90,000 to cover tax withholdings.

~~(d)~~

~~Share Purchase Warrants~~

~~A summary of the Company’s warrants and changes during the nine months ended August 31, 2017 is as follows:~~

Number of
Warrants

Weighted
average years to
expiry

Weighted
average exercise
price
$

Balance – beginning of period 6,521,740 2.35 1.60
Balance – end of period 6,521,740 1.85 1.60

~~Financial instruments~~

7)Financial instruments

The Company is exposed to a variety of risks arising from financial instruments. These risks and management’s objectives, policies and procedures for managing these risks are disclosed as follows.

The Company’s financial instruments consist of cash, ~~and cash equivalents,~~ accounts receivable, deposits, ~~investments,~~ and accounts payable and accrued liabilities. The fair value of the Company’s financial instruments approximates their carrying value due to the short-term nature of their maturity. The Company’s financial instruments initially measured at fair value and then held at amortized cost include cash, ~~and cash equivalents,~~ accounts receivable, deposits, and accounts payable and accrued liabilities. The Company’s investments are held for trading and are marked-to-market at each period end with changes in fair value recorded to the statement of loss. The South32 purchase option is a derivative financial liability measured at fair value with changes in value recorded to the statement of loss.

Financial risk management

The Company’s activities expose ~~them~~it to certain financial risks, including currency risk, credit risk, liquidity risk, interest risk and price risk.

(a)

~~(a)~~

Currency risk

Currency risk is the risk of a fluctuation in financial asset and liability settlement amounts due to a change in foreign exchange rates. The Company operates in the United States and Canada. The Company’s exposure to currency risk at ~~August~~May 31, ~~2017~~2023 is limited to the Canadian dollar balances consisting of cash of approximately CDN$~~2,596,000,~~51,000, accounts receivable of approximately CDN$~~421,000, deposit amounts of CDN$116,000, investments of CDN$5,833,000~~22,000 and accounts payable of approximately CDN$~~859,000.~~360,000. Based on a 10% change in the US-Canadian exchange rate, assuming all other variables remain constant, the Company’s net loss would change by approximately ~~$647,000.~~

$21,000.

(b)

~~(b)~~

Credit risk

Credit risk is the risk of an unexpected loss if a customer or third party to a financial instrument fails to meet its contractual obligations. The Company holds cash ~~and cash equivalents~~ with a Canadian ~~Chartered~~chartered financial ~~institutions.~~institution of which the majority is uninsured as at May 31, 2023. The Company’s ~~accounts receivable consist of GST receivable from the Federal Government of Canada and other receivables for recoverable expenses. The Company’s~~only significant exposure to credit risk is equal to the balance of cash ~~and cash equivalents and accounts receivable~~ as recorded in the financial statements.

	~~(c)~~	~~Liquidity risk~~
	Trilogy Metals Inc. For the Quarter Ended May 31, 2023	13

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Trilogy Metals Inc.

Notes to the Interim Consolidated Financial Statements

(c)	Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulties raising funds to meet its financial obligations as they fall due. The Company is in the exploration stage and does not have cash inflows from operations; therefore, the Company manages liquidity risk through the management of its capital structure and financial leverage. Management does expect to monetize its investments held over the next year to assist in meeting its operational requirements. Future financings are anticipated through the sale of investments, equity financing, the exercise of mineral properties option, debt financing, convertible debt, or other means.

Contractually obligated undiscounted cash flow requirements as at ~~August~~May 31, ~~2017~~2023 are as ~~follows.~~follows:


	in thousands of dollars
	Total	< 1 Year	1–2 Years	2–5 Years	Thereafter
	$	$	$	$	$
Accounts payable and accrued liabilities	598	598	—	—	—
Office lease	133	133	—	—	—
	731	731	—	—	—

Included in ~~thousands~~accounts payable and accrued liabilities approximately $155,000 is for accrued salaries that were settled, subsequent to the end of ~~dollars~~

Total
$

< 1 Year
$

1–2 Years
$

2–5 Years
$

Thereafter
$

Accounts payable and accrued liabilities 4,759 4,759 - - -
Office lease (note 8) 1,349 44 178 580 547
6,108 4,803 178 580 547

~~On February 21, 2017,~~the second quarter, on June 1, 2023 through the issuance of common shares of the Company ~~entered into a lease for office space effective July 1, 2017 for a period of seven years with a total commitment of $1.3 million.~~

(note 9).

(d)

~~(d)~~

Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company is exposed to interest rate risk with respect to interest earned on ~~cash and cash equivalents.~~cash. Based on balances as at ~~August~~May 31, ~~2017,~~2023, a 1% change in interest rates would result in a negligible change in net loss, ~~of $0.1 million,~~ assuming all other variables remain constant.

As we are currently in the exploration phase none of our financial instruments are exposed to commodity price risk; however, our ability to obtain long-term financing and its economic viability could be affected by commodity price volatility.

~~Fair value accounting~~

Financial instruments measured at fair value are classified into one of three levels in the fair value hierarchy according to the significance of the inputs used in making the measurement. The three levels of the fair value hierarchy are as follows:

~~Level 1~~ ~~— Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;~~

~~Level 2~~ ~~— Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; and~~

~~Level 3~~ ~~— Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity)~~

~~The levels in the fair value hierarchy into which the Company’s financial assets and liabilities that are measured and recognized at fair value on a recurring basis were categorized as follows:~~

~~in thousands of dollars~~

August 31, 2017
$

November 30, 2016
$

Level 1 Level 2 Level 3 Level 1 Level 2 Level 3
Current investments – shares 4,571 - - 7,538 - -
Investments – warrants - - 81 - - 297
South32 purchase option - - - - - -

The Company’s investments consist of shares and warrants in a publicly-held mining company. The share investments are recorded as current investments and are valued using quoted market prices in active markets and as such are classified as a Level 1 financial instrument. The warrants are valued using a Black-Scholes pricing model and are considered a Level 3 financial instrument because the valuation models have significant unobservable inputs.

The South32 purchase option received is recorded at fair value. As the inputs to valuing the purchase option are significant to the measurement of the option and are unobservable, it is considered a Level 3 financial instrument.

~~Commitments~~

8)Commitment

The Company has commitments inwith respect ofto an office ~~leases~~lease requiring future minimum lease payments as ~~follows:~~summarized in note 5(b) above.

9) Subsequent event

On June 1, 2023, the Board of Directors were granted 163,142 DSUs in ~~thousands~~settlement of ~~dollars~~approximately $79,000 of director fees and senior management were granted 248,531 RSUs in lieu of cash salaries of approximately $155,000, all vesting immediately. The grants were in support of an effort to preserve cash and increase share ownership by settling director fees and a portion of senior management salaries in shares of the Company.

August 31, 2017
$

2017 44
2018 178
2019
184

2020 193
2021 203
2022-2024 547
Total 1,349


	Trilogy Metals Inc. For the Quarter Ended May 31, 2023	14

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~~Item 2.~~

~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Trilogy Metals Inc.

Management’s Discussion & Analysis

For the Quarter Ended May 31, 2023

(expressed in US dollars)

Cautionary notes

~~Forward-looking statements~~

Forward-looking statements

This Management’s Discussion and Analysis contains “forward-looking information” and “forward-looking statements” within the meaning of Section 27A of the U.S. Securities Act of 1933, as amended, Section 21E of the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”), and ~~Canadian~~other applicable securities laws. These forward-looking statements may include statements regarding ~~outlook,~~the Company’s work programs and budgets, including statements about

the plans and budget for the 2023 field exploration program, perceived merit of properties, exploration results and budgets, the impact of the BLM’s suspension of permits on the right-of-way with AIDEA relating to the Ambler Road Project, the Company and Ambler Metals’ funding requirements, mineral reserves and resource estimates, work programs, capital expenditures, operating costs, cash flow estimates, production estimates and similar statements relating to the economic viability of a project, timelines, strategic plans, statements ~~relating to anticipated activity with respect to the~~regarding Ambler ~~Mining District Industrial Access Project, including the Company’s~~Metals’ plans and expectations relating to its Upper Kobuk Mineral Projects, ~~the adequacy~~sufficiency of the ~~funds paid by South32 under the Option Agreement including pursuant to the exercise of the option~~$145 million subscription price to fund the UKMP, ~~through to feasibility and permitting~~impact of COVID-19 on the ~~first mine, the exercise of the option by South32,~~Company’s operations, market prices for precious and base metals, statements regarding the Ambler Access Project (also known as the Ambler Mining District Industrial Access Project), or other statements that are not statements of fact. These statements relate to analyses and other information that are based on forecasts of future results, estimates of amounts not yet determinable and assumptions of management. Statements concerning mineral resource estimates may also be deemed to constitute “forward-looking statements” to the extent that they involve estimates of the mineralization that will be encountered if the property is developed.

Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions or future events or performance (often, but not always, identified by words or phrases such as “expects”, “is expected”, “anticipates”, “believes”, “plans”, “projects”, “estimates”, “assumes”, “intends”, “strategy”, “goals”, “objectives”, “potential”, “possible” or variations thereof or stating that certain actions, events, conditions or results “may”, “could”, “would”, “should”, “might” or “will” be taken, occur or be achieved, or the negative of any of these terms and similar expressions) are not statements of historical fact and may be forward-looking statements.

Forward-looking statements are based on the beliefs, expectations and opinions of management on the date the statements are made, as well as on a number of material assumptions, ~~including those listed below,~~ which could prove to be significantly ~~incorrect:~~incorrect, including about:

·●

~~assumptions made in the interpretation of drill results, and of the geology, grade, and continuity of the Company’s mineral deposits;~~

our ability to achieve production at ~~any of~~ the ~~Company’s mineral exploration and development properties;~~Upper Kobuk Mineral Projects;

·●

the accuracy of our mineral resource and reserve estimates;

●

the results, costs and timing of future exploration drilling and engineering;

●

timing and receipt of approvals, consents and permits under applicable legislation;

●

the adequacy of our financial resources;

●

the receipt of third party contractual, regulatory and governmental approvals for the exploration, development, construction and production of our properties and any litigation or challenges to such approvals;


	Trilogy Metals Inc. For the Quarter Ended May 31, 2023	15

Table of contents

●

our expected ability to develop adequate infrastructure and that the cost of doing so will be reasonable;

·●

~~assumptions that all necessary permits and governmental approvals will be obtained;~~

~~estimated capital costs, operating costs, production and economic returns;~~

~~estimated metal pricing, metallurgy, mineability, marketability and operating and capital costs, together with other assumptions underlying the Company’s resource and reserve estimates;~~

continued good relationships with South32, our joint venture partner, as well as local communities and other stakeholders;

·●

~~our expectations regarding demand for~~there being no significant disruptions affecting operations, whether relating to labor, supply, power damage to equipment ~~skilled labour and services needed for exploration and development of mineral properties;~~or other matter;

·●

expected trends and specific assumptions regarding ~~the merit of litigation;~~metal prices and currency exchange rates;

·●

~~that our activities will not be adversely disrupted or impeded by development, operating or regulatory risks.~~the potential impact of the novel coronavirus (COVID-19); and

●

prices for and availability of fuel, electricity, parts and equipment and other key supplies remaining consistent with current levels.

We have also assumed that no significant events will occur outside of our normal course of business. Although we have attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. We believe that the assumptions inherent in the forward-looking statements are reasonable as of the date of this MD&A. However, forward-looking statements are not guarantees of future performance and, accordingly, undue reliance should not be put on such statements due to the inherent uncertainty therein.

Forward-looking statements are subject to a variety of known and unknown risks, uncertainties and other factors that could cause actual events or results to differ from those reflected in the forward-looking statements, including, without limitation:

·●

risks related to the COVID-19 pandemic;

●

risks related to inability to define proven and probable reserves;

·●

risks related to our ability to finance the development of our mineral properties through external financing, strategic alliances, the sale of property interests or otherwise;

·●

~~none of~~uncertainty as to whether there will ever be production at the Company’s mineral ~~properties are in production or are under development;~~

~~uncertainties relating to the assumptions underlying our resource estimates, such as metal pricing, metallurgy, mineability, marketability~~exploration and ~~operating and capital costs;~~development properties;

·●

risks related to our ability to commence production and generate material revenues or obtain adequate financing for our planned exploration and development activities;

●

risks related to lack of infrastructure including but not limited to the risk whether or not the Ambler Mining District Industrial Access Project, ~~(“AMDIAP”)~~or AMDIAP, will receive the requisite permits and, if it does, whether the Alaska Industrial Development and Export Authority will build the AMDIAP;

·●

~~uncertainty as~~risks related to ~~whether there will ever be production at~~ the ~~Company’s mineral exploration~~suspension by the BLM of the right-of-way permits with AIDEA relating to the AMDIAP to permit the Department of the Interior to carry out additional work on the environmental impact statement, and ~~development properties;~~associated delays relating to such suspension;

·●

~~uncertainty as to estimates of capital costs, operating costs, production and economic returns;~~

~~risks related to our ability to commence production and generate material revenues or obtain adequate financing for our planned exploration and development activities;~~

~~risks related to future sales or issuances of equity securities decreasing the value of existing Trilogy common shares, diluting voting power and reducing future earnings per share;~~

~~risks related to market events and general economic conditions;~~

~~uncertainty related to inferred mineral resources;~~

uncertainty related to the economic projections contained herein derived from the Preliminary Economic Assessment titled “Preliminary Economic Assessment Report on the Arctic Project, Ambler Mining District, Northwest Alaska” dated effective September 12, 2013;

risks related to inclement weather which may delay or hinder exploration activities at ~~its~~our mineral properties;

·●

risks related to our dependence on a third party for the development of our projects;

●

none of the Company’s mineral properties are in production or are under development;


	Trilogy Metals Inc. For the Quarter Ended May 31, 2023	16

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●

commodity price fluctuations;

●

uncertainty related to title to our mineral properties;

●

our history of losses and expectation of future losses;

●

risks related to increases in demand for equipment, skilled labor and services needed for exploration and development of mineral properties, and related cost increases;

●

risks related to increases in costs of fuel and other required supplies and concerns relating to supply chain and the ability to obtain needed supplies at a reasonable cost, or at all;

●

risks related to global economic instability, including global supply chain issues, inflation and fuel and energy costs may affect the Company’s business;

●

uncertainties relating to the ~~interpretation of drill results, the geology, grade,~~assumptions underlying our resource estimates, such as metal pricing, metallurgy, mineability, marketability and ~~continuity of our mineral deposits;~~operating and capital costs;

·●

uncertainty related to inferred mineral resources;

●

mining and development risks, including risks related to infrastructure, accidents, equipment breakdowns, labor disputes or other unanticipated difficulties with or interruptions in development, construction or production;

·●

risks and uncertainties relating to the ~~risk that permits~~interpretation of drill results, the geology, grade and ~~governmental approvals necessary to develop and operate mines at~~continuity of our mineral ~~properties will not be available on a timely basis or at all;~~deposits;

·●

~~commodity price fluctuations;~~

risks related to governmental regulation and permits, including environmental regulation, including the risk that more stringent requirements or standards may be adopted or applied due to circumstances unrelated to the Company and outside of ~~its~~our control;

·●

the risk that permits and governmental approvals necessary to develop and operate mines at our mineral properties will not be available on a timely basis or at all;

●

risks related to the need for reclamation activities on our properties and uncertainty of cost estimates related thereto;

·●

~~uncertainty~~risks related to ~~title to our mineral properties;~~the acquisition and integration of operations or projects;

·●

~~our history of losses and expectation of future losses;~~

~~risks related to increases in demand for equipment, skilled labor and services needed for exploration and development of mineral properties, and related cost increases;~~

our need to attract and retain qualified management and technical personnel;

·●

risks related to conflicts of interests of some of our ~~directors;~~directors and officers;

·●

risks related to potential future litigation;

·●

risks related to market events and general economic conditions;

●

risks related to future sales or issuances of equity securities decreasing the value of existing Trilogy common shares, diluting voting power and reducing future earnings per share;

●

risks related to the voting power of our major shareholders and the impact that a sale by such shareholders may have on our share price;

·●

~~risks related to global climate change;~~

~~risks related to adverse publicity from non-governmental organizations;~~

uncertainty as to the volatility in the price of the Company’s common shares;


	Trilogy Metals Inc. For the Quarter Ended May 31, 2023	17

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·●

the Company’s expectation of not paying cash dividends;

·●

adverse federal income tax consequences for U.S. shareholders should the Company be a passive foreign investment company;

·●

risks related to global climate change;

●

risks related to adverse publicity from non-governmental organizations;

●

uncertainty as to our ability to maintain the adequacy of internal control over financial reporting as per the requirements of Section 404 of the Sarbanes-Oxley Act; and

·●

increased regulatory compliance costs, associated with rules and regulations promulgated by the United States Securities and Exchange Commission, ~~(the “SEC”),~~ Canadian Securities Administrators, the NYSE American, the ~~TSX,~~Toronto Stock Exchange, and the Financial Accounting Standards Boards, and more specifically, our efforts to comply with the Dodd-Frank Wall Street Reform and Consumer Protection Act.

This list is not exhaustive of the factors that may affect any of the Company’s forward-looking statements. Forward-looking statements are statements about the future and are inherently uncertain, and actual achievements of the Company or other future events or conditions may differ materially from those reflected in the forward-looking statements due to a variety of risks, uncertainties and other factors, including, without limitation, those referred to in Trilogy’s Form 10-K dated February ~~2, 2017,~~14, 2023, filed with the Canadian securities regulatory authorities and the SEC, and other information released by Trilogy and filed with the appropriate regulatory agencies.

The Company’s forward-looking statements are based on the beliefs, expectations and opinions of management on the date the statements are made, and the Company does not assume any obligation to update forward-looking statements if circumstances or management’s beliefs, expectations or opinions should change, except as required by law. For the reasons set forth above, investors should not place undue reliance on forward-looking statements.

~~Cautionary note to United States investors~~

~~Reserve and resource estimates~~

This Management’s Discussion and Analysis has been prepared in accordance with the requirements of the securities laws in effect in Canada, which differ from the requirements of U.S. securities laws. Unless otherwise indicated, all resource and reserve estimates included in this Management’s Discussion and Analysis have been prepared in accordance with National Instrument 43-101 Standards of Disclosure for Mineral Projects (“NI 43-101”) and the 2014 Canadian Institute of Mining, Metallurgy, and Petroleum Definition Standards on Mineral Resources and Mineral Reserves. NI 43-101 is a rule developed by the Canadian Securities Administrators which establishes standards for all public disclosure an issuer makes of scientific and technical information concerning mineral projects. Canadian standards, including NI 43-101, differ significantly from the requirements of the SEC, and resource and reserve information contained herein may not be comparable to similar information disclosed by U.S. companies. In particular, and without limiting the generality of the foregoing, the term “resource” does not equate to the term “reserves”. Under U.S. standards, mineralization may not be classified as a “reserve” unless the determination has been made that the mineralization could be economically and legally produced or extracted at the time the reserve determination is made. The SEC’s disclosure standards normally do not permit the inclusion of information concerning “measured mineral resources”, “indicated mineral resources” or “inferred mineral resources” or other descriptions of the amount of mineralization in mineral deposits that do not constitute “reserves” by U.S. standards in documents filed with the SEC. Investors are cautioned not to assume that any part or all of mineral deposits in these categories will ever be converted into reserves. U.S. investors should also understand that an “inferred mineral resource” has a lower level of confidence than an “indicated mineral resource” and must not be converted to a mineral “reserve”. It is reasonably expected that the majority of “inferred mineral resources” could be upgraded to “indicated mineral resources” with continued exploration. Under Canadian rules, estimated “inferred mineral resources” may not form the basis of feasibility or pre-feasibility studies except in rare cases. Disclosure of “contained ounces” in a resource is permitted disclosure under Canadian regulations; however, the SEC normally only permits issuers to report mineralization that does not constitute “reserves” by SEC standards as in-place tonnage and grade without reference to unit measures. The requirements of NI 43-101 for identification of “reserves” are also not the same as those of the SEC, and reserves reported by the Company in compliance with NI 43-101 may not qualify as “reserves” under SEC standards. Accordingly, information concerning mineral deposits set forth herein may not be comparable with information made public by companies that report in accordance with U.S. standards.

General

This Management’s Discussion and Analysis (“MD&A”) of Trilogy Metals Inc. (“Trilogy”, “Trilogy Metals”, “the Company” or “we”) is dated ~~October 4, 2017~~July 13, 2023 and provides an analysis of our unaudited interim financial results for the quarter ended ~~August~~May 31, ~~2017~~2023 compared to the quarter ended ~~August~~May 31, ~~2016.~~

2022.

The following information should be read in conjunction with our ~~August~~May 31, ~~2017~~2023 unaudited interim condensed consolidated financial statements and related notes which were prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”). The MD&A should also be read in conjunction with our audited consolidated financial statements and related notes for the year ended November 30, ~~2016.~~2022. A summary of the U.S. GAAP accounting policies ~~are~~is outlined in note 2 of the audited ~~consolidated financial statements and note 2 of the interim~~ consolidated financial statements. All amounts are in United States dollars unless otherwise stated. References to “Canadian dollars” ~~and “C$”~~ and “CDN$” are to the currency of Canada and references to “U.S. dollars”, “$” or “US$” are to the currency of the United States.

~~Andrew W. West,~~Richard Gosse, P.Geo., ~~an employee and~~Vice President, Exploration ~~Manager for Trilogy,~~of the Company, is a Qualified Person under National Instrument 43-101 -Standards of Disclosure for Mineral Projects (“NI 43-101”), and has approved the scientific and technical information in this MD&A.

Trilogy’s shares are listed on the Toronto Stock Exchange (“TSX”) and the ~~NYSE-American~~NYSE American Stock Exchange (“NYSE American”) under the symbol “TMQ”. Additional information related to Trilogy, including our annual report on Form 10-K, is available on SEDAR atwww.sedar.com and on EDGAR at~~www.sec.gov~~. www.sec.gov.


	Trilogy Metals Inc. For the Quarter Ended May 31, 2023	18

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Description of business

We are a base metals exploration company focused on ~~exploring~~the exploration and ~~developing~~development of mineral properties, through our ~~mineral holdings~~equity investee, in the Ambler mining district located in Alaska, U.S.A. We conduct our operations through a ~~wholly-owned~~wholly owned subsidiary, NovaCopper US Inc. which is doing business as Trilogy Metals ~~US.~~US (“Trilogy Metals US”). Our Upper Kobuk Mineral Projects, (“UKMP” or “UKMP Projects”), were contributed into a 50/50 joint venture named Ambler Metals LLC (“Ambler Metals”) between Trilogy and South32 Limited (“South32”) on February 11, 2020 (see below). The projects contributed to Ambler Metals consist of: i) the ~~100% owned~~ Ambler lands which host the Arctic copper-zinc-lead-gold-silver ~~Project~~project (the “Arctic Project”); and ii) the Bornite lands being explored under a collaborative long-term agreement with NANA Regional Corporation, Inc. (“NANA”), a regional Alaska Native Corporation, which ~~host~~hosts the Bornite carbonate-hosted copper ~~Project~~project (the “Bornite Project”). and related assets. The Company may also conduct early-stage exploration through a wholly owned subsidiary, 995 Exploration Inc.

Project activities

The ~~focus~~Company announced the second and third set of ~~this third fiscal quarter has been working to advance our projects. With a combined 2017 budget of $17.1 million for~~drilling results from the ~~Bornite and Arctic Projects, this quarter was busy at our remote project sites in northwest Alaska.~~

~~Bornite Project~~

~~We are currently executing a $10 million exploration program~~2022 field season at the ~~Bornite Project, funded by South32 Group Operations Pty Ltd., a subsidiary~~Upper Kobuk Mineral Projects (“UKMP”) on January 25, 2023 and February 27, 2023, respectively. On April 4, 2023, the Company announced the final set of ~~South32 Limited (ASX/JSE/LSE: S32), (“South32”) under an Option Agreement on~~drilling results from the UKMP entered into on April 10, 2017 (“Option Agreement”). The focus of this year’s program is to target high-grade copper mineralization north and east of the previously identified resources which were last drilled by us in 2013 and to define the edges of the mineralized system. This year’s exploration at Bornite was approved by a joint Trilogy-South32 Technical Committee.

Under the terms of the Option Agreement, Trilogy Metals US granted South32 the right to form a 50/50 joint venture to hold all of the Company’s Alaskan assets currently held directly by Trilogy Metals US. Upon exercise of the option, Trilogy Metals US will transfer its Alaskan assets, including the UKMP, and South32 will contribute a minimum of $150 million, subject to certain adjustments, to a newly formed and jointly held, limited liability company.

~~To maintain the option in good standing, South32 is required to fund a minimum of $10 million per year for up to a three year period, which funds will be used to execute a mutually agreed upon program~~2022 field season at the UKMP. ~~South32 may exercise its option at any time over~~

On February 14, 2023, the next three years to enter into the 50/50 joint venture. Provided that all the exploration data and information has been made available to South32 by no later than December 31 of each year, South32 must decide by the end of January of the following year whether: (i) to fund a further tranche of a minimum of $10 million, or (ii) to withdraw and not provide any further annual funding. If the election to fund a further tranche is not made in January, South32 has until the end of March to exercise the option to form the LLC and make the subscription payment.

~~This year’s exploration program at Bornite is one of the larger programs in the history of drilling at the Bornite Project. With~~Company announced an approved budget of $10 million, we will be drilling approximately 9,000 meters at Bornite this field season to test the extension of the mineralization from the drill holes from our 2013 drill campaign along with a ground gravity survey, continuation of hydrology data collection and initiating metallurgy and acid based accounting for Bornite.

Drilling at the Bornite Project began in early June and is expected to be finished in early October with results released throughout the fall. We completed 6,037 meters by August 31, 2017 and released our first results on September 18, 2017 from the first three holes comprising 3,083 meters.

~~Arctic Project~~

~~In early June 2017, we announced the engagement of Ausenco Engineering Canada Inc. to prepare the Arctic Project PFS~~updated feasibility study technical report anticipated to be complete in Q1 2018. The Company has also engaged Amec Foster Wheeler to complete mine planning and SRK Consulting (Canada) Inc. to complete tailings and waste design, hydrology and environmental studies.

~~The summer field program~~ for the Arctic Project ~~PFS was conducted in July~~and an updated resource for the Bornite Project, and filed NI 43-101 technical reports for both projects with the ~~completion~~Canadian securities regulators. In addition, the Company announced technical report summaries for both projects prepared in accordance with S-K 1300, which were filed as exhibits with the annual report on Form 10-K.

Ambler Mining District Industrial Access Project (“AMDIAP” or “Ambler Access Project”)

On March 20, 2023, the USBLM submitted a status report reaffirming the timing as noted in its previous reports. On May 19, 2023, the USBLM submitted a status report revising the timeline for development of ~~257 meters~~the SEIS and a subsequent Record of ~~geotechnical drilling~~Decision. The USBLM now anticipates publishing a draft SEIS in the third quarter of calendar year 2023, a final SEIS in the first quarter of calendar year 2024, and ~~26 test pits completed~~a Record of Decision within the second quarter of calendar year 2024. Their next status report to ~~determine site facility locations~~be submitted to the United States District Court for the District of Alaska is due on July 18, 2023.

In March 2023, the Board of Ambler Metals approved a budget totaling $12.3 million for the Ambler Access Project. The total budget of $24.6 million, funded equally by AIDEA and ~~mine design. We also completed geophysical ground surveys~~Ambler Metals to ~~evaluate ground conditions. We continued our environmental baseline program through the summer~~include funding for 2023 field season work consisting of ~~2017 which includes baseline~~field studies, permitting and data collection ~~on aquatic~~to assist the USBLM in completing the additional work to support the SEIS.

On November 15, 2022, the United States Bureau of Land Management ("USBLM") submitted a status report announcing that it anticipated publishing a draft Supplemental Environmental Impact Statement (“SEIS”) in the second quarter of calendar 2023 and ~~avian resources, ongoing water quality, hydrology and meteorology. The water quality program was expanded~~a final SEIS in ~~2017 to include additional sample locations and increased sample frequency.~~

~~The results from this summer’s field program are currently being compiled and analyzed by~~ the ~~PFS consultants. The~~fourth quarter of calendar 2023. On January 17, 2023, the USBLM submitted a status report reaffirming the timing of the draft and final SEIS.

The field work is being carried out from two camps: the Coldfoot camp from May to mid-September and the Bornite camp from mid-June to August. The planned field program will ~~provide~~consist of cultural resource inventory surveys and testing of sites over approximately 765 acres, hydraulic and hydrology studies at 47 bridge crossings to assess conditions for area drainage, culvert placement and bridge design, collecting topographical and bathymetric survey data to support bridge data and fish passage culverts, engineering reconnaissance surveys and fish habitat investigations on over 100 sites.


	Trilogy Metals Inc. For the Quarter Ended May 31, 2023	19

Table of contents

Corporate developments

Private Placement

On April 25, 2023, the ~~information required for completion~~Company completed non-brokered private placement of 5,854,545 common shares of the ~~PFS anticipated to be in Q1 2018.~~Company (the “Common Share”) at a price of $0.55 per Common Share for gross proceeds of $3.2 million. After legal and stock exchange fees, the Company received net proceeds of $3.1 million.

~~We also completed 455 meters of infill drilling at Arctic in late August collecting core to provide two tonnes of material for an ore-sorting study to be initiated in Q4 2017.~~

~~Outlook~~

Annual General Meeting

Our 2017 program has a total budget of $17.1 million with $7.1 million to be expended during the fiscal year to advance the Arctic Project to pre-feasibility and $10.0 million for the exploration program at the Bornite Project. The Arctic Project PFS will be supported by information collected during the 2015 - 2017 field seasons. The completion of our 2017 field program has completed a staged three-year site investigation program where the first two years focused almost exclusively on collecting data in and around the proposed Arctic open-pit, and the third year focused on infrastructure and mine design. The Arctic Project PFS is anticipated to be completed in Q1 2018.

The ~~exploration program at the Bornite Project is an opportunity to potentially expand the size~~Annual General Meeting of ~~the Bornite deposit by drilling the extensions of mineralization last drilled~~shareholders was held on May 17, 2023. All directors nominated by the Company ~~in 2013. Approximately 9,000 meters will be drilled at Bornite which drilling will be focused entirely on testing the size~~ and ~~depth~~standing for election were elected by shareholders of the ~~extension~~Company, with each director receiving greater than 97% of the known deposit. Drilling at the Bornite Project commenced in early June and will continue through to early October with drill results anticipated to be released through the fall. Initial drill results were released on September 18, 2017 on the first three drill holes.votes cast.

~~Property review~~

Our principal assets, the UKMP Projects, are located in the Ambler mining district in Northwest Alaska. Our UKMP Projects comprise approximately 355,385 acres (143,819 hectares) consisting of the Ambler and Bornite lands.

~~Arctic Project~~

The Ambler lands, which host a number of deposits, including the high-grade copper-zinc-lead-gold-silver Arctic Project, and other mineralized targets within a 100 kilometer long volcanogenic massive sulfide (“VMS”) belt, are owned by Trilogy Metals US. The Ambler lands are located in Northwestern Alaska and consist of 114,500 acres (46,337 hectares) of Federal patented mining claims and State of Alaska mining claims, within which VMS mineralization has been found.

~~We have recorded the Ambler lands as a mineral property with acquisition costs capitalized and exploration costs expensed in accordance with our accounting policies.~~

~~Bornite Project~~

On October 19, 2011, Trilogy Metals US and NANA signed a collaborative agreement to explore and develop the Ambler mining district. Under the Exploration Agreement and Option to Lease (the “NANA Agreement”), we acquired, in exchange for, among other things, a $4.0 million cash payment to NANA, the exclusive right to explore the Bornite property and lands deeded to NANA through the Alaska Native Claims Settlement Act (“ANCSA”), located adjacent to the Arctic Project, and the non-exclusive right to access and entry onto NANA’s lands. The agreement establishes a framework for any future development of either the Bornite Project or the Arctic Project. Both projects are included as part of a larger area of interest set forth in the NANA Agreement. The agreement with NANA created a total land package incorporating our Ambler lands with the adjacent Bornite and ANCSA lands with a total area of approximately 355,385 acres (143,819 hectares).

Upon the decision to proceed with development of a mine within the area of interest, NANA maintains the right to purchase an ownership interest in the mine equal to between 16%-25% or retain a 15% net proceeds royalty which is payable after we have recovered certain historical costs, including capital and cost of capital. Should NANA elect to purchase an ownership interest in the mine, consideration will be payable based on the elected percentage purchased and all the costs incurred on the properties less $40.0 million, not to be less than zero. The parties would form a joint venture and be responsible for all future costs incurred in connection with the mine, including capital costs of the mine, based on each party’s pro-rata share.

NANA would also be granted a net smelter return royalty between 1% and 2.5% upon the execution of a mining lease or a surface use agreement, the amount of which is determined by the particular area of land from which production originates.

~~We have accounted for the Bornite property as a mineral property with acquisition costs capitalized and exploration costs expensed in accordance with our accounting policies.~~

Summary of results


				in thousands of US dollars, except per share amounts
	Three months ended				Six months ended
	May 31, 2023		May 31, 2022		May 31, 2023		May 31, 2022
Selected expenses	$		$		$		$

General and administrative		328		338		736		735
Investor relations		23		38		53		137
Professional fees		188		192		758		437
Salaries		193		261		430		675
Salaries and directors expense – stock-based compensation		491		662		2,853		2,584
Share of loss on equity investment		1,603		2,460		3,088		4,370
Comprehensive loss for the period		(2,803)		(4,074)		(7,875)		(9,097)
Basic and diluted loss per common share		(0.02)		(0.03)		(0.05)		(0.06)

~~in thousands of dollars,~~

~~except for per share amounts~~

Three months ended Nine months ended
Selected expenses
August 31,
2017
$

August 31,
2016
$

August 31,
2017
$

August 31,
2016
$

Foreign exchange (gain) loss (592 ) 3 (542 ) 8
General and administrative 273 311 1,050 1,030
Mineral properties expense 8,471 3,077 10,407 4,067
Professional fees 86 84 404 430
Salaries 218 250 683 719
Salaries – stock-based compensation 104 146 603 544
Unrealized loss on held for trading investments 83 - 1,252 -
Loss from continuing operations for the period 8,992 3,902 14,378 6,885
Loss from discontinued operations for the period - 353 - 712
Loss and comprehensive loss for the period 8,992 4,255 14,378 7,597
Basic and diluted loss per common share $ 0.09 $ 0.04 $ 0.14 $ 0.07

For the ~~three months~~three-month period ended ~~August~~May 31, ~~2017, Trilogy~~2023, we reported a net loss of ~~$9.0~~$2.8 million ~~(or $0.09 basic and diluted loss per common share)~~ compared to a net loss of ~~$4.3~~$4.1 million for the ~~corresponding~~three-month period ended May 31, 2022. The decrease in ~~2016 (or $0.04 basic and diluted~~comprehensive loss ~~per common share). This variance~~in the second quarter of ~~$4.7 million was primarily~~2023 compared to the same quarter in 2022 is due to ~~the size~~decrease in our share of ~~the field programs at the UKMP in 2017 as well as the timing~~loss of ~~the program. An increase~~Ambler Metals, and stock-based compensation and salaries. The decrease of ~~$5.4 million~~our share of losses of Ambler Metals is mainly due to decrease in mineral property expenses ~~incurred during~~over the three months ended August 31, 2017 compared to the three months ended August 31, 2016 accounted for the increase in its entirety. The 2017 program consists of a $10.0 million exploration program at the Bornite Project, funded by South32, and a $7.1 million program towards completing a pre-feasibility study at the Arctic Project expected to be completed in Q1 2018. Comparably, in 2016, the field program consisted of a drill program at Arctic to prepare the project for pre-feasibility work. The field program in 2017 began in late May and continued through the third quarter. In 2016, the field program consisted of a 45-day program that wrapped up in late July. The increasecomparative quarter in the ~~mineral property expenses is due to the size~~prior year from decrease in drilling, engineering and ~~variety of the programs being undertaken. The~~project support costs, and partially offset from increase was offset by slight decreases in general and administrative, salaries and stock-based compensation expense during the three months ended August 31, 2017 compared to the three months ended August 31, 2016.

~~Trilogy recognized a gain on foreign exchange during the three months ended August 31, 2017 of $0.6 million due to the appreciation of the Canadian dollar~~cost in the current fiscal year. We were holding a higher average volume of cash and cash equivalents in Canadian dollars during the third quarter of 2017 mainly due to the sale of investments which consist of shares in Gold Mining Inc. (“GMI”). The investments are also denominated in Canadian dollars and benefited from the appreciation of the Canadian dollar in the third quarter. We acquired the investments on September 1, 2016 as consideration for the sale of Sunward Investments Limited (“Sunward”) and its Titiribi gold-copper exploration project in Colombia. As such, a comparable foreign currency movement did not exist in the third quarter of 2016. There was also a loss from discontinued operations of $0.4 million for the three months ended August 31, 2016 which relates to the sale of Sunward. There is no comparable amount in the current fiscal year as the sale was completed on September 1, 2016. Other minor differences noted for the comparable periods were i) a small decrease in general and administrative expenses; ii) a small decrease in salaries due to lower level of staff in the third quarter of 2017 compared to 2016; and iii) a small decrease in stock-based compensation due to the timing of the amortization of expense.

The basic and diluted loss per common share of $0.09 for the three months ended August 31, 2017 increased from the basic and diluted loss per common share of $0.04 for the three months ended August 31, 2016 due to the increased loss as described above.

Ambler Access Project.

For the ~~nine months~~six-month period ended ~~August~~May 31, ~~2017, Trilogy~~2023, we reported a net loss of ~~$14.4~~$7.9 million ~~(or $0.14 basic and diluted loss per common share)~~ compared to a net loss of ~~$7.6~~$9.1 million for the ~~corresponding~~six-month period ended May 31, 2022. The difference for the six-month period ended May 31, 2023, when compared to the same period in ~~2016 (or $0.07 basic and diluted loss per common share). The increase in net loss~~2022, is primarily due to ana $1.3 million decrease in our equity pick-up of Ambler Metals’ comprehensive loss in the current period as well as decreases in salaries and investor relations, and partially offset from the increase in professional fees and stock-based compensation. The decrease in our share of losses of Ambler Metals is mainly due to a decrease in mineral property ~~expense of $6.3 million from $4.1 million for~~expenses over the ~~nine months ended August 31, 2016 to $10.4 million for the nine months ended August 31, 2017. Similarly to the variance~~comparable period in the ~~three-month periods, the field program being executed~~prior year from decreases in ~~2017 is significantly larger~~drilling, engineering, and more varied than the field program completed in 2016. The variance is also due to an unrealized loss on investments on the GMI securities of $1.3 million classified as held for trading for which changes in the fair value of the investments are recorded through the statement of loss. There are no comparable amounts for the nine months ended August 31, 2016 as the Company acquired the investments in September 2016.

~~Trilogy recognized a gain on foreign exchange during the nine months ended August 31, 2017 of $0.5 million due to the appreciation of the Canadian dollar in the current quarter~~project support costs as well as the volume of funds held in Canadian dollars. There is no comparable amount in 2016 due to the timing of acquiring the GMI investments. Additionally, there was a loss from discontinued operations of $0.7 million for the nine months ended August 31, 2016 from the operations of Sunward for which there is no comparable amount in 2017. Other minor differences noted for the comparable periods were i) a small increase in general and administrative expenses; ii) a small decrease in professional fees due to a lower level of corporate activity compared to 2016, iii) a small decrease in salaries due to lower level of staff in the third quarter of 2017 compared to 2016; and iv) a small increase in stock-based compensation due to increasing Black-Scholes valuations from an increased share price.Ambler Access Project cost.

The basic and diluted loss per common share of $0.14 for the nine months ended August 31, 2017 increased from the basic and diluted loss per common share of $0.07 for the nine months ended August 31, 2016 due to the increased loss as described above.

~~Selected financial data~~

~~Quarterly information~~

~~in thousands of dollars,~~

~~except per share amounts~~

Q3 2017 Q2 2017 Q1 2017 Q4 2016 Q3 2016 Q2 2016 Q1 2016 Q4 2015

08/31/17
$

05/31/17
$

02/28/17
$

11/30/16
$

08/31/16
$

05/31/16
$

02/29/16
$

11/30/15
$

Interest and other income 23 12 11 10 16 18 18 12
Mineral property expenses 8,471 1,297 639 970 3,077 458 532 779
Income (loss) from discontinued operations for the period - - - 4,561 (352 ) (187 ) (172 ) (200 )
Earnings (loss) for the period (8,992 ) (2,390 ) (2,996 ) 2,736 (4,255 ) (1,648 ) (1,695 ) (2,090 )
Earnings (loss) per common share – basic and diluted (0.09 ) (0.02 ) (0.03 ) 0.03 (0.04 ) (0.02 ) (0.02 ) (0.02 )

Factors that can cause fluctuations in our quarterly results include the length of the exploration field season at the properties, the type of program conducted, stock option vesting, and issuance of shares. Other factors that have caused fluctuations in the quarterly results that would not be expected to re-occur include the acquisition and disposition of Sunward and financing activities.

Our net loss for the fourth quarter of 2015 of $2.1 million consists of $0.8 million in mineral property expenses incurred for assay costs and engineering studies conducted in the fall as well as $0.2 million in discontinued operation costs from Sunward.

Our loss for the first quarter ended February 29, 2016 is comparable to typical first quarter losses in that it consists mainly of mineral property expenses relating to engineering studies completed in advance of the 2016 field program. The loss is increased slightly due to costs related to operating Sunward of $0.2 million when compared to periods when Trilogy did not own Sunward. During the second quarter of 2016, we incurred $0.5 million in mineral property expenses due to the field season starting up in the last month of the second quarter and $0.2 million in discontinued operations relating to Sunward. During the third quarter of 2016, we incurred mineral property expenses of $3.1 million as we completed our drilling program. As a result, our loss for the third quarter ended August 31, 2016 is higher compared to previous quarter losses and consistent with the spending in the third quarter of 2015. We recognized earnings for the fourth quarter of 2016 of $2.7 million due to the gain on the sale of Sunward. Adjusted for the discontinued operations, the fourth quarter periods are substantially comparable.

Our loss for the first quarter ended February 28, 2017 of $3.0 million is significantly increased compared to prior quarterly periods due to an unrealized loss on held for trading investments of $1.2 million. The investments are classified as held for trading and changes in the fair value of the investments are recorded through the statement of loss. Our loss for the second quarter ended May 31, 2017 of $2.4 million is significantly increased from the comparable period due to a significant increase is the size of our field program resulting in increased mineral property expenses of $1.3 million. Similarly, our loss for the third quarter ended August 31, 2017 of $9.0 million is significantly increased from the comparable loss of $4.3 million in the third quarter ended August 31, 2016 due to the size of the 2017 field program which is more than double the 2016 field program.

Liquidity and capital resources

~~At August 31, 2017, we had $10.2 million in cash and cash equivalents.~~ We expended ~~$9.1~~$1.5 million on operating activities during the ~~nine months ended August~~six-month period ending May 31, ~~2017 compared~~2023 with ~~$6.7 million for operating activities for~~ the ~~same period in 2016. The~~ majority of cash spent on ~~operating activities during all periods was expended on mineral property expenses. Other operating expenses consisted of cash spent on general and administrative costs,~~corporate salaries, professional fees related to our annual regulatory filings, and ~~investor relations. At August 31, 2017,~~annual fees paid to the ~~Company had working capital available~~Toronto Stock Exchange and the NYSE American Exchange with the American and Canadian securities commissions.


	Trilogy Metals Inc. For the Quarter Ended May 31, 2023	20

Table of ~~$11.2 million.~~ contents

As at ~~August~~May 31, 2017, the Company continues to manage its cash expenditures and management believes that the working capital available is sufficient to meet its operational requirements for the next year. Management does expect to monetize its current investments by selling shares of GMI in the next six months to assist in meeting its operational requirements. Future financings are anticipated through the sale of investments, equity financing, the exercise of mineral properties option, convertible debt, or other means.

~~During the nine months ended August 31, 2017,~~2023, we ~~received $10.0~~had $4.2 million in funding from South32 for the exploration program at the Bornite Project which is categorized as an investing activity as the funds are being utilized on the UKMP. The Company is responsible for the disbursement of these funds in accordance with the approved program and budget and accordingly has not classified the funds as restricted cash. Funds are transferred to operating accounts on a monthly basis in accordance with the approved budgetcash and working capital ~~needs. As at August 31, 2017,~~of $3.5 million. Management continues with cash preservation strategies to reduce cash expenditures where feasible, including but not limited to reductions in marketing and investor conferences and office expenses. In addition, the Company’s Board of Directors have agreed to take all of their fees in DSUs in an effort to preserve cash. The Company’s senior management team is also taking a portion of their base salaries in shares of the Company ~~held $2.7~~to preserve cash.

All project related costs are funded by Ambler Metals. Amber Metals is well funded to advance the UKMP with $72.8 million in ~~a segregated bank account for spending on the approved year 1 program at the Bornite Project.~~

~~During the nine months ended August 31, 2017, we generated $2.2~~cash and $71.8 million in proceeds from the sale of investments. The proceeds were used for general operating activities. There was no comparable amount from investing activities in 2016 as we acquired the investments in September 2016. Subsequent to quarter-end, we have generated approximately an additional C$1.0 million in proceeds from the sale of investments.

During the nine months ended August 31, 2017, $0.1 million was used in financing activities to pay statutory employee withholding taxes on Restricted Share Units that vested. There were no comparable amounts from financing activities in 2016.

~~Contractual obligations~~

~~Contractually obligated cash flow requirements~~working capital as at ~~August~~May 31, ~~2017~~2023. There are ~~as follows.~~sufficient funds at Ambler Metals to fund this fiscal year’s budget for the UKMP and the Ambler Access Project. Trilogy does not anticipate having to fund the activities of Ambler Metals until the current cash balance $72.8 million is expended.

~~in thousands of dollars~~

Total
$

< 1 Year
$

1–2 Years
$

2–5 Years
$

Thereafter
$

Accounts payable and accrued liabilities 4,759 4,759 - - -
Office lease 1,349 44 178 580 547
6,108 4,803 178 580 547

~~On February 21, 2017, the Company entered into a lease for office space effective July 1, 2017 for a period of seven years with a total commitment of $1.3 million.~~

Off-balance sheet arrangements

We have no material off-balance sheet arrangements. ~~The Company has lease commitments for office spaces with a remaining total commitment of $1.3 million.~~

Outstanding share data

~~At October 4, 2017,~~As at July 14, 2023, we had ~~105,674,303~~155,559,334 common shares issued and outstanding. ~~At October 4, 2017,~~As at July 14, 2023, we had ~~outstanding 6,521,740 warrants with an exercise price of $1.60 each, 7,197,500~~13,049,400 stock options outstanding with a weighted-average exercise price of ~~$0.56, 1,041,232 DSUs, 600,002 RSUs,~~CDN$2.16, 2,253,573 Deferred Share Units (“DSUs”), and ~~20,685~~1,610,638Restricted Share Units (“RSUs”) outstanding. As at July 14, 2023 we hold 5,144 NovaGold Resources Inc. (“NovaGold”) DSUs for which the ~~holder~~NovaGold director is entitled to receive one common share of Trilogy for every six NovaGold shares ~~received. For additional information on~~to be received upon their retirement from the NovaGold ~~Arrangement Options and~~board. A total of 859 common shares will be issued upon redemption of the NovaGold ~~DSUs, please refer to note 6 in our August 31, 2017 interim consolidated financial statements.~~DSUs. Upon the exercise of all of the ~~forgoing~~foregoing convertible securities, the Company would be required to issue an aggregate of ~~15,363,921~~16,914,470 common shares.

New accounting pronouncements

~~Certain recent~~There are no new accounting pronouncements ~~have been included under note 2 in our August 31, 2017 unaudited interim consolidated financial statements~~affecting the Company.

Critical accounting estimates

The most critical accounting estimates upon which our financial status depends are those requiring estimates of the recoverability of our ~~capitalized mineral properties, impairment of long-lived assets,~~equity method investment in Ambler Metals, income taxes and valuation of ~~stock-based~~stock‐based compensation.

~~Mineral properties and development costs~~

All direct costs related to the acquisition of mineral property interests are capitalized. The acquisition of title to mineral properties is a complicated and uncertain process. We have taken steps, in accordance with industry standards, to verify the title to mineral properties in which it has an interest. Although we have made efforts to ensure that legal title to mining assets is properly recorded, there can be no assurance that such title will be secured indefinitely.

Impairment of ~~long-lived assets~~

Investment in Ambler Metals LLC

Management assesses the possibility of impairment in the carrying value of its ~~long-lived assets~~equity method investment in Ambler Metals whenever events or circumstances indicate that the carrying ~~amounts~~amount of the ~~asset or asset group~~investment may not be recoverable. Significant judgments are made in assessing the possibility of impairment. Factors that may be indicative of an impairment include a loss in the value of an investment that is not temporary. Management considers several factors in considering if an indicator of impairment has occurred, including but not limited to, ~~indications~~sustained losses by the investment, the absence of ~~value from external sources,~~the ability to recover the carrying amount of the investment, significant changes in the legal, business or regulatory environment, ~~and~~significant adverse changes inimpacting the ~~use or physical condition~~investee including the status of the ~~asset.~~ Ambler Access Project and internal reporting indicating the economic performance of an investment is, or will be, worse than expected.

These factors are subjective and require consideration at each period end. If an indicator of impairment is determined to exist, ~~management~~the fair value of the impaired investment is determined based on the valuation of cohort companies with similar projects or upon the present value of expected future cash flows using discount rates and other assumptions believed


	Trilogy Metals Inc. For the Quarter Ended May 31, 2023	21

Table of contents

to be consistent with those used by principal market participants and observed market earnings multiples of comparable companies.

Management calculates the estimated undiscounted future net cash flows relating to the asset or asset group using estimated future prices, proven and probable reserves and other mineral resources, and operating, capital and reclamation costs. When the carrying value of an asset exceeds the related undiscounted cash flows, the asset is written down to its estimated fair value, which is usually determined using discounted future cash flows. Management’s estimates of mineral prices, mineral resources, foreign exchange rates, production levels ~~and~~ operating, capital and reclamation costs are subject to risk and uncertainties that may affect the determination of the recoverability of the long-lived asset. It is possible that material changes could occur that may adversely affect management’s estimates.

Income taxes

We must make estimates and judgments in determining the provision for income tax expense, deferred tax assets and liabilities, and liabilities for unrecognized tax benefits including interest and penalties. We are subject to income tax law in the United States and Canada. The evaluation of tax liabilities involving uncertainties in the application of complex tax regulation is based on factors such as changes in facts or circumstances, changes in tax law, new audit activity, and effectively settled issues. The evaluation of an uncertain tax position requires significant judgment, and a change in such recognition would result in an additional charge to the income tax expense and liability.

Stock-based compensation

Compensation expense for options granted to employees, directors and certain service providers is determined based on estimated fair values of the options at the time of grant using the Black-Scholes option pricing model, which takes into account, as of the grant date, the fair market value of the shares, expected volatility, expected life, expected forfeiture rate, expected dividend yield and the risk-free interest rate over the expected life of the option. The use of the Black-Scholes option pricing model requires input estimation of the expected life of the option, volatility, and forfeiture rate which can have a significant impact on the valuation model, and resulting expense recorded.

Additional information

Additional information regarding the Company, including our annual report on Form 10-K, is available on SEDAR atwww.sedar.com and EDGAR atwww.sec.govand on our website at~~www.trilogymetals.com~~. www.trilogymetals.com. Information contained on our website is not incorporated by reference.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Not applicable.

~~Item 3.~~

~~Quantitative and Qualitative Disclosures about Market Risk~~

Our financial instruments consist of cash and cash equivalents, accounts receivable, deposits, investments, and accounts payable and accrued liabilities. The fair value of the financial instruments approximates their carrying value due to the short-term nature of their maturity. Our financial instruments initially measured at fair value and then held at amortized cost include cash and cash equivalents, accounts receivable, deposits, and accounts payable and accrued liabilities. Our investments are held for trading and are marked-to-market at each period end with changes in fair value recorded to the statement of loss. The South32 purchase option is a derivative financial liability measured at fair value with changes in fair value recorded to the statement of loss.

~~(a)~~

~~Currency risk~~

Currency risk is the risk of a fluctuation in financial asset and liability settlement amounts due to a change in foreign exchange rates. We operate in the United States and Canada. Our exposure to currency risk at August 31, 2017 is limited to Canadian dollar balances consisting of cash of CDN$2,596,000, accounts receivable of CDN$421,000, deposit amounts of CDN$116,000, investments of CDN$5,833,000 and accounts payable of CDN$859,000. Based on a 10% change in the US-Canadian exchange rate, assuming all other variables remain constant, our net loss would change by approximately $647,000.

~~(b)~~

~~Credit risk~~

Credit risk is the risk of an unexpected loss if a customer or third party to a financial instrument fails to meet its contractual obligations. We hold cash and cash equivalents with Canadian Chartered financial institutions. Our accounts receivable consist of GST receivable from the Federal Government of Canada and other receivables for recoverable expenses. Our exposure to credit risk is equal to the balance of cash and cash equivalents and accounts receivable as recorded in the financial statements.

~~(c)~~

~~Liquidity risk~~

Liquidity risk is the risk that we will encounter difficulties raising funds to meet our financial obligations as they fall due. We are in the exploration stage and do not have cash inflows from operations; therefore, we manage liquidity risk through the management of the capital structure and financial leverage. Future financings may be obtained through equity financing, sales of investments, convertible debt, exercise of options, or other means. Continued operations are dependent on our ability to obtain additional financing or to generate future cash flows. Our contractually obligated cash flow is disclosed under the section titled “Contractual obligations.” Please see further discussion of our liquidity under “Liquidity and capital resources”

~~(d)~~

~~Interest rate risk~~

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. We are exposed to interest rate risk with respect to interest earned on cash and cash equivalents. Based on balances as at August 31, 2017, a 1% change in interest rates would result in a change in net loss of $0.1 million, assuming all other variables remain constant.

~~Item 4.~~

~~Controls and Procedures~~

Item 4. Controls and Procedures

~~Management, with the participation of our President and Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure~~Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of August 31, 2017. On the basis of this review, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure

Disclosure controls and procedures are ~~effective~~designed to ensure that ~~the~~ information ~~we are~~ required to ~~disclose~~be disclosed in reports ~~that we file~~filed or ~~submit~~submitted by the Company under ~~the Exchange Act~~U.S. and Canadian securities legislation is recorded, processed, summarized and reported within the time periods specified in ~~the~~those rules, including providing reasonable assurance that material information is gathered and ~~forms of the SEC and~~reported to ~~ensure that information required to be disclosed in the reports filed or submitted under the Exchange Act is accumulated and communicated to our~~senior management, including ~~our President and~~the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), as appropriate, to ~~allow~~permit timely decisions regarding ~~required~~public disclosure. Management, including the CEO and CFO, has evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures, as defined in Rule 13a-15(e) and 15d-15(e) of the U.S. Securities Exchange Act of 1934, as amended (the

26
	Trilogy Metals Inc. For the Quarter Ended May 31, 2023	22

Table of contents

~~There~~“Exchange Act”) and the rules of Canadian Securities Administration, as of May 31, 2023. Based on this evaluation, the CEO and CFO have ~~not been any changes in~~concluded that the Company’s disclosure controls and procedures were effective.

Internal control over financial reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting ~~(as~~as defined in ~~Rules~~Rule 13a-15(f) and 15d-15(f) ~~promulgated by the SEC under~~of the Exchange Act) during the Company’s most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect the Company’s internal control over financial reporting.Act and National Instrument 52-109 Certification of Disclosure in Issuer’s Annual and Interim filings. Any system of internal control over financial reporting, no matter how well designed, has inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

Changes in internal control over financial reporting

There have been no changes in our internal controls over financial reporting during the fiscal quarter ended May 31, 2023 which have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting. We continue to evaluate our internal control over financial reporting on an ongoing basis to identify improvements.

PART II - OTHER INFORMATION

~~Item 1.~~

~~Legal Proceedings~~

Item 1. Legal Proceedings

From time to time, we are a party to routine litigation and proceedings that are considered part of the ordinary course of its business. We are not aware of any material current, pending, or threatened litigation.

~~Item 1A.~~

~~Risk Factors~~

Item 1A. Risk Factors

Trilogy and its future business, operations and financial condition are subject to various risks and uncertainties due to the nature of its business and the present stage of exploration of its mineral properties. Certain of these risks and uncertainties are under the heading “Risk Factors” under Trilogy’s Form 10-K dated February ~~2, 2017,~~14, 2023 (“Form 10-K”) which is available on SEDAR at www.sedar.com and EDGAR at www.sec.gov and on our website at www.trilogymetals.com. There have been no material changes to the risk factors set forth in Trilogy’s Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

~~Item 2.~~

~~Unregistered Sales of Equity Securities and Use of Proceeds~~

~~None~~

~~Item 3.~~

~~Defaults Upon Senior Securities~~

Item 3. Defaults Upon Senior Securities

None.

~~Item 4.~~

~~Mine Safety Disclosures~~

Item 4. Mine Safety Disclosures

These disclosures are not applicable to us.

Item 5. Other Information

None.

	~~Item 5.~~	~~Other Information.~~
	Trilogy Metals Inc. For the Quarter Ended May 31, 2023	23

~~None.~~Table of contents

~~Item 6.~~

~~Exhibits~~

Item 6. Exhibits

~~See Exhibit Index.~~

~~SIGNATURES~~

~~Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.~~

~~Date: October 5, 2017~~	~~TRILOGY METALS INC.~~
Exhibit No.		Description
3.1	~~By:~~	~~/s/ Rick Van Nieuwenhuyse~~
		~~Rick Van Nieuwenhuyse~~
		~~President and Chief Executive Officer~~

	~~By:~~	~~/s/ Elaine M. Sanders~~
		~~Elaine M. Sanders~~
		~~Vice President and Chief Financial Officer~~

~~EXHIBIT INDEX~~

~~Exhibit No.~~		~~Description~~

~~3.1~~

Certificate of Incorporation, ~~of NovaCopper Inc.,~~ dated April 27, 2011 (incorporated by reference Exhibit 99.2 to the Registration Statement on Form 40-F as filed on March 1, 2012, File No. 001-35447)

~~3.2~~
3.2		Articles of ~~NovaCopper~~Trilogy Metals Inc., effective April 27, 2011, as altered March 20, 2011 (incorporated by reference to Exhibit 99.3 to Amendment No. 1 to the Registration Statement on Form 40-F as filed on April 19, 2012, File No. 001-35447)

~~3.3~~
3.3		Notice of Articles and Certificate of Change of Name, dated September 1, 2016 (incorporated by reference to Exhibit 3.1 to the Form 8-K dated September 8, 2016)


~~31.1~~
31.1		Certification of the Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a)

31.2		Certification of the Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a)

32.1		Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350

32.2		Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350

101		Interactive Data Files

101.INS		Inline XBRL Instance Document

101.SCH		Inline XBRL Taxonomy Extension Schema Document

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document

104		Cover Page Interactive Data File – the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

30
	Trilogy Metals Inc. For the Quarter Ended May 31, 2023	24

Table of contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


Date: July 14, 2023	TRILOGY METALS INC.


	By:	/s/ Tony Giardini
		Tony Giardini

		President and Chief Executive Officer


	By:	/s/ Elaine M. Sanders
		Elaine M. Sanders

		Vice President and Chief Financial Officer


	Trilogy Metals Inc. For the Quarter Ended May 31, 2023	25

~~British Columbia~~	~~98-1006991~~
British Columbia	98-1006991
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

Suite 1150, 609 Granville Street Vancouver, British Columbia Canada	V7Y 1G5
(Address of Principal Executive Offices)	(Zip Code)


Large accelerated filer¨◻	Accelerated filer¨◻	Non-accelerated filer¨ ~~(Do not check if a smaller~~ ~~reporting company)~~☒	Smaller reporting companyx☒	Emerging growth company¨☐

		~~Page~~
				Page
PART I - FINANCIAL INFORMATION		2	3
Item 1.	Financial Statements		3
~~Item 1.~~	~~Financial Statements~~	2
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	26	22
Item 4.	Controls and Procedures	26	22

PART II - OTHER INFORMATION		28	23
Item 1.	Legal Proceedings		23
Item 1.1A.	~~Legal Proceedings~~Risk Factors	28	23
~~Item 1A.~~	~~Risk Factors~~	28
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28	23
Item 3.	Defaults Upon Senior Securities	28	23
Item 4.	Mine Safety Disclosures	28	23
Item 5.	Other ~~Information.~~Information	28	23
Item 6.	Exhibits	28	24

	August 31, 2017 $			November 30, 2016 $
Assets
Current assets
Cash and cash equivalents		10,205			7,340
Accounts receivable		341			47
Deposits and prepaid amounts		864			724
Current investments (note 3)		4,571			7,538
		15,981			15,649

Investments (note 3)		81			297
Plant and equipment		399			215
Mineral properties and development costs (note 4)		30,587			30,586
		47,048			46,747
Liabilities
Current liabilities
Accounts payable and accrued liabilities (note 5)		4,759			593
		4,759			593

Mineral properties purchase option (note 4)		10,000			-
		14,759			593
Shareholders’ equity
Share capital (note 6)– unlimited common shares authorized, no par value; Issued –105,667,125 (2016 – 105,286,469)		136,494			136,357
Warrants (note 6(d))		2,163			2,163
Contributed surplus		124			124
Contributed surplus – options (note 6(a, b))		18,392			18,134
Contributed surplus – units (note 6(c))		1,258			1,140
Deficit		(126,142	)		(111,764	)
		32,289			46,154
		47,048			46,747