TMQ Trilogy Metals Inc. - 10-K

Item 1A.  RISK FACTORS

Investing in our securities is speculative and involves a high degree of risk due to the nature of our business and the present stage of exploration of our mineral properties. The following risk factors, as well as risks currently unknown to us, could materially adversely affect our future business, operations and financial condition and could cause them to differ materially from the estimates described in forward-looking information relating to Trilogy, or our business, property or financial results, each of which could cause purchasers of securities to lose all or part of their investments.

Risks Related to the Company’s Mineral Properties

We may not have sufficient funds to develop our mineral projects or to complete further exploration programs.

We have limited financial resources. We currently generate no mining operating revenue and must primarily finance exploration activity and the development of mineral projects by other means. Our ability to continue exploration, development and production activities, if any, will depend on our ability to obtain additional external financing. Any unexpected costs, problems or delays could severely impact our ability to continue exploration and development activities. The failure to meet ongoing obligations on a timely basis could result in a loss or a substantial dilution of our interests in projects.

The sources of external financing that we may use for these purposes include project or bank financing or public or private offerings of equity and debt. In addition, we may enter into one or more strategic alliances or joint ventures, in addition to our joint venture with South32, sell marketable securities held by the Company, decide to sell certain property interests, or utilize one or a combination of all of these alternatives. The financing alternative we choose may not be available on acceptable terms, or at all. If additional financing is not available, we may have to postpone further exploration or development of, or sell our interest in, one or more of our principal properties.

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Even if one of our mineral projects is determined to be economically viable to develop into a mine, such development may not be successful.

If the development of one of our projects is found to be economically feasible and approved by our board of directors (the “Board”) and in the case of the UKMP Projects, by our joint venture partner, South32, such development will require obtaining permits and financing, the construction and operation of mines, processing plants and related infrastructure, including road access. As a result, we are and will continue to be subject to all of the risks associated with establishing new mining operations, including:

the timing and cost, which can be considerable, of the construction of mining and processing facilities and related infrastructure;

the availability and cost of skilled labor and mining equipment;

the availability and cost of appropriate smelting and refining arrangements;

the need to obtain necessary environmental and other governmental approvals and permits and the timing of the receipt of those approvals and permits;

the availability of funds to finance construction and development activities;

potential opposition from non-governmental organizations, environmental groups or local groups which may delay or prevent development activities; and

potential increases in construction and operating costs due to changes in the cost of fuel, power, materials and supplies.

The costs, timing and complexities of developing our projects may be greater than anticipated because our property interests are not located in developed areas, and, as a result, our property interests are not currently served by appropriate road access, water and power supply and other support infrastructure. Cost estimates may increase significantly as more detailed engineering work is completed on a project. It is common in new mining operations to experience unexpected costs, problems and delays during construction, development and mine start-up. In addition, delays in the early stages of mineral production often occur. Accordingly, we cannot provide assurance that we will ever achieve, or that our activities will result in, profitable mining operations at the UKMP Projects or any other property that we may acquire.

In addition, there can be no assurance that our mineral exploration activities will result in any discoveries of new mineralization. If further mineralization is discovered there is also no assurance that the mineralization would be economical for commercial production. Discovery of mineral deposits is dependent upon a number of factors and significantly influenced by the technical skill of the exploration personnel involved. The commercial viability of a mineral deposit is also dependent upon a number of factors which are beyond our control, including the attributes of the deposit, commodity prices, government policies and regulation and environmental protection.

The Upper Kobuk Mineral Projects are located in a remote area of Alaska, and access to them is limited. Exploration and any future development or production activities may be limited and delayed by infrastructure challenges, inclement weather and a shortened exploration season.

We cannot provide assurances that the proposed AAP that would provide access to the Ambler Mining District will be built, that it will be built in a timely manner, that the cost of accessing the proposed road will be reasonable, that it will be built in the manner contemplated, or that it will sufficiently satisfy the requirements of the Upper Kobuk Mineral Projects. The proposed AAP requires significant permitting and approvals, and the JROD issued in 2020 is currently

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subject to lawsuits which could delay or prevent the project. Further, changes in the U.S. federal administration may result in changes in interpretations or priorities which may further delay or prevent the proposed AAP.

In addition, successful development of the Upper Kobuk Mineral Projects will require the development of the necessary infrastructure. If adequate infrastructure is not available in a timely manner, there can be no assurance that:

the development of the Upper Kobuk Mineral Projects will be commenced or completed on a timely basis, if at all;

the resulting operations will achieve the anticipated production volume; or

the construction costs and operating costs associated with the development of the Upper Kobuk Mineral Projects will not be higher than anticipated.

As the Upper Kobuk Mineral Projects are located in a remote area, exploration, development and production activities may be limited and delayed by inclement weather and a shortened exploration season. The exploration of the UKMP Projects was also impacted by COVID-19 and any future pandemic events may have a similar impact on the UKMP Projects.

We are dependent on a third party that participates in exploration and development of our Upper Kobuk Mineral Projects.

In December 2019, South32 exercised its option to acquire a 50% interest in Ambler Metals. The formation of Ambler Metals was completed in February 2020 and Ambler Metals now owns the Upper Kobuk Mineral Projects. Our success with respect to the Upper Kobuk Mineral Projects depends on the efforts and expertise of South32 with whom we have contracted; we hold a 50% interest and the remaining 50% interest is held by South32, who is not under our control or direction. We are dependent on them for the progress and development of the Upper Kobuk Mineral Projects. South32 may also have different priorities which could impact the timing and cost of development of the Upper Kobuk Mineral Projects.  The third party may also be in default of its agreement with us, without our knowledge, which may put the mineral property and related assets at risk. The existence or occurrence of one or more of the following circumstances and events could have a material adverse impact on our ability to achieve our business plan, profitability, or the viability of our interests held with the third party, which could have a material adverse impact on our business, future cash flows, earnings, results of operations and financial condition: (i) disagreement with our business partner on how to develop and operate the Upper Kobuk Mineral Projects efficiently; (ii) inability to exert influence over certain strategic decisions made in respect of the jointly-held Upper Kobuk Mineral Projects; (iii) inability of our business partner to meet its obligations to the joint business or third parties; and (iv) litigation with our business partner regarding joint business matters.

We have no history of production and no revenue from mining operations.

We have a very limited history of operations and to date have generated no revenue from mining operations. As such, we are subject to many risks common to such enterprises, including under-capitalization, cash shortages, limitations with respect to personnel, financial and other resources and lack of significant revenues. There is no assurance that the Upper Kobuk Mineral Projects, or any other future projects will be commercially mineable, and we may never generate revenues from our mining operations.

Changes in the market price of copper, zinc and other metals, which in the past have fluctuated widely, will affect our ability to finance continued exploration and development of our projects and affect our operations and financial condition.

Our long-term viability will depend, in large part, on the market price of copper, zinc and other metals. The market prices for these metals are volatile and are affected by numerous factors beyond our control, including:

global or regional consumption patterns;

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the supply of, and demand for, these metals;

speculative activities;

the availability and costs of metal substitutes;

expectations for inflation; and

political and economic conditions, including interest rates and currency values.

We cannot predict the effect of these factors on metal prices. A decrease in the market price of copper, zinc and other metals could affect our ability to raise funds to finance the exploration and development of any of our mineral projects, which would have a material adverse effect on our financial condition and results of operations. The market price of copper, zinc and other metals may not remain at current levels. In particular, an increase in worldwide supply, and consequent downward pressure on prices, may result over the longer term from increased copper production from mines developed or expanded as a result of current metal price levels. There is no assurance that a profitable market may exist or continue to exist.

Title and other rights to our properties may be subject to challenge.

We cannot provide assurance that title to our properties will not be challenged. We (through our interest in Ambler Metals) indirectly own mineral claims which constitute our property holdings. We may not have, or may not be able to obtain, all necessary surface rights to develop a property. Title insurance is generally not available for mineral properties and our ability to ensure that we have obtained a secure claim to individual mining properties may be severely constrained. Our mineral properties may be subject to prior unregistered agreements, transfers or claims, and title may be affected by, among other things, undetected defects. We have not conducted surveys of all of the claims in which we hold direct or indirect interests. A successful claim contesting our title to a property will cause us to lose our rights to explore and, if warranted, develop that property or undertake or continue production thereon. This could result in our not being compensated for our prior expenditures relating to the property. In addition, our ability to continue to explore and develop the property may be subject to agreements with other third parties including agreements with native corporations and first nations groups, for instance, the lands at the Upper Kobuk Mineral Projects are subject to the NANA Agreement (as more particularly described under "History of Trilogy - Agreement with NANA Regional Corporation").

We will incur losses for the foreseeable future.

We expect to incur losses unless and until such time as our mineral projects generate sufficient revenues to fund continuing operations. The exploration and development of our mineral properties will require the commitment of substantial financial resources that may not be available.

The amount and timing of expenditures will depend on a number of factors, including the progress of ongoing exploration and development, the results of consultants’ analyses and recommendations, the rate at which operating losses are incurred, the execution of any joint venture agreements with strategic partners and the acquisition of additional property interests, some of which are beyond our control. We cannot provide assurance that we will ever achieve profitability.

High metal prices in past years have encouraged increased mining exploration, development and construction activity, which has increased demand for, and cost of, exploration, development and construction services and equipment .

The relative strength of metal prices in past years has encouraged increases in mining exploration, development and construction activities around the world, which has resulted in increased demand for, and cost of, exploration, development and construction services and equipment. Increased demand for and cost of services and equipment could result in delays if services or equipment cannot be obtained in a timely manner due to inadequate availability and may

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cause scheduling difficulties due to the need to coordinate the availability of services or equipment, any of which could materially increase project exploration, development and/or construction costs.

Risks Relating to the Mining Industry and Mineral Reserves

Mineral resource and reserve calculations are only estimates.

Any figures presented for mineral resources or reserves in this Form 10-K and in our other filings with securities regulatory authorities and those which may be presented in the future are and will only be estimates. There is a degree of uncertainty attributable to the calculation of mineral reserves and mineral resources. Until mineral reserves or mineral resources are actually mined and processed, the quantity of metal and grades must be considered as estimates only and no assurances can be given that the indicated levels of metals will be produced. In making determinations about whether to advance any of our projects to development, we must rely upon estimated calculations as to the mineral resources or reserves and grades of mineralization on our properties.

The estimating of mineral reserves and mineral resources is a subjective process that relies on the judgment of the persons preparing the estimates. The process relies on the quantity and quality of available data and is based on knowledge, mining experience, analysis of drilling results and industry practices. Valid estimates made at a given time may significantly change when new information becomes available. While we believe that the mineral resource estimates included in this Form 10-K for the Upper Kobuk Mineral Projects are well-established and reflect management’s best estimates, by their nature mineral resource estimates are imprecise and depend, to a certain extent, upon analysis of drilling results and statistical inferences that may ultimately prove to be inaccurate. There can be no assurances that actual results will meet the estimates contained in feasibility studies or pre-feasibility studies. As well, further studies are required.

Estimated mineral reserves or mineral resources may have to be recalculated based on changes in metal prices, further exploration or development activity or actual production experience. This could materially and adversely affect estimates of the volume or grade of mineralization, estimated recovery rates or other important factors that influence mineral reserve or mineral resource estimates. The extent to which mineral resources may ultimately be reclassified as mineral reserves is dependent upon the demonstration of their profitable recovery. Any material changes in mineral resource estimates and grades of mineralization will affect the economic viability of placing a property into production and a property’s return on capital. We cannot provide assurance that mineralization can be mined or processed profitably.

Our mineral resource estimates have been determined and valued based on assumed future metal prices, cut-off grades and operating costs that may prove to be inaccurate. Extended declines in market prices for copper, zinc, lead, gold and silver may render portions of our mineralization uneconomic and result in reduced reported mineral resources, which in turn could have a material adverse effect on our results of operations or financial condition. We cannot provide assurance that mineral recovery rates achieved in small scale tests will be duplicated in large scale tests under on-site conditions or in production scale.

A reduction in any mineral reserves that may be estimated by us could have an adverse impact on our future cash flows, earnings, results of operations and financial condition. No assurances can be given that any mineral resource estimates for the Upper Kobuk Mineral Projects will ultimately be reclassified as mineral reserves. See “ Cautionary Note to United States Investors .”

Significant uncertainty exists related to inferred mineral resources.

There is a risk that inferred mineral resources referred to in this Form 10-K cannot be converted into measured or indicated mineral resources as there may be limited ability to assess geological continuity. It is reasonably expected that the majority of inferred mineral resources could be upgraded to indicated mineral resources with continued exploration. See “ Cautionary Note to United States Investors .”

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Mining is inherently risky and subject to conditions or events beyond our control.

The development and operation of a mine is inherently dangerous and involves many risks that even a combination of experience, knowledge and careful evaluation may not be able to overcome, including:

unusual or unexpected geological formations;

metallurgical and other processing problems;

metal losses;

environmental hazards;

power outages;

labor disruptions;

industrial accidents;

periodic interruptions due to inclement or hazardous weather conditions;

flooding, explosions, fire, rockbursts, cave-ins and landslides;

mechanical equipment and facility performance problems; and

the availability of materials and equipment.

These risks could result in damage to, or destruction of, mineral properties, production facilities or other properties, personal injury or death, including to our employees, environmental damage, delays in mining, increased production costs, asset write downs, monetary losses and possible legal liability. We may not be able to obtain insurance to cover these risks at economically feasible premiums, or at all. The Company's insurance premiums have increased in recent years and in other circumstances the scope of insurance coverage has been reduced. Insurance against certain environmental risks, including potential liability for pollution and other hazards associated with mineral exploration and production, is not generally available to companies within the mining industry. We may suffer a material adverse effect on our business if we incur losses related to any significant events that are not covered by our insurance policies.

We cannot provide assurance that we will successfully acquire commercially mineable mineral rights.

Exploration for and development of copper properties involves significant financial risks which even a combination of careful evaluation, experience and knowledge may not eliminate. While the discovery of an ore body may result in substantial rewards, few properties which are explored are ultimately developed into producing mines. Major expenses may be required to establish reserves by drilling, constructing mining and processing facilities at a site, developing metallurgical processes and extracting metals from ore. We cannot ensure that our current exploration and development programs will result in profitable commercial mining operations.

The economic feasibility of development projects is based upon many factors, including the accuracy of mineral resource estimates; metallurgical recoveries; capital and operating costs; government regulations relating to prices, taxes, royalties, land tenure, land use, importing and exporting and environmental protection; and metal prices, which are highly volatile. Development projects are also subject to the successful completion of feasibility studies, issuance of necessary governmental permits and availability of adequate financing.

Most exploration projects do not result in the discovery of commercially mineable ore deposits, and no assurance can be given that any anticipated level of recovery of ore reserves, if any, will be realized or that any identified mineral deposit will ever qualify as a commercially mineable (or viable) ore body which can be legally and economically exploited.

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Estimates of mineral reserves, mineral resources, mineral deposits and production costs can also be affected by such factors as environmental permitting regulations and requirements, weather, environmental factors, unforeseen technical difficulties, the metallurgy of the mineralization forming the mineral deposit, unusual or unexpected geological formations and work interruptions. If current exploration programs do not result in the discovery of commercial ore, we may need to write-off part or all of our investment in our existing exploration stage properties and may need to acquire additional properties.

Material changes in mineral reserves, if any, grades, stripping ratios or recovery rates may affect the economic viability of any project. Our future growth and productivity will depend, in part, on our ability to develop commercially mineable mineral rights at our existing properties or identify and acquire other commercially mineable mineral rights, and on the costs and results of continued exploration and potential development programs. Mineral exploration is highly speculative in nature and is frequently non-productive. Substantial expenditures are required to:

establish mineral  resources and reserves through drilling and metallurgical and other testing techniques;

determine metal content and metallurgical recovery processes to extract metal from the ore; and

construct, renovate or expand mining and processing facilities.

In addition, if we discover ore, it would take several years from the initial phases of exploration until production is possible. During this time, the economic feasibility of production may change. As a result of these uncertainties, there can be no assurance that we will successfully acquire commercially mineable (or viable) mineral rights.

Risks Relating to Government Regulation

We are subject to significant governmental regulations.

Our exploration activities are subject to extensive federal, state, provincial and local laws and regulations governing various matters, including:

environmental protection;

the management and use of toxic substances and explosives;

the management of natural resources;

the exploration and development of mineral properties, including reclamation;

exports;

price controls;

taxation and mining royalties;

management of tailing and other waste generated by operations;

labor standards and occupational health and safety, including mine safety;

historic and cultural preservation; and

transportation.

Failure to comply with applicable laws and regulations may result in civil or criminal fines or penalties or enforcement actions, including orders issued by regulatory or judicial authorities enjoining, curtailing or closing operations or requiring

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corrective measures, installation of additional equipment or remedial actions, any of which could result in significant expenditures. We may also be required to compensate private parties suffering loss or damage by reason of a breach of such laws, regulations or permitting requirements. It is also possible that future laws and regulations, or more stringent enforcement of current laws and regulations by governmental authorities, could cause us to incur additional expense or capital expenditure restrictions, suspensions or closing of our activities and delays in the exploration and development of our properties.

We require further permits in order to conduct current and anticipated future operations, and delays in obtaining or failure to obtain such permits, or a failure to comply with the terms of any such permits that we have obtained, would adversely affect our business.

Our current and anticipated future operations, including further exploration, development and commencement of production on our mineral properties, require permits from various governmental authorities. Obtaining or renewing governmental permits is a complex and time-consuming process. The duration and success of efforts to obtain and renew permits are contingent upon many variables not within our control. Due to the preliminary stages of the Upper Kobuk Mineral Projects, it is difficult to assess what specific permitting requirements will ultimately apply.

Shortage of qualified and experienced personnel in the U.S. federal and Alaskan State agencies to coordinate a federally led joint environmental impact statement process could result in delays or inefficiencies. Backlog within the permitting agencies could affect the permitting timeline or potential of the Upper Kobuk Mineral Projects, as may negative public perception of mining projects in general due to circumstances unrelated to the Company and outside of its control. Other factors that could affect the permitting timeline include (i) the number of other large-scale projects currently in a more advanced stage of development which could slow down the review process for the Upper Kobuk Mineral Projects and (ii) significant public response regarding the Upper Kobuk Mineral Projects.

We cannot provide assurance that all permits that we require for our operations, including any for construction of mining facilities or conduct of mining, will be obtainable or renewable on reasonable terms, or at all. Delays or a failure to obtain such required permits, or the expiry, revocation or failure to comply with the terms of any such permits that we have obtained, would adversely affect our business.

Our activities are subject to environmental laws and regulations that may increase our costs and restrict our operations.

All of our exploration, potential development and production activities are subject to regulation by governmental agencies under various environmental laws. These laws address emissions into the air, discharges into water, management of waste, management of hazardous substances, protection of natural resources, antiquities and endangered species and reclamation of lands disturbed by mining operations. Environmental legislation is evolving, and the general trend has been towards stricter standards and enforcement, increased fines and penalties for noncompliance, more stringent environmental assessments of proposed projects and increasing responsibility for companies and their officers, directors and employees. Compliance with environmental laws and regulations may require significant capital outlays on our behalf and may cause material changes or delays in our intended activities.

Several regulatory initiatives are currently ongoing within the State of Alaska that have the potential to influence the permitting process for the Upper Kobuk Mineral Projects. These include revisions to Alaska's Water Quality Standards regarding mixing zones regulations, which are currently under Environmental Protection Agency review, and which revisions may be required in order to authorize a mixing zone for discharge in Subarctic Creek. Future changes in these laws or regulations could have a significant adverse impact on some portion of our business, requiring us to re-evaluate those activities at that time.

Environmental hazards may exist on our properties that are unknown to us at the present time and that have been caused by previous owners or operators or that may have occurred naturally. We may be liable for remediating such damage.

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Failure to comply with applicable environmental laws, regulations and permitting requirements may result in enforcement actions thereunder, including orders issued by regulatory or judicial authorities, causing operations to cease or to be curtailed, and may include corrective measures requiring capital expenditures, installation of additional equipment or remedial actions.

Land reclamation requirements for our exploration properties may be burdensome.

Land reclamation requirements are generally imposed on mineral exploration companies (as well as companies with mining operations) in order to minimize long term effects of land disturbance. Reclamation may include requirements to:

treat ground and surface water to applicable water quality standards;

control dispersion of potentially deleterious effluents; and

reasonably re-establish pre-disturbance landforms and vegetation.

In order to carry out reclamation obligations imposed on us in connection with exploration, potential development and production activities, we must allocate financial resources that might otherwise be spent on further exploration and development programs. In addition, regulatory changes could increase our obligations to perform reclamation and mine closing activities. If we are required to carry out unanticipated reclamation work, our financial position could be adversely affected.

Risks Related to the Acquisition of New Projects

Risks inherent in acquisitions of new properties.

We may actively pursue the acquisition of exploration, development and production assets consistent with our acquisition and growth strategy. From time to time, we may also acquire securities of or other interests in companies with respect to which we may enter into acquisitions or other transactions. Acquisition transactions involve inherent risks, including but not limited to:

accurately assessing the value, strengths, weaknesses, contingent and other liabilities and potential profitability of acquisition candidates;

ability to achieve identified and anticipated operating and financial synergies;

unanticipated costs;

diversion of management attention from existing business;

potential loss of our key employees or key employees of any business acquired;

unanticipated changes in business, industry or general economic conditions that affect the assumptions underlying the acquisition;

decline in the value of acquired properties, companies or securities;

assimilating the operations of an acquired business or property in a timely and efficient manner;

maintaining our financial and strategic focus while integrating the acquired business or property;

implementing uniform standards, controls, procedures and policies at the acquired business, as appropriate; and

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to the extent that we make an acquisition outside of markets in which we have previously operated, conducting and managing operations in a new operating environment.

Acquiring additional businesses or properties could place increased pressure on our cash flow if such acquisitions involve a cash consideration. The integration of our existing operations with any acquired business will require significant expenditures of time, attention and funds. Achievement of the benefits expected from consolidation would require us to incur significant costs in connection with, among other things, implementing financial and planning systems. We may not be able to integrate the operations of a recently acquired business or restructure our previously existing business operations without encountering difficulties and delays. In addition, this integration may require significant attention from our management team, which may detract attention from our day-to-day operations. Over the short-term, difficulties associated with integration could have a material adverse effect on our business, operating results, financial condition and the price of our Common Shares. In addition, the acquisition of mineral properties may subject us to unforeseen liabilities, including environmental liabilities, which could have a material adverse effect on us. There can be no assurance that any future acquisitions will be successfully integrated into our existing operations.

Any one or more of these factors or other risks could cause us not to realize the anticipated benefits of an acquisition of properties or companies and could have a material adverse effect on our financial condition.

We face industry competition in the acquisition of exploration properties and the recruitment and retention of qualified personnel.

We compete with other exploration and producing companies, many of which are better capitalized, have greater financial resources, operational experience and technical capabilities or are further advanced in their development or are significantly larger and have access to greater mineral reserves, for the acquisition of mineral claims, leases and other mineral interests as well as for the recruitment and retention of qualified employees and other personnel. If we require and are unsuccessful in acquiring additional mineral properties or in recruiting and retaining qualified personnel, we will not be able to grow at the rate we desire, or at all.

Risks Related to the Company’s Executive Officers and Board of Directors

We may experience difficulty attracting and retaining qualified management and technical personnel to grow our business.

We are dependent on the services of key executives and other highly skilled and experienced personnel to advance our corporate objectives as well as the identification of new opportunities for growth and funding. Mr. Giardini and Ms. Sanders are currently our only executive officers. It will be necessary for us to recruit additional skilled and experienced executives. Our inability to do so, or the loss of any of these persons or our inability to attract and retain suitable replacements for them, or additional highly skilled employees required for our activities, would have a material adverse effect on our business and financial condition.

Some of our directors and officers have conflicts of interest as a result of their involvement with other natural resource companies.

Certain of our directors and officers also serve as directors or officers, in other companies involved in natural resource exploration and development or mining-related activities. To the extent that such other companies may participate in ventures in which we may participate in, or in ventures which we may seek to participate in, our directors and officers may have a conflict of interest in negotiating and concluding terms respecting the extent of such participation. In all cases where our directors and officers have an interest in other companies, such other companies may also compete with us for the acquisition of mineral property investments. Any decision made by any of these directors and officers involving Trilogy will be made in accordance with their duties and obligations to deal fairly and in good faith with a view to the best interests of Trilogy and its shareholders. In addition, each of the directors is required to declare and refrain from voting on any matter in which these directors may have a conflict of interest in accordance with the procedures set

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forth in the Business Corporations Act (British Columbia) and other applicable laws. In appropriate cases, the Company will establish a special committee of independent directors to review a matter in which several directors, or management, may have a conflict. Nonetheless, as a result of these conflicts of interest, the Company may not have an opportunity to participate in certain transactions, which may have a material adverse effect on the Company’s business, financial condition, results of operation and prospects.

General Risk Factors

General economic conditions may adversely affect our growth, future profitability and ability to finance.

The unprecedented events in global financial markets in the past several years and the impact of COVID-19 have had a profound impact on the global economy. Many industries, including the copper mining industry, are impacted by these market conditions. Some of the key impacts of the current financial market turmoil include contraction in credit markets resulting in a widening of credit risk, devaluations, high volatility in global equity, commodity, foreign exchange and precious metal markets and a lack of market liquidity. A worsening or slowdown in the financial markets or other economic conditions, including but not limited to, consumer spending, employment rates, business conditions, inflation, fuel and energy costs, consumer debt levels, lack of available credit, the state of the financial markets, interest rates and tax rates, may adversely affect our growth and ability to finance. Specifically:

the volatility of copper, zinc, lead and other metal prices would impact our estimates of mineral resources, revenues, profits, losses and cash flow, and the feasibility of our projects;

negative economic pressures could adversely impact demand for our future production, if any;

construction related costs could increase and adversely affect the economics of any project;

volatile energy, commodity and consumables prices and currency exchange rates could impact our estimated production costs;

the devaluation and volatility of global stock markets would impact the valuation of our equity and other securities; and

any future pandemic events similar to that of COVID-19 may also have similar impacts on general economic conditions.

Future sales or issuances of equity securities could decrease the value of any existing Common Shares, dilute investors’ voting power and reduce our earnings per share.

We may sell additional equity securities (including through the sale of securities convertible into Common Shares) and may issue additional equity securities to finance our operations, exploration, development, acquisitions or other projects. We are authorized to issue an unlimited number of Common Shares. We cannot predict the size of future sales and issuances of equity securities or the effect, if any, that future sales and issuances of equity securities will have on the market price of the Common Shares. Sales or issuances of a substantial number of equity securities, or the perception that such sales could occur, may adversely affect prevailing market prices for the Common Shares. With any additional sale or issuance of equity securities, investors will suffer dilution of their voting power and may experience dilution in our earnings per share.

Our largest shareholder has significant influence on us and may also affect the market price and liquidity of the securities .

Electrum Strategic Opportunities Fund L.P. (“Electrum”) is our single largest shareholder, controlling approximately 18% of the outstanding voting securities. Accordingly, Electrum will have significant influence in determining the outcome of any corporate transaction or other matter submitted to the shareholders for approval, including mergers, consolidations and the sale of all or substantially all of our assets and other significant corporate actions. Unless significant participation

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of other shareholders takes place in such shareholder meetings, Electrum may be able to approve such matters itself. The concentration of ownership of the shares by Electrum may: (i) delay or deter a change of control of the Company; (ii) deprive shareholders of an opportunity to receive a premium for their shares as part of a sale of the Company; and (iii) affect the market price and liquidity of the shares. Without the consent of Electrum, we could be prevented from entering into transactions that are otherwise beneficial to us. The interests of Electrum may differ from or be adverse to the interests of our other shareholders. The effect of these rights and Electrum’s influence may impact the price that investors are willing to pay for securities. If Electrum sells a substantial number of shares in the public market, the market price of the shares could fall. The perception among the public that these sales will occur could also contribute to a decline in the market price of the shares.

Our Common Shares are subject to various factors that have historically made share prices volatile.

The market price of our Common Shares may be subject to large fluctuations, which may result in losses to investors. The market price of the Common Shares may increase or decrease in response to a number of events and factors, including: our operating performance and the performance of competitors and other similar companies; volatility in metal prices; the arrival or departure of key personnel; the number of Common Shares to be publicly traded after an offering; the public’s reaction to our press releases, material change reports, other public announcements and our filings with the various securities regulatory authorities; changes in earnings estimates or recommendations by research analysts who track the Common Shares or the shares of other companies in the resource sector; changes in general economic and/or political conditions; acquisitions, strategic alliances or joint ventures involving us or our competitors; and the factors listed under the heading “ Cautionary Statement Regarding Forward-Looking Information. ”

The market price of the Common Shares may be affected by many other variables which are not directly related to our success and are, therefore, not within our control, including other developments that affect the market for all resource sector securities, the breadth of the public market for the Common Shares and the attractiveness of alternative investments.

We do not intend to pay any cash dividends in the foreseeable future.

We have not declared or paid any dividends on our Common Shares.  Our current business plan requires that for the foreseeable future, any future earnings be reinvested to finance the growth and development of our business.  We do not intend to pay cash dividends on the Common Shares in the foreseeable future. We will not declare or pay any dividends until such time as our cash flow exceeds our capital requirements and will depend upon, among other things, conditions then existing including earnings, financial condition, restrictions in financing arrangements, business opportunities and conditions and other factors, or our Board determines that our shareholders could make better use of the cash.

The consummation of the transactions contemplated by the binding letter of intent with the U.S. Government and the U.S. Government’s ownership of significant equity interests in the Company may subject the Company and it stockholders to a number of additional risks and uncertainties, any of which could have a material adverse effect on the Company’s business, financial condition and results of operations or adversely impact the interests of our other sh areholders .

The binding letter of intent entered into on October 6, 2025 with the DOW, led by the Office of the Undersecretary of Defense for Acquisitions and Sustainment (OUSD (A&S)) and the Office of Strategic Capital (OSC), for the Strategic Investment, which provides that the DOW will purchase from the Company 8,215,570 units at a price of $2.17 per unit for an aggregate purchase price of approximately $17.8 million. Each unit is comprised of one common share of Trilogy and 3/4 of a 10-year Trilogy Warrant. Each Trilogy Warrant will be exercisable following completion of construction of the Ambler Road at an exercise price of $0.01 to acquire one common share of Trilogy. Additionally, the DOW will purchase from South32, the Company’s joint venture partner at Ambler Metals, at a price of approximately $17.8 million 8,215,570 common shares of Trilogy that South32 currently holds and a 10-year call option to acquire an additional 6,161,678 common shares of Trilogy from South32 at a price of $0.01 per share, exercisable following completion of construction of the Ambler Road. The aggregate 16,431,140 shares to be issued and/or transferred to the DOW pursuant

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to the transactions above represents approximately 10% of the Company’s then issued and outstanding common shares. The Company and South32 will reinvest the entire proceeds from the Strategic Investment in Ambler Metals to advance the exploration and development of the UKMP. Unitl October 6, 2028, the DOW shall have a three-year right to appoint one independent third-party director with relevant corporate governance experience to the board of directors of Trilogy, subject to the approval of the Trilogy board of directors, not to be unreasonably withheld. Finally, the letter of intent contains covenants to act in good faith regarding (i) a framework agreement among interested parties to establish the basis on which the Ambler Road can be permitted, financed and constructed, (ii) the DOW’s help to facilitate financing required for the construction of the Ambler Road in coordination with the State of Alaska, and (iii) certain permitting matters. Finally, the binding letter of intent provides for limits on the Company’s incurrence of indebtedness for the next three years in excess of $1 billion. The transaction is expected to close following the reauthorization of the Defense Production Act by the United States Congress and the completion by the U.S. government of its Foreign Ownership, Control, or Influence (FOCI) review; provided however, that if these conditions have not occurred prior to March 31, 2026 the letter of intent will terminate.

The closing of the Strategic Investment and the associated receipt of funds depends on the availability of appropriations from the legislative branch of the U.S. government and the ability of the executive branch of the U.S. government to obtain the funding and support contemplated by the transaction. The legislative, judicial or executive branches of the U.S. government could determine in the future that all or a portion of the transactions were unauthorized, void or voidable. The issuance of common shares to the U.S. government at a discount to the current market price is dilutive to existing shareholders, and shareholders may suffer significant additional dilution if the conditions to the Trilogy Warrant are triggered and the Trilogy Warrant is exercised. In addition, enforcement against a government counterparty is inherently uncertain given the defenses available to the U.S. government. The transactions contemplated by the letter of intent and the Strategic Investment may result in the U.S. government becoming one of the Company’s larger shareholders. The U.S. government’s interests in the Company may not be the same as those of other shareholders, and the presence of an additional large shareholder may dilute the voting power of existing or future shareholders. The contractual debt limitation may adversely impact the Company’s ability to raise capital. The existence of a significant U.S. government equity interest in the Company, and the U.S. government’s substantial additional powers with respect to the laws and regulations impacting the Company, may impact the Company's ability to pursue potential future strategic transactions that may be beneficial to shareholders.

We may be a “passive foreign investment company” for our current and future tax years, which may have adverse U.S. federal income tax consequences for U.S. Holders.

U.S. Holders (as defined below under “Certain U.S. Federal Income Tax Considerations – U.S. Holders”) should be aware that we believe that we were a “passive foreign investment company” (a “PFIC”) within the meaning of Section 1297(a) of the Internal Revenue Code of 1986, as amended, for our most recently completed tax year, and based on current business plans and financial expectations, we may be a PFIC in the current tax year and future tax years. PFIC status depends on the composition of a company’s income and assets and the fair market of its assets (including goodwill) calculated on a yearly basis after the close of the taxable year, as well as on the application of complex statutory and regulatory rules that are subject to potentially varying or changing interpretations. There can be no assurance that we will not be treated as a PFIC for any taxable year.

If we are a PFIC for any tax year during which a U.S. Holder holds Common Shares, certain adverse U.S. federal income tax consequences may apply to such U.S. Holder. If we are a PFIC for any year during a U.S. Holder’s holding period, then such U.S. Holder generally will be required to treat any gain realized upon a disposition of Common Shares and any so-called “excess distribution” received on its Common Shares as ordinary income, and to pay an interest charge on a portion of such gain or distributions. In certain circumstances, the sum of the tax and the interest charge may exceed the total amount of proceeds realized on the disposition, or the amount of excess distribution received, by the U.S. Holder. Subject to certain limitations, these tax consequences may be altered if a U.S. Holder makes a timely and effective QEF Election or a Mark-to-Market Election (each as defined below under the heading “Certain U.S. Federal Income Taxation Considerations – Default PFIC Rules under Section 1291 of the Code”). A U.S. Holder who makes a QEF Election generally must report on a current basis its share of our net capital gain and ordinary earnings for any year in which we

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are a PFIC, whether or not we distribute any amount to our shareholders. We will make available to U.S. Holders, upon their written request, information as to our status as a PFIC, as reasonably determined by us, and will provide to a U.S. Holder all information and documentation that a U.S. Holder making a QEF Election with respect to us that is required to obtain for U.S. federal income tax purposes in the event we are a PFIC. We may provide such information on our website. A U.S. Holder who makes the Mark-to-Market Election generally must include as ordinary income each year the excess of the fair market value of the Common Shares over the U.S. Holder’s tax basis therein. This paragraph is qualified in its entirety by the discussion below under the heading “Certain U.S. Federal Income Taxation Considerations.” Each U.S. Holder should consult its own tax advisor regarding the PFIC rules and the U.S. federal income tax consequences of the acquisition, ownership, and disposition of their Common Shares.

Proposed legislation in the U.S. Congress, including changes in U.S. tax law may adversely impact us and the value of our Common Shares.

Changes to U.S. tax laws (which changes may have retroactive application) could adversely affect us or holders of our Common Shares. In recent years, many changes to U.S. federal income tax laws have been proposed and made, and additional changes to U.S. federal income tax laws are likely to continue to occur in the future.

The U.S. Congress is currently considering numerous items of legislation which may be enacted prospectively or with retroactive effect, which legislation could adversely impact our financial performance and the value of our Common Shares. Additionally, U.S. states in which we operate or own assets may impose new or increased taxes. If enacted, most of the proposals would be effective for the current or later years. The proposed legislation remains subject to change, and its impact on us and purchasers of our Common Shares is uncertain.

Global climate change is an international concern and could impact our ability to conduct future operations.

Global climate change is an international issue and receives an enormous amount of publicity. We would expect that the imposition of international treaties or U.S. or Canadian federal, state, provincial or local laws or regulations pertaining to mandatory reductions in energy consumption or emissions of greenhouse gasses could affect the feasibility of our mining projects and increase our operating costs.

Adverse publicity from non-governmental organizations could have a material adverse effect on us.

There is an increasing level of public concern relating to the effect of mining production on our surroundings, communities and environment. Non-governmental organizations (“NGOs”), some of which oppose resource development, are often vocal critics of the mining industry. While we seek to operate in a socially responsible manner, adverse publicity generated by such NGOs related to extractive industries, or our operations specifically, could have an adverse effect on our reputation and financial condition or our relationship with the communities in which we operate.

We may fail to achieve and maintain the adequacy of our internal control over financial reporting as per the requirements of the Sarbanes-Oxley Act.

We are required to document and test our internal control procedures in order to satisfy the requirements of Section 404 of SOX. It requires an annual assessment by management of the effectiveness of our internal control over financial reporting. We may in the future fail to achieve and maintain the adequacy of our internal control over financial reporting, as such standards are modified, supplemented or amended from time to time, and we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404 of SOX. Our failure to satisfy the requirements of Section 404 of SOX on an ongoing, timely basis could result in the loss of investor confidence in the reliability of our financial statements, which in turn could harm our business and negatively impact the trading price of our Common Shares. In addition, any failure to implement required new or improved controls, or difficulties encountered in their implementation, could harm our operating results or cause us to fail to meet our reporting obligations. Future acquisitions of companies may provide us with challenges in implementing the required processes, procedures and controls in our acquired operations. Acquired companies may not have

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disclosure control and procedures or internal control over financial reporting that are as thorough or effective as those required by securities laws currently applicable to us.

Our business is subject to evolving corporate governance and public disclosure regulations that have increased both our compliance costs and the risk of noncompliance, which could have an adverse effect on our stock price.

We are subject to changing rules and regulations promulgated by a number of United States and Canadian governmental and self-regulated organizations, including the SEC, the Canadian Securities Administrators, the NYSE American, the TSX, and the Financial Accounting Standards Board. These rules and regulations continue to evolve in scope and complexity and many new requirements have been created in response to laws enacted by the United States Congress, making compliance more difficult and uncertain. Our efforts to comply with new rules and regulations, including those promulgated under Dodd-Frank, have resulted in, and are likely to continue to result in, increased general and administrative expenses and a diversion of management time and attention from revenue-generating activities to compliance activities.

Changes in U.S. laws and policies regulating international trade may adversely impact the Company.

The activities of the current administration in the United States may result in legislative and regulatory changes that could have a material adverse effect on the Company and its financial condition. In particular, there is uncertainty regarding U.S. tariffs and support for existing treaty and trade relationships, including with Canada. Although discussions continue between the United States and other countries, there remains significant uncertainty over whether tariffs or other restrictive trade measures or countermeasures will be implemented and, if so, the scope, impact and duration of any such measures. A trade war or new tariffs barriers may potentially lead to increases or decreases in revenues due to higher or lower metal prices, but the overall effect would depend on changes in demand, production strategies, and operational costs. Further, a trade war or new tariff barriers may potentially lead to increased costs and may result in uncertainty over mineral resources and reserve estimates in its technical reports. Additionally, due to worldwide economic uncertainty, the availability and cost of funds for development and other costs have become increasingly difficult, if not impossible, to project.

In the future, we may be subject to legal proceedings.

Due to the nature of our business, we may be subject to numerous regulatory investigations, claims, lawsuits and other proceedings in the ordinary course of our business. The results of these legal proceedings cannot be predicted with certainty due to the uncertainty inherent in litigation, including the effects of discovery of new evidence or advancement of new legal theories, the difficulty of predicting decisions of judges and juries and the possibility that decisions may be reversed on appeal. There can be no assurances that these matters will not have a material adverse effect on our business.

Item 7.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

General

This Management’s Discussion and Analysis (“MD&A”) of Trilogy Metals Inc. (“Trilogy”, “the Company”, “us” or “we”) is dated February 16, 2026 and provides an analysis of our audited financial results for the year ended November 30, 2025 compared to the year ended November 30, 2024. A discussion of our year ended November 30, 2025 compared to November 30, 2024 is contained in this report on Form 10-K for the year ended November 30, 2025.

The following information should be read in conjunction with our November 30, 2025 audited consolidated financial statements and related notes which were prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”). A summary of the U.S. GAAP accounting policies is outlined in note 2 of the audited 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.

Richard Gosse, P. Geo, VP Exploration of the Company, is a Qualified Person under National Instrument 43-101 -  Standards of Disclosure for Mineral Projects  (“NI 43-101”) and S-K 1300, 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 LLC (the “NYSE American”) under the symbol “TMQ”. Additional information related to Trilogy, including our annual report on Form 10-K, is available on SEDAR+ at www.sedarplus.ca and on EDGAR at www.sec.gov .

Description of business

We are a base metals exploration company focused on the exploration and development of mineral properties, through our equity investee, in the Ambler Mining District located in Alaska, U.S.A. We conduct our operations through a wholly owned subsidiary, NovaCopper US Inc. which is doing business as Trilogy Metals US (“Trilogy Metals US”). Our Upper Kobuk Mineral Projects, (“UKMP” or “UKMP Projects”) were contributed into a 50/50 joint venture (the “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 Ambler lands which host the Arctic copper-zinc-lead-gold-silver 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 hosts the Bornite carbonate-hosted copper project (the “Bornite Project”) and related assets. The Company also conducts early-stage exploration through a wholly owned subsidiary, 995 Exploration Inc.

Corporate activities

Base Shelf Prospectus

The Company filed a final short form base shelf prospectus base shelf prospectus with the securities commissions in each of the provinces and territories of Canada (the “Canadian Base Shelf Prospectus”), and a corresponding shelf registration statement on Form S-3 (the “Registration Statement”, and together with the Canadian Base Shelf Prospectus, the (“Base Shelf Prospectus”) with the United States Securities and Exchange Commission (“SEC”) allowing for the future issuance, from time to time, of up to $50 million in common shares of the Company (the “Common Shares”), warrants to purchase Common Shares, share purchase contracts of the Company, subscription receipts and units comprised of some or all of the foregoing securities (collectively, the “Securities”). Any amounts, prices and terms will be determined based on market conditions at the time of an offering and will be set out in an accompanying prospectus supplement. The final

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Base Shelf Prospectus became effective on April 14, 2025.  The Canadian Base Shelf Prospectus will remain effective for 25 months, while the Registration Statement will remain effective for three years.

At-The-Market Offering

On May 27, 2025, the Company entered into an equity distribution agreement (the “May Distribution Agreement”) with BMO Nesbitt Burns Inc., Cantor Fitzgerald Canada Corporation, BMO Capital Markets Corp. and Cantor Fitzgerald & Co. for an at-the-market equity program (“May ATM Program”).  On the same date, the Company filed a prospectus supplement (the “May Prospectus Supplement”) to the Canadian Base Shelf Prospectus and the US shelf registration statement on Form S-3 qualifying the distribution of the Common Shares under the May ATM Program. Under the May ATM Program and pursuant to the May Distribution Agreement and the May Prospectus Supplement, the Company could sell up to $25 million of Common Shares. The Common Shares sold under the May ATM Program were to be sold at the prevailing market price at the time of sale. The net proceeds of any such sales under the May ATM Program are anticipated to be used for continued development of the UKMP and for general corporate purposes.  In October 2025, pursuant to the May ATM Program the Company sold 3,513,495 shares of common stock at an average price of $7.12 per share for gross proceeds of $25.0 million and net proceeds of $24.3 million after commissions paid under the May Distribution Agreement. The May ATM Program was terminated upon completion of these sales.

On October 31, 2025, the Company filed a prospectus as part of its automatic shelf registration statement on Form S-3 with the SEC.  This registration allows the Company to issue, from time to time, various securities including Common Shares, warrants to purchase Common Shares (the “Warrants”), share purchase contracts, subscription receipts, and units comprised of some or all of the foregoing securities (collectively, the “Securities”) or any combination thereof in one or more transactions under this shelf prospectus (the “US Prospectus”). Securities may be offered separately or together, at times, in amounts, at prices and on terms to be determined based on market conditions at or prior to the time of each offering and set forth in an accompanying shelf prospectus supplement.

On November 7, 2025, the Company entered into an equity distribution agreement with Cantor Fitzgerald & Co. and BMO Capital Markets Corp., as lead agents (the “Lead Agents”), and Canaccord Genuity LLC, National Bank of Canada Financial Inc. and Raymond James (USA) Ltd., for an at-the-market equity program pursuant to which the Company may offer and issue up to $200 million of Common Shares from time to time through the Lead Agents (“Nov ATM Program”). The Offering is being made in the United States under the terms of the Company’s registration statement on Form S-3 filed with the SEC (“November Prospectus Supplement”).  No sales of Common Shares under this November Prospectus Supplement will be made in Canada, to anyone known by the Agents to be a resident of Canada or over or through the facilities of the TSX or any other exchange or market in Canada. No sales were made under the Nov ATM Program in the fourth quarter of 2025.

U.S. Government Support

On October 6, 2025, the Company, South32 and Ambler Metals entered into a binding letter of intent with the U.S. Department of War (“DOW”) for an investment to advance exploration and development of the Company’s UKMP.  The DOW will invest approximately $17.8 million in Trilogy Metals in exchange for 8,215,570 units at a price of $2.17 per unit, with each unit comprising of one common share of Trilogy Metals and 3/4 of a 10-year warrant.  Each full warrant would be exercisable to acquire up to 6,161,678 common shares of Trilogy Metals at a price of $0.01 per share (“Trilogy Warrant”). Concurrently, the DOW will pay approximately $17.8 million to South32 in exchange for 8,215,570 common shares of Trilogy Metals that South32 currently holds and a 10-year call option to acquire an additional 6,161,678 shares of Trilogy Metals from South32 at a price of $0.01 per share (“South32 Warrant”). The Trilogy Warrant and the South32 Warrant are exercisable following completion of construction of the Ambler Road. The entire proceeds of approximately $35.6 million from the transactions with the DOW will be reinvested in Ambler Metals.

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Property review

The UKMP Projects are held by our equity investee, Ambler Metals of which Trilogy holds a 50% interest. The projects are located in the Ambler Mining District in Northwest Alaska. The UKMP Projects comprise approximately 448,217 acres (181,387 hectares) consisting of the Ambler and Bornite lands.

On October 19, 2011, NANA, an Alaska Native Corporation headquartered in Kotzebue, Alaska, and Trilogy Metals US entered an Exploration Agreement and Option Agreement (as amended, the “NANA Agreement”) for the cooperative development of NANA’s respective resource interests in the Ambler Mining District of Northwest Alaska. Upon the formation of Ambler Metals, the Company assigned its rights and obligations under the NANA Agreement to Ambler Metals.  The NANA Agreement consolidates Ambler Metals’ and NANA’s land holdings into an approximately 142,831-hectare land package and provides a framework for the exploration and any future development of this high-grade and prospective poly-metallic belt.

The NANA 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.  Upon the decision to proceed with development of a mine within the area of interest, inclusive of the Arctic and Bornite Projects, 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.

Arctic Project

The Ambler lands, which host a number of deposits, include the high-grade copper-zinc-lead-gold-silver Arctic Project, and other mineralized occurrences within a 100-kilometer-long volcanogenic massive sulfide (“VMS”) belt. The Ambler lands are located in Northwestern Alaska and consist of 185,805 acres (75,192 hectares) of Federal patented mining claims which hosts the Arctic deposit and State of Alaska mining claims which Ambler Metals is actively exploring, within which VMS mineralization has been found.

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 (as amended, 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 amounts paid to NANA were recorded as acquisition costs for the Bornite Project.

On January 15, 2025, the Company announced the positive results of its Preliminary Economic Assessment Study/Initial Assessment (“Bornite PEA”) for the Bornite copper project.  Highlights of the Bornite PEA include the following:

1.9 billion pounds of copper over 17-year mine life;

Potential to extend mine activity for the Upper Kobuk Mineral Projects to over 30 years;

Pre-tax net present value (“NPV”)8% of $552.0 million and an internal rate of return (“IRR”) of 23.6%; and

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After-tax NPV8% of $394.0 million and after-tax IRR of 20.0%.

The Bornite PEA describes the technical and economic viability of establishing an underground mining operation for a 6,000 tonne-per-day operation with a 17-year mine life.  The Bornite PEA assumes re-purposing the infrastructure described in the Arctic Feasibility Study for the use with the Bornite Project once the Arctic deposit has been depleted.

Ambler Metals

On February 11, 2020, pursuant to a contribution agreement among Trilogy and South32, Trilogy contributed all its assets associated with the UKMP, including the Arctic and Bornite Projects in exchange for a 50% membership interest in Ambler Metals.  Simultaneously, South32 contributed $145 million cash in exchange for a 50% membership interest in Ambler Metals.

Ambler Metals is an independently operated company, jointly controlled by Trilogy and South32 through a four-member board of which two members are currently appointed by Trilogy based on its 50% equity interest. All significant decisions related to the UKMP require the approval of both companies. We determined that Ambler Metals is a variable interest entity, or 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 limited liability company agreement. As we have significant influence over Ambler Metals through our representation on its board, we use the equity method of accounting for our investment in Ambler Metals. Our maximum exposure to loss in this entity is limited to the carrying amount of our investment in Ambler Metals, which, as of November 30, 2025, totaled $105.3 million.

The board of Ambler Metals approved a 2025 fiscal year budget totaling $5.8 million to support external and community affairs, to maintain the State of Alaska mineral claims in good standing, and for the maintenance of physical assets.  During the fiscal year ended November 30, 2025, Ambler Metals spent $5.6 million in expenses primarily related to salaries and wages, professional fees, engineering, and project support.

In addition, the board of Ambler Metals also approved supplement budgets totaling $1.2 million to support the AAP.  During the fiscal year ended November 30, 2025, Ambler Metals incurred $1.0 million related to the Ambler Access Project costs, primarily consisting of continuity engagement activities.

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

On October 6, 2025, President Trump issued a decision under Section 1106 of the Alaska National Interest Lands Conservation Act (“ANILCA”), granting the permits for the Ambler Access Project (or “Ambler Road”). The decision approved an appeal by the Alaska Industrial Development and Export Authority (“AIDEA”), a public corporation of the State of Alaska, to reverse the Biden Administration’s decision in June 2024 to select the “No Action Alternative” and terminate the previously issued right-of-way grant for the Ambler Road. President Trump directed relevant agencies to promptly reinstate, grant and finalize all necessary permits and authorizations with terms necessary to assure adequate and feasible access for economic and other purposes, such as mining and use of the road for industrial and commercial access. All federal right-of-way permits were subsequently issued and are currently in place.

Outlook

The Company has approved its 2026 corporate budget of approximately $5.0 million for public company compliance activities and oversight of Ambler Metals.  In January 2026, the Company added capacity to the senior management team to support strategic initiatives and technical expertise to support the advancement of the UKMP.

The Company has also approved a budget for Ambler Metals for fiscal 2026 in the amount of approximately $35 million of which our share is $17.5 million.  The activities at Ambler Metals will focus on re-staffing, initiating the permitting process for the Arctic Project and progressing technical work necessary to support long-term development.

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Summary of Results

in thousands of dollars, except per share amount

November 30,

November 30,

Change

Exploration expenses

General and administrative

Investor relations

Professional fees

Salaries

Salaries and directors expense – stock-based compensation

Share of loss on equity investment

Loss on derivative carried at fair market value

Interest and other income

Comprehensive loss for the year

Basic and diluted loss per common share

For the year ended November 30, 2025, we reported a net loss of $42.2 million (or $0.26 basic and diluted loss per common share) compared to a net loss of $8.6 million (or $0.05 basic and diluted loss per common share) in fiscal 2024. The increase in comprehensive loss in the current year was primarily driven by the initial recognition of a derivative liability and the corresponding expense of $8.1 million related to the U.S. government’s proposed collaboration agreement and the fair value adjustment of $22.6 million at the fiscal year end.  Additionally, the increase in loss reflects higher salaries paid in cash during 2025, whereas in 2024 a significant portion of executive compensation as settled in common shares of the Company, as part of multi-year cash preservation effort.  The increase in the current year loss was also attributable to higher professional fees, including legal and regulatory costs related to the Company’s preparation of base shelf prospectuses, the May ATM Program and the Nov ATM Program.  These increases were partially offset by higher interest earned during the year.

Fourth quarter results

For the fourth quarter of 2025, we incurred a net loss of $34.7 million compared to a net loss of $1.6 million in the fourth quarter of 2024.  The increase in net loss is primarily driven by our share of loss from the equity investment in Ambler Metals and the loss on the derivative related to the U.S. government’s proposed strategic investment for shares and warrants carried at fair market value. The increase in comprehensive loss in the current year also reflects higher regulatory expenses and legal fees related to the Company’s preparation of base shelf prospectuses and at-the-market programs and the payment of executive compensation in cash instead of settling the compensation in common shares of the Company.

Liquidity and capital resources

During the year ended November 30, 2025, we spent $3.2 million in operating activities, spent $1.0 million in investing activities, and raised $30.0 million in financing activities. Operating expenditures were driven primarily by corporate salaries, professional fees to complete the Bornite PEA, and the preparation of base shelf prospectuses, at-the-market programs, including regulatory filing fees with the U.S. and Canadian securities commissions.  In addition, the Company contributed $1.0 million for our share of funding to Ambler Metals. These cash outflows were offset by $30.0 million in proceeds from financing activities, primarily from the May ATM Program and exercise of stock options.

At November 30, 2025, we had cash of $51.6 million and working capital of $49.6 million, which are current assets less current liabilities excluding the non-cash derivative liability. There is sufficient cash on hand to fund the Company’s fiscal 2026 budget of $5.0 million and our share of Ambler Metas’ fiscal 2026 budget of $17.5 million.

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Off-balance sheet arrangements

We have no material off-balance sheet arrangements.

Outstanding share data

At February 17, 2026, we had 172,545,639 common shares issued and outstanding. At February 17, 2026, we had 9,935,250 stock options outstanding with a weighted-average exercise price of CDN$1.99 and 3,206,355 Deferred Share Units, 373,692 Fixed Deferred Share Units and 951,670 Restricted Share Units (“RSUs”) outstanding. Upon the exercise of all convertible securities, the Company would be required to issue an aggregate of 14,466,967 common shares.

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 Company’s financial instruments consist of cash and cash equivalents, accounts receivable, deposits, 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 majority of the Company’s cash and cash equivalents is held at two large Canadian financial institutions and is largely uninsured as at November 30, 2025.

The derivative liability is carried at fair value on a recurring basis.  The fair value of the derivative liability is valued on the basis of Level 3 inputs.  The estimated fair value is based on the Company’s common stock price of $4.28 at November  30, 2025 ($2.09 on October 7, 2025), volatility of 79%, a risk-free rate of 3.53% and management’s estimate of the equal probability of completion and non-completion of the Ambler Access Project, which is beyond the control of the Company.  A 10% change in the Company’s stock price affects the gain or loss on the derivative liability by approximately $4.8 million at November 30, 2025.  A 10% change in management’s estimate of the likelihood of completion affects the gain or loss on the derivative liability by approximately $1.3 million at November 30, 2025.

New accounting pronouncements

Recently Adopted Accounting Standards

In fiscal year 2025, we adopted Accounting Standards Update (“ASU”) 2023-07 “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures”.  Management evaluated the Company’s organizational structure and internal reporting and concluded that the Company continues to operate as one reportable operating segment consistent with prior periods.  As required by the ASU, we have provided expanded segment disclosures for fiscal 2025 and applied the guidance retrospectively to fiscal 2024.  Adoption of ASU 2023-07 did not affect our results of operations, financial condition, cash flows, or the underlying processes for recording or presenting financial information.  The impact of adoption was limited to the expansion of qualitative and quantitative disclosures related to management oversight of our single operating segment.

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Issued and Not Effective

In December 2023, the FASB issued ASU 2023-09 “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” ASU 2023-09 enhances the transparency and decision usefulness of income tax disclosures through changes to the rate reconciliation and income taxes paid information. The standard is effective beginning with the Company’s Annual Report on Form 10-K for the fiscal year ended November 30, 2026, and subsequent interim periods, with early adoption permitted. The Company is evaluating the impact of the guidance on the consolidated financial statements.

Critical accounting estimates

The most critical accounting estimates upon which our financial status depends are those requiring estimates of the recoverability of our equity method investment in Ambler Metals LLC, fair value measurement of derivative liability and valuation of stock-based compensation.

Impairment of Investment in Ambler Metals LLC

Management assesses the possibility of impairment in the carrying value of its equity method investment in Ambler Metals whenever events or circumstances indicate that the carrying amount of the investment may not be recoverable.  Ambler Metals is a non-publicly traded equity investment owning exploration and development projects. Significant judgments are made in assessing the possibility of impairment. The Company determines whether a potential triggering event or other-than-temporary impairment has occurred by reviewing the recoverability of the underlying assets of Ambler Metals and considering whether there has been changes to the development plans or project strategy.  If the Company concludes that sufficient evidence of a potential other-than temporary impairment exist, an assessment of fair value is performed. If the underlying assets are not recoverable, the Company records an impairment charge equal to the difference between the investment carrying amount and its fair value.

Fair Value Measurement of Derivative Liability

The Company measures the proposed strategic investment by the Department of War under the binding letter of intent as a derivative liability at fair value on a recurring basis.  The valuation of this liability requires to the use of significant unobservable inputs and therefore represents a level 3 fair value measurement.  The valuation relies on management judgement and assumptions on the completion of the Ambler Access Project which is subject to regulatory, political and permitting processes that are not within the Company’s control.  As a result, estimating the probability of project completion requires significant judgement and incorporates inherently uncertain assumptions.

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.

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 17, 2026 available on SEDAR+ at  www.sedarplus.ca  and EDGAR at www.sec.gov and on our website at www.trilogymetals.com.

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Additional information

Additional information regarding the Company, including our annual report on Form 10-K, is available on SEDAR+ at  www.sedarplus.ca and EDGAR at www.sec.gov and on our website at www.trilogymetals.com .

Cautionary notes

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 other applicable securities laws. These forward-looking statements may include statements regarding the Company’s work programs and budgets; perceived merit of properties, exploration results and budgets, 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 regarding Ambler Metals’ plans and expectations relating to its Upper Kobuk Mineral Projects, sufficiency of the Ambler Metals’ cash to fund the UKMP; market prices for precious and base metals; statements regarding the Ambler Road 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, which could prove to be significantly incorrect, including about:

our ability to achieve production at the 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;

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

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

there being no significant disruptions affecting operations, whether relating to labor, supply, power damage to equipment or other matter;

expected trends and specific assumptions regarding metal prices and currency exchange rates; and

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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 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;

uncertainty as to whether there will ever be production at the Company’s mineral exploration and 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, or AMDIAP, will receive the requisite permits and, if it does, whether the Alaska Industrial Development and Export Authority will build the AMDIAP;

risks related to the ability to complete the anticipated strategic investment by the U.S. government, and associated risks of having the U.S. government as a significant shareholder;

risks related to inclement weather which may delay or hinder exploration activities at 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;

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;

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

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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 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;

risks related to the acquisition and integration of operations or projects;

risks related to industry competition in the acquisition of exploration properties and the recruitment and retention of qualified personnel;

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

risks related to conflicts of interests of some of our 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;

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

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, Canadian Securities Administrators, the NYSE American, the 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 17, 2026, 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.

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