8-K: Trilogy Metals Files Technical Report for Bornite Project Preliminary Economic Assessment

Trilogy Metals has filed a technical report summarizing the preliminary economic assessment (PEA) for the Bornite copper project in Northwest Alaska.

Summary

• Trilogy Metals has filed a National Instrument 43-101 technical report for the Bornite Project PEA.
• The PEA was prepared on a 100% ownership basis, of which Trilogy's share is 50%.
• The Bornite project is held by Ambler Metals LLC, a joint venture equally owned by Trilogy and South32 Limited.
• The technical report includes an S-K 1300 Technical Report Summary on the Initial Assessment of the Bornite Project.
• The company vision is to develop the Ambler Mining District into a premier North American copper producer.
• The report details an initial assessment (IA) supporting a high-grade copper mineral resource amenable to both open pit and underground mining methods.
• The IA assumes Arctic process and waste management facilities will be available after the Arctic project has been completed and the Arctic deposit has been depleted.
• The mineral resources are reported in place (point of reference) and are based on a copper price of $4.60/lb.
• The Bornite mine consists of an underground operation to exploit South Reef using sublevel stoping.
• Throughput and cut-off grade were optimized resulting in 6,000 t/d and 1.6% Cu cut-off, respectively.
• The Bornite life-of-mine (LOM) is 17 years.
• Bornite material will be processed in the Arctic process plant that has currently been designed to a feasibility study (FS) level and will process 10,000 t/d of material on a two week on, one week off campaign basis.
• The Bornite Projects initial capital cost is $503.4 million, including indirect costs of $80.6 million and contingency of $72.5 million.
• A sustaining capital of $363.1 million considers equipment replacement costs and pipeline and ditch construction for water management and electrical.
• Total operating costs over the LOM have been estimated at $3,651.6 million.
• The after-tax evaluation of the Bornite Project under the assumptions used in this Report generates positive results with an NPV @ 8% of $393.9 million.
• The payback period is 4.4 years and the IRR After Tax is 20.0%.

Sentiment

Score: 7

Explanation: The document presents a positive outlook for the Bornite Project, with a positive NPV and IRR. However, the reliance on Inferred resources and the need for further studies introduce some uncertainty.

Positives

• The Bornite Project generates positive after-tax results with an NPV @ 8% of $393.9 million.
• The payback period is 4.4 years and the IRR After Tax is 20.0%.
• The project leverages existing infrastructure at the Arctic site, reducing capital costs.
• The project has a long mine life of 17 years.
• The project has a high copper recovery rate of 90.89% at a copper feed grade of 2.66%.

Negatives

• The assessment is preliminary in nature, it includes Inferred mineral resources that are considered too speculative geologically to have modifying factors applied to them that would enable them to be categorized as mineral reserves, and there is no certainty that this economic assessment will be realized.
• The project is sensitive to fluctuations in copper selling price and copper feed grade.
• There is uncertainty around the annual cost of the AAP road.
• Dewatering quantities may be significant at Bornite based on historical rapid flooding of the exploration shaft when it intersected a specific zone at depth.

Risks

• The available geotechnical information indicates that sublevel stoping should be a viable mining method for Bornite, but further studies and core drilling are required to validate this assumption.
• Dewatering quantities may be significant at Bornite based on historical rapid flooding of the exploration shaft when it intersected a specific zone at depth.
• The IA has assumed the Arctic process plant copper, zinc and tailings thickeners will have sufficient capacity for the Bornite copper concentrate and tailings streams based on benchmarking reference projects and existing operations; however, thickening test work to confirm this has not been completed.
• Backfilling the Bornite underground mine may not be possible if the plant tailings can't be processed adequately to provide bulk feed for backfilling, which would significantly affect the mine design and require additional tailings storage.
• Water treatment needs are poorly constrained, and assumptions may not actually be conservative which could lead to higher water treatment costs or significant permitting needs/delays.
• Actual ground conditions along proposed infrastructure are not suitable for proposed structures, which must be moved or redesigned resulting in higher costs.
• The uncertainty in the cost of the AAP road could materially affect the results of the economic analysis for the Bornite Project.

Future Outlook

The Bornite Project shows a positive financial return under the assumptions in the report, and the QPs have identified additional test work and engineering studies required to support further mining studies.

Industry Context

This announcement relates to the ongoing development of the Ambler Mining District in Alaska, a region known for its rich copper and polymetallic deposits. The PEA provides an economic framework for the Bornite project, which could potentially contribute to the supply of copper in North America.

Comparison to Industry Standards

• The report benchmarks the project against similar mining projects in terms of capital and operating costs, metallurgical recovery, and concentrate grades.
• The report references the Arctic project feasibility study for process plant design and cost estimates.
• The report uses CostMine data for labor rates and equipment costs, which are industry-standard sources for mining cost estimation.

Stakeholder Impact

• The project has the potential to improve work opportunities for village residents in the region.
• The project may have potential impacts to wildlife and fish for those projects within their traditional use areas.

Next Steps

• Developing an advanced exploration decline to access South Reef for further drilling.
• Conducting hydrogeology, geotechnical and rock mechanics work.
• Performing metallurgical test work.
• Investigating re-purposing the Arctic process plant to receive Bornite mineralized material.
• Conducting tailings studies considering additional locations and technologies.
• Implementing a hydrological program.
• Completing geochemistry assessments.
• Developing a site water and load balance (water quality predictions) and assessing water treatment needs.
• Undertaking environmental baseline studies.

Key Dates