VANCOUVER, April 10, 2017 /CNW/ - Trilogy Metals Inc. (TSX, NYSE-MKT: TMQ) ("Trilogy" or "Trilogy Metals") is pleased to announce that it has signed an agreement with South32 Limited (ASX/JSE/LSE: S32) ("South32") whereby Trilogy has granted South32 an option to form a 50/50 joint venture with respect to Trilogy's Alaskan assets, known collectively as the Upper Kobuk Mineral Projects ("UKMP"), which includes the Arctic and Bornite Projects, the Exploration and Option to Lease Agreement with NANA Regional Corporation, Inc. ("NANA"), and the remainder of Trilogy's state mining claims along the 100km volcanogenic massive sulphide belt ("UKMP Assets").
South32 must contribute a minimum of $10 million each year, for a maximum of 3 years, to keep the option in good standing ("Initial Funding"). South32 may exercise its option at any time to form the 50/50 joint venture ("JV"). To subscribe for 50% of the JV, South32 will contribute a minimum of $150 million, plus any amounts Trilogy spends at the Arctic Project over the next three years to a maximum of $5 million per year (the "Subscription Price"), less an amount of the Initial Funding contributed by South32. All amounts are in US dollars.
Trilogy will host a conference call today at 1:30pm PT. See conference details below.
Highlights of the agreement and an updated $17 million 2017 field program:
- South32 to fund $10 million per year, for a maximum of 3 years.
- South32 may elect at any time to form a 50/50 joint venture for min. $150M.
- Bornite Exploration: South32's Initial Funding of $10 million this year will be spent on exploration at the Bornite Project during the 2017 field season to test the extension of high-grade copper at the Bornite deposit. The drill program will be off-setting previously drilled diamond drill holes, including RC13-0224 which intersected 236 meters of continuous mineralization averaging 1.9% copper last drilled during the 2013 field program.
- Arctic Pre-Feasibility Study: Trilogy previously announced spending of $7.1 million mainly at the Arctic Project during 2017 in preparation for a pre-feasibility study anticipated to be released in Q1 2018.
- Trilogy will continue to work closely with the Alaska Industrial Development and Export Authority ("AIDEA") and NANA to advance the Environmental Impact Study ("EIS") permitting process for the Ambler Access Road.
Conference Call & Webcast Details
Trilogy's conference call and webcast to discuss this transaction will take place on April 10, 2017 at 1:30pm PT (4:30pm ET). The webcast and conference call-in details are provided below. The webcast will be archived on Trilogy's website for two weeks.
Webcast: http://event.on24.com/wcc/r/1405849-1/E5EEF42CA2215B384927A08301DDEECB
North American callers: 1-888-390-0546
International callers: 1-416-764-8688
Conference ID: 68372321
Agreements
Trilogy and South32 have entered into an agreement whereby Trilogy has granted South32 an option to subscribe for a 50% interest in a joint venture which will hold the UKMP Assets. To maintain the option in good standing South32 must contribute the Initial Funding which will be used to test the extension of the high-grade copper resource identified at the Bornite deposit. South32 can exercise the option at any time over the next 3 years. Once the option is exercised, Trilogy will transfer the UKMP Assets to a newly created limited liability company (the "LLC") in which Trilogy and South32 will be equal partners. Advancing the projects towards a production decision will be funded by the Subscription Price.
2017 Project Plans
South32 and Trilogy Metals have agreed in principal on the 2017 exploration program at Bornite. The parties will drill a minimum of 7 drill holes up to 1,400 meters deep to test the northern extension of the Bornite mineralization. The drilling will evaluate an area approximately one kilometer east-west by 400 meters north-south.
Trilogy Metals also intends to conduct a $7.1 million program at the Arctic Project, focused on geotechnical drilling to identify, test, and evaluate potential locations for all mine-related facilities, including: the ore processing facility (crushing and milling); the waste rock and tailings disposal area(s); water storage ponds; and supporting road infrastructure. This work is being done in support of completing a pre-feasibility level of study for the Arctic Project in the first quarter of 2018. In addition, the Company will continue to work closely with AIDEA and NANA to advance the EIS permitting process for the Ambler Access Road, also known as the Ambler Mining District Industrial Access Project ("AMDIAP").
Trilogy will manage both the Arctic and Bornite programs.
Rick Van Nieuwenhuyse, President and CEO of Trilogy Metals said, "This is a terrific opportunity for Trilogy shareholders. South32 is a global diversified metals and mining company who will bring a wealth of operational experience to the project. Along with our Alaska Native Corporation partner, NANA and their experience as the land owner and co-owner of the Red Dog Mine, one of the largest zinc mines in the world, we have a strong team that will be invaluable as the UKMP progresses towards development."
Rick Van Nieuwenhuyse continued, "We believe this deal recognizes the quality of our assets. By offering to fund at a 150% premium to the investment made by Trilogy, the terms recognize the high-quality asset base that Trilogy has assembled at the UKMP. In terms of the option, South32 will invest up to $30 million to explore, expand and advance the already sizeable metal endowment identified to date. The immediate exploration focus will be to expand the known copper mineralization along the northern frontier of the Bornite deposit. With only three field seasons of exploration drillling at Bornite, we have already identified a resource in excess of 6 billion pounds of copper1. During our last year of drilling at Bornite in 2013, five of the last holes drilled for exploration intercepted significant copper intervals. Mineralization remains open along an approximately 1-kilometer strike length, including drill hole RC13-224 which intersected 236 meters grading 1.9% copper. The copper grades and thick intervals of mineralization found at Bornite warrant further exploration to fully understand the potential of this project."
Wayne Westlake, President and CEO of NANA Regional Corporation added, "NANA looks forward to partnering with Trilogy and South32 on this new phase of exploration. Our region has benefited from responsible resource development, and we value working with companies that advance our land's mineral potential and create shareholder value while respecting our traditional subsistence lifestyle."
1. Indicated in-pit resources at the Bornite deposit at a 0.50% Cu cutoff are 40.5 million tonnes at 1.02% Cu. An additional Inferred in-pit resources at the Bornite deposit at a 0.50% Cu cutoff measures 84.1 million tonnes at 0.95% Cu. In addition to the in-pit resources, Inferred below pit resources at the Bornite deposit are reported (at 1.5% Cu cutoff) as 57.8 million tonnes at 2.89% Cu.
Option Funding Phase
South32 will contribute a minimum of $10 million each year, for up to 3 years, to fund exploration expenditure at Bornite. Provided that all the exploration data and information has been made available to South32 by no later than December 31 of each year, South32 must decide by the end of January of the following year whether; (i) to fund a further tranche of a minimum of $10 million, or (ii) to withdraw and not provide any further annual funding. If the election to fund a further tranche is not made in January, South32 has until the end of March to exercise the option to form the LLC and make the subscription payment. If South32 elects to exercise the option, the Subscription Price less certain deductions for Initial Funding shall be paid in one tranche within 45 business days. Should South32 elect to withdraw the option will lapse and South32 will have no claim to ownership or the funds it had already spent.
Subscription Funding Phase
At any time during the Option Funding Phase of the agreement South32 may elect to subscribe for a 50% interest in a newly formed LLC which will take transfer of, and hold, the UKMP Assets. The Subscription Price is based on a 1.5 times multiple of Trilogy's historical expenditures on the projects of approximately $100 million. As part of the Subscription Price, South32 will match any spending Trilogy makes at the Arctic Project over the next 3 years, to a maximum of $15 million. Depending on when the option is exercised, certain amounts of the Initial Funding will be deducted from the Subscription Price.
Trilogy estimates that the Subscription Price will fund the Arctic and Bornite Projects through feasibility and the permitting of the first mine to be developed in the Ambler mining district. Once the full amount of the subscription payment of approximately $150 million is expended, the parties will contribute funding pro rata, as contemplated by the operating agreement which will govern the LLC (the "LLC Agreement"). The LLC Agreement anticipates a General Manager, Chief Financial Officer and Chief Operating and Technical Officer ("LLC Management Team") to be appointed by the LLC's Board, which will have equal representation from Trilogy and South32.
Qualified Persons
Erin Workman, P.Geo., Director of Technical Services and an employee of Trilogy Metals, is a Qualified Person as defined by National Instrument 43-101. Ms. Workman has reviewed the scientific and technical information in this news release and approves the disclosure contained herein.
Advisors
Blake, Cassels & Graydon LLP and Dorsey & Whitney LLP acted as legal advisors and Deloitte LLP acted as tax advisors to Trilogy Metals.
About South32
South32 is a globally diversified metals and mining company with high-quality and well maintained operations which mine and produce bauxite, alumina, aluminum, energy and metallurgical coal, manganese, nickel, silver, lead and zinc in Australia, Southern Africa and South America.
More information about South32 is available on their company's website at www.south32.net.
About Trilogy Metals
Trilogy Metals Inc., formerly NovaCopper Inc., is a metals exploration company focused on exploring and developing the Ambler mining district located in northwestern Alaska. It is one of the richest and most-prospective known copper-dominant districts located in one of the safest geopolitical jurisdictions in the world. It hosts world-class polymetallic VMS deposits that contain copper, zinc, lead, gold and silver, and carbonate replacement deposits which have been found to host high grade copper mineralization. Exploration efforts have been focused on two deposits in the Ambler mining district - the Arctic VMS deposit and the Bornite carbonate replacement deposit. Both deposits are located within the Company's land package that spans approximately 143,000 hectares. The Company has an agreement with NANA Regional Corporation, Inc., a Regional Alaska Native Corporation that provides a framework for the exploration and potential development of the Ambler mining district in cooperation with local communities. Our vision is to develop the Ambler mining district into a premier North American copper, zinc and precious metals producer.
