Trilogy Metals Inc. (NYSE American / TSX: TMQ) (“Trilogy Metals”, “Trilogy” or “the Company”) is pleased to announce that the Company, South32 Limited (ASX, LSE, JSE: S32; ADR: SOUHY) (“South32”) and Ambler Metals LLC (“Ambler Metals”) have entered into a binding letter of intent with the U.S. Department of War (“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 an investment to advance exploration and development of the Company’s Upper Kobuk Mineral Projects (“UKMP”). The UKMP are held by Ambler Metals – the Company’s 50/50 joint venture with South32.
The DOW to invest approximately $35.6 million for the development of critical mineral resources at the UKMP in transactions with Trilogy Metals and South32.
The DOW will hold approximately 10% of Trilogy Metals.
The DOW intends to 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 following completion of construction of the Ambler Access Project (or “Ambler Road”) at an exercise price of $0.01 to acquire one common share of Trilogy.
The DOW intends to 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, exercisable following completion of construction of the Ambler Road, the entire proceeds of which, will be reinvested in Ambler Metals.
Trilogy Metals and South32 commit to use the funds to advance the exploration and development of the UKMP. DOW shall have the right to appoint one independent third-party director to the board of directors of Trilogy Metals for a period of three years. From the date hereof until January 1, 2029, Trilogy Metals agrees to not incur obligations with respect to third-party indebtedness for borrowed money in excess of $1 billion in the aggregate without the prior written approval of DOW.
The proposed transaction also contemplates that Ambler Metals, South32, Trilogy Metals, the U.S. Government and other interested parties, as applicable, will discuss in good faith a framework agreement to establish the basis on which the Ambler Road can be permitted, financed and constructed—unlocking the development of Arctic, Bornite and any other mineral projects identified through Ambler Metals exploration efforts. DOW will work in good faith to help facilitate financing required for the construction of the Ambler Road in coordination with the State of Alaska. The parties are also committed to work collaboratively in good faith to include future UKMP permit applications in the FAST-41 process to assist with expediting the mine permitting process.
Any transaction is subject to the receipt of all regulatory and stock exchange approvals and the parties expect to negotiate definitive documentation reflecting the terms of the transaction. The Company intends to rely on the Exemptions for Eligible Interlisted Issuer in accordance with section 602.1 of the TSX Company Manual. The parties intend to close the transaction promptly 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 Ambler Access Project or Ambler Road is a proposed 211-mile, industrial-use-only road from the Ambler Mining District to the Dalton Highway that would enable the advancement of exploration and development of the Company’s mineral projects in Northwest Alaska. The Ambler Road is held by The Alaska Industrial Development and Export Authority (“AIDEA”), a public corporation of the State of Alaska.
“This proposed partnership with the U.S. Government represents a significant milestone for Trilogy Metals and for the development of a secure, domestic supply of critical minerals for America in Alaska. The Department of War’s interest underscores the strategic importance of the Upper Kobuk Mineral Projects in supporting U.S. energy, technology, and national security priorities. We look forward to working with our partners at South32, federal and state agencies, and Alaska Native communities to advance this world-class district responsibly and collaboratively.” commented Tony Giardini, President and Chief Executive Officer of Trilogy Metals.
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