Trilogy Metals: Naturally Diversified Resources in Alaska’s Ambler Mining District

Trilogy Metals Inc. (TSX:TMQ) (NYSE:TMQ), which recently changed its name from NovaCopper Inc., is focused on Alaska’s Ambler mining district which ranks as one of the richest and most prospective districts for the discovery of world class polymetallic volcanogenic massive sulphide (VMS) and carbonate replacement deposits. These types of deposits contain copper, zinc, lead, gold and silver—gifting Trilogy with a naturally diversified resource base for building shareholder value.
The Investing News Network recently spoke with Rick Van Nieuwenhuyse, President, CEO and Director of Trilogy Metals, to discuss the company’s name change, the significant exploration upside potential in the region and its current success at the Arctic and Bornite projects.
Investing News Network: Rick, Trilogy Metals holds a significant land package in Alaska’s Ambler mining district. Would you please provide us some more insight about the region and give us some background on your two projects?
Rick Van Nieuwenhuyse: Certainly, the Ambler mining district has been known since the early 1960s as a very prolific belt of rocks hosting both polymetallic VMS deposits and a parallel belt of carbonate hosted copper replacement deposits. We’ve tied up the lion’s share of the belt with our partner NANA Regional Corporation which is one of the regional Alaska Native Corporations. We’ve put together a district play; this is not a one- trick-pony kind of a property. We have over 30 recognized VMS deposits and half a dozen carbonate replacement deposits in the Ambler district. We are focused on developing two of these assets right now, Arctic and Bornite.
Arctic is a polymetallic VMS deposit with roughly 30 million tons of 6 percent copper equivalent; a real standout, high quality asset. About 20 miles to the south of Arctic is our Bornite Project which is a carbonate replacement deposit hosted in Devonian carbonate so it’s actually the same age host rock as the Arctic deposit. We’ve outlined a very substantial open-pit resource there and then it continues in a potential underground mining scenario. We’ve outlined about 6 billion pounds of copper at Bornite and another 2 or 3 billion pounds of copper at Arctic, plus a substantial amount of zinc and precious metals. It’s a very prolific belt and we are just getting started there.
INN: You have just completed the 2016 summer field program. I understand a majority of the focus has been on the Arctic property. Would you be able to provide us with some more details about the progress you’ve made and the goals of the program?
Rick: Yes, Arctic was the focus of this year’s program. Essentially, we are completing a number of pre-feasibility level studies many of which start with drilling at site; geotechnical drilling for pit slope stability studies, acid rock drainage testing, metallurgy and hydrological studies. The majority of the work this year has focused more on engineering than in previous years when we really went after expanding the resources. We have the open-pit resources nailed down for Arctic. The open pit body is certainly open around a few edges and will probably continue in an underground mining scenario, however we’ve decided to stay focused on developing a pre-feasibility study around the open-pit portion of the deposit. We’ve completed the majority of that work this summer.
INN: Turning to your other project, Trilogy recently published a 173 percent increase in the Indicated resource estimate at Bornite. Can you please tell us more about the resource and the value for shareholders?
Rick: Bornite is a really interesting project and it brings excellent exploration upside for Trilogy and its shareholders. It’s a carbonate replacement deposit and somewhat akin to the Mt. Isa district in Australia, of course a very famous long-lived copper mining district, and also has a lot of similarities to the recently discovered Kamoa/Kakula deposits in the Congo – similar mineralogy and mineral zoning with chalcocite, bornite and chalcopyrite replacing sedimentary host rocks – which in our case are carbonates.
We’ve outlined a very substantial resource already. We’ve done significant in-field drilling and re-assayingmuch of the historic core. This deposit was originally discovered by Kennecot back in the early 1960s. They were really focused on developing a high-grade direct shipping ore, so they were looking at 5 percent copper and above. We re-assayed the core that didn’t meet that criteria at the time, focusing on intervals assaying about 1 percent chalcopyrite – this is material that previously was not sampled. Including this previously un-assayed material resulted in the large increase in the Indicated resource. We are up now in the neighborhood of 6 billion pounds of copper at Bornite and at very good grades of 1 percent in the potential open-pit resource area and around 3 percent in the potential underground mining scenario.
What’s really exciting is the deposit is wide open, so what’s up next for Bornite is continued exploration. We are looking to conduct another exploration program at Bornite to the north and east on strike and down deep from where we drilled last in 2013. We had intervals that were hundreds of meters of 2 percent copper. We are very excited to get back to exploring the Bornite project next year.
INN: Thank you. Your Q2 2016 financials show you have a strong cash position with US$13 million on hand. Are there any other highlights from the financials that you’d like to point out to investors?
Rick: Obviously a good cash position is key in this kind of a market. We have a strong shareholder base, and we just recently completed a transaction in which we sold a non-core asset, the Titiribi Project. It’s a large gold resource in Colombia that was a part of our acquisition of Sunward Resources last year. We completed this corporate transaction essentially as an alternative to financing. Sunward had about US$20 million in cash and were trading below cash value. These past few years have been tough for exploration companies in terms of financing, so we came up with a clever alternative.
With gold resources increasing significantly in value, we decided to sell Titiribi to a company that was focused on advancing gold resources. We are very pleased to have completed that transaction with Brazil Resources as of September 1st. The transaction is in exchange for 5 million Brazil Resources shares. They are trading in the neighborhood around $2.25 or so, so it’s in excess of a $10 million transaction. We think gold is in a good position to go up, so we are pleased to be able to realize that value through a very liquid stock that is in good hands with Amir Adnani and his team. We feel this was a good transaction for both companies.
INN: That’s great, Rick. Switching gears to infrastructure, I understand Trilogy Metals is working closely with the Alaskan Industrial Development and Export Authority on the Ambler Mining District Industrial Access Project – a road to provide access into the mining district. Would you give us some insight about the significance of this project and the progress being made to complete the road?
Rick: The Alaska Industrial Development and Export Authority (AIDEA) is a state-owned development bank. Their mandate is to work with public-private partnerships in building infrastructure in Alaska. Clearly Alaska has lots of various areas lacking infrastructure and this is essentially what AIDEA was set up to do—to help build infrastructure. They did this with the Red Dog Mine project. AIDEA owns and operates the road and port facility which was built back in the late 1980s for around $250 million.
In the Ambler mining district, AIDEA has taken on the responsibility of permitting, building and operating an access road. This would be a private road for which the mining companies, including ourselves, would pay a toll to use. Private investors would finance the road by purchasing bonds issued by AIDEA. This is the same approach used to finance construction of the Delong Mountain Road and Port facility used by the Red Dog Mine. Now, nearly 30 years later the Delong Mountain Transportation system is a source of income for the state of Alaska . Of course Red Dog will be mining zinc for many years and the same is envisioned for the Amber mining district once into production.
AIDEA has submitted their application to the state and federal agencies to permit the road, so the next step is conducting a scoping level review for the NEPA permitting process. I am very pleased; it is a major milestone achieved. We think this road project probably will take a couple years to permit, meanwhile Trilogy will be working on developing our Arctic and Bornite projects so that we are in a position to negotiate a toll usage arrangement with AIDEA once the road is ready to be built.
INN: Our investor audience understands how important it is to have community support to enable the success of a mining project. You’ve successfully developed a cooperative partnership with the local leaders in the region. Please tell us more about the nature of your relationship with the regional Alaska Native Corporation.
Rick: Certainly, NANA is made of about 8,000 Iñupiat Eskimos shareholders, most of whom live in the region. Kotzebue is the largest village in the region. The nearest villages to us are Shungnak, Kobuk and Ambler. It is a big area and is sparsely populated. The shareholders of NANA own a huge amount of land in the region and we partnered with them on what we call the Bornites land. So, the Bornite prospect that I talked about earlier is located on NANA lands. We pooled our state mining claims with their substantial privately-owned land in the region to cooperatively develop the Ambler mining district. We’ve been working together formally since 2011 in a truly cooperative relationship. It brings local benefit in terms of NANA shareholder employment, training and scholarships. We think this is the right way to be working in the region—directly engaged with the community.
INN: You recently announced the company has changed the name from NovaCopper to Trilogy Metals. What’s behind the name change?
Rick: It’s really to recognize that we are more than copper. There is substantial zinc and a significant amount of precious metals at Arctic and there’s significant silver and cobalt at Bornite. One of our new taglines is “naturally diversified” because we have a whole belt of rocks that host these polymetallic types of deposits. The board of directors met earlier this year to come up with the new name of Trilogy and we we’re excited to launch that this September.
INN: What are the next catalysts for Trilogy that investors should be watching out for in 2016-2017?
Rick: I think concrete progress on the Ambler mining district access road that we discussed earlier is a very important catalyst, especially as it moves through the permitting process from scoping through to the EIS (Environmental Impact Study) process. Those are very concrete developments. Clearly, this district would have been developed years ago had there been a road into the area. Six percent copper won’t stay on the surface very long in most areas, and it’s the lack of infrastructure that has created this opportunity for us. In working with AIDEA and working with NANA, we’ve been able to select an access route, complete the appropriate environmental studies and submit the permit application. Getting that permitted is going to be a very major catalyst for the company.
In addition, we’ll be releasing updated results from the Arctic drilling program this year. Next year we hope to continue exploring as well as expanding and upgrading the resources at Bornite, which are again very high grade for today’s copper world with 1 percent open-pit copper and 3 percent in the underground resources at Bornite. So, we think that will create some very exciting catalysts for investors.
INN: Rick, thank you very much for you time.
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