Trilogy Metals Inc.



                      Management's Discussion and Analysis

                           (expressed in US dollars)



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 $145 million subscription
price to fund the UKMP through feasibility and the permitting of the first mine;
impact of COVID-19 on the upcoming field season; market prices for precious and
base metals, 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;

· 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;

· the potential impact of the novel coronavirus (COVID-19); and

· 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.



                                       16





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 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;

· commodity price fluctuations;

· our history of losses and expectation of future losses;

· 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 related to market events and general economic conditions;

· risks related to the outbreak of the coronavirus (COVID-19);

· risks and uncertainties relating to the interpretation of drill results, the

geology, grade and continuity of our mineral deposits;

· 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;

· uncertainty related to title to our mineral properties;

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

· risks related to increases in demand for equipment, skilled labor and services

needed for exploration and development of mineral properties, and related cost

increases;

· 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 the voting power of our major shareholders and the impact that

a sale by such shareholders may have on our share price;

· 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;

· 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;

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

· the Company's expectation of not paying cash dividends; and

· adverse federal income tax consequences for U.S. shareholders should the


   Company be a passive foreign investment company.




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 13, 2020, filed with the Canadian securities regulatory
authorities and the SEC, and other information released by Trilogy and filed
with the appropriate regulatory agencies.



                                       17





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.

Cautionary note to United States investors

Reserve and resource estimates





This Management's Discussion and Analysis has been prepared in accordance with
the requirements of the securities laws in effect in Canada, which differ from
the requirements of U.S. securities laws. Unless otherwise indicated, all
resource and reserve estimates included in this Management's Discussion and
Analysis have been prepared in accordance with National Instrument 43-101
Standards of Disclosure for Mineral Projects ("NI 43-101") and the Canadian
Institute of Mining, Metallurgy, and Petroleum Definition Standards on Mineral
Resources and Mineral Reserves. NI 43-101 is a rule developed by the Canadian
Securities Administrators which establishes standards for all public disclosure
an issuer makes of scientific and technical information concerning mineral
projects. Canadian standards, including NI 43-101, differ significantly from the
requirements of the SEC, and resource and reserve information contained herein
may not be comparable to similar information disclosed by U.S. companies. In
particular, and without limiting the generality of the foregoing, the term
"resource" does not equate to the term "reserves". Under U.S. standards,
mineralization may not be classified as a "reserve" unless the determination has
been made that the mineralization could be economically and legally produced or
extracted at the time the reserve determination is made. The SEC's disclosure
standards normally do not permit the inclusion of information concerning
"measured mineral resources", "indicated mineral resources" or "inferred mineral
resources" or other descriptions of the amount of mineralization in mineral
deposits that do not constitute "reserves" by U.S. standards in documents filed
with the SEC. Investors are cautioned not to assume that any part or all of
mineral deposits in these categories will ever be converted into reserves. U.S.
investors should also understand that "inferred mineral resources" have a great
amount of uncertainty as to their existence and great uncertainty as to their
economic and legal feasibility. It cannot be assumed that all or any part of an
"inferred mineral resource" will ever be upgraded to a higher category. Under
Canadian rules, estimated "inferred mineral resources" may not form the basis of
feasibility or pre-feasibility studies except in rare cases. Investors are
cautioned not to assume that all or any part of an "inferred mineral resource"
exists or is economically or legally mineable. Disclosure of "contained ounces"
in a resource is permitted disclosure under Canadian regulations; however, the
SEC normally only permits issuers to report mineralization that does not
constitute "reserves" by SEC standards as in-place tonnage and grade without
reference to unit measures. The requirements of NI 43-101 for identification of
"reserves" are also not the same as those of the SEC, and reserves reported by
the Company in compliance with NI 43-101 may not qualify as "reserves" under SEC
standards. Accordingly, information concerning mineral deposits set forth herein
may not be comparable with information made public by companies that report in
accordance with U.S. standards.



General



This Management's Discussion and Analysis ("MD&A") of Trilogy Metals Inc.
("Trilogy", "Trilogy Metals", "the Company" or "we") is dated April 7, 2020 and
provides an analysis of our unaudited interim financial results for the quarter
ended February 29, 2020 compared to the quarter ended February 28, 2019.



The following information should be read in conjunction with our February 29,
2020 unaudited interim condensed consolidated financial statements and related
notes which were prepared in accordance with United States generally accepted
accounting principles ("U.S. GAAP"). The MD&A should also be read in conjunction
with our audited consolidated financial statements and related notes for the
year ended November 30, 2019. 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.



Andrew W. West, P.Geo., an employee and Exploration Manager, is a Qualified
Person under National Instrument 43-101 - Standards of Disclosure for Mineral
Projects("NI 43-101"), 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 Stock Exchange ("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.sedar.com and on EDGAR at www.sec.gov.



                                       18





Description of business



We are a base metals exploration company focused on exploring and developing our
mineral holdings 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 named Ambler Metals LLC ('Ambler Metals") between Trilogy
and South32 Limited ('South32") on February 11, 2020 (see below). The projects
contributed to the joint venture 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
host the Bornite carbonate-hosted copper project (the "Bornite Project") and
related assets.



Corporate developments



Long-term incentives

On December 19, 2019, the Board of Directors approved the granting of 2,050,000 stock options to employees and directors with various vesting terms.





Project Activities

2020 Operating Budget for the Upper Kobuk Mineral Projects





In a press release dated February 26, 2020, the Company announced that Ambler
Metals had approved a 2020 program budget of $22.8 million for the advancement
of the UKMP. The budget is 100% funded by Ambler Metals. The 2020 program budget
includes 10,000 meters of drilling at the Arctic Project, 2,500 meters of
drilling within the Ambler Volcanogenic massive Sulphide ("VMS") Belt and
geological mapping and geochemical soil sampling at the Bornite Project.
However, the timing of these programs may be delayed, see "Impact of Coronavirus
(COVID-19)" below.



Arctic Project



Activities at the Arctic Project will continue to focus on advancing studies and
preparing for permit applications. Ambler Metals plans to conduct a 10,000-meter
drilling program at the Arctic Project during the summer field season to gather
additional drill data for the conversion of resources to the measured category,
the next phase of metallurgical studies, including pilot plant testing, and
geotechnical drilling for infrastructure placement. The drill program is
expected to commence in mid-June and finish at the end of August. Studies are
expected to continue throughout the year.



Bornite Project



The 2020 field program at the Bornite Project will consist of geological mapping
and geochemical soil sampling over the northern Cosmos Hills and review of drill
core and surface exposures to determine controls on high grade zones of copper
mineralization. Although there is no planned drilling at the Bornite Project in
2020, the Bornite geological database will be updated and the team will identify
priority drill targets for the 2021 field season.



Regional Exploration Project
Following up from the 2019 work performed by Trilogy along the 70-mile (100
kilometer) Ambler VMS belt, Ambler Metals will continue exploration efforts
within the Ambler VMS belt to discover and define potential deposits that can
provide additional feed to a future Arctic mill. Ambler Metals plans to conduct
a 2,500-meter drill campaign in the VMS belt, following up from last year's
drilling at the Sunshine prospect and at other identified targets. The drill
program is expected to commence in mid-July and finish at the end of August. The
drilling will be preceded by detailed geologic mapping, geochemical soil
sampling, and ground geophysics.

Impact of Coronavirus (COVID-19)





With respect to the outbreak of the novel coronavirus (COVID-19), Trilogy
recognizes that the situation is extremely fluid and is monitoring the State of
Alaska Health Department recommendations and restrictions on travel. These
recommendations and restrictions may significantly impact our ability to conduct
the planned work programs during the upcoming field season. So, although the
work programs discussed above are still currently scheduled to commence as
originally planned, our highest priority is the health, safety and welfare of
our employees, contractors and community members. As a result, we and our joint
venture partner, through Ambler Metals, will make the necessary adjustments to
the work programs, including extending the timeline or scope for the remainder
of the programs, or even cancelling the planned exploration activities at the
UKMP for this season, if it is determined to be necessary or prudent to do

so.



                                       19





Joint Venture



Option agreement



On April 10, 2017, Trilogy and Trilogy Metals US entered into an Option
Agreement to form a Joint Venture with South32 Group Operations Pty Ltd., a
wholly-owned subsidiary of South32, which agreement was later assigned by
South32 Operations to its affiliate, South32 USA Exploration Inc. on the UKMP
("Option Agreement"). Under the terms of the Option Agreement, as amended,
Trilogy Metals US granted South32 the right to form a 50/50 joint venture to
hold all of Trilogy Metals US' Alaskan assets which South32 exercised on
December 19, 2019.



Formation of joint venture



On February 11, 2020, Trilogy completed the 50/50 joint venture with South32.
Trilogy contributed all of its assets associated with the 172,675-hectare UKMP,
including the Arctic and Bornite projects, while South32 contributed a
subscription price of US$145 million (the "Subscription Price"), resulting in
each party owning a 50% interest in Ambler Metals. The Subscription Price will
be used to advance the Arctic and Bornite Projects, along with exploration in
the Ambler mining district. With Ambler Metals being well funded, with access to
$145 million, Trilogy does not expect to fund programs and budgets to advance
the UKMP until the Subscription Price is spent by Ambler Metals.



Ambler Metals is an independently operated company 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 investment in Ambler Metals was
initially measured at its fair value of $176 million upon recognition. Our
maximum exposure to loss in this entity is limited to the carrying amount of our
investment in Ambler Metals, which totaled $176 million as well as $0.4 million
of amounts receivable per a Service Agreement between Trilogy and Ambler Metals.



Subsequent to the end of the first quarter, Ambler Metals loaned US$57.5 million
back to South32 and retained $87.5 million. The loan has a 7-year maturity date,
but Ambler Metals can demand earlier repayment in installments as required to
advance development studies, resource drilling and regional exploration
programs. The loan is secured by South32's membership interest in the LLC and
guaranteed by South32 International Investment Holdings Pty Ltd. Trilogy
currently estimates that the Subscription Price, which includes the funds to be
repaid under the loan, will fund the UKMP through feasibility and the permitting
of the first mine to be developed in the Ambler mining district. Once the full
amount of the Subscription Price payment of $145 million is expended, the
parties will contribute funding pro rata, as contemplated by the operating
agreement which governs Ambler Metals.



                                       20





Summary of results



                                                        in thousands of dollars,
                                                    except for per share amounts

                                                                              Three months ended
Selected expenses                                      February 29, 2020       February 28, 2019
                                                                       $                       $
General and administrative                                           651                     492
Mineral properties expense                                         1,545                   1,535
Professional fees                                                    668                      91
Salaries                                                             224                     281

Salaries - stock-based compensation                                1,196                   1,939
Total expenses                                                     4,475                   4,458
Gain on derecognition of assets contributed to
joint venture                                                   (175,770 )                     -
Equity in investee                                                   178                       -
Comprehensive earnings (loss) for the period                     171,179                  (4,336 )
Basic earnings (loss) per common share               $              1.22     $             (0.03 )
Diluted earnings (loss) per common share             $              1.16   

 $             (0.03 )





For the three months ended February 29, 2020, Trilogy reported net earnings of
$171 million (or $1.22 basic and $1.16 diluted earnings per common share). For
the comparable period in 2019, we reported a net loss of $4.3 million (or $0.03
basic and diluted loss per common share). The first quarter 2020 differences,
when compared to the first quarter 2019, are primarily due to the gain of $176
million recognized from the contribution of mineral property assets to the joint
venture with South32 upon formation of the joint venture on February 11, 2020.
This gain was slightly offset by $0.18 million in loss from equity investee,
consisting of Trilogy's 50% share of Ambler Metals' operating loss for the first
quarter of 2020, for which there is no comparable amount in the first quarter of
2019.



Other variances noted for the comparable period were i) an increase in general
and administrative expenses of $0.16 million primarily due to an additional
$0.07 million in regulatory fees due mostly to the filing of the base shelf
prospectus and $0.1 million in executive recruiting fees; ii) an increase in
professional fees of $0.58 million mainly consisting of $0.12 million for
consulting fees for the research and implementation of new accounting standards,
legal fees of $0.25 million related to the formation of the joint venture,
valuation and loan capacity analysis fees of $0.07 million related to the
formation of the joint venture, and consulting fees of $0.1 million for Rick Van
Nieuwenhuyse who remained as a consultant to Trilogy through to February 29,
2020; iii) a decrease of $0.06 million in salaries due to reductions in head
office staffing levels; and iv) a decrease in stock-based compensation driven
primarily by a 0.38 million reduction in the number of stock options granted
during the first quarter versus the comparative period as well as no vesting of
RSUs during the period, resulting in stock based compensation savings of
approximately $0.74 million and $0.33 million, respectively.

Mineral property expenses for the three months ended February 29, 2020 were consistent with the comparative period and mainly include engineering costs related to the Company's Arctic feasibility study.





Selected financial data



Quarterly information

                                                        in thousands of dollars,

                                                        except per share amounts

                      Q1 2020       Q4 2019       Q3 2019       Q2 2019       Q1 2019       Q4 2018       Q3 2018       Q2 2018
                     02/28/19      11/30/19      08/31/19      05/31/19      02/28/19      11/30/18      08/31/18      05/31/18
                            $             $             $             $             $             $             $             $
Interest and
other income               62            91           137           150           122           117           135            77
Mineral property
expenses                1,545         3,819        10,951         2,906         1,535         3,833         9,051         2,475
Earnings (loss)
for the period        171,179        (6,525 )     (12,535 )      (4,509 )      (4,336 )      (5,319 )      (9,920 )      (3,664 )
Earnings (loss)
per common share
- basic                  1.22         (0.05 )       (0.09 )       (0.04 )       (0.03 )       (0.04 )       (0.08 )       (0.03 )
Earnings (loss)
per common share
- diluted                1.16         (0.05 )       (0.09 )       (0.04 )       (0.03 )       (0.04 )       (0.08 )       (0.03 )




Factors that can cause fluctuations in our quarterly results include the length
of the exploration field season at the properties, the type of program
conducted, stock option vesting, and issuance of shares. Other factors that have
caused fluctuations in the quarterly results that would not be expected to
re-occur include the acquisition and disposition of assets and financing
activities.



                                       21





For the first quarter of 2020, we reported comprehensive earnings of $171
million which consisted of a gain of $176 million arising from the derecognition
of our Alaskan mineral properties upon contribution to the joint venture with
South32, offset by Trilogy's 50% share of the joint venture's operating loss for
the period from February 11, 2020 to February 29, 2020 and total expenses of
$4.5 million for the period. There are no prior period comparatives for the gain
on contribution of Alaskan assets or the pro rata share of the joint venture's
operating loss. The remaining difference between the expense of $4.4 million
incurred for the current quarter and the loss of $6.5 million for the fourth
quarter of 2019 was primarily due to a $2.3 million reduction in mineral
property expenses and reflects the seasonal nature of this cost.



The loss of $6.5 million for the fourth quarter ended November 30, 2019 is
higher when compared to the net loss of $5.3 million incurred in the fourth
quarter ended November 30, 2018. The primary drivers for the difference were
$0.7 million higher stock-based compensation, $0.6 million higher professional
fees and $0.1 million increase in general and administrative expenses, all
offset by $0.2 million in decreased salaries and benefits in the fourth quarter
2019.



Our net loss for the third quarter ended August 31, 2019 of $12.5 million was
significantly higher versus the comparative loss of $9.9 million for the same
quarter in the prior year. The $2.6 million increase is primarily due to an
increase in mineral properties expenditures due to the size of the 2019 field
program which included the new regional exploration program which did not exist
in the comparative period.



Our net loss for the second quarter ended May 31, 2019 of $4.5 million is $0.9
million higher when compared to the comparative second quarter ended May 31,
2018. The difference is primarily due to an increase in mineral properties
expenses related to the new regional exploration program commencing in the
period with district-wide airborne geophysical surveys completed in the quarter
and an increase in stock-based compensation.

Liquidity and capital resources


At February 29, 2020, we had $15.2 million in cash and cash equivalents and
working capital of $14.5 million, which is sufficient to fund our ongoing
operations for at least the next 12 months. The projects will be funded by
Ambler Metals and we do not anticipate needing to fund our 50% share of future
expenditures to advance the projects until the approximately $145 million is
spent.



Contractual obligations



Contractual obligated undiscounted cash flow requirements as at February 29,
2020 are as follows.



                                                         In thousands of dollars

                                   Total         <1 Year        1-2 Years        2-5 Years         Thereafter
                                       $               $                $                $                  $
Accounts payable and
accrued liabilities                1,274           1,274                -                -                  -
Office lease                         839             136              384              319                  -
                                   2,113           1,410              384              319                  -

Off-balance sheet arrangements

We have no material off-balance sheet arrangements.





Outstanding share data




At April 7, 2020, we had 140,665,733 common shares issued and outstanding. At
April 7, 2020, we had outstanding, 10,983,933 stock options with a
weighted-average exercise price of $1.21 as well as 1,182,391 deferred share
units ("DSUs") and 11,927 NovaGold DSUs for which the holder is entitled to
receive one common share for every six NovaGold shares received. Upon exercise
of all the foregoing convertible securities, the Company would be required to
issue aggregate of 12,168,312 common shares.

New accounting pronouncements

Certain recent accounting pronouncements have been included under note 2 in our February 29, 2020 unaudited interim consolidated financial statements.





                                       22





Critical accounting estimates



The most critical accounting estimates upon which our financial status depends
are those requiring estimates of the recoverability of our capitalized mineral
properties, impairment of long-lived assets, equity method investment, income
taxes and valuation of stock-based compensation.

Mineral properties and development costs





All direct costs related to the acquisition of mineral property interests are
capitalized. The acquisition of title to mineral properties is a complicated and
uncertain process. The Company has taken steps, in accordance with industry
standards, to verify the title to mineral properties in which it has an
interest. Although the Company has made efforts to ensure that legal title to
its mining assets is properly recorded, there can be no assurance that such
title will be secured indefinitely.

Impairment of long-lived assets


Management assesses the possibility of impairment in the carrying value of its
long-lived assets whenever events or circumstances indicate that the carrying
amounts of the asset or asset group may not be recoverable. Significant
judgments are made in assessing the possibility of impairment. Management
considers several factors in considering if an indicator of impairment has
occurred, including but not limited to, indications of value from external
sources, significant changes in the legal, business or regulatory environment,
and adverse changes in the use of physical condition of the asset. These factors
are subjective and require consideration at each period end. If an indicator of
impairment is determined to exist, management calculates the estimated
undiscounted future net cash flows relating to the asset or asset group using
estimated future prices, mineral resources, and operating, capital and
reclamation costs. When the carrying value of an asset exceeds the related
undiscounted cash flows, the asset is written down to its estimated fair value,
which is usually determined using discounted future cash flows. Management's
estimates of mineral prices, mineral resources, foreign exchange rates,
production levels and operating capital and reclamation costs are subject to
risk and uncertainties that may affect the determination of the recoverability
of the long-lived asset.



Income taxes



We must make estimates and judgments in determining the provision for income tax
expense, deferred tax assets and liabilities, and liabilities for unrecognized
tax benefits including interest and penalties. We are subject to income tax law
in the United States and Canada. The evaluation of tax liabilities involving
uncertainties in the application of complex tax regulation is based on factors
such as changes in facts or circumstances, changes in tax law, new audit
activity, and effectively settled issues. The evaluation of an uncertain tax
position requires significant judgment, and a change in such recognition would
result in an additional charge to the income tax expense and liability.



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.



Investment in affiliates



Investments in unconsolidated ventures over which the Company has the ability to
exercise significant influence, but does not control, are accounted for under
the equity method and include the Company's investment in the Ambler Metals
project. We identified Ambler Metals LLC as a Variable Interest Entity (VIE) as
the entity is dependent on funding from its owners. All funding, ownership,
voting rights and power to exercise control is shared equally on a 50/50 basis
between the owners of the VIE. Therefore, the Company has determined that it is
not the primary beneficiary of the VIE. The Company's maximum exposure to loss
is its investment in Ambler Metals LLC.



Ambler Metals LLC is a non-publicly traded equity investee holding exploration
and development projects. The Company reviews and evaluates its investment in
affiliates for other than temporary impairment when events or changes in
circumstances indicate that the related carrying amounts may not be recoverable.
Events that could indicate impairment of an investment in affiliates include a
significant decrease in long-term expected gold price, a significant increase in
expected operating or capital costs, unfavorable exploration results or
technical studies, a significant decrease in reserves, a loss of significant
mineral claims or a change in the development plan or strategy for the project.
Asset impairment is considered to exist if the total estimated future cash flows
on an undiscounted basis are less than the carrying amount of the asset. If the
underlying assets are not recoverable, an impairment loss is measured and
recorded based on the difference between the carrying amount of the investee and
its estimated fair value which may be determined using a discounted cash flow
model.



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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.sedar.com and EDGAR at www.sec.gov and
on our website at www.trilogymetals.com. Information contained on our website is
not incorporated by reference.

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