By Dr. Allen Alper, PhD Economic Geology and Petrology, Columbia University, NYC, USA
Trilogy Metals Inc. (TSX, NYSE-MKT: TMQ): Thirty M Tons of Six Percent Copper Equivalent, Copper, Lead, Zinc, Gold, Silver, the Highest Grade Copper Mine in the World in an Open Pit; Rick Van Nieuwenhuyse, President & CEO
Trilogy Metals Inc. (TSX, NYSE-MKT: TMQ) is a metals exploration company, focused on one of the richest copper-dominant districts in the world, called Ambler mining district, located in northwestern Alaska. We learned from Rick Van Nieuwenhuyse, President & Chief Executive Officer of Trilogy Metals, that their efforts currently are concentrated on advancing their high-grade, polymetallic Arctic VMS deposit, which holds roughly thirty million tons of six percent copper equivalent, copper, lead, zinc, gold, silver, and is nothing less than the highest grade copper mine in the world, in an open pit. According to Mr. Van Nieuwenhuyse, in early April, they should have a final resource update, which will convert inferred resource to measured and indicated. Next, this summer, they will come up with the mine plan. The pre-feasibility study is expected to be published in the first quarter of 2018.
Rick Van Nieuwenhuyse, President & Chief Executive Officer of Trilogy Metals
Dr. Allen Alper: This is Dr. Allen Alper, Editor-in-chief of Metals News, interviewing Rick Van Nieuwenhuyse, President & Chief Executive Officer of Trilogy Metals. Could you give our readers/investors an update and overview of Trilogy?
Mr. Nieuwenhuyse: Certainly, we've been working for the last year to get ready to prepare a pre-feasibility study for our Arctic deposit. Arctic is our high grade polymetallic deposit in Alaska, it's roughly thirty million tons of six percent copper equivalent, copper, lead, zinc, gold, silver in an open pit mining series. It's nothing less than the highest grade copper line in the world from an open pit standpoint.
We completed all the infill drilling, we've done all the hydrology work to a pre-feasibility level of study. The pit slopes stability work is done, those reports are finalized. We’ll have a press release out later this month on finalizing the metallurgy. Then we'll have a final resource update, which will convert inferred resourced to measured indicated resources. That should be in early April.
We’re doing a lot of work right now. We're putting the RFP together to evaluate the different engineering companies that can complete the pre-feasibility study for us. We're also preparing for our field season this year. We understand the resource to a pre-feasibility level. Now we need to do a study on the tailings and the waste rock, the best location to deposit them and to locate the mill.
Our summer’s work is roughly a two million dollar field program. We’ll integrate that into the mine plan, with the updated resource estimate. That will all come together in a pre-feasibility study document we expect to publish in the first quarter of 2018.
Dr. Allen Alper: Exciting! Sounds like you have a great plan for 2017 and 2018. Very important!
Mr. Nieuwenhuyse: Yes, and we're fortunate to have been financed for that. We have about seven million dollars U.S, cash in the bank, and we have about ten million dollars of marketable securities. We'll probably use around seven million dollars from the marketable securities to finance this year’s program. We're just finishing that up and in a month or so we'll work towards a deal.
Dr. Allen Alper: That sounds great. Could you refresh the memory of our readers on your background and your team?
Mr. Nieuwenhuyse: We've been in the exploration business a while, worked together as a team. I started a company called NovaGold about twenty years ago. We found the Donlin Gold Project. I think it's the highest grade large tonnage undeveloped gold deposit in the world containing over 40 million ounces of gold. We've won a couple of awards for that discovery. We've more recently won an award for our Bornite discovery in the Ambler Mining District.
We're hoping to get back and explore there. We're working on a plan to get some exploration work done at Bornite this year. It's another exciting copper project, where we have outlined about a hundred and twenty-five million tons of one percent copper in an open pit. Not as high grade as Arctic, but 1% is a very good grade deposit. In addition, we have outlined about sixty million tons of three percent copper, using an underground cut-off grade. But the property's wide open so we'd like to go back and continue to explore there and see how big the Bornite deposit can get.
Just to put that in perspective, combining Arctic and Bornite is about half the size of the Mount Isa district in terms of copper production, and Mount Isa has been in operation over an eighty year period of time and produced four hundred million tons of ore, averaging two percent from both open pit and underground - so that’s the target we are looking for here. Mt. Isa is one of Australia’s most famous mines and is very comparable in size and scale to what we're looking at here. We're really just getting started with Bornite, so the way I like to frame it is, we found half of it at Mount Isa; we'd like to go find the other half!
Dr. Allen Alper: Fantastic! Really great! Could you tell us a little bit about the name Trilogy?
Mr. Nieuwenhuyse: We spun this company out of NovaGold, about 2012. Post 2011 we had to rethink things after the economic meltdown. NovaGold was a huge project it was going to take a lot of effort. We finished the feasibility study with our joint venture partner Barrick, and it really was going to transition into permitting and operations and that's not really what my team and I do. We're more explorers and developers. We felt we needed to hire a new CEO to focus on permitting and operations. Then separate the Ambler project out, which is a copper focus project, put it where our team does best, explore and develop.
We made the split in 2012, we split it into NovaGold and NovaCopper. We decided last year to change the name to Trilogy to put some distance between the two companies. There was still confusion in the market as to whether it's NovaGold or NovaCopper, and if it were a private company or public company. Also, we wanted to highlight the fact that we were separate and that we were more than copper. We were naturally diversified by having a lot of zinc and a lot of precious metals as well. That was the logic and progression of the name Trilogy.
Dr. Allen Alper: Well thought out. Thank you. Could you tell us a little bit about your share structure?
Mr. Nieuwenhuyse: Yeah, we have a hundred and five million shares outstanding. We're traded both in Toronto in the full board TSX listing and on the New York Stock Exchange MKT. We have a really impressive group of shareholders including management, who control about sixty percent of the stock. That's Electrum, Baupost and Paulson, so three well known and diversified funds, along with Resource Capital Fund out of Denver and First Gold, which is a Hong Kong based resource fund. Along with management, that's sixty percent of the share capital, so we're very dedicated to making this work. Our shareholders have been very supportive of the needs of the company, from a financial standpoint. Our shareholders represent patient capital that understands that real projects take time and we're here to develop a world class mining district – the Ambler mining district.
Dr. Allen Alper: That sounds great. Shows that you have strong supporters and you believe in the project, and your team believes in the project and you put your money into the project. That sounds great.
Mr. Nieuwenhuyse: Yeah we were fortunate to have good strong shareholders who do understand the resource sector, understand that it takes time, understands that markets are cyclical and that no matter whether it's raining or shining you still have to do a lot of work and that's what we've been doing over the past several years.
It's nice to see that the copper market came back a bit and that the zinc market came back. The last five years have not been a lot of fun, seeing the copper prices go down and seeing share prices go down with them. But we seem to have hit bottom with a two dollar copper price over the last couple of years. Escondida, the largest copper mine in the world, is on strike for the third or fourth week now. That has started to have an effect, pushing copper prices up. We hadn't seen that for a number of years. There were strikes going on before, but they weren't affecting supply because there was an oversupply of copper. So this is a good indication the oversupply situation has ended and when there's disruption in the supply it pushes the price up. I expect that over time, we’ll see that copper price back up in the three to four dollar range.
Dr. Allen Alper: I spoke to a couple of mining people and that's their thought too that copper is moving up now. The zinc people are very optometrist.
Mr. Nieuwenhuyse: We do have over two billion pounds of zinc at Arctic. We do like to emphasize that we not only have exposure to the copper space, but we have significant exposure to zinc and precious metals. We have over a million ounces of gold equivalent, gold plus silver and that comes out as byproduct metals. You can either leverage that with the streaming and royalty companies, or you can just keep yourself open to be leveraged to those metal prices when they go on their runs, which they do frequently.
Dr. Allen Alper: Sounds great! What are the primary reasons our high-net-worth investors readers/investors should consider investing in Trilogy?
Mr. Nieuwenhuyse: This is a high quality asset and located in a safe, rule of law jurisdiction. Copper is a metal that you can't live without, so the demand is always there.
I'd say high quality asset, strong management and safe jurisdiction, this is a whole district play here. This is going to be a dividend producing company for a long period of time, when we put this in operation. On a copper equivalent basis, we'll be producing copper for about sixty-two cents a pound. In rough numbers that's two dollars of free cashflow and a hundred and twenty-five million pounds of copper production a year. That's two hundred fifty million dollars of free cashflow. There's plenty of room for good paying dividends out of that.
Dr. Allen Alper: That sounds great. It's a great opportunity. Would you like to add anything else?
Mr. Nieuwenhuyse: No, I appreciate your interest. PDAC has been very good. We've been extremely busy, a lot of meetings. It's nice to see the pulse of the industry is back up.
Dr. Allen Alper: That's great! Excellent!
Rick Van Nieuwenhuyse
President & Chief Executive Officer