Trilogy Metals sees enormous potential in the Chinese market for copper products, as the country continues its energy revolution and transitions to copper-dependent forms of cleaner energy and low-carbon transportation. Trilogy Metals’ president and CEO, Rick Nieuwenhuyse, is optimistic about demand in the market not only to address pollution reduction, but also for consumer products containing copper for the large and growing Chinese middle class. With significant high-grade assets containing copper and cobalt, Trilogy Metals offers not only access as a high-caliber investment, but also the confidence of investing with a company operating in a stable and predictable regulatory environment
NovaCopper was incorporated in 2011, then in 2016, the company changed its name to Trilogy Metals. Can you give a summary of its current activities in Alaska?
We are developing the Ambler Mining District which is rich in deposits of copper, zinc, cobalt, and precious metals. It is located in northern Alaska, where we have entered into several partnerships including NANA, the local Alaska Regional Native Corporation, who are responsible for economic development of the region. They own a substantial amount of land, and we’ve made an agreement with them to develop their land, in combination with our State of Alaska mining claims. We’ve also partnered with the State of Alaska through the Alaska Industrial Development and Export Authority, who are developing a road to access the project. That road will allow the supplies needed for mining, and then will allow us to transport the metal concentrate products for export. China will likely be a big market for these metal concentrates, where they will refined into copper, zinc, and cobalt products.
How important is the Chinese market for Trilogy’s products at the moment, and how would you evaluate the appetite in China for more exports?
China continues to develop its middle class population, which is over 300 million and growing — that’s a middle class larger than the population of the United States. That population will continue to demand more resources and, specifically, more copper. As the energy revolution in China continues its transition to more non-carbon-based forms of energy and lower-emission vehicles, that will also be a stimulus for continued growth in our sector.
In May, you accompanied Governor Bill Walker on the Opportunity Alaska trade mission, along with 27 other Alaskan entities from multiple sectors who wanted to showcase their opportunities and products in China. Can you tell us a bit more about your experience on the trade mission, why you went, and what were the most important outcomes?
The trip was a great opportunity to go to China with a whole group of Alaskan entrepreneurs representing businesses across the spectrum of the Alaskan economy. Some of the first meetings Governor Walker attended in Changzhou were with a number of provincial governors. They all spoke about the level of pollution in China and the proactive plans they are putting in place to reduce pollution, including converting to renewable forms of energy and low-emission vehicles. They are looking to change from internal combustion engine cars and trucks to electric vehicles. All of this involves a lot of copper, which is where my interest lies. There’s definitely a strong long-term demand for copper foreseen in China, and, as a result, a lot of interest in the resources Alaska is able to provide.
In May, the company announced it is exploring the potential for cobalt at Bornite. Currently, most of the world’s cobalt comes from the Democratic Republic of Congo and China is the world’s leading consumer. How optimistic are you that cobalt will be found, and what could this mean for China, Trilogy and Alaska?
We recently published our maiden cobalt resource estimate containing 77 million pounds of cobalt. It’s one of the largest resources of cobalt in North America. Alaska is a jurisdiction that knows resource development very well and has a very stable track record in terms of permitting. It is one of the most stable jurisdictions in the world. While the Democratic Republic of Congo has 65% of the world’s cobalt currently, it’s not a region that has a stable rule of law. Investors have been very challenged there because the rules change frequently. We saw that happen recently with the new increased royalties for cobalt in the country, which may soon be applied to copper as well. This change in royalties paid to the central government occurred after companies made huge investments to develop the sector. When you control 65% of the known cobalt resources, you can get away with that type of regulatory environment, but it does make investors wince. Alaska is viewed as a safe jurisdiction; at Trilogy, we’re working in partnership with the state, so we have a high degree of confidence that we’ll be able to develop the resource in a sustainable manner. We’re looking forward to continuing our work to develop our cobalt resource. We have a $10 million exploration project this summer to update our resource estimate for both copper and cobalt. I’m confident with further drilling that we can grow our copper and cobalt resource significantly. This will be a significant achievement on top of 6 billion pounds of copper and 77 million pounds of cobalt we have already discovered.
It’s an exciting time for us. This is a great environment for development-stage projects, and we’re also very close to China. Most people don’t realize how close Alaska and China are in terms of shipping routes. We see that as a real opportunity to provide resources to China as it continues to grow out its economy. We’re here to develop those metals in a sustainable manner that’s going to be beneficial to the world as China transitions to cleaner and more environmentally friendly forms of energy and transportation.
You briefly touched on sustainability. Can you talk about the long-term exploration and cultivation of these resources? How do you do so in a way that is sustainable and protects the environment?
To me, sustainability is about working with the local communities so that we are developing a resource that is consistent with their lifestyle. In rural Alaska, that lifestyle really circles around subsistence hunting and fishing to provide traditional food for the family. Those are important aspects of being a Native Alaskan. I think we can develop a mine that is consistent with, and not disruptive of, that lifestyle. There’s no question that we will have some impact in developing the roads and developing a mine in that region, but we can and have to minimize the impacts as well as bring lasting improvements to the local economy. We recognize that there is a cost to doing it right and we are prepared to do that.
Alaska is a model worldwide of working with the communities and particularly indigenous communities. Can you tell us more about that?
I think it is. The Alaska Native Claims Settlement Act (ANCSA) became law in the early 1970s and began a process recognizing indigenous rights and land claims. Nothing is perfect and there are always things we can improve on, but as long as we can have a healthy open dialogue, we can continue to make progress and improve. At Trilogy, we partnered with NANA early on and developed an excellent working relationship. We think it’s important to find ways of partnering with local businesses and tribal organizations. It’s a good way of doing business.
The LNG pipeline was a big outcome of the trade mission and recent talks between China and the State of Alaska. What would that project mean for Trilogy metals’ business?
We are already planning to use LNG from Cook Inlet’s existing gas field as the source of our on-site power generation. We’ll be generating about 20 megawatts on-site. Obviously, if there’s natural gas coming down a gas line we might tap into that since it would be a lot closer, but the use of gas and transportation of gas as LNG just makes a whole lot of sense from a cleaner energy perspective and also ease of transport. However, it is important to note that our plans to use LNG are not dependent on the larger Alaska gas line going through.
The company is currently listed on the TSX and NYSE stock exchanges and recently the stock prices have seen a significant uptick. What are your projections for the future stock performance of the company, and what message would you like to send to potential investors?
We have high-quality assets located in a safe, mining-friendly jurisdiction. Investors are recognizing that in the copper space there are not a lot of high-quality projects out there. Trilogy stands out as high quality and a safe investment. There are a lot of low-grade copper deposits, but not a lot of high-quality deposits, and so I think we’re starting to get some recognition for the high-quality deposits we have. We’ve made progress on permitting the access road which will allow us to develop the entire Ambler Mining District. Permitting has moved through the Scoping state and they are currently completing the draft Environmental Impact Statement (EIS). The current timeline is to finish the EIS by the end of 2019. This is consistent for us to start work on permitting and developing our first mine at Arctic while we continue to explore the rest of this amazing district.
I think the market is catching on and recognizing the achievements we’ve reached over the past several years and it’s nice to see that reflected in the share price. We do trade mostly in New York, but we’re starting to see more trading happening in Canada. I was just in London where we visited some of our European shareholders and we expect to get more. We’re also heading to Hong Kong this fall and hope to continue to develop our shareholder base there as well.
Do you have any final message to Chinese investors?
If you have an interest in building a sustainable future based on low-carbon energy and transportation, copper plays a very important role in making that happen. Trilogy operates in a stable jurisdiction for mining and provides an excellent investment opportunity, whether you are European, American or Chinese. We live in a global economy; metals is a global business; and 50% of the copper eventually ends up in China in a consumer product or in a wind turbine generating clean energy. It is easy to buy shares of Trilogy on the NYSE or Canadian stock exchange, and we certainly encourage you to do so.
Trilogy Metals is engaged in the exploration and development of the high-quality Upper Kobuk Mineral Projects, located in northwestern Alaska’s mineral-rich Ambler mining district.
Among the projects currently being undertaken by Trilogy, formerly named NovaCopper, is the Arctic VMS deposit, which a pre-feasibility study recently assessed as having 40 million tonnes of copper at 5% CuEq grade. Elsewhere, the Arctic PFS produces an average of 159 million pounds of copper, 199 million pounds of zinc, 33 million pounds of lead, 3.3 million ounces of silver and 30,600 ounces of gold annually, with an economic result of $1.4 billion after-tax net present value (NPV) and a 33% internal rate of return (IRR).
Trilogy’s reported reserves at Arctic are two billion pounds of copper, three billion pounds of zinc, and over one million ounces of gold equivalent. Finally, Trilogy’s Bornite deposit holds a copper resource of six billion pounds. The company is advancing the development of the Ambler Mining District by way of three important partnerships: a business arrangement with NANA, the local native corporation that consolidates the company’s 353,000 acre land package; a Public-Private Partnership with the Alaska Industrial Development and Export Authority to construct an access road; and an option agreement with South32 Ltd. to form a joint venture to develop the district.