US defense department to invest $35.6 million in Trilogy Metals

The U.S. Department of War plans to invest approximately $35.6 million in Trilogy Metals Inc. (NYSE American: TMQ) and South32 Limited (ASX: S32) to advance exploration and development of critical mineral resources in Alaska, according to a company statement.

The investment involves the Department of War acquiring approximately 10% of Trilogy Metals through two separate transactions. The department will invest $17.8 million directly in Trilogy Metals for 8,215,570 units priced at $2.17 each, with each unit containing one common share and three-quarters of a 10-year warrant.

The department will pay an additional $17.8 million to South32 for 8,215,570 Trilogy Metals shares that South32 currently holds, plus a 10-year call option to acquire 6,161,678 additional Trilogy shares at $0.01 per share. The proceeds will be reinvested in Ambler Metals LLC, a 50-50 joint venture between Trilogy and South32.

The investment targets the Upper Kobuk Mineral Projects in northwestern Alaska, which contain copper, zinc, lead, gold and silver deposits. The funds will support exploration and development of the Arctic and Bornite deposits within the Ambler Mining District.

As part of the agreement, the Department of War will have the right to appoint one independent director to Trilogy's board for three years. Trilogy also agreed not to incur more than $1 billion in third-party debt without the department's approval until January 1, 2029.

The transaction requires regulatory and stock exchange approvals and is contingent on reauthorization of the Defense Production Act by Congress and completion of the government's Foreign Ownership, Control, or Influence review. The letter of intent will terminate if these conditions are not met by March 31, 2026.

The investment also contemplates establishing a framework for permitting, financing and constructing the proposed 211-mile Ambler Access Project road, which would connect the mining district to the Dalton Highway.

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