Business Context and Reporting Period
The filing is an annual Form 20-F for North American Nickel Inc., a British Columbia mineral exploration and development company, for the fiscal year ended December 31, 2020. The request metadata identifies Nexmetals Mining Corp.; however, the filing text identifies the registrant as North American Nickel Inc. The company explores nickel-copper-cobalt and precious-metals projects in Greenland and Canada and has exposure to Botswana opportunities through its investment in Premium Nickel Resources Inc. The company has no commercial production or operating revenue.
The financial statements are prepared under IFRS in Canadian dollars. The company reported 109,833,648 common shares outstanding at December 31, 2020, plus 590,931 Series 1 convertible preferred shares. The filing is an annual report rather than a quarterly Q4 filing, although it covers the full year including the fourth quarter.
Key Financial Metrics
| Metric | 2020 | 2019 |
|---|---|---|
| Net operating revenue | C$0 | C$0 |
| Net loss | C$2.741 million | C$28.859 million |
| Loss per share | C$0.03 | C$0.36 |
| Operating cash flow | Use of C$1.332 million | Use of C$2.316 million |
| Exploration and evaluation spending | C$0.635 million | C$0.780 million |
| Cash at year-end | C$0.308 million | C$1.098 million |
| Total assets | C$39.644 million | C$40.039 million |
| Exploration and evaluation assets | C$39.103 million | C$38.633 million |
| Total liabilities | C$0.629 million | C$0.608 million |
| Total equity | C$39.015 million | C$39.431 million |
General and administrative expense declined to C$1.238 million from C$2.145 million. Share-based payment expense was C$969,000, compared with zero in 2019. The company recorded a C$438,000 impairment related primarily to the terminated Loveland property agreement and a C$130,000 equity-accounted loss from Premium Nickel Resources.
Working capital remained negative at approximately C$208,000, although this improved from negative C$746,000 in 2019. Trade payables and accrued liabilities were C$362,000. The filing reports no debt or borrowings; liquidity is dependent on equity financings, warrant exercises and other capital sources.
Material Changes Versus the Prior Comparable Period
- Net loss decreased by C$26.118 million, principally because 2019 included a C$26.510 million impairment of exploration and evaluation assets. The 2020 impairment was C$438,000.
- Cash declined by C$790,000 during 2020, from C$1.098 million to C$308,000. Financing activities provided C$1.348 million, but operating and investing activities consumed C$2.138 million.
- The company issued 21,142,857 units in August 2020 at C$0.07 per unit, generating gross proceeds of C$1.480 million. Each unit included one common share and one warrant exercisable at C$0.09.
- Common shares outstanding increased to 109.8 million from 88.7 million, increasing dilution risk. Warrants outstanding increased to 25.7 million and options outstanding increased to 8.0 million at year-end.
- The company terminated the Loveland Nickel property earn-in after its 2020 drilling program failed to identify significant extensions of mineralization. Associated acquisition and exploration costs of C$437,897 were written off.
- The company increased its ownership of Premium Nickel Resources to 11.01% at year-end and recorded the investment at C$48,000 under the equity method. Premium Nickel reported a 2020 comprehensive loss of approximately C$1.228 million.
- COVID-19 travel restrictions delayed the planned 2020 Greenland exploration program. Management was reassessing a potential 2021 program.
Guidance, Outlook, Risks and Unusual Items
Management expects to continue pursuing nickel sulphide exploration and to expand its project pipeline, supported by its view that long-term nickel demand may benefit from electric-vehicle growth and potential supply deficits. No quantified production, revenue, earnings or exploration-spending guidance is provided.
The company’s principal asset is the Maniitsoq project in southwest Greenland, carried at approximately C$36.565 million. The project has no stated mineral reserves or resources and remains dependent on successful exploration, financing, permitting and eventual commercial development. Greenland license extensions and reduced exploration obligations provided flexibility during 2020 and 2021, while accumulated exploration credits supported the licenses.
The auditors reported substantial doubt about the company’s ability to continue as a going concern because it has never generated revenue, has recurring losses and requires additional financing. The financial statements contain no adjustments for the possible outcome of this uncertainty.
- The company has no viable commercial business or operating cash inflows and must raise additional capital.
- Exploration assets may not be recoverable if projects fail to demonstrate commercial viability or if financing cannot be obtained.
- Commodity prices, permitting, political and regulatory conditions, environmental obligations, weather and logistical constraints may affect exploration results and costs.
- The company recorded a C$267,000 provision for Greenland camp-site cleanup and restoration, expected to be fulfilled within the following 12 months.
- The shares are thinly traded, quoted on the TSX Venture Exchange and OTC Bulletin Board, and are subject to penny-stock and liquidity risks.
- Future equity issuances, options and warrants may dilute existing shareholders. The company does not expect to pay dividends in the foreseeable future.
- Related-party transactions included C$647,164 of services charged to Premium Nickel and C$8,495 of administrative fees. Certain directors and officers serve in management or board roles at both companies.
Subsequent to year-end, the company received C$665,135 from warrant exercises and completed an April 2021 private placement of 8,290,665 units for gross proceeds of approximately C$1.990 million. It also invested an additional C$50,400 in Premium Nickel and received a further C$100,400 investment certificate in March 2021.
Investor Verification Points
- Verify the registrant identity: the supplied metadata says Nexmetals Mining Corp., while the filing names North American Nickel Inc.
- Confirm the company’s immediate liquidity, outstanding payables and amount of additional financing required to fund operations and exploration.
- Review the going-concern qualification and assess the likelihood, terms and dilution impact of future equity financing.
- Validate the carrying value and impairment sensitivity of the C$39.103 million exploration and evaluation asset balance, particularly the Maniitsoq project.
- Review all outstanding warrants and options, including acceleration provisions, exercise prices and potential dilution.
- Assess the status, valuation and strategic importance of the Premium Nickel investment and its contemplated Botswana transaction.
- Confirm Greenland license renewal dates, exploration-credit expiry dates, restoration obligations and any future minimum work commitments.
- Review related-party service agreements, management compensation and transactions involving overlapping directors and officers.