North American Nickel Inc. 2021 Form 20-F Summary
Filing identity: The submitted filing is for North American Nickel Inc., not Nexmetals Mining Corp. It is an annual Form 20-F for the fiscal year ended December 31, 2021, filed April 25, 2022. The filing reports annual results rather than separate 2021 fourth-quarter financial statements. Amounts are primarily in Canadian dollars and prepared under IFRS.
Business Context and Reporting Period
The company is a Canadian mineral exploration and development company focused on nickel-copper-cobalt-PGM and related mineral opportunities in Greenland and Canada, with exposure to Botswana through its investment in Premium Nickel Resources Inc. The company has no producing mines, no mineral reserves or resources reported for its principal exploration properties, and no operating revenue.
Key assets include the Maniitsoq project in southwest Greenland and Post Creek, Halcyon, Quetico and other exploration properties in Ontario. The company had no salaried employees at December 31, 2021 and relies substantially on contractors and external financing.
Financial Performance and Position
| Metric | 2021 | 2020 | Change or comment |
|---|---|---|---|
| Net operating revenue | $0 | $0 | No revenue since inception |
| Net loss | $3.996 million | $2.741 million | Loss increased by $1.256 million, primarily due to higher share-based compensation |
| Loss per share | $0.03 | $0.03 | Basic and diluted loss per share |
| Operating cash flow | $(1.474) million | $(1.332) million | No operating cash generation |
| Exploration and evaluation spending | $0.122 million | $0.635 million | Lower spending, partly reflecting COVID-19-related delays |
| Cash at year-end | $1.973 million | $0.308 million | Increase primarily from equity financing and warrant and option exercises |
| Working capital | $1.767 million | $(0.208) million | Improved but remains limited relative to planned activities |
| Total assets | $41.683 million | $39.644 million | Exploration assets represented approximately $39.099 million |
| Total liabilities | $0.480 million | $0.629 million | Primarily trade payables and accrued liabilities |
| Net assets | $41.203 million | $39.015 million | Includes accumulated deficit of $57.091 million |
Share-based payment expense was $2.531 million in 2021 versus $0.969 million in 2020. The company granted 8.179 million options during 2021. General and administrative expense declined to $1.159 million from $1.238 million.
The company reported no debt financing. Year-end trade payables and accrued liabilities were $480,000, and contractual obligations disclosed in the financial statements were payable within one year.
Cash Flow, Financing and Capital Structure
- Net cash used in operating activities was $1.474 million.
- Net cash used in investing activities was $514,000, including $122,000 of exploration and evaluation expenditures and $392,000 invested in Premium Nickel.
- Net cash provided by financing activities was $3.653 million.
- The company raised $1.990 million through an April 2021 private placement of 8.291 million units at $0.24 per unit.
- Warrant and option exercises generated approximately $1.754 million in cash and resulted in the issuance of 13.080 million common shares.
- Common shares outstanding increased to 131.205 million at December 31, 2021 from 109.834 million at December 31, 2020.
- At year-end, 16.083 million warrants and 15.055 million options were outstanding, creating potential future dilution.
Material Changes Versus the Prior Comparable Period
- Net loss increased 46% from $2.741 million to $3.996 million, mainly because of higher share-based compensation.
- Cash increased from $308,000 to $1.973 million after equity financing and security exercises.
- Working capital improved from a deficit of $208,000 to positive working capital of $1.767 million.
- Exploration spending decreased materially, and major Greenland field programs remained delayed by COVID-19 travel restrictions.
- The company invested an additional $441,000 in Premium Nickel and held approximately 10% of that company at year-end, accounted for under the equity method. The investment was carried at $321,000 after recording the company’s $169,000 share of Premium Nickel’s 2021 loss.
- Quetico claims were impaired by $71,000 and Lingman Lake costs were impaired by $28,000. Total impairment of exploration and evaluation assets was $99,000.
- The company fulfilled the Greenland camp restoration obligation and reversed $95,000 of the prior $267,000 provision.
Outlook, Commentary, Risks and Subsequent Events
Management’s strategy is to advance its exploration portfolio, pursue additional nickel sulphide opportunities and benefit from expected long-term nickel demand associated with electric vehicles. The filing does not provide quantitative production, revenue or earnings guidance.
The auditors identified substantial doubt about the company’s ability to continue as a going concern. The company has never generated revenue or profitable operations, has negative operating cash flow and states that additional capital will be required to fund exploration, administrative costs and future development. Management expects to rely on equity or other financing, but no assurance is given that financing will be available or sufficient.
- Exploration and evaluation assets are dependent on successful exploration, permitting, financing, development and eventual profitable production or sale.
- Principal projects have no reported mineral reserves or resources and may not contain economically recoverable deposits.
- COVID-19 delayed Greenland exploration programs and may continue to affect logistics, workforce availability and field operations.
- Commodity prices, access to capital, political and regulatory conditions, environmental obligations and foreign exchange movements are material risks.
- The company’s shares are thinly traded, subject to penny-stock risks and may be difficult to sell at or above the purchase price.
- The company has significant potential dilution from outstanding warrants, options and any future equity financings.
After year-end, the company announced a non-binding proposed merger or reverse takeover involving Premium Nickel. Proposed terms contemplated current North American Nickel shareholders holding approximately 25% and other Premium Nickel shareholders holding approximately 75% of the resulting issuer, subject to definitive agreements, approvals and other conditions. The company also arranged a proposed subscription-receipt offering initially targeted at $5.0 million and later increased to up to $10.000 million at $0.48 per receipt. These transactions were not completed as of the filing date.
Important Facts for Investors to Verify
- Confirm the correct issuer: the supplied Form 20-F identifies North American Nickel Inc., while the request metadata identifies Nexmetals Mining Corp.
- Review the going-concern qualification and the company’s actual financing needs and cash runway after December 31, 2021.
- Verify the status, terms and completion of the proposed Premium Nickel merger and subsequent subscription-receipt financing.
- Assess the valuation and recoverability of the $39.099 million exploration and evaluation asset balance.
- Verify exploration license renewals, work-credit expiries and future commitments in Greenland, Ontario and Morocco.
- Review the dilution impact and expiry dates of the 16.083 million warrants and 15.055 million options outstanding at year-end.
- Evaluate related-party exposure, including the Premium Nickel investment, service arrangements and the reported $199,000 receivable at year-end, which was subsequently collected.