Business Context and Reporting Period
Company: North American Nickel Inc. (NAN)
Filing Type: Form 20-F (Annual Report)
Reporting Period: Fiscal year ended December 31, 2017
Business Overview: The Company is a mineral exploration entity focused on nickel-copper-cobalt-platinum group metal (PGM) sulphide deposits. Its primary assets are the Maniitsoq project in Greenland (Sulussugut and Ininngui licenses), the Post Creek and Halcyon properties in the Sudbury district of Ontario, Canada, and the Section 35 property in Michigan, USA. The Company has no commercial production and generates no revenue.
Key Financial Metrics (Year Ended Dec 31, 2017)
| Metric | 2017 (CAD$ '000s) | 2016 (CAD$ '000s) |
|---|---|---|
| Net Operating Revenues | $0 | $0 |
| Net Loss | $(2,879) | $(2,877) |
| Loss Per Share (Basic & Diluted) | $(0.01) | $(0.01) |
| Total Assets | $53,697 | $41,882 |
| Exploration & Evaluation Assets | $50,494 | $38,342 |
| Cash and Cash Equivalents | $398 | $630 |
| Short-Term Investments | $2,500 | $2,700 |
| Total Liabilities | $969 | $181 |
| Working Capital | $2,171 | $3,291 |
| Share Capital (Common) | $73,598 | $62,315 |
| Shares Outstanding | 554,598,167 | 368,581,886 |
Material Changes vs. Prior Period
- Capital Structure: The Company significantly increased its share count by 186,016,281 shares through two equity financings in 2017 (a brokered prospectus offering and a non-brokered private placement), raising gross proceeds of $13,951,000. This diluted existing shareholders but increased cash reserves.
- Exploration Expenditures: Capitalized exploration and evaluation assets increased by $12,152,000 (from $38.3M to $50.5M), driven primarily by an $11.1M exploration program at the Maniitsoq project in Greenland, which included 8,767 meters of diamond drilling.
- Liquidity: Cash and cash equivalents decreased by $232,000 to $398,000, despite the capital raise, due to high operating and exploration cash burn ($2.4M operating outflow and $11.2M investing outflow).
- Liabilities: Trade payables and accrued liabilities increased significantly from $181,000 to $969,000, reflecting accrued exploration costs and administrative expenses.
Outlook, Risks, and Management Commentary
- Going Concern: The auditors have issued a "Going Concern" opinion. The Company has accumulated losses of $26,550,000 and has not generated revenue. Continuation of operations is dependent on securing additional financing. The financial statements do not include adjustments that might result from this uncertainty.
- Capital Requirements: Management states that the Company requires additional funds to meet obligations and continue exploration. There is no assurance that additional capital can be raised on acceptable terms.
- Operational Focus: The Company continues to focus on defining the extent of nickel sulphide mineralization at the Maniitsoq project. In 2017, they extended known mineral zones (Mikissoq, P-013 SE, P-058) and completed a hydropower feasibility assessment for the project.
- Subsequent Event: On April 19, 2018, the Company closed a non-brokered private placement raising $17.5 million gross proceeds through the issuance of 233,333,333 units.
- Risk Factors:
- Speculative Nature: The Company has no viable commercial business; share price is dependent on future prospects rather than objective measurements.
- Liquidity Risk: Limited funds and reliance on equity financing which may dilute shareholders.
- Market Risk: Shares trade on the OTC Bulletin Board and TSX-V; subject to "penny stock" regulations and thin trading volumes.
- Exploration Risk: No assurance that current properties contain commercially viable mineral resources.
Key Facts for Investor Verification
- Going Concern Status: Verify the Company's ability to raise further capital given the auditor's qualification and the reliance on equity financing to fund operations.
- Share Dilution: Note the significant increase in share count (from ~368M to ~554M in 2017, plus a subsequent 233M issuance in April 2018) and the impact on ownership percentage.
- Asset Valuation: Confirm the recoverability of the $50.5M in exploration assets, which are entirely dependent on future financing and successful discovery of economic reserves.
- Major Shareholder: Sentient Group GP IV beneficially owns approximately 64.27% of the outstanding common shares as of December 31, 2017.
- Exploration Progress: Review the technical reports (NI 43-101) regarding the Maniitsoq project to assess the validity of the reported drill intersections and the potential for a resource estimate.