Business Context and Reporting Period
Company: North American Nickel Inc. (formerly Widescope Resources Inc.)
Filing Type: Form 20-F (Annual Report)
Period Ended: December 31, 2011
Jurisdiction: British Columbia, Canada
Accounting Standard: International Financial Reporting Standards (IFRS) – First-time adoption effective January 1, 2010.
The Company is a mineral exploration entity focused on nickel, copper, and platinum group metals (PGM) in the Sudbury and Thompson nickel belts (Canada) and the Maniitsoq property (Greenland). In 2010, the Company divested its interest in Outback Capital Inc. (Pinefalls Gold) to refocus on base metals. As of December 31, 2011, the Company had 55,058,193 common shares outstanding.
Key Financial Metrics
| Metric (CAD) | 2011 | 2010 |
|---|---|---|
| Net Operating Revenues | $0 | $0 |
| Net Loss | $(1,160,819) | $(538,461) |
| Comprehensive Loss | $(1,084,191) | $(529,808) |
| Loss Per Share (Basic & Diluted) | $(0.02) | $(0.03) |
| Total Assets | $6,109,703 | $1,363,910 |
| Cash and Cash Equivalents | $421,046 | $659,227 |
| Working Capital | $1,211,510 | $556,665 |
| Exploration & Evaluation Assets | $4,736,430 | $677,718 |
| Total Liabilities | $166,095 | $129,527 |
| Shareholders' Equity | $5,943,608 | $1,234,383 |
Note: The Company has no interest-bearing debt. Liabilities consist primarily of trade payables and amounts due to related parties.
Material Changes vs. Prior Period
- Asset Growth: Total assets increased by approximately 348% from 2010 to 2011, driven primarily by a significant increase in Exploration and Evaluation assets (from $677,718 to $4,736,430). This reflects capitalization of exploration expenditures and the acquisition of geological data/IP for the Greenland property.
- Increased Losses: Net loss more than doubled to $(1.16) million, largely due to increased exploration spending, share-based compensation expenses ($383,750), and an impairment charge of $(267,462) related to the write-off of the Bell Lake and Woods Creek properties.
- Capital Raising: The Company raised approximately $3.2 million in equity during 2011 through private placements (flow-through shares and units) and warrant exercises, compared to $1.1 million in 2010.
- Property Portfolio: The Company divested its interest in the Pinefalls Gold property in 2010. In 2011, it acquired a large exploration license in Greenland (Maniitsoq) and expanded its footprint in Sudbury and Thompson, though it wrote off two Sudbury properties (Bell Lake and Woods Creek) due to a decision not to pursue them further.
Outlook, Risks, and Management Commentary
- Going Concern: The auditors have issued an "Emphasis of Matter" paragraph regarding the Company's ability to continue as a going concern. The Company has a history of operating losses and requires additional financing to fund exploration and administrative costs. There is no assurance that such financing will be available.
- Exploration Commitments: The Greenland license requires minimum exploration expenditures of approximately CAD $1.3 million for the second year (2012). The Company met the first-year requirement and received a credit for surplus expenditures.
- Speculative Nature: The Company has no viable commercial business or revenue. All properties are in the exploration stage with no proven reserves. The value of the shares is dependent on future prospects rather than current operations.
- Liquidity: While the Company reported positive working capital of $1.2 million and cash of $421,046 at year-end, management notes that continued operations depend on shareholder support and additional capital raises.
- Related Party Transactions: Significant management and consulting fees ($108,000 and $36,783 respectively) were paid to directors and related entities in 2011.
Key Facts for Investor Verification
- Going Concern Status: Verify the Company's ability to secure the necessary funding to meet the CAD $1.3 million exploration commitment for the Greenland license in 2012.
- Asset Impairment: Review the rationale for the write-off of the Bell Lake and Woods Creek properties and the remaining carrying value of the Greenland and Sudbury assets.
- Dilution Risk: Note the significant increase in share count (from 35.2M to 55.1M) and the existence of over 31 million outstanding warrants and 5.3 million stock options, which pose substantial dilution risk.
- Related Party Dependence: Assess the impact of ongoing management and consulting fees paid to directors and related parties on the Company's cash burn rate.
- Accounting Transition: Confirm that financial comparisons with pre-2010 periods are not directly comparable due to the transition from Canadian GAAP to IFRS.