Business Context and Reporting Period
The filing is North American Nickel Inc.’s Form 20-F annual report for the fiscal year ended December 31, 2019, prepared under IFRS and reported in Canadian dollars. The request identifies Nexmetals Mining Corp.; the supplied filing identifies North American Nickel Inc., so the issuer name should be verified.
The company is an exploration-stage mineral company focused primarily on the Maniitsoq nickel-copper-cobalt-PGM project in Greenland, with additional properties in Canada and the United States. It has no commercial production or mineral reserves and has generated no revenue since inception.
Financial Metrics
| Metric | 2019 | 2018 | Change |
|---|---|---|---|
| Revenue | C$0 | C$0 | No change |
| Net loss | C$28.859 million | C$3.022 million | Loss increased C$25.837 million |
| Loss per share | C$0.36 | C$0.04 | Higher loss per share |
| Cash flow from operations | Used C$2.316 million | Used C$2.664 million | Lower cash use |
| Cash flow from investing | Provided C$1.691 million | Used C$14.566 million | Improved primarily from liquidating short-term investments |
| Cash flow from financing | Provided C$1.384 million | Provided C$17.171 million | Lower equity financing |
| Cash and cash equivalents | C$1.098 million | C$0.339 million | Increased C$0.759 million |
| Working capital | C$0.746 million | C$2.416 million | Decreased C$1.670 million |
| Total assets | C$40.039 million | C$67.500 million | Decreased C$27.461 million |
| Total liabilities | C$0.608 million | C$0.556 million | Increased C$0.052 million |
| Exploration and evaluation assets | C$38.633 million | C$64.479 million | Decreased C$25.846 million |
Operating margins are not meaningful because the company has no revenue. The company reported no interest-bearing debt in the supplied financial statements; current liabilities consisted primarily of trade payables, accrued liabilities and a C$89,000 flow-through share premium liability.
Material Changes Versus the Prior Comparable Period
- A C$26.499 million impairment was recorded against the Maniitsoq exploration property, leaving a stated recoverable amount of approximately C$36.150 million. The impairment was the principal driver of the significantly larger 2019 net loss.
- Exploration spending fell sharply to C$780,000 from C$14.566 million in 2018. Maniitsoq exploration and license expenditures were C$390,443 in 2019 versus C$13.586 million in 2018.
- General and administrative expenses declined to C$2.145 million from C$2.340 million. Share-based payment expense was nil versus C$317,000 in 2018.
- The company completed a 10-for-1 share consolidation in October 2019. Post-consolidation common shares outstanding increased to 88.691 million from 78.793 million at year-end 2018.
- In December 2019, the company raised gross proceeds of C$1.728 million through a private placement of common share units and flow-through shares, incurring C$344,000 of share issuance costs.
- The company entered into an earn-in agreement for the Loveland Nickel Property and issued 300,000 shares valued at approximately C$51,000 as consideration. The arrangement includes up to C$4.5 million of exploration commitments over five years and staged cash payments.
- Outstanding warrants declined to 15.651 million from 25.797 million, primarily because older warrants expired. The company had 2.131 million outstanding stock options at year-end.
Outlook, Commentary, Risks and Unusual Items
- Management intends to continue mineral exploration and project generation, particularly at Maniitsoq and the Ontario properties, but provides no quantified production, revenue or financing guidance.
- The auditors issued an unmodified opinion but included a going-concern emphasis. The company has never generated revenue, expects further losses, requires additional financing and acknowledges substantial doubt about its ability to continue as a going concern.
- Management expects to use existing working capital and raise additional capital as needed. There is no assurance that future financing will be available or sufficient, creating potential dilution and execution risk.
- The Maniitsoq properties have exploration licenses and accumulated exploration credits, but the company has no stated mineral resources or reserves. Recoverability depends on successful exploration, permitting, financing, development and eventual commercial production or sale.
- Flow-through financing proceeds are restricted to qualifying Canadian exploration expenditures. At December 31, 2019, approximately C$399,000 had been renounced to investors, while only approximately C$1,238 of eligible expenditures had been incurred; the company could face indemnification or tax-related obligations if requirements are not met.
- The company relinquished its Michigan Section 35 lease and wrote off approximately C$11,000 of related exploration costs. A C$13,000 reclamation deposit was subsequently received.
- COVID-19 was identified as a subsequent-event risk in March 2020. Management stated that the financial impact was not yet determinable.
- Two shareholders held substantial positions at year-end: Sentient Group at approximately 41.7% and Contemporary Amperex Technology Limited at approximately 25.9%. This creates concentration and potential control risks.
- The common shares are thinly traded, quoted on the TSX Venture Exchange and OTC Bulletin Board, and subject to penny-stock and liquidity risks. The company does not expect to pay dividends in the foreseeable future.
Important Facts for Investors to Verify
- Confirm that the filing relates to North American Nickel Inc., not Nexmetals Mining Corp.
- Review the audited financial statements and the auditor’s going-concern emphasis, including the company’s projected cash needs and financing assumptions.
- Assess the basis for the C$26.499 million Maniitsoq impairment and the reasonableness of the approximately C$36.150 million recoverable amount.
- Verify the status, expiry dates and remaining obligations of the Greenland licenses, exploration credits and the Loveland earn-in agreement.
- Confirm compliance with the flow-through expenditure requirements and any associated indemnification or tax exposure.
- Review subsequent 2020 developments, including the COVID-19 impact, the new Greenland license, additional financing, and the issuance of 6.650 million stock options in February 2020.
- Reconcile the share count, preferred-share conversion terms, outstanding warrants and options on a fully diluted basis.
- Investigate related-party balances and arrangements, including the private-company investment, C$95,000 due from the related party and management and legal fees.