Business Context and Reporting Period
Company: North American Nickel Inc. (formerly Widescope Resources Inc.)
Filing Type: Form 20-F (Annual Report)
Reporting Period: Fiscal year ended December 31, 2016
Business Overview: The Company is a mineral exploration company focused on nickel-copper-cobalt-platinum group metal (PGM) properties in Greenland (Maniitsoq project), Ontario (Sudbury district), and Michigan (Section 35 property). The Company has no commercial production and generates no operating revenue. Its primary activity is the exploration of natural resource properties.
Key Financial Metrics
| Metric (CAD) | 2016 | 2015 |
|---|---|---|
| Net Operating Revenues | $0 | $0 |
| Net Loss | $(2,876,709) | $(2,388,970) |
| Loss Per Share (Basic & Diluted) | $(0.01) | $(0.01) |
| Total Assets | $41,881,735 | $32,729,177 |
| Exploration & Evaluation Assets | $38,341,869 | $29,703,848 |
| Cash and Cash Equivalents | $630,482 | $524,923 |
| Short-term Investments | $2,700,000 | $2,300,000 |
| Working Capital | $3,289,791 | $2,682,397 |
| Accumulated Deficit | $(23,972,138) | $(23,820,013) |
| Share Capital (Common) | $62,315,003 | $50,574,095 |
| Outstanding Common Shares | 368,581,886 | 207,629,506 |
Note: All figures are expressed in Canadian Dollars (CAD) unless otherwise noted. The Company had no long-term debt as of December 31, 2016, having repaid a $4.5 million term loan during the year.
Material Changes vs. Prior Period
- Capital Structure: The Company significantly increased its share count, issuing 160,000,000 units in two financings (July and September 2016) at $0.075 per unit, raising gross proceeds of approximately $12 million. This diluted existing shareholders but provided necessary working capital.
- Debt Repayment: The Company repaid a $4.5 million interest-free term loan to Sentient Executive GP IV Limited in September 2016 using proceeds from the equity financings. Consequently, the loan payable balance is zero.
- Exploration Expenditures: Capitalized exploration and evaluation assets increased by approximately $8.6 million to $38.3 million, driven by continued drilling and geophysical work on the Maniitsoq property in Greenland.
- Net Loss Increase: The net loss increased by approximately $488,000 year-over-year, primarily due to increased exploration costs, share-based compensation, and a foreign exchange loss of $158,037.
- Warrant Expiry: 12,960,000 warrants issued in 2011 expired unexercised in August 2016, resulting in a reversal of $1,813,263 from the reserve to the deficit.
Outlook, Risks, and Management Commentary
- Going Concern: The auditors have included an "Emphasis of Matter" paragraph regarding the Company's ability to continue as a going concern. The Company has accumulated losses of nearly $24 million and relies on external financing to fund operations. There is no assurance that additional capital will be available.
- Exploration Progress: Management highlights the identification of numerous new airborne EM anomalies and drill intersections on the Maniitsoq property (Greenland). Work in 2016 focused on follow-up drilling at mineralized targets, prioritizing the Imiak Hill Complex and Fossilik areas.
- Future Financing: The Company intends to continue exploration activities and will require additional financing. Subsequent to year-end, the Company filed a preliminary short-form prospectus for a proposed offering of up to $15 million.
- Risk Factors:
- Speculative Nature: The Company has no viable commercial business; share value is dependent on future prospects rather than current earnings.
- Liquidity: Shares are thinly traded on the OTCBB and TSX-V, subject to "penny stock" regulations, making it difficult for investors to sell shares.
- Management Expertise: Risks associated with management's limited direct mining expertise and the potential for capital to be wasted on non-viable properties.
- Foreign Jurisdiction: As a Canadian company with assets in Greenland and the US, enforcing US judgments against the company or its assets may be difficult.
Investor Verification Checklist
- Capital Adequacy: Verify the sufficiency of the current cash balance ($630k) and short-term investments ($2.7M) to fund the planned 2017 drilling program and administrative costs.
- Financing Terms: Review the terms of the subsequent $15 million offering filed in 2017 to assess potential dilution and pricing.
- Exploration Results: Confirm the technical validity of the drill intersections reported (e.g., P-004, P-059, Imiak Hill) via independent NI 43-101 technical reports filed on SEDAR.
- License Compliance: Verify that the Company has met all minimum expenditure requirements for the Sulussugut and Ininngui licenses in Greenland to maintain rights.
- Related Party Transactions: Scrutinize the $4.5 million loan repayment and the issuance of shares to Sentient Group GP IV (which holds ~60.5% of shares) to ensure fair value and arm's length terms.