NexMetals Mining Corp 20-F for FY2021
NexMetals Mining Corp. (NEXM)
About this 20-F
NexMetals Mining Corp filed this 20-F on April 26, 2022, covering the fiscal year ended December 31, 2021 (FY2021).
Headline figures
Fiscal year ended December 31, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Net loss
- 4M CAD
- compared with a net loss of 2.74M CAD a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
| REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| OR | |
| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| For
the fiscal year ended | |
| OR | |
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| OR | |
| SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
Commission
file number:
| (Exact name of Registrant as specified in its charter) |
| Province
of British Columbia, |
| (Jurisdiction of incorporation or organization) |
| (Address of principal executive offices) |
Securities registered or to be registered pursuant to Section 12(b) of the Act.
| Title of each class | Name of each exchange on which registered | |
| None | None |
Securities registered or to be registered pursuant to Section 12(g) of the Act. Common Shares, no par value
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act. None
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common shares as of the close of the period covered by the annual report:
inclusive of the conversion of the outstanding Series 1 Convertible Preferred Shares
Indicate by check mark if the registrant is a well-known seasoned issuer.
☐ Yes
☒
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
☐
Yes ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ | Emerging
growth company |
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ☐
† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
Indicate by check mark which financial statement item the registrant has elected to follow.
☒ Item 17 ☐ Item 18
If this is an annual report, indicate by check mark whether the registrant is a shell company as defined in Rule 12b-2 of the Exchange Act.
☐
Yes ☒
Unless otherwise indicated, all references herein are expressed in Canadian dollars and United States currency is stated as “U.S. $ .”
THIS SUBMISSION SHOULD BE CONSIDERED IN CONJUNCTION WITH PREVIOUSLY FILED FORMS 20-F AND 6-K. THE AUDITED FINANCIAL STATEMENTS AND NOTES THERETO ATTACHED ARE AN INTEGRAL PART OF THIS SUBMISSION.
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
Not required
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
Not required
ITEM 3. KEY INFORMATION
A. Selected financial data.
The following financial data summarizes selected financial data for our company prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) for the five fiscal years ended December 31, 2021, 2020, 2019, 2018 and 2017. The information presented below for the five year period ended December 31, 2021, 2020, 2019, 2018 and 2017 is derived from our financial statements which were examined by our independent auditors. The information set forth below should be read in conjunction with our audited annual financial statements and related notes thereto included in this annual report, and with the information appearing under the heading “Item 5 — Operating and Financial Review and Prospects”. All financial information is expressed in Canadian dollars and Danish Krones (“DKK”), except amounts in the table that are expressed in thousands of Canadian dollars and thousands of DKK, and except as otherwise indicated.
North American Nickel Inc. (the “Company”) was incorporated on September 23, 1983. The Company changed its name from Widescope Resources Inc. to North American Nickel Inc. effective April 19, 2010. The Company’s principal business activity is the exploration of natural resource properties.
Effective October 4, 2019, the Company completed a share consolidation of the Company’s issued and outstanding common shares whereby for every ten (10) pre-consolidation common shares issued and outstanding, one (1) post-consolidation common share exists without par value.
All references to share capital, warrants, options and weighted average number of shares outstanding have been adjusted in this discussion, in the consolidated financial statements and retrospectively to reflect the Company’s 10-for-1 share consolidation as if it occurred at the beginning of the earliest period presented.
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North American Nickel Inc.
Selected Financial Data in accordance with IFRS for the years 2021, 2020, 2019, 2018 and 2017
(Expressed in thousands of Canadian dollars, except per share amounts)
| Years Ended December 31 | ||||||||||||||||||||
| 2021 | 2020 | 2019 | 2018 | 2017 | ||||||||||||||||
| Net operating revenues | $ | 0 | 0 | 0 | 0 | 0 | ||||||||||||||
| Loss from operations | $ | 0 | 0 | 0 | 0 | 0 | ||||||||||||||
| Net loss | $ | (3,996 | ) | (2,741 | ) | (28,859 | ) | (3,022 | ) | (2,879 | ) | |||||||||
| Comprehensive loss | $ | (3,996 | ) | (2,741 | ) | (28,859 | ) | (3,022 | ) | (2,879 | ) | |||||||||
| Loss per share from operations | $ | (0.03 | ) | (0.03 | ) | (0.36 | ) | (0.04 | ) | (0.06 | ) | |||||||||
| Share capital | $ | 94,042 | 90,218 | 89,597 | 88,538 | 74,189 | ||||||||||||||
| Common shares issued | 131,204,627 | 109,833,648 | 88,690,791 | 78,792,860 | 55,459,527 | |||||||||||||||
| Weighted average shares outstanding | 122,376,897 | 96,521,169 | 79,152,786 | 71,824,814 | 46,592,964 | |||||||||||||||
| Total assets | $ | 41,683 | 39,644 | 40,039 | 67,500 | 53,697 | ||||||||||||||
| Net assets | $ | 41,203 | 39,015 | 39,431 | 66,944 | 52,728 | ||||||||||||||
| Cash dividends declared per common share | $ | 0 | 0 | 0 | 0 | 0 | ||||||||||||||
| Exchange rates (CAD$ to U.S.$) period average | $ | 0.7980 | 0.7454 | 0.7536 | 0.7718 | 0.7704 | ||||||||||||||
| Exchange rates (CAD$ to U.S.$) for most recent six months | Period High | Period Low | ||||||
| October 2021 | $ | 0.8111 | 0.7903 | |||||
| November 2021 | $ | 0.8085 | 0.7817 | |||||
| December 2021 | $ | 0.7910 | 0.7727 | |||||
| January 2022 | $ | 0.8017 | 0.7830 | |||||
| February 2022 | $ | 0.7888 | 0.7793 | |||||
| March 2022 | $ | 0.7955 | 0.7772 | |||||
B. Not required
C. Not required
D. Risk factors.
The business of the Company entails significant risks, and an investment in the securities of the Company should be considered highly speculative. An investment in the securities of the Company should only be undertaken by persons who have sufficient financial resources to enable them to assume such risks. The following is a general description of all material risks, which can adversely affect the business and in turn the financial results, ultimately affecting the value of an investment the Company.
The Company has no viable commercial business.
Having no viable business, it is difficult to determine a price for the common shares. That price must therefore be dependent on the value that each individual buyer and seller place on the future prospects of the company, rather than any objective measurement. This is a very risk position for shareholders, as the majority perception may turn negative and price decline severely.
The Company has limited funds.
Funds are the fuel needed to drive the company. Should current funds be consumed, and the company not be able to attract more capital, prospects for shareholders would become extremely negative, and shareholder losses will inevitably occur.
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There is no assurance that the Company can access additional capital.
The company will need to demonstrate performance in order to attract additional capital. As the mineral exploration business has a high element of chance associated with it, it is possible that none of the current properties will have any value. The capital markets could perceive this to be a demonstration of poor performance, and be unwilling to provide additional funds. Should this happen, shareholders will incur significant losses.
There is no assurance that the transactions disclosed herein will be successful in its quest to find a commercially viable quantity of mineral resources.
Unless the Company is able to secure other more viable projects, providing better future prospects, buyer interest for common shares will decline severely, resulting in lower prices and significant shareholder losses.
There is no assurance that other prospective mineral properties or other assets can be acquired, and if acquired that the necessary additional capital can be attracted.
Either of these is possible. Either occurring will have the same inevitable outcome. Demand for the common shares will decline severely, resulting in a drop in trading price, and significant shareholder losses.
The Company has a history of operating losses and may have operating losses and a negative cash flow in the future.
This will mean that additional shares will need to be sold to fund operations. Without a concurrent improvement in future prospects, this will result in supply of stock exceeding demand, and much lower prices. This will cause shareholders to lose money.
The Company’s auditors have indicated that U.S. reporting standards would require them to raise a concern about the company’s ability to continue as a going concern.
Additional capital will need to be raised. This could result in the perception of lowered future prospects, lower demand for the Company’s common share, lower stock prices, and shareholder losses.
There can be no assurance that a liquid market will develop for the Company’s shares and therefore no assurance that shareholders will be able to sell their shares.
Lack of liquidity that prevents shareholders from selling, or limits their abilities to sell, will all too likely lead to significant losses for shareholders.
Management has little expertise in mining, which may ultimately cause shareholders to lose money.
Management may waste the Company’s limited capital on worthless properties, or it may do the wrong things with properties that could have value. Either way, the outcome will be the same. Money will have been wasted without any corresponding creation of value. This will cause shareholders to lose patience and lose interest. This could lead to significantly increased selling of shares, driving down the price, and leading to losses for investors.
The Company’s common stock is thinly traded so it is more susceptible to extreme rises or declines in price, and you may not be able to sell your shares at or above the price paid.
You may have difficulty reselling shares of our common stock, either at or above the price paid, or even at fair market value. The stock market often experiences significant price and volume changes that are not related to the operating performance of individual companies, and because our common stock is thinly traded it is particularly susceptible to such changes. These broad market changes may cause the market price of our common shares to decline, regardless of how well the company performs. This may be exaggerated by the fact that the shares trade on the over-the-counter bulletin board (“OTCBB”), which is owned and operated by the Financial Industry Regulatory Authority (“FINRA”). Trading on the OTCBB is often extremely sporadic, and subject to manipulation by market-makers, and short sellers. This may cause you to lose money as you may have difficulty selling the shares that you own.
The Company’s common stock is subject to the “penny stock” regulations, which are likely to make it more difficult to sell.
A “penny stock” is generally a stock trading under $5.00 per share, and not registered on a national securities exchange or quoted on the NASDAQ national market. The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. These rules, intended to protect investors, generally have the result of reducing trading in such stocks, restricting the pool of potential investors, and making it more difficult for investors to sell their shares once acquired. Since our common shares are subject to the “penny stock” rules, you may find it more difficult to sell your shares.
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As a foreign issuer, the Company is exempt from certain informational requirements of the Exchange Act to which domestic issuers are subject.
As a foreign issuer we are not required to comply with all of the informational requirements of the Exchange Act. As a result, there may be less information concerning our company publicly available than if we were a domestic United States issuer. In addition, our officers, directors, and principal shareholders are exempt from the reporting and short profit provisions of Section 16 of the Exchange Act, and the rules promulgated thereunder. Therefore, our shareholders may not know on a timely basis when our officers, directors, and principal shareholders purchase or sell shares of our common stock.
As a Canadian company with most assets and key personnel located outside the United States, you may have difficulty in acquiring United States jurisdiction, or enforcing a United States judgment against us, our key personnel, or assets.
As a Canadian company many of our assets and key personnel, including directors and officers, reside outside the United States. As a result, it may be difficult or impossible for you to effect service of process within the United States upon us or any of our key personnel or to enforce against us or any of our key personnel judgments obtained in United States’ courts, including judgments relating to United States federal securities laws. Canadian courts may not permit you to bring an original action in Canada, or recognize or enforce judgments of United States courts obtained against us predicated upon the civil liability provisions of federal securities laws of the United States, or of any state thereof. Furthermore, because many of our assets are located in Canada, it would be extremely difficult to access these assets to satisfy any award entered against us in a United States court. Accordingly, you may have more difficulty in protecting your interests in the face of actions taken by our management, members of our board of directors, or our controlling shareholders than you would otherwise as shareholders of a United States public company.
The Company does not intend to pay any common stock dividends in the foreseeable future.
We have never declared or paid a dividend on our common stock, and, because we have very limited resources, we do not anticipate declaring or paying any dividends in the foreseeable future. It is unlikely that the holders of our common shares will have an opportunity to profit from anything other than potential appreciation in the value of our common shares. If you require dividend income, you should not rely in an investment in our common shares to provide it.
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Future issuances of common stock may depress stock prices and dilute your interest.
We may issue additional shares of our common stock in future financings, or grant stock options to our employees, officers, directors, and consultants under our stock incentive plan. Any such issuances could have the effect of depressing the market price of our common stock, and, in any case, would dilute the percentage ownership interests in our company of our shareholders. In addition, we could issue securities having rights, preferences and privileges senior to those of our common shares. This could depress the value of our common shares.
ITEM 4. INFORMATION ON THE COMPANY
A. History and development of the Company.
North American Nickel Inc. (the “Company”) was incorporated under the laws of the Province of British Columbia, Canada, by filing of Memorandum and Articles of Association on September 20, 1983, under the name Rainbow Resources Ltd. The company’s name was changed to Widescope Resources Ltd. on May 1, 1984, and to Gemini Technology Inc. on September 17, 1985. In conjunction with a reverse split of its common shares on a five-old for one-new basis, the Company adopted the name International Gemini Technology Inc., effective September 23, 1993. The Company’s name was changed to Widescope Resources Inc., effective July 12, 2006. Effective April 19, 2010, the Company’s shareholders approved a special resolution to reorganize the Company’s capital structure by consolidating in a reverse stock split the existing common shares on the basis of every 2 old shares being equal to 1 new share and concurrently increasing the authorized capital of the Company from 100,000,000 common shares without par value to an unlimited number of common shares without par value. Also, effective this date, the Company’s name was changed to North American Nickel Inc. to reflect its new focus. On October 2, 2019, the Board of Directors and management completed a consolidation of the Company’s issued and outstanding common shares on the basis of ten pre-consolidation shares for one post-consolidation share. All references to common shares, stock options, warrants and weighted average number of shares outstanding in this discussion and the accompanying consolidated financial statements retroactively reflect the share consolidation unless otherwise noted.
In April 2010, the Company initiated a series of actions to realign its focus into the field of nickel exploration in the prolific nickel belts around Sudbury, Ontario and Thompson, Manitoba. Concurrently, the directors of the Company appointed new senior management to oversee the daily operations of the Company.
On May 3, 2011, the Company’s listing application was conditionally accepted by the TSX-V Venture Exchange. On May 30, 2011, the common shares of the Company began trading under the symbol “NAN”.
On August 15, 2011, the Company was granted an exploration license by the Bureau of Minerals and Petroleum of Greenland for exclusive exploration rights over an area totalling 4,841 square kilometres located near Sulussugut, Greenland.
On March 4, 2012, the Company was granted an additional exploration license by the Bureau of Minerals and Petroleum of Greenland for exclusive exploration rights over an area covering a total of 142 square kilometres license and located near Ininngui, Greenland.
On January 19, 2015, the Company signed an exclusivity agreement with Minelco AS (“Minelco”) to acquire the deep water Seqi Port (the “Port”). A report was prepared summarizing environmental due diligence and preliminary assessment of reindeer by Golder Associates — INUPLAN in and around the Port and upon further review, the decided to not pursue the Seqi Port assignment.
On July 13, 2017, the Company announced that it has finalized the details for the acquisition of a watershed (“0.6H”) prospecting licence that overlaps the eastern boundary of its 100% owned Maniitsoq nickel sulphide project in southwest Greenland.
On March 1, 2018, the Company announced that it had received the final Hydropower Feasibility Assessment Study within watershed 06.H located on the eastern flank of the Company’s 100% owned Maniitsoq nickel sulphide project in Southwest Greenland.
On May 4, 2018, the Company acquired new properties, Ikertoq, mineral licence No. 2018/31 and Carbonatite, mineral licence No. 2018/21 located on the Company’s 100% owned Maniitsoq nickel sulphide project in Southwest Greenland. The Ikertoq licences was relinquished as at December 31, 2018.
On September 18, 2018, the Company has completed its 2018 exploration and drilling program with a total of 14,287.6 metres of drilling at the Company’s 100% owned Maniitsoq nickel-copper-cobalt-PGM project in Southwest Greenland.
On July 9, 2020, the Company announced its ownership position in a private company, Premium Nickel Resources (“PNR”) to have direct exposure to Ni-Cu-Co opportunities in the South African region. NAN provides technical and management support to PNR through a Services Agreement and a Consulting Agreement. The CEO, CFO and the Chairman of the Company’s Board were appointed to be the CEO, CFO and the Chairman of PNR. The Company owns 10% of PNR upon a further investment of $441,046 on August 26, 2021 and has a 5-year Warrant to purchase an additional 15% of PNR for USD $10 million before February 26, 2025.
On February 17, 2022, the Company announced that it has executed a non-binding letter of intent (“Non-Binding LOI”) providing for a business combination of PNR and the Company (“Merger”).
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B. Business overview
North American Nickel is an international mineral exploration and resource development company listed on the TSX Venture Exchange (“TSXV”) as at May 3, 2011 trading under the symbol NAN. The Company is focused on the exploration and development of a diversified portfolio of nickel-copper-cobalt-precious metals sulphide projects that should be economically feasible assuming conservative long-term commodity prices. Since 2011 the Company has continued the advancement of its camp scale Maniitsoq Project in Southwest Greenland and the Post Creek Property in Sudbury, Ontario.
The Maniitsoq property consists of four exploration licenses, No. 2011/54 (the “Sulussugut License”) and No. 2012/28 (the “Ininngui License”) comprising 2,689 and 296 square kilometre “(km2)”, respectively and the Carbonatite license No. 2018/21 (63 km2) and recently acquired 2020/05 license. The Ikertoq license No. 2018/31 (33 km2) was relinquished during fiscal 2018. The Maniitsoq property is centred on the 75 kilometre by 15 kilometre Greenland Norite Belt which hosts numerous high-grade nickel-copper sulphide occurrences associated with mafic and ultramafic intrusions.
In early 2018, the Company initiated a strategy to assemble a diversified portfolio of highly prospective nickel-copper-cobalt projects that were located in countries with the Rule-of-Law and that should demonstrate sustainable economics assuming conservative long-term commodity prices. As a result of this work, the Company has acquired three new projects in Ontario which include: the Lingman Nickel Project, covering a portion of the Archean aged Lingman Lake Greenstone Belt and the Quetico Nickel Project which is known to host intrusions with Ni-Cu-Co-PGM mineralization related to a late 2690 Ma Archean magmatic event and the 1110-1090 Ma Proterozoic Mid-continent Rift. On September 25, 2019, the Company entered into an agreement to earn a 100% interest in the Loveland Nickel property in the Timmins area of Ontario and subsequently completed a 4-hole program for 1,086 metres of diamond drilling, with borehole electromagnetic (BHEM) surveys on the project. Based on the result of the exploration program, the management elected not to proceed with further exploration on the property and terminated the agreement.
The company has raised aggregate gross proceed of $20,707,628 through non-brokered private placement as well as flow-thought common shares equity financing during 2018 -2020.
On July 9, 2020, the Company announced its ownership position in a private company, PNR to have direct exposure to Ni-Cu-Co opportunities in the South African region. PNR submitted an indicative offer to the Liquidator of BCL Limited (“BCL”) and Tati Nickel Mining Corporation (“TNMC”) in June 2020 to acquire a combination of prioritized assets of the former producing BCL Mining Complex and separately the TNMC operations located in north-eastern Botswana.
On February 10, 2021, PNR was selected as the preferred bidder and on March 22, 2021, PNR entered into a memorandum of understanding providing for a six-month exclusivity period to complete additional work and negotiate the asset purchase agreements (see news release dated March 24, 2021). On September 28, 2021, the Company announced that PNR had executed a definitive asset purchase agreement with BCL to acquire the Selebi, and Selebi North Ni-Cu-Co assets and related infrastructure formerly operated by BCL. PNR announced the closing of this transaction, and transfer of ownership of the assets, was completed on January 31, 2021. PNR also completed negotiating a separate binding asset purchase agreement to finalize the terms for any prioritized TNMC assets that may be purchased.
The Company announced on February 17, 2022 a proposed business combination of PNR and the Company(“Merger”). Under the policies of TSXV, PNR is a “Non-Arm’s Length Party” of the Company. The Non-Binding LOI will form the basis upon which PNR and the Company will negotiate one or more definitive agreements governing the proposed Merger. It is currently anticipated that the Merger will be completed by way of a triangular amalgamation involving PNR, the Company and a wholly-owned subsidiary of the Company to be formed; provided, however that the definitive structure of the Merger will be determined based on further tax and structuring advice to be received prior to the execution of definitive agreements governing the proposed Merger. In this report, references to the “Resulting Issuer” is to the Company after the closing of the Merger.
Proposed Transaction Terms
The Company currently owns approximately 9.8% of the outstanding common shares of PNR on a basic, undiluted basis, and a warrant entitling the Company to purchase an additional 15% of the equity in PNR, on an undiluted basis, for US$10 million, until February 26, 2025 (the “15% Warrant”) While a definitive exchange ratio remains subject to ongoing due diligence, under the terms of the Non-Binding LOI, each common share of PNR outstanding immediate prior to the closing of the Merger, other than any common share of PNR held by the Company, would be exchanged for 5.27 common shares of the Resulting Issuer (before giving effect to any Consolidation) and the 15% Warrant and the common shares of PNR held by the Company would be extinguished. Following completion of the Merger, approximately 25% of the outstanding common shares of the Resulting Issuer are expected to be held by the current shareholders of the Company and approximately 75% of the outstanding common shares of the Resulting Issuer are expected to be held by the current shareholders of PNR (other than the Company).
In connection with the proposed Merger, and subject to any required shareholder and regulatory approvals, the Company is expected to seek the requisite shareholder and regulatory approvals to change the name and stock ticker symbol of the Resulting Issuer as part of the Merger to such name and ticker symbol as may be requested by PNR, acting reasonably, consolidate the common shares of the Resulting Issuer (the “Consolidation”) and reconstitute the board of directors of the Resulting Issuer. The Non-Binding LOI provides for an exclusivity period ending at 11:59 p.m. (Toronto time) on April 2, 2022, which has been extended to April 29 by mutual written consent of the parties, to allow parties to complete their due diligence and negotiate definitive agreements for the proposed Merger.
On April 2, 2022, the Company entered into an agreement with Paradigm Capital Inc. (the “Agent”) to act as lead agent and sole bookrunner, on behalf of a syndicate, on a “best efforts” basis, for a private placement offering of subscription receipts of the Company (the “Subscription Receipts”) for gross proceeds of $5,000,000 (the “Offering”) at a price of $0.48 per Subscription Receipt (the “Issue Price”). On April 8, 2022, the Offering was upsized to total gross proceeds of up to $10,000,320.
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C. Organizational structure.
The Company is part of no other group. During the year ended June 30, 2006 Outback Capital Inc. dba Pinefalls Gold (“PFG”) a private Alberta corporation became a majority-owned subsidiary of the Company. PFG was incorporated under the Alberta Business Corporations Act on February 6, 2001. Effective May 31, 2010, the Company completed an agreement with an arm’s length entity that resulted in it divesting of its interest in Outback Capital Inc. In June 2015 the Company incorporated North American Nickel (US) Inc. to hold a mineral lease in Michigan, which was granted in January 2016 and written-off during the year ended December 31, 2019.
D. Property, plants and equipment.
The Company has a large land package in southwest Greenland, collectively known at the Maniitsoq property. In addition, the Company has two properties, Post Creek and Halcyon, in Sudbury nickel district of Ontario. A figure showing the locations of all of the company’s properties is displayed below.
Maniitsoq
The Greenland properties currently being explored for nickel-copper-copper-PGM sulphides by North American Nickel are exploration properties without mineral resources or reserves. The Maniitsoq project is centered 100 kilometres north of Nuuk, the capital of Greenland which is a safe, stable, mining-friendly jurisdiction. The centre of the project is located at 65 degrees 18 minutes north and 51 degrees 43 minutes west and has an artic climate. It is accessible year-round either by helicopter or by boat from Nuuk or Maniitsoq, the latter located on the coast approximately 15 kilometres to the west. The deepwater coastline adjacent to Maniitsoq is typical of Greenland’s southwest coast which is free of pack ice with a year-round shipping season. The optimum shipping conditions are due to the Irminger current, a tributary of the warming Gulf Stream flowing continuously past the south west coastline of Greenland. There is no infrastructure on the property; however, the Seqi deepwater pier and a quantified watershed for hydropower are located peripheral to the project. A location map for the property is given below.
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The Maniitsoq property consists of four exploration licences, No. 2011/54 (2,689 km2), No. 2012/28 (296 km2), No. 2018/21 (63 km2) and No 2018/31 (33 km2). The property is centered on the 75 kilometre by 15 kilometre Greenland Norite Belt which hosts numerous high-grade nickel-copper sulphide occurrences associated with mafic and ultramafic intrusions. The Ikertoq license (2018/31) was later relinquished and the costs were expensed as at December 31, 2018. The property is subject to a 2.5% NSR. The Company can reduce the NSR to 1% by paying $2,000,000 on or before 60 days from the decision to commence commercial production. A new prospecting licence, No. 2020/05, for West Greenland was awarded by the Greenland government on March 18, 2020.
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Between 1995 and 2011, various companies carried out exploration over portions of the project area. The most extensive work was carried out by Kryolitselskabet Øresund A/S Company (KØ) who explored the project area from 1959 to 1973. KØ discovered a number of surface and near surface nickel-copper sulphide occurrences and this work was instrumental in proving the nickel prospectivity of the Greenland Norite Belt.
The Company acquired the Maniitsoq project because it has potential for the discovery of significant magmatic sulfide discovery in a camp-scale belt. The company believed that modern, time-domain, helicopter-borne electromagnetic (EM) systems would be more effective at detecting nickel sulphide deposits in the rugged terrain of Maniitsoq than previous, older airborne fixed wing geophysical surveys available to previous explorers. In addition, modern, time domain surface and borehole EM systems could be used to target mineralization in the sub-surface.
During the FY 2020, the Greenland Mineral Licence & Safety Authority (MLSA) granted the Company two distinct one-year period license extensions for all three exploration licences, and reduced exploration obligations to zero for both 2020 and 2021.
Sulussugut Licence (No. 2011/54) was granted by the Bureau of Minerals and Petroleum (“BMP”) of Greenland on August 15, 2011 and valid for 5 years until December 31, 2015 providing the Company meets the terms of the licence, which includes that specified eligible exploration expenditures must be made. The application for the second 5-year term on the Sulussugut Licence was submitted to the MLSA which was effective on April 11, 2016. The granting of two one-year period extensions and a further extension provided on January 2, 2021 provides for the renewal period ending December 31, 2022.
Ininngui Licence (No. 2012/28) is contiguous with the Sulussugut Licence and was granted by the BMP of Greenland on March 4, 2012. The Ininngui Licence was valid for 5 years until June 30, 2017. The application for the second 5-year term on the Ininngui Licence was submitted to the MLSA which was effective March 14, 2017. The granting of two one-year period extensions and a further extension provided on January 2, 2021 provides for the renewal period ending December 31, 2023.
Carbonatite Licence (No.2018/21) was granted by the BMP of Greenland on March 4, 2018 for exclusive exploration rights of an area located near Maniitsoq in West Greenland. The Company paid a licence fee of $6,523 (DKK 31,000) upon granting of the Carbonatite Licence. The Carbonatite Licence is valid for 5 years. The granting of two one-year period extensions and a further extension provided on January 2, 2021 provides for the renewal period ending December 31, 2024.
Details of required work expenditures and accrued work credits for the above three licenses are tabulated and given below in Table 1.
The Greenland MLSA, in two distinct initiatives, has adjusted the minimum required exploration commitment for the above three licenses to DKK 0 for the years 2020 and 2021 and adjusted the license expiry dates and the banked credits carry forward period by one year.
For all licences, future required minimum eligible exploration expenses will be adjusted each year on the basis of the change to the Danish Consumer Price Index.
For all licences, at the expiration of the second licence period (years 6-10), the Company may apply for a new 3-year licence for years 11 to 13. Thereafter, the Company may apply 3 times for additional 3-year licences for a total of 9 additional years. The Company will be required to pay additional licence fees and will be obligated to incur minimum eligible exploration expenses for such years.
The three licences, 2011/54, 2012/28 and 2018/31 have sufficient accrued work credits to keep the property in good standing until December 2023.
Table 1: Exploration commitment and credits at the end of 2021 (All amounts in table are expressed in thousands of DKK)
| Sulussugut Licence 2011/54 | Ininngui Licence 2012/28 | Carbonatite Licence 2018/21 | |||||||||||||
| Area | 2,689 km2 | 296 km2 | 63 km2 | ||||||||||||
| Valid until | December 31, 2021 | December 31, 2022 | December 31, 2023 | ||||||||||||
| Annual licence fee | DKK | 41 | 41 | 31 | |||||||||||
| Total credit available | |||||||||||||||
| Credit from previous years | 283,945 | 30,425 | 10,545 | ||||||||||||
| Approved exploration expenditures (2021) | 1,921 | 90 | 32 | ||||||||||||
| Exploration obligation (2021) | - | - | - | ||||||||||||
| Total Credit | DKK | 285,866 | 30,515 | 10,577 | |||||||||||
| Carry Forward Period: | |||||||||||||||
| From 2017 until December 31, 2022 | 201,752 | 19,534 | - | ||||||||||||
| From 2018 until December 31, 2023 | 79,604 | 10,465 | 9,563 | ||||||||||||
| From 2019 until December 31, 2024 | 1,724 | 283 | 934 | ||||||||||||
| From 2020 until December 31, 2025 | 865 | 143 | 48 | ||||||||||||
| From 2021 until December 31, 2026 | 1,921 | 90 | 32 | ||||||||||||
| Total | DKK | 285,866 | 30,515 | 10,577 | |||||||||||
| Average Annual Rate DKK to CAD | 0.1995 | 0.1995 | 0.1995 | ||||||||||||
| Accumulated exploration credits in CAD (,000) | $ | 57,027 | $ | 6,087 | $ | 2,110 | |||||||||
West Greenland Prospecting Licence – 2020/05 A new prospecting licence, No. 2020/05, for West Greenland was awarded by the Greenland government on March 18, 2020. The Prospecting Licence is in effect until December 31, 2024.
The Company may terminate the licenses at any time; however any unfulfilled obligations according to the licenses will remain in force, regardless of the termination.
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The Company undertook numerous exploration activities and completed various mineralogical studies during the period from 2012 to 2019, including 52,895.16 metres of drilling in 189 holes and 13,497 line-km of SkyTEM and VTEM surveys. A National Instrument 43-101 was completed on the Maniitsoq property in March 2016 and updated in March 2017. QEMSCAN mineralogical analyses on drill core samples documenting favourable liberation and recovery characteristics for Maniitsoq mineralization was reported in April 2016.
NAN has progressively implemented new exploration methodologies and tools in an effort to refine targeting at the property and borehole scales. These include the introduction of helicopter-borne electromagnetic and magnetic surveys, modern surface-based electromagnetic, induced polarization, and gravity surveys, application of Worldview-3 satellite imagery, implementation and consistent use of borehole electromagnetic methods, collection of oriented drill core, optical televiewer data and downhole physical properties; structural studies, geochemical studies and 3D modelling. The compilation and integration of data has resulted in a vast improvement in the understanding of the geology of the GNB and it resulted in the discovery of surface and sub-surface nickel-copper sulphide occurrences and the expansion of mineral zones comprising the Mikissoq, Spotty Hill, Imiak Hill, Fossilik, P-008, P-013, and P-053, four of which remain open in one or more directions. In addition, nickel sulphide mineralization has been intersected at a number of other locations throughout the Greenland Norite Belt, including at the P-004, P-013, P-030, P-032, P-053, and Pingo targets (figure 1). Exploration continues to extend known zones of mineralization and provides a framework for future discoveries.
In 2019, the Company had planned to return to Maniitsoq and other regional target areas to continue the systematic exploration program. Unfortunately, the Company was not successful in completing a treasury financing within the lead-time required for the logistical planning in Greenland. The initial 2019 work program for Maniitsoq project had been postponed to the 2020 summer season after a successful financing capable of supporting an integrated exploration program. However, the 2020 and 2021 summer program were further delayed due to the COVID-19 travel restrictions.
In June 2021, fuel and equipment stored on site at the Puiattoq camp site was removed. The wooden tent platforms remain on site for use in future exploration programs.
Hydropower assessment of watershed 06.H was continued with the emplacement of devices to measure the seasonal variability of water levels in Lake Taserssuatsiaq and to provide a framework for further surveys over the next 3-5 years. A new hydropower prospecting licence was submitted to the Greenland Government replacing the original licence that expired in July of 2021.
Carbonatite
On May 4, 2018 the Company was awarded an exploration licence (2018/21; “Carbonatite”) over a highly prospective block of ground to the west of the Fossilik Intrusion in an area which has very limited nickel exploration and contains the Qeqertassaq carbonatite complex.
The work program in 2018 consisted of compilation, surface sampling for geochemistry, surface EM work in areas with possible norite-associated mineralization and drilling to evaluate the potential for strategic metals (niobium, tantalum, and rare earth elements) in areas outside of the focus areas of historic drilling.
A report on the strategic metal potential of the Qeqertassaq carbonatite was commissioned, and emphasis was placed on understanding the upside potential of the light rare earth element vein system, the niobium mineralization, and the potential for tantalum mineralization is association with soeviite series rocks.
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Figure 1. Location of Mineralized targets.
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Sudbury nickel properties:
The Sudbury properties currently being explored by North American Nickel are exploration properties without mineral resources or reserves. All properties can be readily accessed by paved and/or all-weather gravel roads and have access to water and diesel-power for exploration purposes. Sudbury is considered a world class nickel district. Multiple Ni-Cu-PGM deposits and past and currently producing mines are associated with the Sudbury Igneous Complex. Global nickel resources have been estimated at 1648 million tonnes at a grade of 1.20% nickel. The Sudbury properties have unique geologic characteristics of the Sudbury Basin. Quart Diorite and Sudbury Breccia, two lithologies that commonly host Sudbury nickel-copper-PGM (platinum group metal) mineralization, have been identified on the Post Creek property. The Sudbury properties are strategically located near the Whistle Offset Dyke structure hosting the past-producing Podolsky Cu-Ni-PGM mine owned by KGHM Polska Miedź S.A. (KGHM). A location map for the properties is given below.
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Post Creek: The Company entered into an option agreement in April 2010, subsequently amended in March 2013, to acquire rights to Post Creek Property located within the Sudbury Mining District of Ontario. On August 1, 2015, the company has completed the required consideration and acquired 100% interest in the property. the Company is obligated to pay advances on the NSR of $10,000 per annum, which will be deducted from any payments to be made under the NSR.
The property is located 35 kilometres east of Sudbury in Norman, Parkin, Alymer and Rathburn townships and consists of 39 unpatented mining claims in two separate blocks, covering a total area of 912 hectares held by the Company. The center of the property occurs at UTM coordinates 513000mE, 5184500mN (WGS84, UTM Zone 17N). The Post Creek property lies adjacent to the Whistle Offset Dyke Structure which hosts the past—producing Whistle Offset and Podolsky Cu-Ni-PGM mines. Post Creek lies along an interpreted northeast extension of the Whistle Offset Dyke trend. Offset Dykes and Footwall deposits account for a significant portion of all ore mined in the Sudbury nickel district and, as such, represent favorable exploration targets. Key lithologies are Quartz Diorite related to Offset Dykes and Sudbury Breccia associated with Footwall rocks of the Sudbury Igneous Complex which both represent potential controls on mineralization.
Previous operators completed geological, geophysical and Mobile Metal Ion soil geochemical surveys. Highlights of this work included:
| ● | A drill intersection returning 0.48% copper, 0.08% nickel, 0.054 grams/tonne palladium, 0.034 grams/tonne platinum and 0.020 grams/tonne gold over a core length of 0.66 metres; and | |
| ● | A grab sample from broken outcrop which returned 0.83% nickel, 0.74% copper, 0.07% cobalt, 2.24 grams/tonne Pt and 1.05 grams/tonne Pd. |
A NI 43-101 compliant Technical Report was completed by Dr. Walter Peredery, formerly of INCO, in 2011 and subsequently accepted by the Securities Commission.
During the period 2011 to 2016, the Company carried out exploration programs comprising ground geophysics (magnetics and electromagnetics), diamond drilling (1,533 metres in 7 drillholes), borehole electromagnetic surveys, georeferencing of selected claim posts, prospecting, trenching, geological mapping, sampling and petrographic studies. This work has identified new occurrences of Quartz Diorite (dyke and Sudbury Breccia, both of which are geologically significant lithologies known to host ore deposits associated with the Sudbury structure. Ground traverses, trenching and mapping carried out in 2016 outlined a Sudbury Breccia belt of at least 300 metres by 300 metres in size which lies along the same trend at the Whistle Offset Dyke located on KGHM property to the southwest. These findings support the potential for the Post Creek property to host both Footwall and Offset Dyke type deposits.
In 2017, the Company initiated support for a two-year MITAC project whereby an M.Sc. student carried out field and laboratory study aimed at understanding the mineral resource potential of the Post Creek Property. The field mapping gram expanded the area of Sudbury Breccia.
A two-hole drill program was completed in 2018 and reported in 2019 with the objectives of assessing magnetic and electromagnetic anomalies within a corridor of breccias and quartz diorite extending radially away from the Whistle Offset and to provide a platform for downhole geophysics. Both drill holes encountered a thick sequence of mafic volcanic rocks; quartz diorite, partially melted country rocks or footwall-style mineralization were not encountered. DDH PC-18-21 did intersect a thick interval of volcanogenic massive sulphide-type sphalerite mineralization including 7.50 m @ 3.55% zinc and 0.82 ppm silver. Multiple BHEM anomalies were detected both north and south of the zinc mineralization and are potential drill targets for volcanogenic massive sulfide mineralization.
In 2020, prospecting work to the immediate north and west of the drilling completed on the CJ Offset identified quartz diorite boulders and an outcrop of grey gabbro with 0.17% Ni, 0.55% Cu, and 0.26g/t Au+Pt+Pd. Sampling completed on Cu-Au mineralization within the area of Sudbury breccia returned up to 1.975% Cu and 0.873 ppm Au in two different samples, but no significant Ni, Pt, or Pd.
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Location of the Post Creek Project and the Sudbury Breccia Zone
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Halcyon: The property is located 35 Km NNE of Sudbury in the Parkin and Alymer townships and consists of 53 unpatented mining claims covering an area of approximately 864 hectares. Halcyon is adjacent to the Post Creek property and is located approximately 2 kilometers north of the Whistle Offset Dyke structure and the past-producing Podolsky mine of KGHM. Previous operators on the property defined numerous conductive zones based on induced polarization (IP) surveys with coincident anomalous soil geochemistry. Base and precious metal mineralization have been found in multiple locations on the property but follow-up work was never done. The former producing Milnet Mine (nickel-copper-cobalt-platinum) is situated 1 kilometre north of the property.
During the period 2011 to 2016, the Company carried out a small amount of exploration including ground geophysics (magnetics and electromagnetics), diamond drilling (301 metres in 1 drill hole), a borehole electromagnetic survey, georeferencing of selected claim posts, prospecting, geological mapping, sampling and petrographic studies. The single hole located on the southeast corner of the property was drilled with the purpose of providing geological information and to provide a platform for borehole pulse EM (“BHPEM”). No anomalies were detected although quartz diorite breccia and partial melt material with 2-3% disseminated pyrrhotite and chalcopyrite was intersected over short core lengths. The property is strategically located adjacent to the Company’s Post Creek property, located immediately to the south, where occurrences of both quartz diorite and Sudbury Breccia have been identified. This program was carried out concurrently with similar work on the Post Creek Property. Assay, whole rock and thin section samples were collected for analysis and study. Results have been received and compiled.
Work in 2020 and 2021 consisted of monitoring activity on adjacent claims to assist in target generation.
As at the date of this MD&A, the company holds 100% interest in Halcyon Property and is obligated to pay advances on the NSR of $8,000 per annum, which will be deducted from any payments to be made under the NSR.
Quetico: During FY 2018, the Company acquired 809 claims known as Quetico located within the Sudbury Mining District of Ontario. The Company incurred total acquisition and exploration related costs of $64,256. Cells were acquired to assess (i) the Quetico Sub-province corridor, which hosts intrusions with Ni-Cu-Co-PGM mineralization related to a late 2690 Ma Archean magmatic event, and (ii). the Neoproterozoic (1100 Ma MCR) magmatic event and related intrusions. Three clusters of claims cells, labeled Quetico South, East and West cover magnetic features interpreted to represent small differentiated intrusions. The review of government geological and geophysical data, and historic assessment file data was completed in 2019 and recommendations for additional exploration work were prepared. An application has been lodged with the Mining Lands Administration of the Ontario Government to extend the tenure of the claim blocks due to impact from COVID-19 on implementation of exploration work. A one-year exclusion was granted on September 1, 2020.
A short program of prospecting and outcrop sampling was completed in June 2020 to search for mineralization related to early mid-continent rift peridotite intrusions and Archean pyroxenites. Targets comprising, magnetic responses, prospective geology and geochemical anomalies, were examined on all three clusters of claim cells.
Exploration was focused on the East block where previous work identified mafic rocks with geochemical signatures similar to those that host the Current Lake deposit, located 10 km to the east (below table). The Current Lake and Escape Lake deposits a total indicated resource of 16.285 million tonnes at 3.5 g/t PdEq and an inferred resource of 9.852 million tonnes at 2.1 g/t PdEq (2021 update to NI 43-101 Technical Report, Clean Air Metals Inc.).
Sampling in the East block adjacent to Clean Air Metals’ Current Lake Property identified outcropping peridotite and gabbroic rocks with trace sulphide. The geochemical signature of the peridotite is similar to the differentiated Disraeli, Hele and Seagull intrusions based on a comparison with historic assessment report and government data. There is no known electromagnetic (EM) survey coverage in the area and accordingly the next phase of exploration will include airborne or surface EM survey work. These surveys will be designed to detect conductive responses of potential nickel sulphide mineralization associated with the ultramafic intrusions.
On the West block, a total of eight magnetic anomalies were investigated. Six anomalies remain unexplained and weakly mineralized magnetic pyroxenite was identified at two locations. A weakly mineralized pyroxenite sample associated with a strong magnetic anomaly has an elevated Au+Pt+Pd content. The configuration of the magnetic anomaly suggests the potential for a 3 km2 ultramafic intrusion and a related feeder-dyke to the west. These intrusions may be separated from a larger intrusion to the east by a keel structure which is a classic target for magmatic sulphide exploration. Future exploration will focus on this intrusion and others that were not prospected in 2020.
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Quetico Property Location Map
Lingman Lake Property: The Company digitally staked 188 claim cells known as Lingman Lake on April 15, 2019. The property occurs about 65 km South East of Red Sucker Lake First Nation and about 35 km southwest of Sachigo Lake First Nation, approximately 650 km northwest of Thunder Bay. The Lingman Nickel Project, covers a portion of the Archean age Lingman Lake Greenstone Belt that includes tholeiitic-komatiitic rocks and sulphide facies iron formation. Historic field work has identified ultramafic rocks with elevated nickel and copper in grab samples and untested VTEM anomalies.
An application was lodged with the Ontario Ministry of Energy, Northern Development and Mine (ENDM) on March 17, 2021 to extend the tenure of the claim blocks due to impact from COVID-19 on the implementation of exploration work. The one-year exclusion was granted on May 6, 2021. Work commitments of $75,200 are due prior to April 15, 2022.
High Atlas Project in Morocco:
In 2018, the Company geologists identified a camp scale project opportunity in the high Atlas Mountains of Morocco. Jurassic aged troctolitic and gabbroic intrusions occur at the margin of a significant trans-lithospheric structure over a strike length greater than 100 km. The intrusions are host to three major Ni-Cu occurrences and another ten minor occurrences. There is no modern geophysical coverage and no drilling on the property.
In 2019, the Company signed an MOU with ONHYM (Office National des Hydrocarbons et des Mines), a government entity and single largest current permit holder in Morocco. Through this alliance, the Company was given access to confidential exploration data to develop nickel projects in the High Atlas Region of Morocco. In November and December 2021, the Company lodged applications for five permits in Morocco. All five permits were awarded to NAN as at the date of this report.
Project Pipeline: Due to long term nickel market forecasts indicating a supply deficit developing, the Company believes that it is a good time to acquire nickel exploration and development projects that could be developed assuming conservative long-term nickel prices. The Company maintains a nickel project generation activity focusing on high prospectivity projects in countries with the Rule of Law and reasonable development economics.
In the context of rising nickel prices and positive developments in the electric vehicle market, the Company will look to enhance shareholder value by aggressively expanding its nickel sulphide project pipeline. The Company’s staff are proceeding with compilation work on prospective geological environments related to North American Archean craton margins where structural space controls the development of mafic-ultramafic intrusions. The objective of this work is to identify underexplored or unexplored open system intrusions where large zones of high-grade sulphide mineralization are controlled within the footprints of very small intrusions. For the past year, the Company has been evaluating opportunities in Africa, including a direct investment in PNR, a private Canadian company who has recently completed a binding purchase agreement to acquire the assets, currently in liquidation, formerly operated by BCL in Botswana. In addition, the development of a Moroccan-based subsidiary company is proceeding and will provide an opportunity to assess nickel sulphide potential throughout the country.
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ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
The following discussion and analysis should be read in conjunction with the financial statements and notes thereto included herein (see also “Selected Financial Data”). The financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”).
Overview
North American Nickel is an international mineral exploration and resource development company listed on the TSX Venture Exchange (“TSXV”) as at May 3, 2011 trading under the symbol NAN. The Company’s principal business activity is the exploration and development of mineral properties in Greenland, Morocco and Canada, as well as in Botswana through its participation in Premium Nickel Resources.
A. Operating Results
The Company is an exploration and development stage entity and has not yet achieved profitable operations. The Company has shown losses for the past several years. These losses result largely from having no revenue and significant exploration and administrative expenses related to operations.
The Company continues in the exploration business and the development of its camp scale Maniitsoq Project in south-western Greenland and the Post Creek Property in Sudbury, Ontario. In addition, the company looks to enhance shareholder value by aggressively expanding its nickel sulphide project pipeline including the development of a Moroccan-based subsidiary company as well as a direct investment in PNR, a private Canadian company who has recently acquired the Selebi and Selebi North Ni-Cu-Co assets, currently in liquidation, formerly operated by BCL in Botswana.
Net loss of $3,996,317 in FY 2021 was higher by $1,255,544 compared to a loss of $2,740,773 in FY 2020. The higher loss in FY 2021 was mainly driven by higher share-based payments costs during FY 2021.
B. Liquidity and Capital Resources
Since the Company is organized in Canada, the Company’s December 31, 2021 financial statements have been prepared in accordance with International Financial Reporting Standards (‘IFRS”).
At the end of FY 2021, the Company had a working capital of $1,767,242 (FY 2020 - $207,775 a negative working capital) and reported accumulated deficit of $57,090,869 (FY 2020 - $53,299,078). The Company will require additional funds to continue its planned operations and meet its obligations.
As at December 31, 2021, the Company had $1,972,716 in available cash (December 31, 2020— $308,151). There are no sources of operating cash flows. Given the Company’s current financial position and the ongoing exploration and evaluation expenditures, the Company will need to raise additional capital through the issuance of equity or other available financing alternatives to continue funding its operating, exploration and evaluation activities, and eventual development of the mineral properties. Although the Company has been successful in its past fund-raising activities, there is no assurance as to the success of future fundraising efforts or as to the sufficiency of funds raised in the future.
As noted, these conditions raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustment that might arise from uncertainty. The auditors’ report includes an explanatory paragraph disclosing the Company’s ability to continue as a going concern.
During FY 2021 year, the Company received additional cash inflow of $1,641,675 from exercised warrants and $112,000 from exercised options. On April 20, 2021, the Company closed a private placement consisting of an aggregate of 8,290,665 units of the Company (“Units”) at a price of $0.24 per Unit, for aggregate gross proceeds of $1,989,760.
C. Research and development, patents and licenses, etc.
Not applicable
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D. Trend information
The major trends impacting the company and its industry are lack of access to capital, caused by the severe global financial contraction, and the corresponding contraction of demand for most commodities. However, the long-term nickel market forecasts indicating a supply deficit developing due to positive developments in the electric vehicle market as well as supply constrains by a protracted low level of investment in mine expansion, exploration and development of new nickel mine. The Company believes that it is a good time to acquire nickel exploration and development projects that could be developed assuming conservative long-term nickel prices.
Impact of Inflation
The Company believes that inflation had minimal effect on costs related to its exploration activities in the 12 months ending December 31, 2021.
Quantitative and Qualitative Disclosures about Market Risk
Not applicable to the Company.
E. Off-balance sheet arrangements
Not applicable
F. Tabular disclosure of contractual obligations
Not applicable
Critical Accounting Policies and Estimates
Basis of preparation and accounting policies
The financial statements of the Company have been prepared in accordance with International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board (“IASB”) and interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”).
These consolidated financial statements have been prepared under the historical cost convention, modified by the revaluation of any financial assets and financial liabilities where applicable. The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise judgment in the process of applying the Company’s accounting policies. These areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements, are disclosed in Note 3 of audited financial statements.
Basic of consolidation
These financial statements include the financial statements of the Company and its wholly-owned subsidiary, North American Nickel (US) Inc. which was incorporated in the State of Delaware on May 22, 2015.
Consolidation is required when the Company is exposed, or has rights to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. All intercompany transactions, balances, income and expenses are eliminated upon consolidation.
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Foreign currency translation
Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the transaction. Foreign currency monetary items are translated at the period-end exchange rate. Non-monetary items measured at historical cost continue to be carried at the exchange rate at the date of the transaction. Non-monetary items measured at fair value are reported at the exchange rate at the date when fair values were determined.
Exchange differences arising on the translation of monetary items or on settlement of monetary items are recognized in profit or loss in the statement of comprehensive income in the period in which they arise, except where deferred in equity as a qualifying cash flow or net investment hedge.
Exchange differences arising on the translation of non-monetary items are recognized in other comprehensive income in the statement of comprehensive income to the extent that gains and losses arising on those non-monetary items are also recognized in other comprehensive income. Where the non-monetary gain or loss is recognized in profit or loss, the exchange component is also recognized in profit or loss.
Exploration and evaluation assets
Exploration and evaluation assets include the costs of acquiring licenses, costs associated with exploration and evaluation activity, and the fair value (at acquisition date) of exploration and evaluation assets acquired in a business combination. Exploration and evaluation expenditures are initially capitalized. Costs incurred before the Company has obtained the legal rights to explore an area are recognized in profit or loss.
Government tax credits received are recorded as a reduction to the cumulative costs incurred and capitalized on the related property.
Exploration and evaluation assets are assessed for impairment if (i) sufficient data exists to determine technical feasibility and commercial viability, and (ii) facts, events and circumstances suggest that the carrying amount exceeds the recoverable amount.
Once the technical feasibility and commercial viability of the extraction of mineral resources in an area of interest are demonstrable, exploration and evaluation assets attributable to that area of interest are first tested for impairment and then reclassified to mining property and development assets within equipment.
Recoverability of the carrying amount of any exploration and evaluation assets is dependent on successful development and commercial exploitation, or alternatively, sale of the respective areas of interest.
The Company may occasionally enter into farm-out arrangements, whereby it will transfer part of the interest, as consideration, for an agreement by the farmee to meet certain exploration and evaluation expenditures which would have otherwise been undertaken by the Company. The Company does not record any expenditures made by the farmee on its behalf. Any cash consideration received from the agreement is credited against the costs previously capitalized to the mineral interest given up by the Company, with any excess consideration accounted for in profit.
When a project is deemed to no longer have commercially viable prospects to the Company, exploration and evaluation expenditures in respect of that project are deemed to be impaired. As a result, those exploration and evaluation expenditure costs, in excess of estimated recoveries, are written off to the statement of comprehensive loss/income.
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Restoration and environmental obligations
The Company recognizes liabilities for statutory, contractual, constructive or legal obligations associated with the retirement of long-term assets, when those obligations result from the acquisition, construction, development or normal operation of the assets. The net present value of future restoration cost estimates is capitalized to exploration and evaluation assets along with a corresponding increase in the restoration provision in the period incurred. Discount rates using a pre-tax rate that reflect the time value of money are used to calculate the net present value. The restoration asset will be depreciated on the same basis as other mining assets.
These changes are recorded directly to mining assets with a corresponding entry to the restoration provision. The Company’s estimates are reviewed annually for changes in regulatory requirements, discount rates, effects of inflation and changes in estimates.
Changes in the net present value, excluding changes in the Company’s estimates of reclamation costs, are charged to profit and loss for the period.
The net present value of restoration costs arising from subsequent site damage that is incurred on an ongoing basis during production are charged to profit or loss in the period incurred.
The costs of restoration projects included in the provision are recorded against the provision as incurred. The costs to prevent and control environmental impacts at specific properties are capitalized in accordance with the Company’s accounting policy for exploration and evaluation assets.
Impairment of assets
Impairment tests on intangible assets with indefinite useful economic lives are undertaken annually at the financial year-end. Other non-financial assets, including exploration and evaluation assets are subject to impairment tests whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. Where the carrying value of an asset exceeds its recoverable amount, which is the higher of value in use and fair value less costs to sell, the asset is written down accordingly.
Where it is not possible to estimate the recoverable amount of an individual asset, the impairment test is carried out on the asset’s cash-generating unit, which is the lowest group of assets in which the asset belongs for which there are separately identifiable cash inflows that are largely independent of the cash inflows from other assets.
An impairment loss is charged to the profit or loss, except to the extent they reverse gains previously recognized in other comprehensive loss/income.
Financial instruments
The Company classifies its financial instruments in the following categories: at fair value through profit and loss (“FVTPL”), at fair value through other comprehensive income (loss) (“FVTOCI”), or at amortized cost. The Company determines the classification of financial assets at initial recognition. The classification of debt instruments is driven by the Company’s business model for managing the financial assets and their contractual cash flow characteristics. Equity instruments that are held for trading are classified as FVTPL. For other equity instruments, on the day of acquisition the Company can make an irrevocable election (on an instrument-by-instrument basis) to designate them as at FVTOCI. Financial liabilities are measured at amortized cost, unless they are required to be measured at FVTPL (such as instruments held for trading or derivatives) or the Company has opted to measure them at FVTPL.
The following table shows the classification of the Company’s financial assets and liabilities:
| Financial asset/liability | Classification | |
| Cash | FVTPL | |
| Other receivable | Amortized cost | |
| Trade payables | Amortized cost |
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Measurement
Financial assets and liabilities at amortized cost
Financial assets and liabilities at amortized cost are initially recognized at fair value plus or minus transaction costs, respectively, and subsequently carried at amortized cost less any impairment.
Financial assets and liabilities at FVTPL
Financial assets and liabilities carried at FVTPL are initially recorded at fair value and transaction costs are expensed in profit or loss. Realized and unrealized gains and losses arising from changes in the fair value of the financial assets and liabilities held at FVTPL are included in the statements of comprehensive loss in the period in which they arise.
Impairment of financial assets at amortized cost
An ‘expected credit loss’ impairment model applies which requires a loss allowance to be recognized based on expected credit losses. The estimated present value of future cash flows associated with the asset is determined and an impairment loss is recognized for the difference between this amount and the carrying amount as follows: the carrying amount of the asset is reduced to estimated present value of the future cash flows associated with the asset, discounted at the financial asset’s original effective interest rate, either directly or through the use of an allowance account and the resulting loss is recognized in profit or loss for the period.
In a subsequent period, if the amount of the impairment loss related to financial assets measured at amortized cost decreases, the previously recognized impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortized cost would have been had the impairment not been recognized.
Derecognition
Financial assets
The Company derecognizes financial assets only when the contractual rights to cash flows from the financial assets expire, or when it transfers the financial assets and substantially all of the associated risks and rewards of ownership to another entity. Gains and losses on derecognition are generally recognized in the statements of comprehensive loss.
Financial liabilities are derecognized when, and only when, the Company’s obligations are discharged, cancelled or they expire. The difference between the carrying amount of the financial liability derecognized and the consideration paid and payable is recognized in the Statement of Comprehensive Loss.
Financial assets are derecognized when the rights to receive cash flows from the investments have expired or have been transferred and the Company has transferred substantially all risks and rewards of ownership.
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Loss per share
The Company uses the treasury stock method to compute the dilutive effect of options, warrants and similar instruments. Under this method the dilutive effect on loss per common share is recognized on the use of the proceeds that could be obtained upon exercise of options, warrants and similar instruments. It assumes that the proceeds would be used to purchase common shares at the average market price during the period.
Basic loss per common share is calculated using the weighted average number of common shares outstanding during the period and does not include outstanding options and warrants. Dilutive loss per common share is not presented differently from basic loss per share as the conversion of outstanding stock options and warrants into common shares would be anti-dilutive.
Income taxes
Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognized in net income except to the extent that it arises in a business combination, or from items recognized directly in equity or other comprehensive loss/income.
Current income tax assets and liabilities for the current period are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date, in the countries where the Company operates and generates taxable income.
Current income tax relating to items recognized directly in other comprehensive income or equity is recognized in other comprehensive income or equity and not in profit or loss. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.
Deferred income tax is provided using the asset and liability method of temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.
The carrying amount of deferred income tax assets is reviewed at the end of each reporting period and recognized only to the extent that it is probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilized.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realized or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period.
Deferred income tax assets and deferred income tax liabilities are offset, only if a legally enforceable right exists to set off current tax assets against current income tax liabilities and the deferred income taxes relate to the same taxable entity and the same taxation authority.
Flow-through shares
Any premium received by the Company on the issuance of flow-through shares is initially recorded as a liability (“flow-through tax liability”). Upon renouncement by the Company of the tax benefits associated with the related expenditures, a flow-through share premium liability is recognized and the liability will be reversed as eligible expenditures are made. If such expenditures are capitalized, a deferred tax liability is recognized. To the extent that suitable deferred tax assets are available, the Company will reduce the deferred tax liability.
Share-based payments
Where equity-settled share options are awarded to employees, the fair value of the options at the date of grant is recognized over the vesting period. Performance vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each reporting date so that, ultimately, the cumulative amount recognized over the vesting period is based on the number of options that eventually vest. Non-vesting conditions and market vesting conditions are factored into the fair value of the options granted. As long as all other vesting conditions are satisfied, a charge is made irrespective of whether these non-vesting and market vesting conditions are satisfied. The cumulative expense is not adjusted for failure to achieve a market vesting condition or where a non-vesting condition is not satisfied.
Where the terms and conditions of options are modified, the increase in the fair value of the options, measured immediately before and after the modification, is also recognized over the remaining vesting period.
Where equity instruments are granted to non-employees, they are recorded at the fair value of the goods or services received. Amounts related to the issuance of shares are recorded as a reduction of share capital.
When the value of goods and services received in exchange for the share-based payment cannot be reliably estimated, the fair value is measured by use of a valuation model. The expected life used in the model is adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations.
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All equity-settled share-based payments are reflected in share-based payments reserve, until exercised. Upon exercise shares are issued from treasury and the amount reflected in share-based payments reserve is credited to share capital along with any consideration paid.
Share capital
The Company’s common shares, preferred shares, share warrants and flow-through shares are classified as equity instruments.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction from the proceeds.
Proceeds received on the issuance of units, consisting of common shares and warrants are allocated to share capital.
Flow-through shares
Resource expenditure deductions for income tax purposes related to exploratory activities funded by flow-through share arrangements are renounced to investors in accordance with income tax legislation. Pursuant to the terms of the flow-through share agreements, these shares transfer the tax deductibility of qualifying resource expenditures to investors. On issuance, the Company bifurcates the flow-through share into a flow-through share premium, equal to the estimated premium, if any, investors pay for the flow-through feature, which is recognized as a liability and share capital. Upon expenses being incurred, the Company derecognizes the liability and recognizes a deferred tax liability for the amount of tax reduction renounced to the shareholders. The premium is recognized as other income and the related deferred tax is recognized as a tax provision.
Proceeds received from the issuance of flow-through shares are restricted to be used only for Canadian resource property exploration expenditures within a two-year period. The portion of the proceeds received but not yet expended at the end of the period is disclosed separately as flow-through share proceeds, if any.
The Company may also be subject to a Part XII.6 tax on flow-through proceeds renounced under the look-back Rule, in accordance with Government of Canada flow-through regulations. When applicable, this tax is accrued as a financing expense until qualifying expenditures are incurred.
Equipment
Equipment is stated at historical cost less accumulated depreciation and accumulated impairment losses.
Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of a significant replaced part is derecognized. All other repairs and maintenance are charged to the statement of comprehensive income during the financial period in which they are incurred. Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognized in profit or loss.
Depreciation and amortization are calculated on a straight-line method to charge the cost, less residual value, of the assets to their residual values over their estimated useful lives. The depreciation and amortization rate applicable to each category of equipment is as follows:
| Equipment | Depreciation rate | |||
| Exploration equipment | 20 | % | ||
| Computer software | 50 | % | ||
| Computer equipment | 55 | % | ||
Equity investment
Investments in entities over which the Company has a significant influence, but not control, are accounted for by the equity method, whereby the original cost of the investment is adjusted for the Company’s proportionate share of the investee’s income or loss. When the Company’s equity investee issues its own shares to outside interest, a dilution gain or loss arises as a result of the difference between the Company’s proportionate share of the proceeds and the carrying value of the underlying equity. When net accumulated losses from an equity accounted investment exceed its carrying amount, the investment balance is reduced to zero and additional losses are not provided for unless the Company is committed to provide financial support to the investee.
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Accounting standards and amendments issued but not yet effective:
Certain accounting standards or amendments to existing accounting standards that have been issued but have future effective dates are either not applicable or are not expected to have a significant impact on the Company’s financial statements.
IAS 16 - “Property, Plant and Equipment”
The IASB issued an amendment to IAS 16, Property, Plant and Equipment to prohibit the deducting from property, plant and equipment amounts received from selling items produced while preparing an asset for its intended use. Instead, sales proceeds and its related costs must be recognized in profit or loss. The amendment will require companies to distinguish between costs associated with producing and selling items before the item of property, plant and equipment is available for use and costs associated with making the item of property, plant and equipment available for its intended use. The amendment is effective for annual periods beginning on or after January 1, 2022, with earlier application permitted. The amendment is not currently applicable.
IAS 1 – “Presentation of Financial Statements”
The IASB issued an amendment to IAS 1, Presentation of Financial Statements to clarify one of the requirements under the standard for classifying a liability as non-current in nature, specifically the requirement for an entity to have the right to defer settlement of the liability for at least 12 months after the reporting period. The amendment includes: (i) specifying that an entity’s right to defer settlement must exist at the end of the reporting period; (ii) clarifying that classification is unaffected by management’s intentions or expectations about whether the entity will exercise its right to defer settlement; (iii) clarifying how lending conditions affect classification; and (iv) clarifying requirements for classifying liabilities an entity will or may settle by issuing its own equity instruments. An assessment will be performed prior to the effective date of January 1, 2023 to determine the impact to the Company’s financial statements.
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
It should be noted that the management discussed below is primarily involved with the Company’s current activities. As the Company concludes an acquisition or merger, or embarks on any other type of project, additional personnel with differing areas of expertise will be utilized. Directors are elected annually by a majority vote of the shareholders and hold office until the next general meeting of the shareholders. Officers are appointed by, and serve at the discretion of, the board of directors. The names, place of residence, positions within the Company and the principal occupations of the directors and senior officers of the Company are set out below.
A. Directors and senior management.
Name, Municipality of Residence Principal Occupation and Position and Position with the Company |
Age | During the Past Five Years | ||
Douglas E. Ford West Vancouver, B.C. Director |
58 | Director of North American Nickel Inc. since September 1992; General Manager of Dockside Capital, a private merchant banking and venture capital firm, from 1987 to present. | ||
Christopher Messina Indialantic, Florida Director |
50 | Director of North American Nickel Inc. since October 2015, Advisor to a number of technology companies in the big data analytics, artificial intelligence, shipping, commodities and cyber security industries. | ||
Janet Huang NingDe, China Director |
44 | Director of North American Nickel Inc. since April 2019, Head of Internal Audit for Contemporary Amperex Technology Limited (CATL) 2018-Present, Investment Manager of CATL, 2016-2018 | ||
Charles Riopel Montreal, QC Director, Chairman |
55 | Director of North American Nickel Inc. since Jun 2019, founder and managing partner at Latitude 45, a mining private equity fund; board member of Premium Nickel Resources, North American Nickel, Aligo Innovation, Meridian Mining SA, Women in Mining Canada and the Foundation of Greater Montreal. | ||
John Hick Toronto, ON Director |
72 | Director of North American Nickel Inc. since February 2021, Independent corporate director of a number of publicly listed and private companies. | ||
Mark Fedikow Saltspring Island, B.C. President |
69 | President of North American Nickel Inc. since August 2010, President of Mount Morgan Resources Ltd. 2001 — present Director and VP of Exploration Services for VMS Ventures Inc. 2008 — April 2015, Director and VP of Exploration IMetal Resources Inc. 2004-Present. | ||
Keith Morrison Burlington, ON Director, Chief Executive Officer |
62 | Director and CEO of North American Nickel Inc. since December 2014, Director of Era Resources Inc. 2011-2017, Non-Executive Chairman of Security Devices International Inc. 2014-2017, Non-Executive Chairman of Osgood Mountain Gold Ltd. August 2016 — 2017, Non-Executive chairman of ZEN Graphene Solution Ltd. 2018 | ||
Sarah-Wenjia Zhu Montreal, QC Chief Financial Officer |
47 | CFO of North American Nickel Inc since May 2018, formerly an investment manager at The Sentient Group 2009-2017; Equity analyst/associate at PE fund and bank 2007-2009; Deloitte China 1998-2003 |
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B. Compensation.
Management compensation is determined by the board of directors based on competitive prices for services provided. During the year ended December 31, 2021, directors and officers, including private companies controlled by directors and officers, as a group, paid or accrued a total of $530,565 in management fees. See “Item 7. Major Shareholders and Related Party Transactions” for more detail on fees paid to members of management or to entities owned by them.
For the year ended December 31, 2021, the Company paid $210,000 in compensation to Directors for acting as Directors. The Company does not have any pension or retirement plans, nor does the Company compensate its directors and officers by way of any material bonus or profit sharing plans.
The Company adopted a Stock Option Plan (the “Plan”), providing the authority to grant options to directors, officers, employees and consultants enabling them to acquire up to 10% of the issued and outstanding common stock of the Company. Under the Plan, the exercise price of each option equals the market price or a discounted price of the Company’s stock as calculated on the date of grant. The options can be granted for a maximum term of 10 years.
During the year ended December 31, 2021, the Company granted an aggregate total of 8,178,972 stock options to employees, directors and consultants with a maximum term of 5 years. All options vest immediately and are exercisable as to 3,185,000 options at $0.32 per share and 4,993,972 options at $0.40 per share. The Company calculates the fair value of all stock options using the Black-Scholes Option Pricing Model. The fair value of options granted during the year ended December 31, 2021 amounted to $2,530,706 and was recorded as a share-based payment expense.
C. Board practices.
Pursuant to the provisions of the Company Act (BC), the Company’s directors are elected annually at the regularly schedules annual general meeting of shareholders. Each elected director is elected for a one-year term unless he resigns prior to the expiry of his term.
The Company has no arrangements in place for provision of benefits to its directors or upon their termination.
The Board has five committees in place:
Audit Committee is made up of Douglas Ford (Chair), Christopher Messina and Charles Riopel. The Audit Committee is an operating committee of the board of directors responsible for the oversight of financial reporting and disclosure. On May 2, 2006, the Company’s board of directors adopted a new charter for the Audit Committee.
Compensation Committee is made up of Christopher Messina (Chair), Douglas Ford and John Hick. In addition to making recommendations to the Board of the Company as to appropriate salary and other compensation for senior executives and directors of the Company, the compensation committee makes recommendations to the Board of the Company as to the level of stock option compensation and stock warrants granted within the Company.
Technical Oversight Committee is made up of Keith Morrison and Charles Riopel. The Technical Oversight Committee provides general oversight and support to the Geological team and identifies technical issues and tasks necessary to support the activities of the Company.
Corporate Governance Committee is made up of John Hick (Chair), Douglas Ford and Janet Huang. The Corporate Governance Committee is responsible for reviewing and making recommendations to the Board of the Company as to the rules and procedures for making decisions in corporate affairs and establishing a complete Handbook for the Company.
Compliance/Disclosure Committee is made up of Charles Riopel (Chair) and Keith Morrison. The purpose of the Compliance Committee is to oversee the Company’s implementation of programs, policies and procedures that are designed to respond to the various compliance and regulatory risks facing the Company. The Compliance Committee meets as required to oversee the dissemination of all corporate material.
D. Employees.
The Company began termination and working notice severance to all employees from December 2019 and migrated the employees who were willing to continue with the Company to contractors.
As at December 31, 2021, the Company had no salaried employees.
E. Share ownership.
A total of ten percent (10%) of the common shares of the Company, outstanding from time to time, are reserved for the issuance of stock options pursuant to the Company’s Incentive Stock Option Plan. During the year 2021, the Company granted an aggregate total of 8,178,972 stock options to directors, consultants and employees. Other information on ownership is contained in the table below.
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS.
A. Major shareholders.
The following table sets forth certain information regarding beneficial ownership of the Company’s shares as of the date of this report by (i) each person who is known to own beneficially more than 5% of the Company’s outstanding Common Stock, (ii) each of the Company’s directors and executive officers and (iii) all current directors and executive officers as a group. The table does not reflect common shares held of record by depositories but does include currently exercisable options and warrants which are included in the calculation of percentage of class ownership for each individual holder. As of the day of this report, there were 133,870,031 common shares issued and outstanding, 65,659 preferred shares outstanding, 15,013,972 exercisable options, 13,417,421 warrants which fully diluted is 162,367,083
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| Name of Beneficial Owner | Number of Shares (post-consolidation) | Percent | ||||||
| Principal Holders | ||||||||
| Sentient Group GP IV | 36,980,982 | 27.62 | % | |||||
| Contemporary Amperex Technology Ltd. (CATL) | 22,944,444 | 17.14 | % | |||||
| Officers and Directors | ||||||||
| Douglas Ford | 276,050 | (1) | ||||||
| Keith Morrison | 1,740,117 | (2) | ||||||
| Mark Fedikow | 2,106,183 | |||||||
| Christopher Messina | 128,143 | |||||||
| Sarah-Wenjia Zhu | 830,623 | |||||||
| Charles Riopel | 209,243 | |||||||
| All Officers and Directors as a Group (8 persons) | 5,290,359 | 3.95 | % | |||||
| (1) | Includes 200,000 shares held through Dockside Capital Group Inc. | |
| (2) | includes 840,826 shares held through Lacnikdon Ltd. |
Effective October 4, 2019, the Company completed a share consolidation of the Company’s issued and outstanding common shares whereby for every ten (10) pre-consolidation common shares issued and outstanding, one (1) post-consolidation common share exists without par value.
All references to share capital, warrants, options and weighted average number of shares outstanding have been adjusted retrospectively to reflect the Company’s 10-for-1 share consolidation as if it occurred at the beginning of the earliest period presented.
On April 20, 2021, the Company closed the previously announced and oversubscribed non-brokered private placement consisting of an aggregate of 8,290,665 units of the Company (the “Units”) at a price of $0.24 per Unit, for aggregate gross proceeds of $1,989,759.60 Each Unit consists of one common share in the capital of the Company and one half transferable common share purchase warrant (“Warrant”) of the Company. Each full Warrant entitles the holder to acquire one common share of the Company at any time prior to 5:00 p.m. (Toronto time) on the date that is twenty-four (24) months following its issuance date, at a price of $0.35. The warrants are subject to an acceleration clause that if the closing market price of the common shares on the TSX-V is greater than the $0.60 per common share for a period of 10 consecutive trading days at any time after the four-month anniversary of the closing of the placement, the Company may, at its option, accelerate the warrant expiry date to within 30 days.
During the year ended December 31, 2021, the Company issued 13,080,314 common shares on exercise of warrants and options and received $1,642,121 in proceeds from the exercise of 12,580,314 warrants and $112,000 from the exercise of 500,000 options. There were no warrants or options exercised during the year ended December 31, 2020 and 2019.
As at December 31, 2021, the Company has 131,204,627 common shares issued and outstanding, (December 31, 2020 – 109,833,648) (December 31, 2019 – 88,690,791).
B. Related party transactions.
Related party transactions were in the normal course of business and have been recorded at the exchange amount which is the fair value agreed to between the parties. Amounts due to related parties are unsecured, non-interest bearing and without specific terms of repayment.
Related party balances - The following amounts due to related parties are included in trade payables and accrued liabilities
(All amounts in table are expressed in thousands of Canadian dollars)
| December 31, | December 31, | December 31, | ||||||||||
| 2021 | 2020 | 2019 | ||||||||||
| Directors and officers of the Company | $ | 28 | $ | 21 | $ | 38 | ||||||
| Related company | 5 | 7 | 131 | |||||||||
| $ | 33 | $ | 28 | 161 | ||||||||
These amounts are unsecured, non-interest bearing and have no fixed terms of repayment.
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The following amount due from related party and advancement represent other receivable included in current assets as well as investment in Premium Nickel Resource Inc. (“Premium Nickel”) a private company incorporated in Ontario in which certain directors and officers of the Company also hold offices and minority investments.
(All amounts in table are expressed in thousands of Canadian dollars)
| December 31, | December 31, | December 31, | ||||||||||
| 2021 | 2020 | 2019 | ||||||||||
| Due from related party | $ | 199 | $ | 55 | $ | 55 | ||||||
| Advance | — | 50 | 50 | |||||||||
| Investment | 321 | 48 | 48 | |||||||||
| Total | 520 | 153 | 153 | |||||||||
(a) Investment in Premium Nickel
On September 30, 2019, the Company entered into a Memorandum of Understanding (“MOU”) with Premium Nickel Resources Inc. (“Premium Nickel”). Pursuant to the MOU, the Company and Premium Nickel set forth their interests in negotiating and acquiring the business and assets of BCL Limited, a private company with operations in Botswana that is currently in liquidation.
Concurrent with the MOU, the Company initially subscribed for 2,400,000 common shares of Premium Nickel at $0.01, for a total investment of $24,000. The Company’s initial investment included a provision that gives the Company the right to nominate two directors to the board of directors of Premium Nickel. The Company’s initial investment also included Premium Nickel issuing the Company a non-transferable share purchase warrant (the “Warrant”), which entitles the Company to purchase common shares of Premium Nickel, for up to 15% of the capital of Premium Nickel upon payment of US $10 million prior to the fifth anniversary of the date of issue. At December 31, 2019, the Company’s investment was recorded as an advance, as the Company had not yet been issued the common share certificate nor the Warrant. The initial investment common share certificate and Warrant were issued during the year ended December 31, 2020.
To December 31, 2020, the Company subscribed for a further 4,657,711 common shares of Premium Nickel, for a further investment of $154,164. The common shares underlying the investment are restricted (“Restricted”) from being traded before such date that is 4 months after the later of (a) the date of issuance and (b) the date at which Premium Nickel becomes a reporting issuer in any province or territory. To December 31, 2020 and subsequently, the underlying common shares are Restricted. During year ended December 31, 2021, the Company invested additional $441,446 and to December 31, 2021, the Company’s total investment constitutes a 10% holding (December 31, 2020 – 11.01%) in Premium Nickel.
As December 31, 2021, the Company had representation on the board, participate in the policy-making process, material transactions between the Company and Premium Nickel, interchange of managerial personnel, provision of essential technical information and operating involvement. Accordingly, the Company determined that it has significant influence in Premium Nickel and has used equity accounting of the investment. Premium Nickel’s financial information at December 31, 2021 was net assets of $4,770,937 which was comprised primarily of cash, and a total comprehensive loss of $1,688,310 was recorded for the year ended December 31, 2021.
Details of the Company’s investment at December 31, 2021 is as follows:
| Investment | ||||
| Balance, December 31, 2020 | 48 | |||
| Reallocation of advance | 50 | |||
| Investment | 392 | |||
| Share of loss of Premium Nickel | (169 | ) | ||
| Total | 321 | |||
On January 1, 2020, the Company entered into a Management and Technical Services Agreement (“the Services Agreement”) with Premium Nickel whereby the Company will provide certain technical, corporate, administrative and clerical, office and other services to Premium Nickel during the due diligence stage of the contemplated arrangement. The Company will charge Premium Nickel for expenses incurred and has the right to charge a 2% administrative fee on third party expenses. The Company will invoice Premium Nickel on a monthly basis and payment shall be made by Premium Nickel no later than 15 days after receipt of such invoice. The term of the Service Agreement is for an initial period of 3 years and can be renewed for an additional 1 year period. The Service Agreement can be terminated within 30 days notice, for non-performance, by the Company giving 6 months notice or Premium Nickel within 90 days provided the Company no longer owns at least 10% of the outstanding common shares of Premium Nickel. If Premium Nickel defaults on making payments, the outstanding balance shall be treated as a loan to Premium Nickel, to be evidenced by a promissory note. The promissory note will be payable upon demand and bear interest at a rate equal to the then current lending rate plus 1%, calculated from the date of default. Subsequent payment by Premium Nickel will be first applied to accrued interest and then principle of the invoice. During the year ended December 31, 2020, pursuant to the Services Agreement, the Company charged Premium Nickel $2,370,444 (December 31, 2020 - $647,164) for services and charged, $42,315 (December 31, 2020 - $8,495) in administrative fees, received $2,225,589 (December 31, 2020 – $701,305) and recorded $199,145 in due from Premium Nickel (December 31, 2020 - $54,619). Subsequent to December 31, 2021, the Company received the $199,145 in full from Premium Nickel.
(b) Key Management Compensation
Key management personnel are defined as members of the Board of Directors and senior officers.
Key management compensation was:
(All amounts in table are expressed in thousands of Canadian dollars)
| December 31, 2021 | December 31, 2020 | December 31, 2019 | ||||||||||
| Geological consulting fees — expensed | - | 5 | 136 | |||||||||
| Management fees — expensed | 531 | 478 | 747 | |||||||||
| Salaries - expensed | 182 | 185 | ||||||||||
| Share-based payments | 2,314 | 756 | - | |||||||||
| Total | 2,845 | 1,421 | 1,068 | |||||||||
(c) Transactions with Sentient
As of December 31, 2021, Sentient Executive GP IV Limited (“Sentient”) beneficially owns 36,980,982 common shares, constituting approximately 28.19% (2020 – 33.66%) of the currently issued and outstanding common shares of the Company.
(d) Transaction with CATL
As of December 31, 2021, Contemporary Amperex Technology Limited (“CATL”) beneficially owns 22,944,444 common shares, constituting approximately 17.49% (2020 - 20.89%) of the currently issued and outstanding shares of the Company. CATL has pre-emptive rights and the right to nominate one director to the board of directors of the Company.
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C. Interests of experts and counsel
Not required.
ITEM 8. FINANCIAL INFORMATION
A. Consolidated Statements and Other Financial Information
See Item 17 and our financial statements and accompanying notes beginning on page F-1.
B. Significant Changes
The Company is not aware of any significant change since December 31, 2020 that is not otherwise reported in this filing.
ITEM 9. THE OFFER AND LISTING
Effective December 21, 2006 our common shares became quoted on the United States OTC Bulletin Board, under the symbol “WSCRF”. On May 30, 2011 the common shares of the Company began trading under the symbol “NAN” on the TSX-V Venture Exchange. The table below sets forth the high and low prices expressed in Canadian dollars on the TSX-V and in United States dollars on the OTC in the United States for the Company’s common shares for the past five years, for each quarter for the last two fiscal years, and for the last six months. Note this trading data does not take into effect the 10-old for 1-new reverse split effected on October 4, 2019.
| High | Low | High | Low | |||||||||||||
| (Canadian Dollars) | (United States Dollars) | |||||||||||||||
| Last Five Fiscal Years | ||||||||||||||||
| 2021 | 0.65 | 0.14 | 0.518 | 0.113 | ||||||||||||
| 2020 | 0.30 | 0.06 | 0.332 | 0.045 | ||||||||||||
| 2019 | 0.40 | 0.10 | 0.372 | 0.023 | ||||||||||||
| 2018 | 0.085 | 0.030 | 0.075 | 0.020 | ||||||||||||
| 2017 | 0.095 | 0.065 | 0.076 | 0.043 | ||||||||||||
| 2021 | ||||||||||||||||
| Fourth Quarter ended December 31, 2021 | 0.65 | 0.315 | 0.518 | 0.247 | ||||||||||||
| Third Quarter ended September 30, 2021 | 0.32 | 0.225 | 0.278 | 0.178 | ||||||||||||
| Second Quarter ended June 30, 2021 | 0.29 | 0.215 | 0.24 | 0.172 | ||||||||||||
| First Quarter ended March 31, 2021 | 0.39 | 0.14 | 0.30 | 0.113 | ||||||||||||
| 2020 | ||||||||||||||||
| Fourth Quarter ended December 31, 2020 | 0.235 | 0.15 | 0.199 | 0.111 | ||||||||||||
| Third Quarter ended September 30, 2020 | 0.30 | 0.08 | 0.332 | 0.052 | ||||||||||||
| Second Quarter ended June 30, 2020 | 0.10 | 0.07 | 0.072 | 0.045 | ||||||||||||
| First Quarter ended March 31, 2020 | 0.215 | 0.06 | 0.158 | 0.05 | ||||||||||||
| Last Six Months | ||||||||||||||||
| March 2022 | 0.58 | 0.58 | 0.476 | 0.476 | ||||||||||||
| February 2022 | 0.63 | 0.53 | 0.49 | 0.413 | ||||||||||||
| January 2022 | 0.64 | 0.435 | 0.512 | 0.343 | ||||||||||||
| December 2021 | 0.59 | 0.40 | 0.458 | 0.326 | ||||||||||||
| November 2021 | 0.65 | 0.37 | 0.518 | 0.297 | ||||||||||||
| October 2021 | 0.455 | 0.315 | 0.363 | 0.247 | ||||||||||||
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The closing price of the Company’s common shares as reported by the TSX-V on December 31, 2021 was C$0.43. The closing price of the Company’s common shares as reported by the OTCbb on December 31, 2021 was US$0.34.
The Company’s common shares are issued in registered form. Computershare Investor Services Inc. is the registrar and transfer agent for the Company’s common shares.
The Company has no outstanding securities not listed on a marketplace other than incentive stock options and warrants.
Since the beginning of the most recently completed financial year, warrants issued to purchase an aggregate 21,731,011 common shares were issued. The following table outlines the detail of each issuance:
| Number of Warrants | Exercise Price | Grant Date | ||||||
| (CDN $) | ||||||||
| 4,006,370 | $ | 0.35 | April 16, 2021 | |||||
| 4,006,370 | ||||||||
Since the beginning of the most recently completed financial year, Options issued to purchase an aggregate 8,178,972 common shares were issued. The following table outlines the detail of each issuance:
| Number of Options | Exercise Price | Grant Date | ||||||
| (CDN $) | ||||||||
| 3,185,000 | $ | 0.32 | February 25, 2021 | |||||
| 4,993,972 | 0.40 | October 25, 2021 | ||||||
| 8,178,972 | ||||||||
ITEM 10. ADDITIONAL INFORMATION
A. Share capital
Not required
B. Memorandum and articles of association
| 1. | The Company was incorporated as Rainbow Resources Ltd. September 20, 1983 under certificate of incorporation no. 268952 in the Province of British Columbia Canada. The name was changed to Widescope Resources Ltd. May 1 1984, to Gemini Technology Inc. September 13 1985, to International Gemini Technology Inc. September 23 1993, and to Widescope Resources Inc., effective July 12, 2006. The name was subsequently changed to North American Nickel Inc., effective April 19, 2010. No objects and purposes are described. |
| 2. | If a director has a material interest in a matter subject to a vote, he must declare it and abstain from voting, or have his vote not counted, except for certain specific exclusions which include setting director compensation. There are no restrictions on directors issuing debt however shareholder approval may be required in connection with convertible debt or other debt driven requirements to issue shares. There is no retirement age or share ownership requirement for directors. |
| 3. | Dividends are declared by directors and subject to any special rights, paid to all holders of shares in a class according to the number of shares held. Voting rights are one vote per share. Directors stand for election every year at the annual meeting. Shareholders have no rights to share directly in the company’s profits. Subject to prior claims of creditors and preferred shareholders, common shareholders participate in any surplus in the event of liquidation according to the number of shares held. The Company may redeem shares by directors’ resolution in compliance with applicable law unless the company is insolvent or may become insolvent by doing so. It must make its offer pro rata to every member who holds a class, subject to applicable stock exchange rules or company act provisions. The directors have wide discretion. Shareholders have no liability for further capital calls. No discriminatory provisions, against an existing or prospective shareholder of a substantial number of shares, are imposed by the articles. |
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| 4. | Rights of holders of any class of shares can only be changed with their consent, and in accordance with the company act. Consent must be in writing by the holders or by a three fourths majority of a vote of the holders, and by the consent of the British Columbia Securities Commission. |
| 5. | A notice convening an annual general or special meeting must specify the place, date, hour, and in the case of a special meeting, the general nature of the special business, and must be given in accordance with the company act. There are no special conditions outlining rights of admission. |
| 6. | There are no limitations on rights to own securities. |
| 7. | There are no provisions to delay, defer, or prevent a change in control. |
| 8. | Nothing in the articles requires ownership disclosure. |
| 9. | Not applicable. |
| 10. | Not applicable. |
C. Material contracts
On December 23, 2009, the Company executed a letter of intent whereby the Company has an option to acquire the mineral claim known as the Post Creek Property located within the Sudbury Mining District of Ontario. The Company paid a non-refundable deposit of $8,000. On April 5, 2010, the Company entered into an option agreement to acquire rights to Post Creek Property. On March 12, 2013, the Post Creek Property Option Agreement was amended, in order to acquire 100% working interests in the property, subject to certain net smelter return royalties (“NSR”) and advance royalty payments the Company agreed to the following amended consideration, which has been met, cash payments totaling $138,000 and the issuance of 1,000,000 common shares. The Company has exercised its option on Post Creek and as of August 1, 2015, the Company is obligated to pay advances on the NSR of $10,000 per annum, which will be deducted from any payments to be made under the NSR
On April 5, 2010, the Company entered into an option agreement to acquire rights to Halcyon Property. On March 12, 2013, the Halcyon Property Option Agreement was amended. In order to acquire up to a 100% working interest in the property, subject to certain net smelter return royalties (“NSR”) and advance royalty payments the Company agreed to the following amended consideration, which has been met, cash payments totalling $120,000 and the issuance of 700,000 common shares. Further, commencing on the amended date of August 1, 2015, if the Company exercises its option, the Company will be obligated to pay advances on the NSR of $8,000 per annum, which will be deducted from any payments to be made under the NSR.
On August 15, 2011, the Company was granted an exploration license (the “Sulussugut License”) by the Bureau of Minerals and Petroleum (“BMP”) of Greenland for exclusive exploration rights of an area located near Sulussugut, Greenland. The Company paid a license fee of $5,742 (Danish Krones (“DKK”) 31,400) upon granting of the Sulussugut License. The Sulussugut License was valid for 5 years until December 31, 2015, with December 31, 2011 being the first year providing the Company meets the terms of the license, which includes that specified eligible exploration expenditures must be made. The application for another 5-year term on the Sulussugut License was submitted to the Greenland Mineral Licence & Safety Authority (MLSA) which was effective on April 11, 2016, with December 31, 2019 being the ninth year.
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On March 4, 2012, the Company was granted an additional exploration license (the “Ininngui License”) by the BMP of Greenland for exclusive exploration rights over an area covering a total of 142 square kilometres. The license is located near Ininngui, Greenland. The Company paid a license fee of DKK 32,200 upon granting of the Ininngui License. The Ininngui License is valid for 5 years until December 31, 2016, with December 31, 2012 being the first year. The Ininngui License is contiguous with the Sulussugut License.The application for another 5-year term on the Ininngui License was submitted to the Greenland Mineral Licence & Safety Authority (MLSA), which was effective March 14, 2017, with December 31, 2019 being the eighth year.
In conjunction with the granting of the Sulussugut License, on August 12, 2011, the Company entered into an arm’s length Intellectual Property and Data Acquisition Agreement (the “IP Acquisition Agreement”) with Hunter Minerals Pty Limited (“Hunter”) and Spar Resources Pty Limited (“Spar”). Pursuant to the IP Acquisition Agreement, each of Hunter and Spar or their designates was granted to a 1.25% net smelter returns royalty, subject to rights of NAN to reduce both royalties to a 0.5% net smelter returns royalty upon payment to each of Hunter and Spar (or their designates) of $1,000 on or before the 60th day following a decision to commence commercial production on the mineral properties.
Effective May 4, 2018, the Company was granted an exploration license (the “Carbonatite License”) by the BMP of Greenland for exclusive exploration rights of an area located near Maniitsoq in West Greenland. The Company paid a license fee of $6,523 (DKK 31,000) upon granting of the Carbonatite License. The Carbonatite License is valid for 5 years until December 31, 2022, with December 31, 2019 being the second year.
On September 25, 2019, the Company entered into earn in agreement with International Explorers and Prospectors Inc. whereby the Company may acquire a 100% interest in the Loveland Nickel property. Consideration for the acquisition is $1,525,000 in cash, 300,000 post-consolidation common shares and $4,500,000 in work commitments over a 5-year period. The TSX Venture Exchange approved the transaction for filing on October 24, 2019. The 300,000 common shares were issued subsequent to the quarter as a purchase consideration with a value of $60,000. Based on the results of the exploration program completed in April 2020, the management elected not to proceed with further exploration on the property and terminated the agreement.
On February 18, 2020, the Company was granted new prospective license No. 2020/05, by the BMP of Greenland for a period of 5 years ending December 31, 2024.
On January 1, 2020, the Company entered into a Management and Technical Services Agreement (“the Services Agreement”) with Premium Nickel whereby the Company will provide certain technical, corporate, administrative and clerical, office and other services to Premium Nickel during the due diligence stage of the contemplated arrangement. The Company will charge Premium Nickel for expenses incurred and has the right to charge a 2% administrative fee on third party expenses. The Company will invoice Premium Nickel on a monthly basis and payment shall be made by Premium Nickel no later than 15 days after receipt of such invoice. The term of the Service Agreement is for an initial period of 3 years and can be renewed for an additional 1 year period. The Service Agreement can be terminated within 30 days notice, for non-performance, by the Company giving 6 months notice or Premium Nickel within 90 days provided the Company no longer owns at least 10% of the outstanding common shares of Premium Nickel. If Premium Nickel defaults on making payments, the outstanding balance shall be treated as a loan to Premium Nickel, to be evidenced by a promissory note. The promissory note will be payable upon demand and bear interest at a rate equal to the then current lending rate plus 1%, calculated from the date of default. Subsequent payment by Premium Nickel will be first applied to accrued interest and then principle of the invoice.
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D. Exchange Controls
This summary is of a general nature only and is not intended to be, and should not be interpreted as, legal advice to any prospective purchaser. Accordingly, prospective purchasers of the Company’s shares should consult with their own advisors with respect to their individual circumstances.
There are no laws or governmental decrees or regulations in Canada that restrict the export or import of capital, or which affect the remittance of dividends, interest or other payments to holders of the Company’s securities who are not residents of Canada, other than withholding tax requirements.
There are no limitations imposed by the laws of Canada, the laws of Alberta or by the charter or other governing documents of the Company on the right of a non-resident to hold or vote common shares of the Company, other than as provided in the Investment Canada Act (the “Investment Act”) and the potential requirement for a Competition Act Review.
The following summarizes the principal features of the Investment Act and the Competition Act Review for a non-resident who proposes to acquire common shares. This summary is of a general nature only and is not intended to be, nor is it, a substitute for independent advice from an investor’s own advisor. This summary does not anticipate statutory or regulatory amendments.
The Canadian Investment Act
The Canadian Investment Act generally prohibits implementation of a reviewable investment by an individual, government or agency thereof, corporation, partnership, trust or joint venture that is not a “Canadian” as defined in the Investment Act (a “non-Canadian”), unless, after review, the minister responsible for the Investment Act (the “Minister”) is satisfied that the investment is likely to be of a net benefit to Canada. Under the Investment Act, a United States citizen qualifies as a “World Trade Organization Investor.” Subject to the restrictions noted below, an investment in a Canadian business by a World Trade Organization Investor would be reviewable under the Investment Act only if it is an investment to acquire control of such Canadian business and the value of the assets of the Canadian business as shown on its financial statements is not less than a specified amount, which for 1999 was $184 million. An investment in the shares of a Canadian business by a non-Canadian other than a “World Trade Organization Investor” when the Company is not controlled by a World Trade Organization Investor, would be reviewable under the Investment Act if it is an investment to acquire control of the Canadian business and the value of the assets of the Canadian business as shown on its financial statements is $5 million or more, or if an order for review is made by the federal cabinet on the grounds that the investment relates to Canada’s cultural heritage or national identity.
The acquisition by a World Trade Organization Investor of control of a Canadian business in any of the following sectors is also subject to review if the value of the assets of the Canadian business exceeds $5 million (as shown on its financial statements): uranium, financial services (except insurance), transportation services and cultural businesses, which include broadcast media (publication, distribution or sale of books, magazines, periodicals, newspapers, music, film and video products and the exhibition of film and video products), television and radio services. As the Company’s business does not fall under any of the aforementioned categories, the acquisition of control of the Company, in excess of the $5 million threshold, by a World Trade Organization Investor would not be subject to such review.
A non-Canadian would acquire control of the Company for purposes of the Investment Act if the non-Canadian acquired a majority of the common shares.
The acquisition of less than a majority but one-third or more of the common shares would be presumed to be an acquisition of control of the Company unless it could be established that, on acquisition, the Company was not controlled in fact by the acquirer through the ownership of common shares. Notwithstanding the review provisions, any transaction involving the acquisition of control of a Canadian business or the establishment of a new business in Canada by a non-Canadian is a notifiable transaction and must be reported to Industry Canada by the non-Canadian making the investment either before or within thirty days after the investment.
Certain transactions relating to common shares are exempt from the Investment Act, including:
| ● | an acquisition of common shares by a person in the ordinary course of that person’s business as a trader or dealer in securities; | |
| ● | an acquisition of control of the Company in connection with the realization of security granted for a loan or other financial assistance and not for a purpose related to the provisions of the Investment Act; and | |
| ● | an acquisition of control of the Company by reason of an amalgamation, merger, consolidation or corporate reorganization, following which the ultimate direct or indirect control in fact of the Company, through the ownership of common shares, remained unchanged. |
Canadian Competition Act Review
Investments giving rise to the acquisition or establishment, directly or indirectly, by one or more persons of control over, or a significant interest in the whole or part of a business of a competitor, supplier, customer or other person are subject to substantive review by Canada’s Competition Law Authority, the Director of Investigation and Research (the “Director”). If or when the Director concludes that a merger, whether by purchase or lease of shares or assets, by amalgamation or by combination, or otherwise, prevents or lessens, or is likely to prevent or lessen competition substantially, he may apply as may be necessary to eliminate the substantial lessening or prevention of competition. Such substantive merger review power applies to all mergers, whether or not they meet limits for pre-notification under the Competition Act.
In addition to substantive merger review, the Competition Act provides for a pre-notification regime respecting mergers of a certain size. The regime applies in respect of share acquisitions, asset acquisitions, amalgamations and combinations. For ease of reference, this filing refers specifically to share acquisition, although the pre-notification regime applies, with the appropriate modification, to other types of acquisition of control as well.
In order for a share acquisition transaction to be pre-notifiable, the parties to the transaction (being the person or persons who proposed to acquire shares, and the corporation the shares of which are to be acquired), together with their affiliates (being all firms with a 50% or more voting shares linkage up and down the chain) must have:
| (i) | aggregate gross assets in Canada that exceed $400 million in value, as shown on their audited financial statements for the most recently completed fiscal year (which must be within the last fifteen (15) months); or |
| (ii) | aggregate gross revenue from sales in, from or into Canada that exceed $400 million for the most recently completed fiscal year shown on the said financial statements; and |
| (iii) | the party being acquired or corporations controlled by that party must have gross assets in Canada, or gross revenues from sales in or from Canada, exceeding $35 million as shown on the said financial statements. Acquisition of shares carrying up to 20% of the votes of a publicly-traded corporation, or 35% of the votes in a private corporation, will not be subject to pre-notification, regardless of the above thresholds. However, exceeding the 20% or the 35% threshold, and again exceeding the 50% threshold, gives rise to an obligation of notification if the size threshold is met. |
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If a transaction is pre-notifiable, a filing must be made with the Director containing the prescribed information with respect to the parties, and a waiting period (either seven or twenty-one days, depending on whether a long or short form filing is chosen) must expire prior to closing.
As an alternative to pre-notification, the Director may grant an Advance Ruling Certificate, which exempts the transaction from pre-notification. Advance Ruling Certificates are granted where the Director concludes, based on the information provided to him, that he would not have sufficient grounds on which to apply to the Competition Tribunal to challenge the Merger.
E. Taxation
This summary is of a general nature only and is not intended to be, and should not be interpreted as, legal or tax advice to any prospective purchaser or holder of the Company’s shares and no representation with respect to the Canadian federal income tax consequences to any such prospective purchaser is made. Accordingly, prospective purchasers of the Company’s shares should consult with their own tax advisors with respect to their individual circumstances.
The following summary describes the principal Canadian federal income tax considerations generally applicable to a holder of the Company’s shares who, for purposes of the Income Tax Act (Canada) (the “Canadian Tax Act”) and the Canada-United States Income Tax Convention, 1980 (the “Convention”) and at all relevant times is resident in the United States and not resident in Canada, deals at arm’s length with the Company, holds the Company’s shares as capital property, and does not use or hold and is not deemed to use or hold the Company’s shares in or in the course of carrying on business in Canada (a “United States Holder”).
This following summary is based upon the current provisions of the Canadian Income Tax Act, the regulations thereunder, all specific proposals to amend the Canadian Tax Act and the regulations announced by the Minister of Finance (Canada) prior to the date hereof and the Company’s understanding of the published administrative practices of the Canada Customs and Revenue Agency (formerly Revenue Canada, Customs, Excise and Taxation). This summary does not take into account or anticipate any other changes in the governing law, whether by judicial, governmental or legislative decision or action, nor does it take into account the tax legislation or considerations of any province, territory or non-Canadian jurisdiction (including the United States), which legislation or considerations may differ significantly from those described herein.
Disposition of the Company’s Shares
In general, a United States shareholder will not be subject to Canadian income tax on capital gains arising on the disposition of the Company’s shares, unless such shares are “taxable Canadian property” within the meaning of the Canadian Income Tax Act and no relief is afforded under any applicable tax treaty. The shares of the Company would be taxable Canadian property of a non-resident if at any time during the five-year period immediately preceding a disposition by the non-resident of such shares, not less than 25% of the issued shares of any class or series of all classes of shares of the Company belonged to the non-resident, to persons with whom the non-resident did not deal at arm’s length, or to the non-resident and persons with whom the non-resident did not deal at arm’s length for purposes of the Canadian Income Tax Act. For this purpose, issued shares include options to acquire such shares (including conversion rights) held by such persons. Under the Convention, a capital gain realized by a resident of the United States will not be subject to Canadian tax unless the value of the shares of the Company is derived principally from real estate (as defined in the Convention) situated in Canada.
F. Dividends and Paying Agents
Not required
G. Statement by Experts
Not required
H. Documents on display
All documents referenced in this Form 20-F may be viewed at the offices of the Company during business hours 666 Burrard Street, Suite 2500, Vancouver BC V6C 2X8, Telephone 604-770-4334.
I. Subsidiary Information
In June 2015 the Company incorporated North American Nickel (US) Inc. to hold a mineral lease in Michigan, which was granted in January 2016.
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not required
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
Not required
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
Not applicable
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
Not applicable
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ITEM 15. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Under the supervision and with the participation of management, including our chief executive officer and the chief financial officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of December 31, 2017. Based on this evaluation, our chief executive officer and chief financial officer concluded as of December 31, 2017 that our disclosure controls and procedures were effective.
Management’s Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements in accordance with generally accepted accounting principles and includes those policies and procedures that:
| (1) | pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of a company’s assets, |
| (2) | provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with generally accepted accounting principles, and that a company’s receipts and expenditures are being made only in accordance with authorizations of a company’s management and directors, and |
| (3) | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of a company’s assets that could have a material effect on the consolidated financial statements. |
Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper management override. Because of such limitations, internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.
However, these inherent limitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk. Management is responsible for establishing and maintaining adequate internal control over financial reporting for the company.
Management has used the framework set forth in the report entitled Internal Control—Integrated Framework published by the Committee of Sponsoring Organizations of the Treadway Commission, known as COSO, to evaluate the effectiveness of the Company’s internal control over financial reporting. Based on this assessment, management has concluded that our internal control over financial reporting was effective as of December 31, 2017.
This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting.
Our management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the SEC that permit us to provide only our management’s report in this annual report on Form 20-F.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal controls over financial reporting that occurred during the period covered by this annual report on Form 20-F that have materially affected, or are reasonably likely to materially affect our internal controls over financial reporting.
ITEM 16.
A. Audit Committee Financial Expert
Mr. Douglas Ford. Mr. Ford has over thirty-years’ experience as a venture capitalist and merchant banker. In his business background he has operated in senior operations roles and as a Chief Financial Officer of several publicly traded companies and private enterprises. In such roles, he has been responsible for all financial aspects of the entities including, internal financial controls, governance, compliance and financial reporting. He currently is CFO and Secretary of two companies listed on Canadian stock exchanges.”
Mr. Messina serves on the Audit Committee as a financial expert. Mr. Messina has worked in the capital markets as an investment banker, asset manager and entrepreneur in financial technology for 22+ years. He has an MBA in finance and strategy from the Australian Graduate School of Management, and over the years has worked on data services involved in corporate governance ratings, derivatives and fixed income markets and has extensive knowledge of valuation norms and accepted pricing conventions for a range of assets from the most liquid to the most illiquid.
Mr. Charles Riopel also serves on the Audit Committee. He is an accomplished senior-level executive with 20+ years domestic/international investment experience in mining. He has managed over the year’s both private and public investment funds. Mr. Riopel is the founder and managing partner at Latitude 45, a private equity fund specialized in mining. Over the past 5 years, Mr. Riopel has been a member and/or chaired Audit Committees at several public and private companies as well as charitable foundations.
B. Code of Ethics
The Company has adopted a code of ethics applicable to its directors, principal executive officer, principal financial officer, principal accounting procedures, and persons performing similar functions. A copy of the Company’s Code of Ethics will be made available to anyone who requests it in writing from the Company’s head office.
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C. Principal Accounting Fees and Services
(a) Audit Fees
Dale Matheson Carr-Hilton LaBonte LLP, Chartered Professional Accountants (“DMCL”) billed the Corporation $42,512 in the year ended December 31, 2021, $45,549 in the year ended December 31, 2020.
(b) Audit Related Fees
DMCL billed $ nil for audit related services in the year ended December 31, 2021 and 2020.
(c) Tax Fees
DMCL billed the Company $3,400 for the tax year 2021 and $6,900 for the tax year 2020.
(d) All Other Fees
DMCL billed the Corporation $ nil for services in the year ended December 31, 2021 and 2020.
(e) Audit Committee Pre-Approval Policies and Procedures
To ensure continuing auditor objectivity and to safeguard the independence of our auditors, our audit committee has determined a framework for the type and authorization of non-audit services which our auditors may provide. The audit committee has adopted policies for the pre-approval of specific services that may be provided by our auditors. The dual objectives of these policies are to ensure that we benefit in a cost effective manner from the cumulative knowledge and experience of our auditors, while also ensuring that the auditors maintain the necessary degree of independence and objectivity.
Our audit committee approved the engagement of Dale Matheson Carr-Hilton LaBonte LLP to render audit and non-audit services before they were engaged by us.
D. Exemption From the Listing Standards for Audit Committees
Not Applicable
E Purchases of Equity Securities by the Issuer and Affiliated Purchasers
Not Applicable
ITEM 17. FINANCIAL STATEMENTS
The financial statements and notes thereto as required by Item 17 are attached hereto and found immediately after the text of this Registration Statement. The auditors’ report of Dale Matheson Carr-Hilton LaBonte LLP, independent registered public accountants, on the audited financial statements and notes thereto is included immediately preceding the audited financial statements.
Independent Auditors’ Report.
Statements of financial position as at December 31, 2021 and 2020.
Statements of comprehensive loss for the years ended December 31, 2021 and 2020
Statement of changes in shareholders’ equity for the years ended December 31, 2021 and 2020
Statements of cash flows for the years ended December 31,2021 and 2020
Notes to the financial statements.
ITEM 18. FINANCIAL STATEMENTS
Not applicable. See “Item 17. Financial Statements” above.
ITEM 19. EXHIBITS
12.1 Certification of Chief Executive Officer pursuant to s.302 of the Sarbanes-Oxley Act of 2002
12.2 Certification of Chief Financial Officer pursuant to s.302 of the Sarbanes-Oxley Act of 2002
13.1 Certification of Chief Executive Officer pursuant to s.906 of the Sarbanes-Oxley Act of 2002
13.2 Certification of Chief Financial Officer pursuant to s.906 of the Sarbanes-Oxley Act of 2002
19.1 Management Discussion & Analysis as of April 25, 2022.
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SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.
| NORTH AMERICAN NICKEL INC | ||
| Date: April 25, 2022 | By: | /s/ Keith Morrison |
| Name: | Keith Morrison | |
| Title: | CEO as duly authorized signatory | |
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Consolidated Financial Statements
For the year ended December 31, 2021
(In accordance with International Financial Reporting Standards (“IFRS”) and stated in thousands of Canadian dollars, unless otherwise indicated)
Consolidated Financial Statements
For the year ended December 31, 2021
(In accordance with International Financial Reporting Standards (“IFRS”) and stated in thousands of Canadian dollars, unless otherwise indicated)
INDEX
Management’s Responsibility for Financial Reporting
Report of Independent Registered Public Accounting Firm
Consolidated Financial Statements
| ■ | Consolidated Statements of Financial Position | |
| ■ | Consolidated Statements of Comprehensive Loss | |
| ■ | Consolidated Statements of Changes in Equity | |
| ■ | Consolidated Statements of Cash Flows | |
| ■ | Notes to the Consolidated Financial Statements |
| 1 | North American Nickel / YEAR END 2021 |
Management responsibility for financial reporting
The consolidated financial statements, and the notes thereto, of North American Nickel Inc., and its subsidiary have been prepared by management in accordance with International Financial Reporting Standards (“IFRS”). Management acknowledges responsibility for the preparation and presentation of the consolidated financial statements, including responsibility for significant accounting judgments and estimates and the choice of accounting principles and methods that are appropriate to the Company’s circumstances.
Management, in discharging these responsibilities, maintains a system of internal controls designed to provide reasonable assurance that its assets are safeguarded, only valid and authorized transactions are executed and accurate, timely and comprehensive financial information is prepared. However, any system of internal controls over financial reporting, no matter how well designed and implemented, has inherent limitations and may not prevent or detect all misstatements.
The Board of Directors, principally through the Audit Committee, is responsible for reviewing and approving the consolidated financial statements together with other financial information of the Company and for ensuring that management fulfils its financial reporting responsibilities.
The consolidated financial statements have been audited by Dale Matheson Carr-Hilton LaBonte LLP, Chartered Professional Accountants, Licensed Public Accountants, who were appointed by the shareholders to examine the consolidated financial statements and provide an independent auditor’s opinion thereon. The report of the independent registered public accounting firm outlines the scope of their examination and their opinion on the consolidated financial statements. Dale Matheson Carr-Hilton LaBonte LLP has full and free access to the Board of Directors.
“signed” Keith Morrison President and Chief Executive Officer
|
“signed” Sarah Zhu Chief Financial Officer
|
| April 25, 2022 | |
| 2 | North American Nickel / YEAR END 2021 |
Report
of Independent Registered Public Accounting Firm (PCABO ID
To the shareholders and the board of directors of North American Nickel Inc.
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated statements of financial position of North American Nickel Inc. (the “Company”) as of December 31, 2021 and 2020, the related consolidated statements of comprehensive loss, changes in equity and cash flows, for the years ended December 31, 2021, 2020 and 2019, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and its financial performance and its cash flows for the years ended December 31, 2021, 2020 and 2019, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.
Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has not generated revenues since inception, has incurred losses in developing its business, and further losses are anticipated. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in this regard are described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting in accordance with the standards of the PCAOB. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion in accordance with the standards of the PCAOB.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and (that): (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.
| 3 | North American Nickel / YEAR END 2021 |
| Critical Audit Matter | How the Matter was Addressed in the Audit | ||
| Valuation of exploration and evaluation assets | The matter was addressed as follows - | ||
|
Refer to Note 6 – Exploration and Evaluation Assets
The principal considerations for our determination that performing procedures relating to the valuation of the exploration and evaluation asset is a critical audit matter is due to the high degree of judgment management made to assess whether indicators of impairment exist on the Company’s exploration and evaluation assets, specifically, related to the Company’s ability and intention to continue to explore the exploration and evaluation assets. As a result, a high degree of auditor effort was involved when performing procedures to evaluate whether management appropriately identified impairment indicators.
|
● | Obtained an understanding of key controls associated with evaluating exploration and evaluation assets for indicators of impairment. | |
| ● | Assessed management’s conclusions and internal and external factors that may be considered indicators of impairment and compared these to management’s assessment of impairment. | ||
| ● | Assessed the Company’s right to perform exploration activities on its exploration and evaluation assets, including that the rights are in good standing. | ||
| ● | Evaluated the Company’s ability and intent to undertake significant exploration activity on its exploration and evaluation assets. | ||
| ● | Evaluated the associated disclosures in the consolidated financial statements. | ||
CHARTERED PROFESSIONAL ACCOUNTANTS
We have served as the Company’s auditor since 2005
April 25, 2022
| 4 | North American Nickel / YEAR END 2021 |
Consolidated Statements of Financial Position (Expressed in thousands of Canadian dollars) |
| Notes | December 31, 2021 | December 31, 2020 | |||||||||
| ASSETS | |||||||||||
| CURRENT ASSETS | |||||||||||
| Cash | |||||||||||
| Receivables and other current assets | 4 | ||||||||||
| Due from related party | 9 | ||||||||||
| TOTAL CURRENT ASSETS | |||||||||||
| NON-CURRENT ASSETS | |||||||||||
| Equipment | 5 | ||||||||||
| Exploration and evaluation assets | 6 | ||||||||||
| Advance | 9 | - | |||||||||
| Investment | 9,10 | ||||||||||
| TOTAL NON-CURRENT ASSETS | |||||||||||
| TOTAL ASSETS | |||||||||||
| LIABILITIES | |||||||||||
| Trade payables and accrued liabilities | 7, 10 | ||||||||||
| Provision for restoration obligation | 6, 12 | - | |||||||||
| TOTAL LIABILITIES | |||||||||||
| EQUITY | |||||||||||
| Share capital - preferred | 8 | ||||||||||
| Share capital – common | 8 | ||||||||||
| Reserve | 8 | ||||||||||
| Deficit | ( | ) | ( | ) | |||||||
| TOTAL EQUITY | |||||||||||
| TOTAL LIABILITIES AND EQUITY | |||||||||||
Nature of Operations (Note 1)
Commitments (Note 6 and 12)
Subsequent Events (Note 18)
The accompanying notes are an integral part of these Consolidated Financial Statements.
Approved by the Board of Directors on April 25, 2022
| “signed” | “signed” |
Keith Morrison Director |
Doug Ford Audit Committee Chair |
| 5 | North American Nickel / YEAR END 2021 |
Consolidated Statements of Comprehensive Loss (Expressed in thousands of Canadian dollars) |
| Notes | Year-ended
December 31, 2021 | Year-ended December 31, 2020 | Year-ended December 31, 2019 |
||||||||||||
| EXPENSES | |||||||||||||||
| General and administrative expenses | 9, 10, 17 | ( | ) | ( | ) | ( |
) | ||||||||
| Property investigation | ( | ) | ( | ) | ( |
) | |||||||||
| Amortization | 5 | ( | ) | ( | ) | ( |
) | ||||||||
| Share-based payments | 8 | ( | ) | ( | ) | - | |||||||||
| Total expenses | ( | ) | ( | ) | ( |
) | |||||||||
| OTHER ITEMS | |||||||||||||||
| Interest income | - | - | |||||||||||||
| Reversal of flow-through share premium | 8 | - | - | ||||||||||||
| Impairment of exploration and evaluation assets | 6 | ( | ) | ( | ) | ( |
) | ||||||||
| Foreign exchange loss | ( | ) | ( | ) | ( |
) | |||||||||
| Equity loss on investment | 9 | ( | ) | ( | ) | - | |||||||||
| Other income (expense), net | ( | ) | ( | ) | ( |
) | |||||||||
| TOTAL COMPREHENSIVE LOSS FOR THE YEAR | ( | ) | ( | ) | ( |
) | |||||||||
| Basic and diluted weighted average number of common shares outstanding | |||||||||||||||
| Basic and diluted loss per share | ( | ) | ( | ) | ( |
) | |||||||||
The accompanying notes are an integral part of these Consolidated Financial Statements.
| 6 | North American Nickel / YEAR END 2021 |
Consolidated Statements of Changes in Equity (Expressed in thousands of Canadian dollars) |
| deficit | total | |||||||||||||||||||||||||
| Note | Number of Shares | Share capital | Preferred stock | Reserve | Deficit | Total Equity | ||||||||||||||||||||
| BALANCE DECEMBER 31, 2018 | ( | ) | ||||||||||||||||||||||||
| Net and comprehensive loss | - | ( | ) | ( | ) | |||||||||||||||||||||
| Share capital issued through private placement | 8 | |||||||||||||||||||||||||
| Share issue costs | 8 | - | ( | ) | ( | ) | ||||||||||||||||||||
| Flow-through share premium | 8 | - | ( | ) | ( | ) | ||||||||||||||||||||
| Share capital issued as earn-in | 8 | |||||||||||||||||||||||||
| Value allocated to warrants | 8 | - | ( | ) | ||||||||||||||||||||||
| Expired warrants | 8 | - | ( | ) | ||||||||||||||||||||||
| Forfeited/expired options | 8 | - | ( | ) | ||||||||||||||||||||||
BALANCE DECEMBER 31, 2019 | ( | ) | ||||||||||||||||||||||||
| Net and comprehensive loss | - | ( | ) | ( | ) | |||||||||||||||||||||
| Share capital issued through private placement | 8 | |||||||||||||||||||||||||
| Share issue costs | 8 | - | ( | ) | ( | ) | ||||||||||||||||||||
| Value allocated to warrants | 8 | - | ( | ) | ||||||||||||||||||||||
| Expired warrants | 8 | - | ( | ) | ||||||||||||||||||||||
| Share-based payments | 8 | - | ||||||||||||||||||||||||
| Forfeited/expired options | 8 | - | ( | ) | ||||||||||||||||||||||
| BALANCE AT DECEMBER 31, 2020 | ( | ) | ||||||||||||||||||||||||
| Balance | ( | ) |
| Net and comprehensive loss | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Share capital issued through private placement | 8 | |||||||||||||||||||||||||||
| Share issue costs | 8 | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Value allocated to warrants | 8 | - | ( | ) | ||||||||||||||||||||||||
| Exercised options | 8 | |||||||||||||||||||||||||||
| Exercised options fair value | - | ( | ) | |||||||||||||||||||||||||
| Exercised warrants | 8 | |||||||||||||||||||||||||||
| Exercised warrants | 8 | - | ( | ) | ||||||||||||||||||||||||
| Expired warrants | 8 | - | ( | ) | ||||||||||||||||||||||||
| Share-based payments | 8 | - | ||||||||||||||||||||||||||
| Forfeited/expired options | 8 | - | ( | ) | ||||||||||||||||||||||||
| BALANCE AT DECEMBER 31, 2021 | ( | ) | ||||||||||||||||||||||||||
| Balance | ( | ) |
The accompanying notes are an integral part of these Consolidated Financial Statements.
| 7 | North American Nickel / YEAR END 2021 |
Consolidated Statements of Cash Flows (Expressed in thousands of Canadian dollars) |
Year ended December 31, 2021 | Year ended December 31, 2020 |
Year ended December 31, 2019 |
||||||||||
| OPERATING ACTIVITIES | ||||||||||||
| Loss for the year | ( | ) | ( |
) | ( |
) | ||||||
| Items not affecting cash: | ||||||||||||
| Amortization | ||||||||||||
| Share-based payments | - | |||||||||||
| Interest Income | - | - | ||||||||||
| Reversal of flow-through share premium | - | ( |
) | - | ||||||||
| Impairment of exploration and evaluation assets | ||||||||||||
| Equity loss on investment | - | |||||||||||
| Changes in working capital | ( | ) | ( |
) | ||||||||
| Net cash used in operating activities | ( | ) | ( |
) | ( |
) | ||||||
| INVESTING ACTIVITIES | ||||||||||||
| Expenditures on exploration and evaluation assets | ( | ) | ( |
) | ( |
) | ||||||
| Short-term investment | - | - | ||||||||||
| Investment | ( | ) | ( |
) | - | |||||||
| Advance | - | ( |
) | ( |
) | |||||||
| Purchase equipment | - | - | ( |
) | ||||||||
| Net cash provided by (used in) investing activities | ( | ) | ( |
) | ||||||||
| FINANCING ACTIVITIES | ||||||||||||
| Proceeds from issuance of common shares | ||||||||||||
| Share issuance costs | ( | ) | ( |
) | ( |
) | ||||||
| Proceeds from exercise of warrants and options | - | - | ||||||||||
| Net cash provided by financing activities | ||||||||||||
| Change in cash for the year | ( |
) | ||||||||||
| Cash, beginning of the year | ||||||||||||
| Cash, end of the year | ||||||||||||
Supplemental cash flow information (Note 11)
The accompanying notes are an integral part of these Consolidated Financial Statements.
| 8 | North American Nickel / YEAR END 2021 |
Notes to the Consolidated Financial Statements
For the year ended December 31, 2021
(Expressed in Canadian dollars)
The accompanying notes are an integral part of these Consolidated Financial Statements.
1. NATURE AND CONTINUANCE OF OPERATIONS
North American Nickel Inc. (the “Company”) was incorporated on September 23, 1983, under the laws of the Province of British Columbia, Canada. The primary mailing office is located at 3400 – 100 King Street West, PO Box 130, Toronto, Ontario, M5X 1A4 and the records office of the Company is located at 666 Burrard Street, Suite 2500, Vancouver BC V6C 2X8. The Company’s common shares trade on the TSX Venture Exchange (“TSXV”) under the symbol “NAN”.
The Company’s principal business activity is the exploration and development of mineral properties in Greenland and Canada, as well as in Botswana through its participation in Premium Nickel Resources (“Premium Nickel”). The Company has not yet determined whether any of these properties contain ore reserves that are economically recoverable. The recoverability of carrying amounts shown for exploration and evaluation assets is dependent upon a number of factors including environmental risk, legal and political risk, the existence of economically recoverable mineral reserves, confirmation of the Company’s interests in the underlying mineral claims, the ability of the Company to obtain necessary financing to complete exploration and development, and to attain sufficient net cash flow from future profitable production or disposition proceeds.
These consolidated financial statements have been prepared on the assumption that the Company will continue as a going concern, meaning it will continue in operation for the foreseeable future and will be able to realize assets and discharge liabilities in the ordinary course of operations. The ability of the Company to continue operations as a going concern is ultimately dependent upon achieving profitable operations and its ability to raise additional capital. To date, the Company has not generated profitable operations from its resource activities and will need to invest additional funds in carrying out its planned exploration, development and operational activities. These uncertainties cast substantial doubt about the Company’s ability to continue as a going concern. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. Such adjustments could be material.
The exploration and evaluation properties in which the Company currently has an interest are in the exploration stage. As such, the Company is dependent on external financing to fund its activities. In order to carry out the planned exploration and cover administrative costs, the Company will use its existing working capital and raise additional amounts as needed. Although the Company has been successful in its past fundraising activities, there is no assurance as to the success of future fundraising efforts or as to the sufficiency of funds raised in the future. The Company will continue to assess new properties and seek to acquire interests in additional properties if there is sufficient geologic or economic potential and if adequate financial resources are available to do so.
The coronavirus COVID-19 declared as a global pandemic in March 2020 continued throughout the 2020 year and to date. This contagious disease outbreak, which continues to spread, and any related adverse public health developments, has adversely affected workforces, economies, and financial markets globally, potentially leading to an economic downturn. The Company is closely monitoring the impact of the pandemic on all aspects of its business and COVID-19 has delayed the Company’s ability to conduct major fieldwork on projects.
The consolidated financial statements were approved and authorized for issuance by the Board of Directors of the Company on April 25, 2022. The notes to the financial statements is stated in Canadian dollars except amounts in the tables are expressed in thousands of Canadian dollars.
2. BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES
(a) Statement of Compliance
The Company’s consolidated financial statements were prepared in accordance with International Financial Reporting Standards (“IFRS”).
| 9 | North American Nickel / YEAR END 2021 |
Notes to the Consolidated Financial Statements
For the year ended December 31, 2021
(Expressed in Canadian dollars)
(b) Basis of Preparation
These consolidated financial statements have been prepared under the historical cost convention, modified by the revaluation of any financial assets and financial liabilities where applicable. The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise judgment in the process of applying the Company’s accounting policies. These areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements and, are disclosed in Note 3.
(c) Basis of consolidation
These consolidated financial statements include the financial statements of the Company and its wholly-owned subsidiary, North American Nickel (US) Inc. which was incorporated in the State of Delaware on May 22, 2015.
Consolidation is required when the Company is exposed, or has rights to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. All intercompany transactions, balances, income and expenses are eliminated upon consolidation.
(d) Foreign currency translation
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the date of the transaction. Foreign currency monetary items are translated at the period-end exchange rate. Non-monetary items measured at historical cost continue to be carried at the exchange rate at the date of the transaction. Non-monetary items measured at fair value are reported at the exchange rate at the date when fair values were determined.
Exchange differences arising on the translation of monetary items or on settlement of monetary items are recognized in profit or loss in the consolidated statement of comprehensive loss in the period in which they arise, except where deferred in equity as a qualifying cash flow or net investment hedge.
Exchange differences arising on the translation of non-monetary items are recognized in other comprehensive income in the consolidated statement of comprehensive loss to the extent that gains and losses arising on those non-monetary items are also recognized in other comprehensive income. Where the non-monetary gain or loss is recognized in profit or loss, the exchange component is also recognized in profit or loss.
(e) Exploration and evaluation assets
Exploration and evaluation assets include the costs of acquiring licenses, costs associated with exploration and evaluation activity, and the fair value (at acquisition date) of exploration and evaluation assets acquired in a business combination. Exploration and evaluation expenditures are initially capitalized. Costs incurred before the Company has obtained the legal rights to explore an area are recognized in profit or loss.
Government tax credits received are generally recorded as a reduction to the cumulative costs incurred and capitalized on the related property.
Exploration and evaluation assets are assessed for impairment if (i) sufficient data exists to determine technical feasibility and commercial viability, and (ii) facts, events and circumstances suggest that the carrying amount exceeds the recoverable amount.
Once the technical feasibility and commercial viability of the extraction of mineral resources in an area of interest are demonstrable, exploration and evaluation assets attributable to that area of interest are first tested for impairment and then reclassified to mining property and development assets within equipment.
| 10 | North American Nickel / YEAR END 2021 |
Notes to the Consolidated Financial Statements
For the year ended December 31, 2021
(Expressed in Canadian dollars)
Recoverability of the carrying amount of any exploration and evaluation assets is dependent on successful development and commercial exploitation, or alternatively, sale of the respective areas of interest.
The Company may occasionally enter into farm-out arrangements, whereby it will transfer part of an interest, as consideration, for an agreement by the farmee to meet certain exploration and evaluation expenditures which would have otherwise been undertaken by the Company. The Company does not record any expenditures made by the farmee on its behalf. Any cash consideration received from the agreement is credited against the costs previously capitalized to the mineral interest given up by the Company, with any excess consideration accounted for in profit.
When a project is deemed to no longer have commercially viable prospects to the Company, exploration and evaluation expenditures in respect of that project are deemed to be impaired. As a result, those exploration and evaluation expenditure costs, in excess of estimated recoveries, are written off to the consolidated statement of comprehensive loss/income.
(f) Restoration and environmental obligations
The Company recognizes liabilities for statutory, contractual, constructive or legal obligations associated with the retirement of long-term assets, when those obligations result from the acquisition, construction, development or normal operation of the assets. The net present value of future restoration cost estimates arising from the decommissioning of plant and other site preparation work is capitalized to exploration and evaluation assets along with a corresponding increase in the restoration provision in the period incurred. Discount rates using a pre-tax rate that reflect the time value of money are used to calculate the net present value. The restoration asset will be depreciated on the same basis as other mining assets.
The Company’s estimates of restoration costs could change as a result of changes in regulatory requirements, discount rates and assumptions regarding the amount and timing of the future expenditures. These changes are recorded directly to exploration and evaluation assets with a corresponding entry to the restoration provision. The Company’s estimates are reviewed annually for changes in regulatory requirements, discount rates, effects of inflation and changes in estimates.
Changes in the net present value, excluding changes in the Company’s estimates of reclamation costs, are charged to profit and loss for the period.
The costs of restoration projects included in the provision are recorded against the provision as incurred. The costs to prevent and control environmental impacts at specific properties are capitalized in accordance with the Company’s accounting policy for exploration and evaluation assets.
(g) Impairment of assets
Impairment tests on intangible assets with indefinite useful economic lives are undertaken annually at the financial year-end. Other non-financial assets, including exploration and evaluation assets, are subject to impairment tests whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. Where the carrying value of an asset exceeds its recoverable amount, which is the higher of value in use and fair value less costs to sell, the asset is written down accordingly.
Where it is not possible to estimate the recoverable amount of an individual asset, the impairment test is carried out on the asset’s cash-generating unit, which is the lowest group of assets in which the asset belongs and for which there are separately identifiable cash inflows that are largely independent of the cash inflows from other assets.
An impairment loss is charged to the profit or loss, except to the extent the loss reverses gains previously recognized in other comprehensive loss/income.
| 11 | North American Nickel / YEAR END 2021 |
Notes to the Consolidated Financial Statements
For the year ended December 31, 2021
(Expressed in Canadian dollars)
(h) Financial instruments
In accordance with IFRS 9, the Company’s accounting policy is as follows:
Classification
The Company classifies its financial instruments in the following categories: at fair value through profit and loss (“FVTPL”), at fair value through other comprehensive income (loss) (“FVTOCI”), or at amortized cost. The Company determines the classification of financial assets at initial recognition. The classification of debt instruments is driven by the Company’s business model for managing the financial assets and their contractual cash flow characteristics. Equity instruments that are held for trading are classified as FVTPL. For other equity instruments, on the day of acquisition the Company can make an irrevocable election (on an instrument-by-instrument basis) to designate them as at FVTOCI. Financial liabilities are measured at amortized cost, unless they are required to be measured at FVTPL (such as instruments held for trading or derivatives) or the Company has opted to measure them at FVTPL.
The following table shows the classification of the Company’s financial assets and liabilities:
Financial asset/liability |
Classification | |||
| Cash | FVTPL | |||
| Other receivable | Amortized cost | |||
| Trade payables | Amortized cost | |||
| Advance | Amortized cost |
Measurement
Financial assets and liabilities at amortized cost
Financial assets and liabilities at amortized cost are initially recognized at fair value plus or minus transaction costs, respectively, and subsequently carried at amortized cost less any impairment.
Financial assets and liabilities at FVTPL
Financial assets and liabilities carried at FVTPL are initially recorded at fair value and transaction costs are expensed in profit or loss. Realized and unrealized gains and losses arising from changes in the fair value of the financial assets and liabilities held at FVTPL are included in the consolidation statements of comprehensive loss in the period in which they arise.
Impairment of financial assets at amortized cost
An ‘expected credit loss’ impairment model applies which requires a loss allowance to be recognized based on expected credit losses. The estimated present value of future cash flows associated with the asset is determined and an impairment loss is recognized for the difference between this amount and the carrying amount as follows: the carrying amount of the asset is reduced to estimated present value of the future cash flows associated with the asset, discounted at the financial asset’s original effective interest rate, either directly or through the use of an allowance account and the resulting loss is recognized in profit or loss for the period.
In a subsequent period, if the amount of the impairment loss related to financial assets measured at amortized cost decreases, the previously recognized impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortized cost would have been had the impairment not been recognized.
Derecognition
Financial assets
The Company derecognizes financial assets only when the contractual rights to cash flows from the financial assets expire, or when it transfers the financial assets and substantially all of the associated risks and rewards of ownership to another entity. Gains and losses on derecognition are generally recognized in the consolidated statements of comprehensive loss.
Investments are derecognized when the rights to receive cash flows from the investments have expired or the Company has transferred the financial asset and the transfer qualifies for derecognition.
| 12 | North American Nickel / YEAR END 2021 |
Notes to the Consolidated Financial Statements
For the year ended December 31, 2021
(Expressed in Canadian dollars)
Financial liabilities
Financial liabilities are derecognized when, and only when, the Company’s obligations are discharged, cancelled or they expire. The difference between the carrying amount of the financial liability derecognized and the consideration paid and payable is recognized in the consolidated statement of comprehensive loss.
The Company uses the treasury stock method to compute the dilutive effect of options, warrants and similar instruments. Under this method, the dilutive effect on loss per common share is recognized on the use of the proceeds that could be obtained upon exercise of options, warrants and similar instruments. It assumes that the proceeds would be used to purchase common shares at the average market price during the period.
Basic loss per common share is calculated using the weighted average number of common shares outstanding during the period and does not include outstanding options and warrants. Dilutive loss per common share is not presented differently from basic loss per share as the conversion of outstanding stock options and warrants into common shares would be anti-dilutive.
(j) Income taxes
Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognized in net income except to the extent that it arises in a business combination, or from items recognized directly in equity or other comprehensive loss/income.
Current income tax assets and liabilities for the current period are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date, in the countries where the Company operates and generates taxable income.
Current income tax relating to items recognized directly in other comprehensive income or equity is recognized in other comprehensive income or equity and not in profit or loss. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.
Deferred income tax is provided using the asset and liability method of temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.
The carrying amount of deferred income tax assets is reviewed at the end of each reporting period and recognized only to the extent that it is probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilized.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realized or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period.
Deferred income tax assets and deferred income tax liabilities are offset, only if a legally enforceable right exists to set off current tax assets against current income tax liabilities and the deferred income taxes relate to the same taxable entity and the same taxation authority.
Flow-through shares
Any premium received by the Company on the issuance of flow-through shares is initially recorded as a liability (“flow-through tax liability”). Upon renouncement by the Company of the tax benefits associated with the related expenditures, a flow-through share premium liability is recognized and the liability will be reversed as eligible expenditures are made. If such expenditures are capitalized, a deferred tax liability is recognized. To the extent that suitable deferred tax assets are available, the Company will reduce the deferred tax liability.
| 13 | North American Nickel / YEAR END 2021 |
Notes to the Consolidated Financial Statements
For the year ended December 31, 2021
(Expressed in Canadian dollars)
Where equity-settled share options are awarded to employees, the fair value of the options at the date of grant is recognized over the vesting period. Performance vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each reporting date so that, ultimately, the cumulative amount recognized over the vesting period is based on the number of options that eventually vest. Non-vesting conditions and market vesting conditions are factored into the fair value of the options granted. As long as all other vesting conditions are satisfied, a charge is made irrespective of whether these non-vesting and market vesting conditions are satisfied. The cumulative expense is not adjusted for failure to achieve a market vesting condition or where a non-vesting condition is not satisfied.
Where the terms and conditions of options are modified, the increase in the fair value of the options, measured immediately before and after the modification, is also recognized over the remaining vesting period.
Where equity instruments are granted to non-employees, they are recorded at the fair value of the goods or services received. Amounts related to the issuance of shares are recorded as a reduction of share capital.
When the value of goods and services received in exchange for the share-based payment cannot be reliably estimated, the fair value is measured by use of a valuation model. The expected life used in the model is adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions, and behavioural considerations.
All equity-settled share-based payments are reflected in share-based payments reserve, until exercised. Upon exercise shares are issued from treasury and the amount reflected in share-based payments reserve is credited to share capital along with any consideration paid.
(l) Share capital
The Company’s common shares, preferred shares and share warrants shares are classified as equity instruments.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction from the proceeds.
Proceeds received on the issuance of units, consisting of common shares and warrants are allocated to share capital.
Resource expenditure deductions for income tax purposes related to exploratory activities funded by flow-through share arrangements are renounced to investors in accordance with income tax legislation. Pursuant to the terms of the flow-through share agreements, these shares transfer the tax deductibility of qualifying resource expenditures to investors. On issuance, the Company bifurcates the flow-through share into a flow-through share premium, equal to the estimated premium, if any, investors pay for the flow-through feature, which is recognized as a liability and share capital. Upon expenses being incurred, the Company derecognizes the liability and recognizes a deferred tax liability for the amount of tax reduction renounced to the shareholders. The premium is recognized as other income and the related deferred tax is recognized as a tax provision.
Proceeds received from the issuance of flow-through shares are restricted to be used only for Canadian resource property exploration expenditures within a two-year period. The portion of the proceeds received but not yet expended at the end of the period is disclosed separately as flow- through share proceeds, if any.
The Company may also be subject to a Part XII.6 tax on flow-through proceeds renounced under the look-back Rule, in accordance with Government of Canada flow-through regulations. When applicable, this tax is accrued as a financing expense until qualifying expenditures are incurred.
| 14 | North American Nickel / YEAR END 2021 |
Notes to the Consolidated Financial Statements
For the year ended December 31, 2021
(Expressed in Canadian dollars)
(n) Equipment
Equipment is stated at historical cost less accumulated depreciation and accumulated impairment losses.
Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of a significant replaced part is derecognized. All other repairs and maintenance are charged to the consolidation statement of comprehensive loss during the financial period in which they are incurred. Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognized in profit or loss.
Depreciation and amortization are calculated on a straight-line method to charge the cost, less residual value, of the assets to their residual values over their estimated useful lives. The depreciation and amortization rate applicable to each category of equipment is as follows:
SCHEDULE OF DEPRECIATION AND AMORTIZATION RATE
| Equipment | Depreciation rate | ||
| Exploration equipment | |||
| Computer software | |||
| Computer equipment |
(o) Equity investment
Investments in entities over which the Company has a significant influence, but not control, are accounted for by the equity method, whereby the original cost of the investment is adjusted for the Company’s proportionate share of the investee’s income or loss. When the Company’s equity investee issues its own shares to outside interest, a dilution gain or loss arises as a result of the difference between the Company’s proportionate share of the proceeds and the carrying value of the underlying equity. When net accumulated losses from an equity accounted investment exceed its carrying amount, the investment balance is reduced to zero and additional losses are not provided for unless the Company is committed to provide financial support to the investee.
(p) Accounting standards and amendments issued but not yet effective
Certain accounting standards or amendments to existing accounting standards that have been issued but have future effective dates are either not applicable or are not expected to have a significant impact on the Company’s consolidated financial statements.
IAS 16 - “Property, Plant and Equipment”
The IASB issued an amendment to IAS 16, Property, Plant and Equipment to prohibit the deducting from property, plant and equipment amounts received from selling items produced while preparing an asset for its intended use. Instead, sales proceeds and its related costs must be recognized in profit or loss. The amendment will require companies to distinguish between costs associated with producing and selling items before the item of property, plant and equipment is available for use and costs associated with making the item of property, plant and equipment available for its intended use. The amendment is effective for annual periods beginning on or after January 1, 2022, with earlier application permitted. The amendment is not currently applicable.
IAS 1 – “Presentation of Financial Statements”
The IASB issued an amendment to IAS 1, Presentation of Financial Statements to clarify one of the requirements under the standard for classifying a liability as non-current in nature, specifically the requirement for an entity to have the right to defer settlement of the liability for at least 12 months after the reporting period. The amendment includes: (i) specifying that an entity’s right to defer settlement must exist at the end of the reporting period; (ii) clarifying that classification is unaffected by management’s intentions or expectations about whether the entity will exercise its right to defer settlement; (iii) clarifying how lending conditions affect classification; and (iv) clarifying requirements for classifying liabilities an entity will or may settle by issuing its own equity instruments. An assessment will be performed prior to the effective date of January 1, 2023 to determine the impact to the Company’s financial statements.
| 15 | North American Nickel / YEAR END 2021 |
Notes to the Consolidated Financial Statements
For the year ended December 31, 2021
(Expressed in Canadian dollars)
3. CRITICAL ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS
The preparation of the financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that can affect reported amounts of assets, liabilities revenues and expenses and the accompanying disclosures. Estimates and assumptions are continuously evaluated and are based on management’s historical experience and on other assumptions believed to be reasonable under the circumstances. However, different judgments, estimates and assumptions could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.
The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are:
(a) Recoverability of Exploration and Evaluation Assets
The
ultimate recoverability of the exploration and evaluation assets with a carrying value of $
Management
undertakes a periodic review of these assets to determine whether any indication of impairment exists. Where an indicator of impairment
exists, a formal estimate of the recoverable amount of the assets is made. An impairment loss is recognized when the carrying value of
the assets is higher than the recoverable amount and when mineral license tenements are relinquished or have lapsed. In undertaking this
review, management of the Company is required to make significant estimates of, among other things, discount rates, commodity prices,
availability of financing, future operating and capital costs and all aspects of project advancement. These estimates are subject to
various risks and uncertainties, which may ultimately have an effect on the expected recoverability of the carrying values of the assets.
During the year ended December 31, 2021, the Company recorded write-off of its Quetico claims of $
(b) Restoration Provisions
Management’s
best estimates regarding the restoration provisions are based on the current economic environment. Changes in estimates of contamination,
restoration standards and restoration activities result in changes to provisions from period to period. Actual restoration provisions
will ultimately depend on future market prices for future restoration obligations. Management has determined that the Company has restoration
obligations at December 31, 2021 of $(December 31, 2020 - $
(c) Valuation of Share-Based Compensation
The Company estimates the fair value of convertible securities such as warrants and options using the Black-Scholes Option Pricing Model which requires significant estimation around assumptions and inputs such as expected term to maturity, expected volatility and expected forfeiture rates. The accounting policies in Note 2(k) and Note 8 of the consolidated financial statements contain further details of significant assumptions applied to these areas of estimation.
(d) Going Concern
Financial statements are prepared on a going concern basis unless management either intends to liquidate the Company or to cease trading, or has no realistic alternative to do so. Assessment of the Company’s ability to continue as a going concern requires the consideration of all available information about the future, which is at least, but not limited to, twelve months from the end of the reporting period. This information includes estimates of future cash flows and other factors, the outcome of which is uncertain. When management is aware, in making its assessment, of material uncertainties related to events or conditions that may cast substantial doubt upon the Company’s ability to continue as a going concern those uncertainties are disclosed.
| 16 | North American Nickel / YEAR END 2021 |
Notes to the Consolidated Financial Statements
For the year ended December 31, 2021
(Expressed in Canadian dollars)
(e) Equity investment
Management determines its ability to exercise significant influence over an investee by looking at its percentage interest and other qualitative factors including but not limited to its voting rights, representation on the board of directors, participation in policymaking processes, material transactions between the Company and the investee, interchange of managerial personnel, provision of essential technical information and operating involvement.
At
December 31, 2021, the Company’s percentage holding in its private investee was
4. RECEIVABLES AND OTHER CURRENT ASSETS
A summary of the receivables and other current assets as of December 31, 2021 and 2020 is detailed in the table below:
(All amounts in table are expressed in thousands of Canadian dollars)
SCHEDULE OF RECEIVABLES AND OTHER CURRENT ASSETS
December 31, 2021 | December 31, 2020 | |||||||
| Sales taxes receivable | ||||||||
| Prepaid expenses | ||||||||
| Total receivables and other current assets | ||||||||
5. EQUIPMENT
The table below sets out costs and accumulated depreciation as at December 31, 2021 and 2020:
SUMMARY OF PROPERTY, PLANT AND EQUIPMENT
Exploration Equipment | Computer Equipment | Computer Software | Total | |||||||||||||
| Cost | ||||||||||||||||
| Balance – December 31, 2020 and 2021 | ||||||||||||||||
| Accumulated Amortization | ||||||||||||||||
| Balance – December 31, 2019 | ||||||||||||||||
| Amortization | ||||||||||||||||
| Balance – December 31, 2020 | ||||||||||||||||
| Amortization | ||||||||||||||||
| Balance – December 31, 2021 | ||||||||||||||||
| Carrying Amount | ||||||||||||||||
| As at December 31, 2020 | ||||||||||||||||
| As at December 31, 2021 | ||||||||||||||||
| 17 | North American Nickel / YEAR END 2021 |
Notes to the Consolidated Financial Statements
For the year ended December 31, 2021
(Expressed in Canadian dollars)
6. EXPLORATION AND EVALUATION ASSETS
(All amounts in table are expressed in thousands of Canadian dollars)
SCHEDULE OF EXPLORATION AND EVALUATION ASSETS
Post Creek Property |
Halcyon Property | Quetico Claims | Loveland Nickel (Enid Creek) | Lingman Lake | Section 35 Property | Maniitsoq Property |
Total | |||||||||||||||||||||||||
| Canada | US | Greenland | ||||||||||||||||||||||||||||||
Post Creek Property |
Halcyon Property | Quetico Claims | Loveland Nickel (Enid Creek) | Lingman Lake | Section 35 Property | Maniitsoq Property |
Total | |||||||||||||||||||||||||
| Acquisition | ||||||||||||||||||||||||||||||||
| Balance, December 31, 2019 | ||||||||||||||||||||||||||||||||
| Acquisition costs | - | - | - | - | ||||||||||||||||||||||||||||
| Administration | - | - | - | - | ||||||||||||||||||||||||||||
| Property maintenance | - | - | - | |||||||||||||||||||||||||||||
| Drilling | - | - | - | - | ||||||||||||||||||||||||||||
| Geology | - | - | ||||||||||||||||||||||||||||||
| Geophysics | - | - | - | |||||||||||||||||||||||||||||
| Helicopter charter aircraft | - | - | - | - | - | - | ||||||||||||||||||||||||||
| Infrastructure | - | - | - | - | - | - | ||||||||||||||||||||||||||
| Camp site cleanup | - | - | - | - | - | - | ||||||||||||||||||||||||||
| Impairment | - | - | - | ( | ) | - | - | - | ( | ) | ||||||||||||||||||||||
| Evaluation assets, gross | ( | ) | - | |||||||||||||||||||||||||||||
| Balance, December 31, 2020 | - | |||||||||||||||||||||||||||||||
| Balance, December 31, 2020 | - | |||||||||||||||||||||||||||||||
| Acquisition costs – cash | - | - | - | - | - | |||||||||||||||||||||||||||
| Impairment | - | - | ( | ) | - | ( | ) | - | - | ( | ) | |||||||||||||||||||||
| Balance, December 31, 2021 | - | - | ||||||||||||||||||||||||||||||
| Exploration | ||||||||||||||||||||||||||||||||
| Balance, December 31, 2019 | ( | ) | ||||||||||||||||||||||||||||||
| Administration | - | - | - | - | ||||||||||||||||||||||||||||
| Property maintenance | - | - | - | |||||||||||||||||||||||||||||
| Drilling | - | - | - | - | ||||||||||||||||||||||||||||
| Geology | - | - | ||||||||||||||||||||||||||||||
| Geophysics | - | - | - | |||||||||||||||||||||||||||||
| Helicopter charter aircraft | - | - | - | - | - | - | ||||||||||||||||||||||||||
| Camp site cleanup | - | - | - | - | - | - | ||||||||||||||||||||||||||
| Impairment | - | - | - | ( | ) | - | - | - | ( | ) | ||||||||||||||||||||||
| Evaluation assets, gross | ( | ) | - | |||||||||||||||||||||||||||||
| Balance, December 31, 2020 | - | - | ||||||||||||||||||||||||||||||
| Balance | - | - | ||||||||||||||||||||||||||||||
| Administration | - | - | - | - | - | - | ||||||||||||||||||||||||||
| Drilling | - | - | - | - | - | - | ||||||||||||||||||||||||||
| Geology | - | - | - | |||||||||||||||||||||||||||||
| Geophysics | - | - | - | - | - | - | ||||||||||||||||||||||||||
| Property maintenance | - | - | - | |||||||||||||||||||||||||||||
| Infrastructure | - | - | - | - | - | - | ||||||||||||||||||||||||||
| Camp site cleanup | - | - | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Impairment | - | - | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||
| Evaluation assets, gross | ( | ) | - | - | - | |||||||||||||||||||||||||||
| Balance, December 31, 2021 | - | - | - | |||||||||||||||||||||||||||||
| Total, December 31, 2020 | - | - | ||||||||||||||||||||||||||||||
| Total, December 31, 2021 | - | - | - | |||||||||||||||||||||||||||||
| Balance | - | - | - | |||||||||||||||||||||||||||||
| 18 | North American Nickel / YEAR END 2021 |
Notes to the Consolidated Financial Statements
For the year ended December 31, 2021
(Expressed in Canadian dollars)
The following is a description of the Company’s exploration and evaluation assets and the related spending commitments:
Post Creek
On December 23, 2009 and as last amended on March 12, 2013, the Company completed the required consideration and acquired the rights to a mineral claim known as the Post Creek Property located within the Sudbury Mining District of Ontario.
Commencing
August 1, 2015, the Company is obligated to pay advances on net smelter return royalties (“NSR”) of $
During
the year ended December 31, 2021, the Company incurred acquisition and exploration expenditures totalling $
Halcyon
On December 31, 2015, the Company completed the required consideration of the option agreement and acquired rights to a mineral claim known as the Halcyon Property located within the Sudbury Mining District of Ontario, subject to certain NSR and advance royalty payments.
Commencing
August 1, 2015, the Company is obligated to pay advances on the NSR of $
During
the year ended December 31, 2021, the Company incurred $
Quetico
On April 26 and May 17, 2018, the Company acquired the right to certain mineral claims known as Quetico located within the Sudbury Mining District of Ontario.
The Company had no minimum required exploration commitment for the years ended December 31, 2021, 2020 and 2019 as it is not required to file any geoscience assessment work between the initial recording of a mining claim and the first anniversary date of the mining claim and two one-year exclusions were granted as a result of the COVID-19 pandemic.
In April 2020, the Company applied for a one - year exclusion under a COVID-19 relief program offered by the Ontario Ministry of Energy, Northern Development and Mine (ENDM). The one-year exclusion was granted on September 1, 2020, thus adjusting the work requirement due dates to April and May of 2021. The COVID-19 relief program was offered again in 2021, and the Company lodged a second set of applications on March 29, 2021 and April 21, 2021 to extend the tenure of the claim blocks. The additional one-year exclusions were granted on May 14 and May 20, 2021 thus adjusting the work requirement due dates to April and May of 2022.
During
the year ended December 31, 2021, the Company incurred $
| 19 | North American Nickel / YEAR END 2021 |
Notes to the Consolidated Financial Statements
For the year ended December 31, 2021
(Expressed in Canadian dollars)
IFRS
6 requires management to assess the exploration and evaluation assets for impairment. Accordingly, at December 31, 2021, management believed
that facts and circumstances existed to suggest that the carrying amount of Quetico claims exceeded its recoverable amount. As a result,
management determined the Quetico claims should be impaired by $
Loveland Nickel (Enid Creek) Property
On
September 25, 2019, the Company entered into earn in agreement to acquire a
As
of December 31, 2020, the Company incurred an aggregate exploration and acquisition expenditures of $
Lingman Lake Property
During
the year ended December 31, 2019, the Company staked certain mineral claims known as Lingman Lake located northwest of Thunder Bay, Ontario.
The Company incurred total acquisition and related costs of $(December 31, 2020 - $)
during the year ended December 31, 2021. As at December 31, 2021, management elected not to proceed with further exploration on the property.
Accordingly, all acquisition and exploration related costs were impaired as at December 31, 2021, totalling $
Section 35 Property
On January 4, 2016, the Company entered into a 10-year Metallic Minerals Lease (the “Lease”) with the Michigan Department of Natural Resources for an area covering approximately 320 acres. The terms of the Lease required annual rental fees.
At
the end of the fiscal year 2019, management of the Company made a decision to relinquish the mineral lease. As a result, all cumulative
exploration related costs of $
Maniitsoq
The
Company has been granted certain exploration licenses, by the Bureau of Minerals and Petroleum (“BMP”) of Greenland for exclusive
exploration rights of an area comprising the Maniitsoq Property, located near Ininngui, Greenland. The Maniitsoq Property is subject
to a
The Company may terminate the licenses at any time, however any unfulfilled obligations according to the licenses will remain in force, regardless of the termination.
Future required minimum exploration expenditures will be adjusted each year on the basis of the change to the Danish Consumer Price Index.
During
the year ended December 31, 2021, the Company spent in aggregate of $
| 20 | North American Nickel / YEAR END 2021 |
Notes to the Consolidated Financial Statements
For the year ended December 31, 2021
(Expressed in Canadian dollars)
During
the year ended December 31, 2020, the Company has recorded a $
IFRS 6 requires management to assess the exploration and evaluation assets for impairment. No facts or circumstances existed at December 31, 2021 and December 31, 2020 to suggest impairment on the Maniitsoq property. The valuation was based on historical drilling results and management’s future exploration plans on the Maniitsoq Property. The Company intends to plan and budget for further exploration on the Maniitsoq Property in the future.
Further details on the licenses comprising the Maniitsoq Property and related expenditures are outlined below:
Sulussugut License (2011/54)
(All references to amounts in Danish Kroners, “DKK”)
Effective
August 15, 2011, the Company was granted an exploration license (the “Sulussugut License”) by the BMP of Greenland for exclusive
exploration rights of an area located near Sulussugut, Greenland. The Company paid a license fee of $
During the year ended December 31, 2021, the Company received a license extension, which provides for renewal period until December 31, 2022.
To
December 31, 2015, under the terms of a preliminary license, the Company completed the exploration requirements of an estimated minimum
of DKK
The
Company had no minimum required exploration commitment for the year ended December 31, 2021 and available credits of DKK
During
the year ended December 31, 2021, the Company spent a total of $
To December 31, 2021 and 2020, the Company has completed all obligations with respect to required reduction of the area of the license.
| 21 | North American Nickel / YEAR END 2021 |
Notes to the Consolidated Financial Statements
For the year ended December 31, 2021
(Expressed in Canadian dollars)
Ininngui License (2012/28)
Effective
March 4, 2012, the Company was granted an exploration license (the “Ininngui License”) by the BMP of Greenland for exclusive
exploration rights of an area located near Ininngui, Greenland. The Company paid a license fee of $
The Ininngui License is contiguous with the Sulussugut License.
Should
the Company not incur
The
Company had no minimum required exploration commitment for the year ended December 31, 2021. As of December 31, 2021, the Company has
spent $
During
the year ended December 31, 2021, the Company spent a total of $
Carbonatite License (2018/21)
Effective
May 4, 2018, the Company was granted an exploration license (the “Carbonatite License”) by the BMP of Greenland for exclusive
exploration rights of an area located near Maniitsoq in West Greenland. The Company paid a license fee of $
The
Company had no minimum required exploration obligation for the year ended December 31, 2021. As of December 31, 2021, the Company has
spent $
During
the year ended December 31, 2021, the Company spent a total of $
West Greenland Prospecting License (2020/05)
On
February 18, 2020,
High Atlas Project in Morocco
In 2018, the Company’s geologists identified a project opportunity in the high Atlas Mountains of Morocco. There is no modern geophysical coverage and no drilling on the property. In 2019, the Company signed an MOU with ONHYM (Office National des Hydrocarbons et des Mines), a government entity and single largest current permit holder in Morocco. Through this alliance, the Company was given access to confidential exploration data to develop nickel projects in the High Atlas Region of Morocco. In November and December 2021, the Company lodged applications for five permits in Morocco. In December, three of the five permits were awarded to the Company with the decision on the fourth and fifth permit pending.
During
the year ended December 31, 2021, the Company spend a total of $
| 7. | TRADE PAYABLES AND ACCRUED LIABILITIES |
(All amounts in table are expressed in thousands of Canadian dollars)
SUMMARY OF TRADE PAYABLES AND ACCRUED LIABILITIES
| | December 31, 2021 | December 31, 2020 | ||||||
| Trade payables | ||||||||
| Amounts due to related parties (Note 10) | ||||||||
| Accrued liabilities | ||||||||
| Trade payables and accrued liabilities | ||||||||
| 22 | North American Nickel / YEAR END 2021 |
Notes to the Consolidated Financial Statements
For the year ended December 31, 2021
(Expressed in Canadian dollars)
The authorized capital of the Company comprises an unlimited number of common shares without par value and Series 1 convertible preferred shares without par value.
| a) | Common shares issued and outstanding |
2021
During
the year ended December 31, 2021, the Company issued common shares on exercise of warrants and options
and received $in proceeds from the exercise of
As at December 31, 2021, the Company has common shares issued and outstanding, (December 31, 2020 – ).
On
April 20, 2021 the Company closed a non-brokered private placement consisting of an aggregate of
In
connection with the private placement,
The
Company allocated a $
2020
On
August 13, 2020, the Company closed the first tranche of its non-brokered private placement equity financing consisting of
In connection with the non-brokered private financing, the Company incurred total share issuance costs of $. The Company issued an aggregate of common share purchase warrants. Each warrant will entitle the holder to acquire one common share of the Company at an exercise price of $0.09 for a period of 24 months from its date of issuance.
The
Company allocated a $
2019
On
October 24, 2019 the TSXV approved the filing of the earn in agreement for the Loveland Nickel Property. As a result, on December 9,
2019, the Company issued common shares at fair value of $
On
December 18, 2019, the Company closed a non-brokered private placement equity financing of
On
issuance, the Company bifurcated the flow-through shares into i) a flow-through share premium of $ that investors paid for the
flow-through feature, which is recognized as a liability and; ii) share capital of $
| 23 | North American Nickel / YEAR END 2021 |
Notes to the Consolidated Financial Statements
For the year ended December 31, 2021
(Expressed in Canadian dollars)
| b) | Preferred shares issued and outstanding |
As at December 31, 2021, December 31, 2020 and December 31, 2019 there are series 1 preferred shares outstanding.
The rights and restrictions of the preferred shares are as follows:
| i) | dividends shall be paid at the discretion of the directors; | |
| ii) | the holders of the preferred shares are not entitled to vote except at meetings of the holders of the preferred shares, where they are entitled to one vote for each preferred share held; | |
| iii) | the shares are convertible at any time after 6 months from the date of issuance, upon the holder serving the Company with 10 days written notice; and | |
| iv) | the
number of the common shares to be received on conversion of the preferred shares is to be
determined by dividing the conversion value of the share, $1 per share, by $ |
| c) | Warrants |
A summary of common share purchase warrants activity during the years ended December 31, 2021, December 31, 2020 and December 31, 2019 is as follows:
SCHEDULE OF NUMBER AND WEIGHTED AVERAGE EXERCISE PRICES OF WARRANTS
| December 31, 2021 | December 31, 2020 | December 31, 2019 | ||||||||||||||||||||||
| Number Outstanding | Weighted Average Exercise Price ($) | Number Outstanding | Weighted Average Exercise Price ($) |
Number Outstanding | Weighted Average Exercise Price ($) | |||||||||||||||||||
| Outstanding, beginning of year | ||||||||||||||||||||||||
| Issued | ||||||||||||||||||||||||
| Exercised | ( | ) | ||||||||||||||||||||||
| Cancelled / expired | ( | ) | ( | ) | ( |
) | ||||||||||||||||||
| Outstanding, end of year | ||||||||||||||||||||||||
| 24 | North American Nickel / YEAR END 2021 |
Notes to the Consolidated Financial Statements
For the year ended December 31, 2021
(Expressed in Canadian dollars)
At December 31, 2021, the Company had outstanding common share purchase warrants exercisable to acquire common shares of the Company as follows:
SCHEDULE OF NUMBER AND WEIGHTED AVERAGE REMAINING CONTRACTUAL LIFE OF OUTSTANDING WARRANTS
| Warrants Outstanding | Expiry Date | Exercise Price ($) | Weighted Average remaining contractual life (years) | |||||||||
| 1 | August 13, 2022 | |||||||||||
| 1 | August 31, 2022 | |||||||||||
| April 16, 2023 | ||||||||||||
| 1 |
The average share price at the dates the finders’ warrants were exercised was $.
| d) | Stock options |
The
Company adopted a Stock Option Plan (the “Plan”), providing the authority to grant options to directors, officers, employees
and consultants enabling them to acquire up to
SCHEDULE OF NUMBER AND WEIGHTED AVERAGE EXERCISE PRICES OF SHARE OPTIONS
| December 31, 2021 | December 31, 2020 | December 31, 2019 | ||||||||||||||||||||||
| Number Outstanding | Weighted Average Exercise Price ($) | Number Outstanding | Weighted Average Exercise Price ($) | Number Outstanding | Weighted Average Exercise Price ($) | |||||||||||||||||||
| Outstanding, beginning of year | ||||||||||||||||||||||||
| Issued | ||||||||||||||||||||||||
| Exercised | ( | ) | ||||||||||||||||||||||
| Cancelled / expired | ( | ) | ( | ) | ( |
) | ||||||||||||||||||
| Outstanding, end of year | ||||||||||||||||||||||||
During the year ended December 31, 2021, the Company granted an aggregate total of stock options to employees, directors and consultants with a maximum term of years. All options vest immediately and are exercisable as to options at $per share and options at $per share. The Company calculates the fair value of all stock options using the Black-Scholes Option Pricing Model. The fair value of options granted during the year ended December 31, 2021 amounted to $and was recorded as a share-based payment expense. The weighted average fair value of options granted during the year ended December 31, 2021 is $ per option.
During the year ended December 31, 2020, the Company granted an aggregate total of stock options to employees, directors and consultants with a maximum term of years. All options vest immediately and are exercisable as to options at $ per share and options at $ per share. The Company calculates the fair value of all stock options using the Black-Scholes Option Pricing Model. The fair value of options granted during the year ended December 31, 2020 amounted to $ and was recorded as a share-based payment expense.
There were incentive stock options granted during the year ended December 31, 2019.
| 25 | North American Nickel / YEAR END 2021 |
Notes to the Consolidated Financial Statements
For the year ended December 31, 2021
(Expressed in Canadian dollars)
SCHEDULE OF INPUTS TO OPTION PRICING MODEL
| December 31, 2021 | December 31, 2020 | December 31, 2019 |
||||||||||
| Expected dividend yield | % | % | - | |||||||||
| Expected share price volatility | % - | % | % - | % | ||||||||
| Risk free interest rate | % - | % | % - | % | ||||||||
| Expected life of options | ||||||||||||
SCHEDULE OF NUMBER AND WEIGHTED AVERAGE REMAINING CONTRACTUAL LIFE OF OUTSTANDING SHARE OPTIONS
Options Outstanding | Options Exercisable | Expiry Date | Exercise Price ($) | Weighted average remaining contractual life (years) | ||||||||||||
| February 21, 2022* | ||||||||||||||||
| February 28, 2023 | ||||||||||||||||
| February 24, 2025 | ||||||||||||||||
| August 19, 2025 | ||||||||||||||||
| February 25, 2026 | ||||||||||||||||
| October 25, 2026 | ||||||||||||||||
| * |
The average share price at the dates the options were exercised was $.
| e) | Reserve |
The
reserve records items recognized as stock-based compensation expense and other share-based payments until such time that the stock
options or warrants are exercised, at which time the corresponding amount will be transferred to share capital. Amounts recorded for
forfeited or expired unexercised options and warrants are transferred to deficit. During the year ended December 31, 2021, the
Company transferred $
During the year ended December 31, 2021, the Company recorded $(December 31, 2020 - $) of share-based payments to reserves. There were share-based payments during the year ended December 31, 2019.
9. INVESTMENT IN PREMIUM NICKEL RESOURCES INC.
On September 30, 2019, the Company entered into a Memorandum of Understanding (“MOU”) with Premium Nickel. Pursuant to the MOU, the Company and Premium Nickel set forth their interests in negotiating and acquiring several of the assets of BCL Limited, a private company with operations in Botswana that is currently in liquidation.
Concurrent
with the MOU, the Company initially subscribed for common shares of Premium Nickel at $,
for a total investment of $.
The Company’s initial investment included a provision that gives the Company the right to nominate two directors to the board of
directors of Premium Nickel. .
At December 31, 2019, the Company’s investment was recorded as an advance, as the Company had not yet been issued the common
share certificates nor the Warrant. The initial common share certificate and Warrant were issued during the year ended December 31,
2020.
To
December 31, 2020, the Company subscribed for an additional common shares of Premium Nickel, for a further
investment of $.
The common shares underlying the investment are restricted (“Restricted”) from being traded before such date that is 4 months
after the later of (a) the date of issuance and (b) the date at which Premium Nickel becomes a reporting issuer in any province or territory.
As of December 31, 2020, the underlying common shares are Restricted. During year ended December 31, 2021, the Company invested
additional $and as of December 31, 2021, the Company
held a
| 26 | North American Nickel / YEAR END 2021 |
Notes to the Consolidated Financial Statements
For the year ended December 31, 2021
(Expressed in Canadian dollars)
As of December 31, 2021, the Company was providing the corporate management and technical expertise to Premium Nickel on a contractual basis, had two directors representing the Company on the Board, who were actively participating in the day-to-day activities of Premium Nickel and actively contributing to Premium Nickel’s financial and operational strategies. Accordingly, the Company determined that it has significant influence in Premium Nickel and has used equity accounting for the investment. Premium Nickel’s financial information at December 31, 2021 was net assets of $which was comprised primarily of cash, and a total comprehensive loss of $was recorded for the year ended December 31, 2021.
Details of the Company’s investment at December 31, 2021 is as follows:
SCHEDULE OF INVESTMENT
| Investment | ||||
| Balance, December 31, 2020 | ||||
| Reallocation of advance | ||||
| Investment | ||||
| Share of loss of Premium Nickel | ( | ) | ||
| Total | ||||
On
January 1, 2020, the Company entered into a Management and Technical Services Agreement (“the Services Agreement”) with Premium
Nickel whereby the Company will provide certain technical, corporate, administrative and clerical, office and other services to Premium
Nickel during the development stage of the contemplated arrangement.
If Premium Nickel defaults on making payments, the outstanding
balance shall be treated as a loan to Premium Nickel, to be evidenced by a promissory note. The promissory note will be payable upon
demand and bear interest at a rate equal to the then current lending rate plus 1%, calculated from the date of default. Subsequent payment
by Premium Nickel will be first applied to accrued interest and then principle of the invoice. During the year ended December 31, 2021,
pursuant to the Services Agreement, the Company charged Premium Nickel $(December 31, 2020 - $)
for services and charged, $(December 31, 2020 - $)
in administrative fees, received $(December 31, 2020 – $)
and recorded $in due from Premium Nickel (December 31, 2020
- $).
Subsequent to December 31, 2021, the Company received the $
10. RELATED PARTY TRANSACTIONS
The following amounts due to related parties are included in trade payables and accrued liabilities (Note 7):
(All amounts in table are expressed in thousands of Canadian dollars)
SCHEDULE OF AMOUNTS DUE TO RELATED PARTIES, INCLUDED IN TRADE PAYABLES AND ACCRUED LIABILITIES
December 31, 2021 | December 31, 2020 | |||||||
| Directors and officers of the Company | ||||||||
| Related company | ||||||||
| Total | ||||||||
These amounts are unsecured, non-interest bearing and have no fixed terms of repayment.
| 27 | North American Nickel / YEAR END 2021 |
Notes to the Consolidated Financial Statements
For the year ended December 31, 2021
(Expressed in Canadian dollars)
The following amount due from related party and advance represent as well as the investment in Premium Nickel a private company incorporated in Ontario, in which certain directors and officers of the Company also hold offices and minority investments.
(All amounts in table are expressed in thousands of Canadian dollars)
December 31, 2021 | December 31, 2020 | |||||||
| Due from related party | ||||||||
| Advance | - | |||||||
| Investment | ||||||||
| Total | ||||||||
| (a) | Related party transactions |
2021
Sentient Executive GP IV Limited (“Sentient”) and Contemporary Amperex Technology Limited (“CATL”) have historically subscribed to private placements of the Company.
As
of December 31, 2021, Sentient beneficially owns common shares, constituting approximately
As
of December 31, 2021, CATL beneficially owns common shares, constituting approximately
2020
Sentient Executive GP IV Limited (“Sentient”) and Contemporary Amperex Technology Limited (“CATL”) have historically subscribed to private placements of the Company.
As
of December 31, 2020, Sentient beneficially owns common shares, constituting approximately
As
of December 31, 2020, CATL beneficially owns common shares, constituting approximately
During
the year ended December 31, 2020, the Company recorded $
2019
As
of December 31, 2019, Sentient beneficially owns common shares, constituting approximately
On
December 18, 2019, CATL subscribed for a total of units under a bought deal private placement financing transaction described
in Note 9 for a total net proceeds of $
During
the year ended December 31, 2019, the Company recorded $
| 28 | North American Nickel / YEAR END 2021 |
Notes to the Consolidated Financial Statements
For the year ended December 31, 2021
(Expressed in Canadian dollars)
| (b) | Key management personnel are defined as members of the Board of Directors and senior officers. |
Key management compensation was:
(All amounts in table are expressed in thousands of Canadian dollars)
SCHEDULE OF KEY MANAGEMENT COMPENSATION
| December 31, 2021 | December 31, 2020 | December 31, 2019 | ||||||||||
| Geological consulting fees – expensed | - | |||||||||||
| Management fees – expensed | ||||||||||||
| Salaries - expensed | - | |||||||||||
| Share-based payments | - | |||||||||||
| Total | ||||||||||||
11. SUPPLEMENTAL CASH FLOW INFORMATION
Changes in working capital for the year ended December 31, 2021 and 2020 are as follows:
(All amounts in table are expressed in thousands of Canadian dollars)
SCHEDULE OF CHANGES IN WORKING CAPITAL
| December 31, 2021 | December 31, 2020 | December 31, 2019 | ||||||||||
| (Increase) decrease in due from related party | ( | ) | ( | ) | ||||||||
| (Increase) decrease in prepaid expenses | ( | ) | ||||||||||
| (Decrease) increase in trade payables and accrued liabilities | ( | ) | ( |
) | ||||||||
| Total changes in working capital | ( | ) | ( |
) | ||||||||
During the year ended December 31, 2021, the Company:
| i) | transferred
$ | |
| ii) | recorded
$ | |
| iii) | recorded
$ | |
| iv) | reclassed
$ |
During the year ended December 31, 2020, the Company:
| v) | transferred
$ | |
| vi) | recorded
$ | |
| vii) | recorded
$ | |
| viii) | reclassed
$ | |
| ix) | offset
$ | |
| x) | offset
$ |
During the year ended December 31, 2019, the Company:
| i) | transferred
$ | |
| ii) | recorded
$ | |
| iii) | paid
$ | |
| iv) | recorded $ of flow-through share premium liability. |
12. COMMITMENTS AND CONTINGENCIES
The Company has certain commitments to meet the minimum expenditures requirements on its exploration and evaluation assets. Further, the Company has a site restoration obligation with respect to its Greenland exploration and evaluation asset.
Effective July 1, 2014, the Company had changes to management and entered into the following agreements for services with directors of the Company and a company in which a director has an interest:
| i) | Directors’
fees: $ | |
| ii) | Management
fees: $ |
Effectively on June 1, 2018, the Company changed the terms with Keith Morrison, the CEO, from direct employment to contracted consultant and entered into a service agreement with his company.
| 29 | North American Nickel / YEAR END 2021 |
Notes to the Consolidated Financial Statements
For the year ended December 31, 2021
(Expressed in Canadian dollars)
Each
of the agreements shall be continuous and may only be terminated by mutual agreement of the parties, subject to the provisions that in
the event there is a change of effective control of the Company, the party shall have the right to terminate the agreement, within
13. RISK MANAGEMENT
The Company’s exposure to market risk includes, but is not limited to, the following risks:
Interest Rate Risk
Interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company is not subject to significant changes in interest rate.
Foreign Currency Exchange Rate Risk
Currency risk is risk that the fair value of future cash flows will fluctuate because of changes in foreign currency exchange rates. In addition, the value of cash and other financial assets and liabilities denominated in foreign currencies can fluctuate with changes in currency exchange rates.
The
Company operates in Canada and Greenland and undertakes transactions denominated in foreign currencies such as United States dollar,
Euros and Danish Krones, and consequently is exposed to exchange rate risks. Exchange risks are managed by matching levels of foreign
currency balances and related obligations and by maintaining operating cash accounts in non-Canadian dollar currencies. The rate published
by the Bank of Canada at the close of business on December 31, 2021 was
Credit Risk
Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. The credit risk is primarily associated with liquid financial assets. The Company limits exposure to credit risk on liquid financial assets by holding cash at highly-rated financial institutions. The credit risk associated with due from related party is low as it’s solely due from Premium Nickel and the outstanding amount was always settled within 30 days upon invoicing.
Price Risk
The Company is exposed to price risk with respect to commodity prices. Commodity price risk is defined as the potential adverse impact on earnings and economic value due to commodity price movements and volatilities. To mitigate price risk, the Company closely monitors commodity prices of precious metals and the stock market to determine the appropriate course of action to be taken by the Company.
Liquidity Risk
Liquidity risk is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities that are settled by delivering cash or another financial asset. The Company manages the liquidity risk inherent in these financial obligations by regularly monitoring actual cash flows to annual budget which forecast cash needs and expected cash availability to meet future obligations.
The Company will defer discretionary expenditures, as required, in order to manage and conserve cash required for current liabilities.
| 30 | North American Nickel / YEAR END 2021 |
Notes to the Consolidated Financial Statements
For the year ended December 31, 2021
(Expressed in Canadian dollars)
The following table shows the Company’s contractual obligations as at December 31, 2021:
(All amounts in table are expressed in thousands of Canadian dollars)
SCHEDULE OF CONTRACTUAL OBLIGATIONS
| As at December 31, 2021 | Less than 1 year | 1 - 2 years | 2 - 5 years | Total | ||||||||||||
| Trade payables and accrued liabilities | ||||||||||||||||
Capital Risk Management
The Company manages its capital to ensure that it will be able to continue as a going concern, so that adequate funds are available or are scheduled to be raised to carry out the Company’s exploration program and to meet its ongoing administrative and operating costs and obligations. This is achieved by the Board of Directors’ review and ultimate approval of budgets that are achievable within existing resources, and the timely matching and release of the next stage of expenditures with the resources made available from capital raisings and debt funding from related or other parties. In doing so, the Company may issue new shares, restructure or issue new debt.
The Company is not subject to any externally imposed capital requirements imposed by a regulator or a lending institution.
In the management of capital, the Company includes the components of equity, loans and borrowings, other current liabilities, net of cash.
(All amounts in table are expressed in thousands of Canadian dollars)
SCHEDULE OF COMPONENTS OF EQUITY, LOANS AND BORROWINGS, AND OTHER CURRENT LIABILITIES
| 2021 | 2020 | 2019 | ||||||||||
| As at December 31, | ||||||||||||
| 2021 | 2020 | 2019 | ||||||||||
| Equity | ||||||||||||
| Current liabilities | ||||||||||||
| Total liabilities and equity | ||||||||||||
| Cash | ( | ) | ( |
) | ( | ) | ||||||
| Equity and liabilities, net of cash | ||||||||||||
| 14. | FINANCIAL INSTRUMENTS |
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy establishes three levels to classify the inputs to valuation techniques used to measure the fair value.
The three levels of the fair value hierarchy are:
Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities
Level 2 – Inputs other than quoted prices that are observable either directly or indirectly
Level 3 – Inputs that are not based on observable market data
Cash is measured using level 1.
| 31 | North American Nickel / YEAR END 2021 |
Notes to the Consolidated Financial Statements
For the year ended December 31, 2021
(Expressed in Canadian dollars)
| 15. | SEGMENTED INFORMATION |
The
Company operates in
(All amounts in table are expressed in thousands of Canadian dollars)
SCHEDULE OF GEOGRAPHIC SEGMENTS
December 31, 2021 | December 31, 2020 | |||||||
| Equipment | ||||||||
| Canada | ||||||||
| Greenland | ||||||||
| Total | ||||||||
December 31, 2021 | December 31, 2020 | |||||||
| Exploration and evaluation assets | ||||||||
| Canada | ||||||||
| Greenland | ||||||||
| Total | ||||||||
| 16. | INCOME TAXES |
A reconciliation of the expected income tax recovery to the actual income tax recovery is as follows:
(All amounts in tables are expressed in thousands of Canadian dollars)
SCHEDULE OF RECONCILIATION OF EXPECTED INCOME TAX RECOVERY TO ACTUAL INCOME TAX RECOVERY
Year ended December 31, 2021 | Year ended December 31, 2020 | |||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Statutory tax rate | % | % | ||||||
| Expected income tax recovery at the statutory tax rate | ( | ) | ( | ) | ||||
| Permanent differences and other | ||||||||
| Change in valuation allowance | ||||||||
| Net deferred income tax recovery | $ | $ | ||||||
The significant components of the Company’s deferred income tax assets and liabilities are as follows:
SCHEDULE OF SIGNIFICANT COMPONENTS OF DEFERRED INCOME TAX ASSETS AND LIABILITIES
Year ended December 31, 2021 | Year ended December 31, 2020 | |||||||
| Exploration and evaluation assets | $ | $ | ||||||
| Loss carry-forwards | ||||||||
| Share issuance costs | ||||||||
| Cumulative eligible capital | ||||||||
| Investment | ||||||||
| Equipment | ||||||||
| Valuation allowance | ( | ) | ( | ) | ||||
| Net deferred tax asset | $ | $ | ||||||
| 32 | North American Nickel / YEAR END 2021 |
Notes to the Consolidated Financial Statements
For the year ended December 31, 2021
(Expressed in Canadian dollars)
The tax pools relating to these deductible temporary differences expire as follows:
SCHEDULE OF TAX POOLS RELATING TO DEDUCTIBLE TEMPORARY DIFFERENCES AND THEIR EXPIRATIONS
| Canadian non-capital losses | Canadian net-capital losses | Canadian resource pools | Canadian share issue costs | |||||||||||||
| 2022 | $ | $ | $ | $ | ||||||||||||
| 2023 | ||||||||||||||||
| 2024 | ||||||||||||||||
| 2030 | ||||||||||||||||
| 2031 | ||||||||||||||||
| 2032 | ||||||||||||||||
| 2033 | ||||||||||||||||
| 2034 | ||||||||||||||||
| 2035 | ||||||||||||||||
| 2036 | ||||||||||||||||
| 2037 | ||||||||||||||||
| 2038 | ||||||||||||||||
| 2039 | ||||||||||||||||
| 2040 | ||||||||||||||||
| 2041 | ||||||||||||||||
| No expiry | ||||||||||||||||
| $ | $ | $ | ||||||||||||||
| 17. | GENERAL AND ADMINISTRATIVE EXPENSES |
Details of the general and administrative expenses by nature are presented in the following table:
(All amounts in table are expressed in thousands of Canadian dollars)
SCHEDULE OF GENERAL AND ADMINISTRATIVE EXPENSES
| December 31, 2021 | December 31, 2020 | December 31, 2019 | ||||||||||
| Consulting fees | ||||||||||||
| Filing fees | ||||||||||||
| General office expenses | ||||||||||||
| Investor relations | ||||||||||||
| Management fees | ||||||||||||
| Professional fees | ||||||||||||
| Salaries and benefits | - | |||||||||||
| Total | ||||||||||||
| 18. | SUBSEQUENT EVENTS |
| a) | On February 17, 2022, the Company announced that it has executed a non-binding letter of intent (“Non-Binding LOI”) providing for a business combination of Premium Nickel and the Company, (“Merger”), which would be implemented by way of a “Reverse Takeover” (under the policies of the TSX Venture Exchange (the “Exchange”)) of NAN by PNR. Under the policies of the TSXV, Premium Nickel is a “Non-Arm’s Length Party” of the Company. The Non-Binding LOI will form the basis upon which Premium Nickel and the Company will negotiate one or more definitive agreements governing the proposed Merger. It is currently anticipated that the Merger will be completed by way of a triangular amalgamation involving Premium Nickel, NAN and a wholly-owned subsidiary of the Company to be formed; provided, however that the definitive structure of the Merger will be determined based on further tax and structuring advice to be received prior to the execution of definitive agreements governing the proposed Merger. The Company is the Issuer” after the closing of the Merger. |
| 33 | North American Nickel / YEAR END 2021 |
Notes to the Consolidated Financial Statements
For the year ended December 31, 2021
(Expressed in Canadian dollars)
Proposed Transaction Terms
The
Company currently owns approximately
In connection with the proposed Merger, and subject to any required shareholder and regulatory approvals, the Company is expected to seek the requisite shareholder and regulatory approvals to change the name and stock ticker symbol of the Resulting Issuer as part of the Merger to such name and ticker symbol as may be requested by Premium Nickel, acting reasonably, consolidate the common shares of the Resulting Issuer (the “Consolidation”) and reconstitute the board of directors of the Resulting Issuer. The Non-Binding LOI provides for an exclusivity period ending at 11:59 p.m. (Toronto time) on April 2, 2022, which has been extended to April 29 by mutual written consent of the parties, to allow parties to complete their due diligence and negotiate definitive agreements for the proposed Merger.
| b) | On March 3, 2022, the Company entered into a promissory note
loan agreement with Premium Nickel, whereby Premium Nickel borrowed US $ |
| c) | On April 2, 2022, the
Company entered into an agreement with Paradigm Capital Inc. (the “Agent”) to act as lead agent and sole bookrunner, on
behalf of a syndicate, on a “best efforts” basis, for a private placement offering of subscription receipts of the
Company (the “Subscription Receipts”) for gross proceeds of $ |
Each Subscription Receipt shall be deemed to be automatically exercised, without payment of any additional consideration and without further action on the part of the holder thereof, into a Resulting Issuer Share. on a one-for one basis, upon satisfaction of the Escrow Release Conditions (as defined below), subject to adjustment in certain events.
“Escrow Release Conditions” shall mean each of the following conditions, which conditions may be waived in whole or in part jointly by the Company and the Lead Agent:
| i) | receipt of all required corporate, shareholder, regulatory and third-party approvals, if any, required in connection with the Offering and the Merger Transaction; | |
| ii) | the completion, satisfaction or waiver of all conditions precedent, undertakings, and other matters to be satisfied, completed and otherwise met or prior to the completion of the Merger Transaction (other than delivery of standard closing documentation) have been satisfied or waived in accordance with the definitive agreement relating to the Merger Transaction, to the satisfaction of the Agents acting reasonably (other than the release of the Escrowed Funds); | |
| iii) | written confirmation to the Agents from each of the Company and PNR that all conditions of the Merger Transaction have been satisfied or waived, other than release of the Escrowed Funds, and that the Merger Transaction shall be completed without undue delay upon release of the Escrowed Funds; | |
| iv) | the common shares of the Resulting Issuer being conditionally approved for listing on the TSXV; and | |
| v) | the Company and the Agents having delivered a joint notice and direction to the Escrow Agent, confirming that the conditions set forth in i) to iv) above have been met or waived. |
The Offering is expected to close on or about April 28, 2022 (the “Closing Date”), or such other date as the Lead Agent and the Company may mutually agree. on the Closing Date, the proceeds of the Offering will be held in escrow pending the earlier of (i) the satisfaction of the Escrow Release Conditions and (ii) the occurrence of a termination event, of which can be terminated by the Company any time after 120 days following the agreement entered with the Agent or by the Agent upon written notification immediately.
| 34 | North American Nickel / YEAR END 2021 |