UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F

Commission file number: 000-14740

Securities registered or to be registered pursuant to Section 12(b) of the Act.

Securities registered or to be registered pursuant to Section 12(g) of the Act. Common Shares

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:

116,534,474 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, as defined in Rule 405 of the Securities Act.

☐ Yes ☒ No

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 ☒ No

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.

☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

☒ Yes ☐ No

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.

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 whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive based received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

If “Other” has been checked in response to the previous question, 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 ☒ No

Unless otherwise indicated, all references herein are expressed in Canadian dollars and United States currency is stated as “US$”.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS 

This annual report on Form 20-F (“Annual Report”) of Premium Nickel Resources Ltd. (“PNRL” or the “Company”)contains forward-looking statements, meaning statements that reflect the Company’s current expectations and views of future events and future financial performance. These forward-looking statements are made under the applicable safe-harbor provisions of United States and Canadian securities laws. In some cases, you can identify forward-looking statements by terminology such as “estimate”, “project”, “believe”, “anticipate”, “intend”, “expect”, “plan”, “predict”, “may”, “should”, “potential”, or “continue”, the negative thereof or other variations thereon or comparable terminology. These forward-looking statements include, but are not limited to, statements about: anticipated assay results; the ability of exploration results (including drilling) to accurately predict mineralization; the significance of exploration (including drilling) results; the objectives of the first phase of drilling; the ability of the Company to prepare a PEA on its Selebi mine in Botswana; the ability of the Company to transition to underground resource drilling at the Selebi mine; the ability of assay results to indicate mine horizons and mineralization, at all, including beyond the limits of legacy production; the ability of the Company to use exploration drifts; the ability of the Company to verify historic data; the potential for establishing a mineral resource estimate on the Selebi deposit at depth; the Company’s ability to re-characterize the historic work on the Selebi mine; the potential for continuity and significant mineralization expansion of the Selebi mine; the potential of the Selebi mine, in general, including related infrastructure; the veracity of previously unsampled core; the Company’s ability to identify additional mineral resources; and the business and prospects of the Company.

Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. There can be no assurance that the forward-looking statements will prove to be accurate as actual results and future events could differ materially from those anticipated in such statements.

Known and unknown risks, uncertainties and other factors include, but are not limited to, those discussed under “Risk Factors” in this Annual Report, other reports the Company files with the U.S. Securities and Exchange Commission and Canadian securities regulators, and the following: the Company largely relies on financing to maintain and continue operations; the Company is dependent on the business and technical expertise of its management team; and the Company relies on one mineral project for the majority of its potential future revenues.

Table of Contents:

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

A. Not applicable.

B. Not applicable.

C. The name of the Company’s auditor is MNP LLP for the year ending December 31, 2022. MNP LLP, an accounting firm registered with the Canadian Public Accountability Board, became the Company’s auditors on December 5, 2022. MNP LLP’s address is Suite 800, 1600 Carling Avenue, Ottawa, Ontario K1Z 1G3. From January 1, 2020 to August 31, 2022, the Company’s auditors were Dale Matheson Carr-Hilton Labonte LLP. Their address is 1500 – 1140 West Pender St., Vancouver, BC V6E 4G1.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3. KEY INFORMATION

A. [Reserved]

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 risks and uncertainties set out below are not the only ones the Company is facing. There are additional risks and uncertainties that the Company does not currently know about or that the Company currently considers immaterial which may also impair the Company’s business operations and cause the price of the common share’s, without par value of the Company (the “Common Shares”) to decline. If any of the following risks actually occur, the Company’s business may be harmed and the Company’s financial condition and results of operations may suffer significantly. Additionally, investors should not interpret the disclosure of a risk to imply that the risk has not already materialized.

The Company largely relies on financing to maintain and continue operations

The Company’s ability to continue will largely be reliant on its continued attractiveness to equity investors and its ability to obtain additional financing to maintain and grow operations. Should the Company require additional capital to continue its operations, failure to raise such capital could result in the Company going out of business, which may result in investors losing all or a significant portion of their investment in the Company. There can be no assurance that additional capital or other types of financing will be available if needed or that, if available, the terms of such financing will be favourable to the Company.

From time to time, the Company may issue new shares, seek debt financing, dispose of assets, or enter into transactions to acquire assets or shares of other corporations. These transactions may be financed wholly or partially with debt, which may temporarily increase the Company’s debt levels above industry standards.

The Company is dependent on the business and technical expertise of its management team

The Company is dependent on the business and technical expertise of its management team. If the Company is unable to retain key members of its management team, if it is unable to rely on this business and technical expertise, or if any of the expertise is inadequately performed, the business, financial condition and results of the operations of the Company could be materially adversely affected until such time as the expertise could be replaced.

The Company depends on key personnel to operate its business effectively in the mineral mining industry

The Company’s success largely depends upon on the performance of the directors and officers and the Company’s continuing ability to attract and retain highly qualified personnel. The loss of the services of these persons, or the failure to attract highly qualified personnel in the future, may have a material adverse effect on the Company’s business and prospects. Moreover, the Company’s competitors may hire and gain access to the expertise of former employees, or former employees may compete with us. There is no assurance that the Company will be successful in attracting, integrating, motivating, and retaining key personnel or that former employees will not compete with the Company in the future. If the Company is unable to retain key personnel and attract additional qualified personnel as and when needed, the Company’s business may be adversely affected.

The market price of the Common Shares may be volatile

The price of the Common Shares may be affected by global macroeconomic developments and market perceptions of the attractiveness of particular industries and location of assets, which may increase the volatility of share prices. The price of the Common Shares will also be affected by the Company’s financial condition or results of operations as reflected in its liquidity position and earnings reports.

Other factors unrelated to the Company’s operations and performance that may have an affect on the price of the Common Shares include, but are not limited to:

As a result of any of these factors and others, the market price of the Company’s shares at any given point in time may not accurately reflect the Company’s long-term value. Securities class action litigation has been brought against companies following periods of volatility in the market price of their securities. The Company may in the future be the target of similar litigation, which could result in substantial costs and damages and divert management’s attention and resources.

The Company relies on one mineral project for the majority of its potential future revenues

The Company’s flagship Selebi mine in Botswana includes two shafts, the Selebi and Selebi North shafts (together, the “Selebi Mine”) and related infrastructure such as rail, power and roads (together with the Selebi Mine, the “Selebi Assets”). The Selebi Mine is the Company’s only material property and accounts for the majority of the Company’s potential for future generation of revenue. Any adverse development affecting the progress or exploration of the Selebi Mine, including but not limited to, unusual and unexpected geologic formulations, seismic activity, rock bursts, cave-ins, flooding and other conditions involved in the drilling and removal of material, any of which could result in damage to, or destruction of, mines and other producing facilities, damage to life or property, environmental damage, hiring suitable personnel and engineering contractors, or securing supply agreements on commercially suitable terms, may have a material adverse effect on the Company’s financial performance and results of operations.

The Company’s business and financial condition may be significantly impacted by volatility of commodity prices, and particularly volatility in the prices of nickel, copper and cobalt

The development of the Company’s material property, the Selebi Mine (and any of the Company’s portfolio of mineral projects) is dependent on the future prices of minerals and metals, particularly the prices of nickel, copper and cobalt, which are sold in an active global market and traded on commodity exchanges, such as the London Metals Exchange and the New York Mercantile Exchange. Should any of the Company’s properties eventually enter commercial production, the Company’s profitability will be significantly affected by changes in the market prices of minerals and metals.

Base and precious metals prices are subject to significant fluctuations, which can be material and occur over short periods of time and which are affected by numerous factors, all of which are beyond the Company’s control. Such factors include, but are not limited to, actual and expected macroeconomic and political conditions, interest and exchange rates, inflation or deflation, foreign exchange rate, levels of supply and demand, speculative trading, the costs of and levels of base and precious metals production, the availability and costs of substitutes, input costs, inventory levels, investments by commodity funds and other actions of participants in the commodity markets. The effect of these factors on the prices of base and precious metals, and therefore the economic viability of any of the Company’s exploration projects, cannot be accurately determined.

In particular, nickel, copper and cobalt prices have fluctuated widely, particularly in recent years, driven in part due to renewable energy and clean technology applications. Consequently, the economic viability of the Selebi Mine cannot be accurately predicted and may be adversely affected by fluctuations in commodity prices. Fluctuations in commodity prices and future price declines could cause the development of (and any future commercial production from) the Company’s properties to be impracticable or uneconomical.

As such, the Company may determine that it is not economically feasible to commence commercial production at some or all of its properties, which could have a material adverse impact on the Company’s financial condition and results of operations. In such a circumstance, the Company may also curtail or suspend some or all of its exploration and development activities.

The Company’s ownership rights and boundaries of its resource properties may be subject to loss or dispute

There is no assurance that the rights of ownership and other rights in concessions to be held by the Company are not subject to loss or dispute, particularly because such rights may be subject to prior unregistered agreements or transfers or other land claims and may be affected by defects and adverse laws and regulations which have not been identified by the Company. There is no guarantee that title to the properties will not be challenged or impugned. The Company’s property interest may be subject to prior unregistered agreements or transfers or native land claims and title may be affected by undetected defects.

All of the Company’s current mineral projects will be at their exploration stages, which involves significant risks, and there is no assurance that such projects will develop into economically viable operating mines

The Company’s projects are each in their exploration stage. The exploration of mineral deposits involves significant financial risks over a prolonged period of time, which may not be eliminated even through a combination of careful evaluation, experience and knowledge. Substantial expenses are required to establish mineral resources and mineral reserves through drilling, to develop metallurgical processes to extract metal from ore and to develop the mining and processing facilities and infrastructure at any site chosen for mining. No assurance can be given that minerals will be discovered in sufficient quantities to justify commercial operation or that the funds required for development can be obtained on a timely basis.

Development of the Company’s properties will occur only after obtaining satisfactory exploration results. Few properties that are explored are ultimately developed into economically viable operating mines. There is no assurance that the Company’s mineral exploration activities will result in the discovery of a body of commercial ore on its exploration properties. Several years may pass between the discovery and development of commercial mineable mineralized deposits.

Most exploration projects do not result in the discovery of commercially-mineralized deposits. The commercial viability of exploiting any precious or base-metal deposit is dependent on a number of factors including infrastructure, mineral markets and processing equipment, and governmental regulations, including those relating to environment, taxes, royalties, allowable production and import and export of minerals. Depending on the price of minerals produced, the Company may determine that it is impractical to commence or continue commercial production. No assurance can be given that minerals will be discovered of sufficient quality, size and grade on any of the Company’s properties to justify a commercial operation.

Exploration projects also face significant operational risks including but not limited to an inability to obtain access rights to properties, accidents, equipment breakdowns, labour disputes (including work stoppages and strikes), impact of health epidemics and other outbreaks of communicable diseases and other unanticipated interruptions.

The operation, development and exploration of the Company’s properties is subject to substantial governmental regulation, including environmental regulations, and any future adverse changes in such regulation may adversely impact the Company’s business and results of operations

Operations, development and exploration on the Company’s properties will be affected to varying degrees by: (i) government regulations relating to such matters as environmental protection, health, safety and labor; (ii) mining law reform; (iii) restrictions on production, price controls, and tax increases; (iv) maintenance of claims; (v) tenure; and (vi) expropriation of property. There is no assurance that future changes in such regulation, if any, will not adversely affect the Company’s operations. Changes in such regulation could result in additional expenses and capital expenditures, limitations on availability of capital, competition, reserve uncertainty, potential conflicts of interest, title risks, dilution, and restrictions and delays in operations, the extent of which cannot be predicted.

The Company is at the exploration stage on all of its properties. Exploration on the Company’s properties requires responsible best-exploration practices to comply with the Company’s policies, government regulations, and maintenance of claims and tenure.

If any of the Company’s projects advance to the development stage, those operations will also be subject to various laws concerning development, production, taxes, labour standards, environmental protection, mine safety and other matters. In addition, new laws governing operations and activities of mining companies could have a material adverse impact on any project in the mine development stage that the Company may possess.

Additionally, environmental legislation is evolving in a manner which requires stricter standards and enforcement, increased fines and penalties for non-compliance, more stringent environmental assessments of proposed properties and a heightened degree of responsibility for companies and their officers, directors and employees. There is no assurance that future changes in environmental regulations, if any, will not adversely affect the Company’s operations. The cost of compliance with changes in governmental regulations has the potential to preclude entirely the economic development of a property. The Company will adopt environmental practices designed to ensure that it will comply with or exceed all environmental regulations currently applicable to it. All of the Company’s activities will be in compliance in all material respects with applicable environmental legislation.

Changes in tax legislation or accounting rules could affect the profitability of the Company

Changes to, or differing interpretation of, taxation laws in Canada, Barbados, Botswana or any of the countries in which the Company’s assets or relevant contracting parties are located, could result in some or all of the Company’s profits being subject to additional taxation. No assurance can be given that new taxation rules or accounting policies will not be enacted or that existing rules will not be applied in a manner which could result in the Company’s profits being subject to additional taxation or which could otherwise have a material adverse effect on the Company’s profitability, results of operations, financial condition and the trading price of the Company’s securities. In addition, the introduction of new tax rules or accounting policies, or changes to, or differing interpretations of, or application of, existing tax rules or accounting policies, such as the International Financial Reporting Standards (“IFRS”), could make acquiring additional resource properties by the Company less attractive to counterparties. Such changes could adversely affect the Company’s ability to acquire new assets or make future investments.

The Company currently reports its financial results under IFRS, which differs in certain significant respects from U.S. GAAP

Currently, the Company reports its financial statements under IFRS. There have been and there may in the future be certain significant differences between IFRS and U.S. generally accepted accounting principles (“U.S. GAAP”), including differences related to revenue recognition, share-based compensation expense, income tax and earnings per share. As a result, the Company’s financial information and reported earnings for historical or future periods could be significantly different if they were prepared in accordance with U.S. GAAP. In addition, the Company does not intend to provide a reconciliation between IFRS and U.S. GAAP unless it is required under applicable law. As a result, you may not be able to meaningfully compare the Company’s financial statements under IFRS with those of companies that prepare financial statements under U.S. GAAP.

As a foreign private issuer, the Company is subject to different U.S. securities laws and rules than a U.S. domestic issuer, which may limit the information publicly available to U.S. investors

The Company is a “foreign private issuer”, under applicable U.S. federal securities laws, and is, therefore, not subject to the same requirements that are imposed upon U.S. domestic issuers by the SEC. Under the Securities Exchange Act of 1934, as amended (the “US Exchange Act”), the Company is subject to reporting obligations that, in certain respects, are less detailed and less frequent than those of U.S. domestic reporting companies. As a result, the Company does not file the same reports that a U.S. domestic issuer would file with the SEC, although the Company is required to file with or furnish to the SEC the continuous disclosure documents that it is required to file in Canada under Canadian securities laws. In addition, the Company’s officers, Directors, and principal shareholders are exempt from the reporting and short-swing profit recovery provisions of Section 16 of the U.S. Exchange Act. Therefore, the Company’s shareholders may not know on as timely a basis as with U.S. domestic issuers when the Company’s officers, Directors, and principal shareholders purchase or sell Common Shares, as the reporting periods under the corresponding Canadian insider reporting requirements are longer. As a foreign private issuer, the Company is exempt from the rules and regulations under the U.S. Exchange Act related to the furnishing and content of proxy statements. The Company is also exempt from Regulation FD, which prohibits issuers from making selective disclosures of material non-public information. While the Company complies with the corresponding requirements relating to proxy statements and disclosure of material non-public information under Canadian securities laws, these requirements differ from those under the U.S. Exchange Act and Regulation FD and shareholders should not expect to receive the same information at the same time as such information is provided by U.S. domestic companies. In addition, the Company may not be required under the U.S. Exchange Act to file annual and quarterly reports with the SEC as promptly as U.S. domestic companies whose securities are registered under the U.S. Exchange Act. In addition, as a foreign private issuer, the Company has the option to follow certain Canadian corporate governance practices, except to the extent that such laws would be contrary to U.S. securities laws, and provided that the Company discloses the requirements it is not following and describes the Canadian practices it follows instead. The Company has elected to follow home country practices in Canada with regard to certain corporate governance matters. As a result, the Company’s shareholders may not have the same protections afforded to shareholders of U.S. domestic companies that are subject to all corporate governance requirements.

Inability of the Company to realize the expected business synergies arising from the RTO

Achieving the benefits of the reverse takeover transaction (the “RTO”) completed on August 3, 2022 between former TSX Venture Exchange (the “TSXV”) listed company, North American Nickel Inc. (“NAN”) and private Canadian company Premium Nickel Resources Corporation (“PNRC”) depends in part on the ability of the Company to effectively capitalize on its scale, to realize the anticipated capital, as well as operating and financial synergies, to profitably sequence the growth prospects of its asset base and to maximize the potential of its improved growth opportunities and capital funding opportunities. A variety of factors, including those risk factors set forth in this Annual Report on Form 20-F may adversely affect the ability of the Company to achieve the anticipated benefits of the RTO.

The Company does not have established mineral resources or reserves

The Company is a junior resource company focused primarily in the exploration and subsequent development of the Selebi Mine located in Botswana. The Company’s properties have no established mineral resources or mineral reserves at this time. The historical South African Code for the Reporting of Exploration Results, Mineral Resources and Mineral Reserves compliant resource (the “Historic SAMREC Resource”) that was calculated for the Selebi Mine in 2016 is considered to be historical in nature has not been prepared in accordance with NI 43-101 and should not be relied upon as a current mineral resource estimate. While management believes that the Historic SAMREC Resource could be indicative of the presence of mineralization on the Selebi deposit, a qualified person has not completed sufficient work to classify the historical mineral estimate as a current mineral resource estimate and the Company is not treating the historical mineral estimates as current mineral resource estimate.

There is no assurance that any of the Company’s projects can be mined profitably. Accordingly, it is not assured that the Company will realize any profits in the short to medium term, if any at all. Any profitability in the future from the business of the Company will be dependent upon development and commercially mining an economic deposit minerals, which in itself is subject to numerous risk factors.

The exploration and development of mineral deposits involves a high degree of financial risk over a significant period of time that even a combination of management’s careful evaluation, experience and knowledge may not eliminate. Few properties that are explored are ultimately developed into producing mines. Major expenses may be required to establish resources and reserves by drilling and to construct mining and processing facilities at a particular site. It is impossible to ensure that current work programs of the Company will result in profitable commercial mining operations. The profitability of the Company’s operations will be, in part, directly related to the cost and success of its work programs, which may be affected by a number of factors, including, but not limited to market conditions, availability of funding, regularity environment, exploration success, geopolitical risk and availability of skilled labour. Substantial expenditures are required to establish mineral reserves that are sufficient to support commercial mining operations and there is no guarantee that such commercial mining operations will be profitable once established.

The Company is exposed to financial risk relating to its financial instruments and as a result of foreign currency exchange rate fluctuations

The Company is also exposed to risks relating to its financial instruments and foreign currency. It is anticipated that the Company will operate in Canada, Greenland and Botswana and undertake transactions denominated in foreign currencies such as United States dollars, Euros, Danish Krones and the Botswanan Pula, and consequently is exposed to exchange rate risks. The Company will also be exposed to equity price risk and the movements in individual equity prices or general movements in the level of the stock market may potentially have an adverse impact on the Company’s earnings. The Company closely monitors individual equity movements and the stock market to determine the appropriate course of action to be taken.

The Company is subject to additional risks by doing business outside of Canada

The Selebi Mine, which is the Company’s only material property, is located in Botswana. The Company’s operations outside North America could subject the Company to a variety of additional risks that may negatively impact its business and operations including any of the following: changes in rules and regulations (including required royalties); failure of local parties to honour contractual relations; delays in obtaining or the inability to obtain necessary governmental permits; opposition to mining from environmental or other non-governmental organizations; limitations on foreign ownership; limitations on the repatriation of earnings; economic or tax policies; tariffs and trade barriers; regulations related to customs and import/export matters; longer payment cycles; tax issues; currency fluctuations and exchange controls; rates of inflation; challenges in collecting accounts receivable; cultural and language differences; employment regulations; crimes, strikes, riots, civil disturbances, terrorist attacks and wars; and deterioration of political relations with Canada or other governments or sanctions imposed by Canada or other governments. There will also be currency exchange risks in connection with the operations of the Company’s foreign mineral assets, including the Selebi Mine.

In addition, Botswana is considered an emerging market. Emerging market investments generally pose a greater degree of risk than investments in more mature market economies because the economies in the developing world are more susceptible to destabilization resulting from domestic and international developments. Further, the current or a future government may adopt substantially different policies, take arbitrary action which might halt exploration or production, re-nationalize private assets or cancel contracts, or cancel mining or exploration rights, any of which could result in a material and adverse effect on the Company’s results of operations and financial condition.

The Company may face risks related to health epidemic and other outbreaks of communicable diseases

The Company may face risks related to health epidemics and other outbreaks of communicable diseases, which could significantly disrupt its operations and may materially and adversely affect its business and financial conditions. While the COVID-19 outbreak no longer remains a salient risk for the Company, COVID-19 has in the past led to a large number of temporary business closures, travel bans, self-imposed quarantine periods, and physical distancing, all of which have contributed to a general reduction in consumer activity and material disruptions to businesses globally resulting in an economic slowdown. Public health crises can result in volatility and disruptions in the supply and demand for Ni-Cu-Co and other metals and minerals, global supply chains and financial markets, as well as declining trade and market sentiment and reduced mobility of people, all of which could affect commodity prices, interest rates, credit ratings, credit risk, share prices and inflation, which could have an adverse effect on the demand for Ni-Cu-Co and the Company’s future prospects.

In addition, such health crises may be a threat to maintaining a skilled workforce in the mining industry in Botswana and could be a challenge to the Company’s operations. The Company could lose members of its workforce or see its workforce man-hours reduced or incur increased medical costs as a result of these health risks, which could have a material and adverse effect on the Company’s future cash flows, earnings, results of operations and financial condition.

There can be no assurance that the Company’s personnel will not be impacted by these pandemic diseases and ultimately see its workforce productivity reduced or incur increased medical costs / insurance premiums as a result of these health risks.

In addition, the re-emergence of COVID-19 could adversely affect global economies and financial markets resulting in an economic downturn that could have an adverse effect on the demand for precious metals and the Company’s future prospects.

Since certain of the Company’s officers and directors are located in Canada and outside the United States, it may be difficult to enforce any United States judgment for claims brought against such officers and directors

The Company is organized under the laws of the Province of Ontario, Canada and certain of the Company’s officers and directors are residents of Canada. While a cross border treaty exists between the United States and Canada relating to the enforcement of foreign judgments, the enforcement process is cumbersome and, in some cases, has prevented the enforcement of judgments. As a result, while actions may be brought in Canada, it may be impossible to affect service of process within the United States on the Company’s officers and directors or to enforce against these persons any judgments in civil and commercial matters, including judgments under United States federal securities laws. In addition, a Canadian court may not permit an original action in Canada or enforce in Canada a judgment of a United States court based on civil liability provisions of United States federal securities laws.

There is substantial doubt as to whether the Company will continue operations. If the Company discontinues operations, you could lose your investment.

The Company’s consolidated financial statements have been prepared on the going concern basis, which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business. However, as at December 31, 2022, the Company has not generated significant revenue or cash flow from operations since inception. As at December 31, 2022, the Company had a working capital deficiency of $6,024,026 and an accumulated deficit of $78,092,605. The Company anticipates that it will incur increased expenses and there is a risk that the Company will not realize sufficient revenues to offset those expenses. The Company’s ability to continue its operations is dependent on obtaining additional financing and generating future revenues, and no assurance can be given that the Company will successfully be able to do so. Accordingly, the Company’s consolidated financial statements contain disclosure regarding management’s substantial doubt about the Company’s ability to continue as a going concern. Importantly, the inclusion in the Company’s consolidated financial statements of a going concern reference may negatively impact the Company’s ability to raise future financing and achieve future revenue. The reference regarding the substantial doubt about The Company’s ability to continue as a going concern will be removed only when, in the opinion of management, revenues have reached a level that is able to sustain the Company’s business operations, or the Company has raised substantial additional funds through the Company’s financing efforts.

The Company may lose its foreign private issuer status in the future, which could result in significant additional costs and expenses to the Company

In order to maintain its status as a foreign private issuer, a majority of the Common Shares must be either directly or indirectly owned by non-residents of the U.S. unless the Company also satisfies one of the additional requirements necessary to preserve this status. The Company may in the future lose its foreign private issuer status if a majority of its Common Shares are held in the U.S. and if the Company fails to meet the additional requirements necessary to avoid loss of its foreign private issuer status. The regulatory and compliance costs under U.S. federal securities laws as a U.S. domestic issuer may be significantly more than the costs incurred as a Canadian foreign private issuer. If the Company is not a foreign private issuer, it would not be eligible to use the Multijurisdictional Disclosure System (“MJDS”) or other foreign issuer forms and would be required to file periodic and current reports and registration statements on U.S. domestic issuer forms with the SEC, which are more detailed and extensive than the forms available to a foreign private issuer, and would be required to file financial statements prepared in accordance with United States generally accepted accounting principles. In addition, the Company may lose the ability to rely upon exemptions from Nasdaq corporate governance requirements that are available to foreign private issuers.

The Company may not be able to raise funds in the future to continue its operations

While the Company may have been successful in raising funds in the past, there is no guarantee that future fundraising efforts will be successful or that the funds raised will be sufficient to meet the Company’s needs.

ITEM 4. INFORMATION ON THE COMPANY

A. History and development of the Company.

The Company, formerly NAN, resulted from the closing of the RTO whereby PNRC and 1000178269 Ontario Inc., a wholly-owned subsidiary of NAN, amalgamated by way of a triangular amalgamation under the Business Corporations Act (Ontario) (the “OBCA”) on August 3, 2022.

NAN was incorporated on September 23, 1983 under the name Widescope Resources Inc., and following a series of name changes ultimately changed its name to North American Nickel Inc. effective April 19, 2010. NAN’s principal business activity was the exploration of natural resource properties in Greenland, Canada and Morocco. Prior to the RTO, the common shares of NAN were listed and posted for trading on the TSXV under the symbol “NAN”. In connection with the RTO, the Company completed (i) a share consolidation of the Company’s issued and outstanding Common Shares, on the basis of one (1) post-consolidation Common Share for every five (5) pre-consolidation common shares issued and outstanding effective July 27, 2022, (ii) a continuation from under the Business Corporations Act (British Columbia) to under the OBCA and changed its name to “Premium Nickel Resources Ltd.” effective July 29, 2022, and (iii) changed its stock exchange ticker symbol from “NAN” to “PNRL” at the resumption of trading subsequent to the RTO.

Prior to the RTO, PNRC was a private corporation existing under the OBCA which seeks to evaluate, acquire, improve and reopen, assuming economic feasibility, a combination of certain assets of BCL Limited (“BCL”) and Tati Nickel Mining Company (“TNMC”) that were in liquidation in Botswana.

The Company’s source of funding was mainly equity financing. The Maniitsoq property in Greenland was owned by NAN prior to the RTO and the Company spent an aggregate of $63M on the project since 2012. Upon the closing of the RTO, The Company has switched its focus to development of its Botswana assets. During the year ended December 31, 2022, the Company incurred $28.7M on its Botswana assets.

The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at http://www.sec.gov. The Company’s website address is www.premiumnickelresources.ca. Nothing on the Company’s website and the information contained on, or that can be accessed through, such website shall be deemed to be incorporated by reference herein unless indicated otherwise, and is not considered part of, this Annual Report on Form 20-F.

B. Business overview

PNRL’s global strategy is to identify high quality nickel-copper-cobalt-platinum group elements (“Ni-Cu-Co-PGE”) projects and acquire opportunities that offer high prospectivity in mining friendly jurisdictions located in low-risk countries with supportive foreign investment and resource legislation as well as rule-of-law. The current portfolio includes global projects in Botswana, Greenland, Canada and Morocco, with the projects in Botswana being the Company’s significant assets.

Currently, the Company’s principal business activity is the exploration and development of its flagship asset, the Ni-Cu-Co sulphide Selebi Mine in Botswana and, separately, the Company’s Selkirk Ni-Cu-Co-PGE sulphide mine (the “Selkirk Mine”), also in Botswana.

Summary of Activities

The Selebi and Selkirk deposits are permitted with 10-year mining licenses and benefit from significant local infrastructure. PNRL concluded the 2022 exploration and drilling program at the Selebi Mine in January 2023. This initial drilling program was focused on an area at the western down dip edge of the Historic SAMREC Resource estimate. The primary objective of this first phase of surface drilling and borehole electromagnetics (“BHEM”) program at Selebi was to provide the Company with the relevant information to demonstrate that the mine horizons could be well mineralized beyond the limits of legacy production, and to support the transition to underground resource drilling at both the Selebi North and Selebi deposits.

The BHEM data acquired as of the date of this report demonstrates that there are multiple sizable anomalies detected on the northern extension of the Selebi Mine. Additionally, the results of the drilling, in conjunction with the BHEM program, have provided compelling evidence that the Selebi and Selebi North deposits are part of a large mineralized system, with multiple mineralized horizons present across the three kilometre area between the Selebi historical mine workings to the south and the Selebi North historic mine workings to the north.

The Company sees significant potential for expanding Historic SAMREC Resource. In 2023, PNRL is planning to undertake a combination of resource and continued exploration drilling at the Selebi Mine to demonstrate the size potential of the Selebi Mine mineral system and ultimately establish a maiden mineral resource estimate prepared in accordance with NI 43-101 as well as completing a preliminary economic assessment. The exploration drilling will be on-going, and the resource drilling at the Selebi Mine is expected to start underground from the Selebi North shaft. Upon completion of the underground development program at Selebi North, the Company will shift its development work three kilometres south to the Selebi area with the intention of utilizing a combination of surface and underground drilling methods.

Concurrently, PNRL will continue its work at the Selkirk Mine and its surrounding prospecting licenses, which is the Company’s second asset in Botswana, located approximately 75 kilometres north of the Selebi Mine. The focus of this work will be to understand the legacy work done by previous owners, which had advanced Selkirk to a bankable feasibility study for redevelopment as an open-pit mine. The Company plans to include drilling, geoscience, and metallurgical work to support a mineral resource estimate prepared under NI 43-101. Additionally, the Company is pursuing an alternative ore processing and tailings management strategy to those used in previous economic studies.

Disclosure regarding the Company’s mineral properties, including with respect to mineral reserve and mineral resource estimates included in this Annual Report, was prepared in accordance with NI 43-101. NI 43-101 is a rule developed by the Canadian Securities Administrators that establishes standards for all public disclosure an issuer makes of scientific and technical information concerning mineral projects. 

In accordance with NI 43-101, the terms “mineral reserve”, “proven mineral reserve” and “probable mineral reserve” are Canadian mining terms as defined in accordance with NI 43- 101 and the Canadian Institute of Mining, Metallurgy and Petroleum (“CIM”) - CIM Definition Standards on Mineral Resources and Mineral Reserves (the “CIM Definition Standards”), adopted by the CIM Council, as amended.

The SEC adopted amendments to its disclosure rules (the “SEC Modernization Rules”) to modernize the mineral property disclosure requirements for issuers whose securities are registered with the SEC under the U.S. Exchange Act, which are codified in Regulation S-K subpart 1300. Under the SEC Modernization Rules, the historical property disclosure requirements for mining registrants included in SEC Industry Guide 7 have been replaced. As a foreign private issuer under United States securities laws that files its Annual Report on Form 20-F with the SEC pursuant to the multi-jurisdictional disclosure system (“MJDS”), the Company is not required to provide disclosure on its mineral properties under the SEC Modernization Rules and will continue to provide disclosure under NI 43-101 and the CIM Definition Standards.

The SEC Modernization Rules include the adoption of terms describing mineral reserves and mineral resources that are substantially similar to the corresponding terms under the CIM Definition Standards. As a result of the adoption of the SEC Modernization Rules, the SEC now recognizes estimates of “measured mineral resources”, “indicated mineral resources” and “inferred mineral resources”. In addition, the SEC has amended its definitions of “proven mineral reserves” and “probable mineral reserves” to be substantially similar to the corresponding CIM Definition Standards.

Shareholders resident in the United States are cautioned that while terms are substantially similar to CIM Definition Standards, there are differences in the definitions and standards under the SEC Modernization Rules and the CIM Definition Standards. Accordingly, there is no assurance any mineral reserves or mineral resources that the Company may report as “proven reserves”, “probable reserves”, “measured mineral resources”, “indicated mineral resources” and “inferred mineral resources” under NI 43-101 will be the same as the reserve or resource estimates prepared under the standards adopted under the SEC Modernization Rules.

Shareholders resident in the United States are also cautioned that while the SEC now recognizes “measured mineral resources”, “indicated mineral resources” and “inferred mineral resources”, investors should not assume that any part or all of the mineralisation in these categories will ever be converted into a higher category of mineral resources or into mineral reserves. Mineralisation described using these terms has a greater amount of uncertainty as to their existence and feasibility than mineralisation that has been characterized as reserves. Accordingly, investors are cautioned not to assume that any “measured mineral resources”, “indicated mineral resources”, or “inferred mineral resources” on the Company’s projects are or will be economically or legally mineable.

Further, “inferred resources” have a greater amount of uncertainty as to their existence and as to whether they can be mined legally or economically. Therefore, shareholders resident in the United States are also cautioned not to assume that all or any part of the inferred resources exist. In accordance with Canadian rules, estimates of “inferred mineral resources” cannot form the basis of feasibility or other economic studies, except in limited circumstances where permitted under NI 43-101.

Accordingly, information contained in this Annual Report containing descriptions of mineral deposits may not be comparable to similar information made public by United States companies subject to the reporting and disclosure requirements under the United States federal securities laws and the rules and regulations thereunder. Shareholders resident in the United States are urged to consider closely the disclosure on technical terminology in this Annual Report.

Corporate Social Responsibility

PNRL is committed to conducting its business in a socially responsible and sustainable manner, with a focus on environmental stewardship, health and safety, community engagement, and ethical conduct. The Company has established policies and procedures to ensure compliance with applicable laws and regulations, as well as industry standards for responsible mining. PNRL recognizes the importance of stakeholder engagement and works closely with local communities, indigenous groups, and other stakeholders to ensure their concerns and perspectives are heard and addressed.

C. Organizational structure

The following corporate structure chart sets out details of the direct and indirect ownership of the principal subsidiaries of the Company.

Notes:

D. Property, plant and equipment.

Selebi Mine, Botswana

The Selebi Mine was acquired on January 31, 2022 through an asset purchase agreement with the liquidator of BCL. The Selebi Mine is comprised of a single mining license covering an area of 11,504 hectares located near the town of Selebi Phikwe, approximately 150 kilometres southeast of the city of Francistown, and 410 kilometres northeast of the national capital Gaborone. The Selebi Mine includes two shafts (Selebi and Selebi North with a total combined capacity of 5,100 tons per day)) as well as all related surface (rail, power and roads) and underground infrastructures. The Selebi deposit began production in 1980 and Selebi North began production in 1990. Mining terminated at both operations in 2016 due to a failure in the separate Phikwe smelter processing facility and was subsequently placed under liquidation in 2017.

At the time of liquidation, Historic SAMREC Resource compliant mineral resources within the Selebi Mine were reported as in-situ and depleted for mining as of December 31, 2016. These historical measured and indicated mineral resources used a nickel equivalent (NiEq)¹ cut-off grade of 0.4% and were estimated to total 17.83 Mt at grades of 0.87% Ni and 1.42% Cu containing 155, 000 tonnes (t) Ni and 253,000 t Cu. Historical inferred mineral resources were estimated to total 15.34 Mt at grades of 0.71% Ni and 0.89% Cu containing 109,000 t Ni and 136,000 t Cu. Nickel and copper prices used were US$8.00/lb Ni and US$3.00/lb Cu, respectively. This estimate, which has not been prepared in accordance with NI 43-101, is considered to be historical in nature and should not be relied upon. However, management believes that it could be indicative of the presence of mineralization on the Selebi Mine property. A qualified person has not completed sufficient work to classify the historical mineral estimate as a current mineral resource estimate and the Company is not treating the historical mineral estimates as a current mineral resource estimate. Readers are cautioned that mineral resources are not mineral reserves and do not have demonstrated economic viability. As of the date of this report, the Company considers the Selebi Mine as its only material property within the meaning of NI 43-101.

¹ The NiEq cut-off grade was based on a ratio of nickel and copper prices where NiEq = %Ni + (Cu price/Ni price)*%Cu.

Exploration and Development Activities

The Company initiated a drilling program in March 2022, with holes targeting the area down plunge of Selebi Mine workings. Concurrent with the drill program, data compilation and verification continued. The program of re-opening historic holes that began in October 2021 is ongoing and up to three drills have been cleaning historic holes to facilitate the collection of new gyro and BHEM geophysical data. Collars of drillholes have been located using a differential Global Positioning System (“DGPS”). An initial downhole program of televiewer and physical property logging has also been completed to support the creation of a structural model. Level plans were digitized, and after significant effort, the Company now has a 3D model of the Selebi and Selebi North underground infrastructure. The gathering of geological information to build a 3D model is ongoing. Information from handwritten drill logs was merged into the BCL drill hole database, and the historic core is being re-logged.

As of December 31, 2022, Mitchell Drilling completed a total of 14,627.36 metres. To date, a total of eight new holes and the extension of one historic hole have reached target depth and intersected mineralized amphibolite; assay results from 477 core samples in seven of these holes have been received from ALS Chemex laboratories in South Africa and results have been released. A total of 38 historic holes have been opened and surveyed with gyro. BHEM surveys have been completed in 44 new and historic holes. Collars of 241 historic holes have been located using DGPS and coordinates collected at another 105 sites where evidence of drilling was found, but no drill hole was seen. Televiewer and physical property surveys have been completed in five holes.

The results from the drilling and geophysical surveys indicate that there is structural thickening at the western down-dip extent of the mineralized amphibolite, and drilling continues in this area to define the plunge and extent of this mineralization.

During the year ended December 31, 2022, the Company incurred $28,046,746 in acquisition and exploration expenditures on the Selebi Assets (December 31, 2021 - $3,099,926).

Outlook – Exploration and Development

The proposed work plan for the Selebi Mine includes underground drilling at Selebi North and the surface/underground diamond drilling program at Selebi, expected to commence in July 2023. Drilling will be ongoing for up to 15 months, with the specific objective of delivering a mineral resource estimate prepared in accordance with NI 43-101 for the Selebi Mine. During that time, data compilation and verification efforts will continue, with additional hole re-openings, downhole gyro, BHEM and televiewer surveys, digitization of historic data, re-logging of historic core and updating of the 3D geological and structural model. In addition to this work, additional metallurgical samples will be collected and sent for detailed studies. The underground infrastructure at Selebi North will be upgraded to support the underground drilling program as well as improve health & safety.

Selkirk Mine, Botswana

The Selkirk Mine was acquired in August 2022 through an asset purchase agreement with the Liquidator of TNMC. The Selkirk property consists of a single mining licence covering an area of approximately 14.6 square kilometres and four prospecting licenses cover 126.7 square kilometres. The project is situated 28 kilometres south-east of the town of Francistown, and 75 kilometres north of the Selebi Mine.

Exploration and Development Activities

The Company has been carrying out due diligence on the Selkirk Mine since 2021. The results of the data verification efforts include examination and sampling of mineralized drill core, sampling from underground workings, collecting DGPS coordinates of drill collars and quality assessment of information in databases.

During the Selkirk core review, five unsampled HQ sized core (63.5 millimeters) holes, drilled immediately prior to the closure of operations by TNMC were identified. These five holes were taken to the core processing facility at Phikwe, where they were sampled in approximately 1 metre intervals, bagged and sent for assays. A total of 56 samples from DSLK278 used for metallurgical testing were analyzed at SGS Canada for nickel and copper and pulps were sent to ALS in Vancouver for a full suite of analyses. The remaining 1010 core samples were sent to ALS Global in Johannesburg for analyses. Results were reported in Q3 and Q4, 2022.

Company geologists also examined underground workings and confirmed continuous visible sulphides along an exploration drift extending 144 metres across the interpreted primary sulphide horizon, in a southwestern direction from the previous mining operations. PNRL collected and submitted twenty 10-kilogram grab samples from this exploration drift for assay to determine the variability in the grade of the mineralization. In November, the Company released results of the exploration drift sampling.

Additionally, the Company completed a concept level metallurgical study to assess if readily marketable copper and nickel concentrates could be produced and, if so, at what metal recovery levels. The Selkirk test program was carried out at SGS Canada in Lakefield, Ontario and followed a similar program conducted on samples from the Selebi Mine, which demonstrated potential for these metallurgical objectives to be achieved. The source of the material was previously unsampled HQ sized drill core from 2016 drill hole DSLK278, positioned 50m from historic mine workings. Highlights of the metallurgical study include: the ability to produce salable market nickel and copper concentrates, nickel concentrate grade of 10% nickel and 6% copper, copper concentrate grade of 33% copper, 0.32% nickel, recoveries of 63% nickel, 85% copper, concentrates clean of deleterious elements and with low (<1%) MgO levels, and attractive amounts of PGE present in the concentrates (36.0 g/t Pd in copper concentrate, 9.0 g/t Pd in nickel concentrate).

The Company filed a voluntarily technical report, prepared in accordance with NI 43-101 for the Selkirk Mine on April 12, 2023. As of the date of this report, the Company does not consider the Selkirk Mine to be a property material to the Company within the meaning of NI 43-101.

During the year ended December 31, 2022, the Company incurred $677,310 in acquisition and due diligence expenditures on the Selkirk assets (December 31, 2021 - $nil).

Outlook – Exploration and Development

The Company currently anticipates that a work plan will be proposed for the Selkirk Mine re-development that will include drilling to better define the existing resources and search for additional resources, develop a 3D geological and structural model, and complete additional metallurgical studies focused on improving recoveries.

Maniitsoq Nickel-Copper-PGM Project, Southwest Greenland

The Maniitsoq project 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. The property is located 100 kilometres north of Nuuk, the capital of Greenland and 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 Company acquired the Maniitsoq project in 2011 due to its potential for the discovery of significant magmatic sulfide deposits in a camp-scale belt. The Maniitsoq property consists of three exploration licences, Sulussagut No. 2011/54 and Ininngui No. 2012/28 comprising 2,689 and 296 square kilometres, respectively and the Carbonatite property No. 2018/21 (63 square kilometres), and a prospecting licence, No. 2020/05, for West Greenland. The Greenland properties have no mineral resources or reserves.

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, at which time a reduction in the size of the property will be required. Prospecting licence 2011/54 expired in December 31, 2022 and the Company has applied for its renewal. The prospecting licence is in effect until December 31, 2024.

Exploration and Development Activities

No exploration work was carried out in Greenland in 2022. Remaining targets were reviewed and prioritized in preparation for a potential field program in 2023.

Prior to the closing of RTO on August 3, 2022, the Maniitsoq property had a book value of $36,692,516. As the RTO is accounted for as a capital transaction with NAN being identified as the accounting acquiree, the net assets of NAN should be measured at fair value. Upon the completion of the RTO, the Company has switched its focus to development of the Botswana assets with the result that limited resources (management time, capital etc.) have since been allocated or will be allocated to the Greenland assets. Management believes that facts and circumstances exist to suggest that the carrying amount of the Maniitsoq property at August 3, 2022 exceeds its fair value. As a result, the carrying value of the Greenland assets has been reduced to nil as of August 3, 2022, for a total impairment of $36,692,516.

From August 3, 2022 to December 31, 2022, the Company spent an additional $48,001 in acquisition and exploration expenditures on the Maniitsoq property, which is comprised of the Sulussugut, Ininngui, Carbonatite and 2020/05 licenses. These expenditures were recorded as general exploration expense in the consolidated statements of comprehensive loss.

Canadian Nickel Projects - Sudbury, Ontario

Post Creek Property

The Post Creek property is located 35 kilometres east of Sudbury in Norman, Parkin, Alymer and Rathburn townships and consists of 73 unpatented mining claim cells in two separate blocks, covering a total area of 912 hectares held by the Company. The Company acquired the property through an option agreement in April 2010, subsequently amended in March 2013. As at the date of this Annual Report, the Company holds a 100% interest in the Post Creek property and is obligated to pay advances on a net smelter returns royalty (“NSR”) of $10,000 per annum, which will be deducted from any payments to be made under the NSR.

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 corridor containing the Whistle Offset Dyke and Footwall deposits account for a significant portion of all ore mined in the Sudbury nickel district and, as such, represent favourable exploration targets. Key lithologies are Quartz Diorite and metabreccia related to offset dykes and Sudbury Breccia associated with Footwall rocks of the Sudbury Igneous Complex which both represent potential controls on mineralization.

No exploration work was completed in 2022 on the Post Creek Property. The claims have sufficient work credits to keep them in good standing until 2025.

Halcyon Property

The Halcyon property is located 35 kilometres northeast of Sudbury in the Parkin and Aylmer townships, and consists of 63 unpatented mining cells for a total of 864 hectares. Halcyon is adjacent to the Post Creek property and is approximately 2 kilometres north of the producing Podolsky Mine of FNX Mining. The property was acquired through an option agreement and as at the date of this Annual Report, the Company holds a 100% interest in the 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.

No exploration work was completed on the Halcyon Property in 2022. The claims are in good standing through 2025.

Quetico Property

The Quetico property is located within the Thunder Bay mining district of Ontario and consists of 99 claim cells in two blocks. 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.

No work was carried out on the Quetico property in 2022. all 99 claims were expire in April 2023.

Immediately prior to completion of the RTO, total book value of the Canadian assets was $2,535,873 which has been written off effective as at August 3, 2022, the closing date of the RTO as the Company has switched its focus to development of the Botswana assets with the result that limited management time and capital resources have been allocated or will be allocated to the Canada assets. During the period from August 3, 2022 to December 31, 2022, the Company incurred an additional $21,739 in exploration and license related expenditures for the Canadian properties and the expenditures were recorded as general exploration expense in the consolidated statements of comprehensive loss.

High Atlas Project

The High Atlas property includes four permits acquired in December 2021 and one permit acquired in February 2022. The property is located 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 kilometres. The intrusions are host to three major nickel-copper occurrences and another ten minor occurrences. There is no modern geophysical coverage and no drilling on the property.

No exploration work was carried out in 2022.

The exploration and license related expenditures for the project is recorded as property investigation expense in the consolidated statements of comprehensive loss. The Company has spent $nil on the project during the period from August 3, 2022 to December 31, 2022.

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.

Overview

The Company is an international mineral exploration and resource development company listed on the TSXV and trading under the symbol PNRL. The Company’s principal business activity is the exploration and development of PNRL’s flagship asset, the Selebi Ni-Cu-Co sulphide mine in Botswana. In addition, the Company’s project pipeline is also includes the Selkirk Ni-Cu-Co-PGE sulphide mine also located in Botswana.

A. Operating Results

Going Concern

The Company’s consolidated financial statements have been prepared on a going concern basis, which presumes that the Company will continue realizing its assets and discharging its liabilities in the normal course of business for the foreseeable future. The Company has incurred significant operating losses and negative cash flows from operations since inception. To date, the Company has financed its operations primarily through the public offering and private placement of its securities, consisting of Common Shares and warrants, and convertible debt. For the twelve-month period ended December 31, 2022, the Company incurred a net loss of $36.4 million and negative working capital deficiency of $6.0 million, and had an accumulated deficit of $78.1 million as of December 31, 2022. Furthermore, as at December 31, 2022, the Company’s current liabilities and expected level of expenses for the next twelve months exceed cash on hand of $5.2 million and its total current liabilities exceed its total current assets. Accordingly, the Company is required to actively manage its liquidity and expenses and payments of payables are not being made as the amounts become due for certain suppliers.

As of the date the consolidated financial statements for the twelve-month period ended December 31, 2022, the available cash balance is expected to be sufficient to operate the business for the next six months under the current business plan. The Company requires funding in the very near term in order to continue its operations. If the Company is unable to obtain funding in the near-term, it may have to cease operations and liquidate its assets.

These conditions cast substantial doubt about the Company’s ability to continue as a going concern.

As at December 31, 2022, the Company had $5,162,991 in available cash (December 31, 2021— $1,990,203). 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 issuances of equity or other available financing alternatives to continue funding its operating, exploration and evaluation activities, and eventual development of 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.

The consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the going concern basis not be valid. These adjustments could be material.

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.

Year Ended December 31, 2022 and December 31, 2021

The Company incurred a net loss of $36,410,469 in the 2022 fiscal year (“FY2022”) compared to a net loss of $9,359,605 in the 2021 fiscal year (“FY2021”) , resulting in an increased loss of $27,050,864 (year-over-year). The net loss in FY 2022 was mainly driven by a loss on the RTO transaction of $29,174,415, and also to the following events:

The higher loss in FY 2022 was partially offset by the following lower expenditures in FY 2022 compared to FY 2021:

Twelve Months Ended December 31, 2021, and December 31, 2020

The Company incurred a net loss of $9,408,511 FY 2021 compared to a net loss of $3,859,729 in FY 2020 resulting in an increased loss of $5,548,782 (year-over-year). The higher loss in FY 2021 was due to the following events with warrant fair value and share-based payment being the most significant:

The higher loss in FY 2021 was offset by the following lower expenditures in FY 2021 compared to FY 2020:

B. Liquidity and Capital Resources

As of December 31, 2022, the Company had a working capital deficiency of $6,024,026 (December 31, 2021 – $1,558,011 positive working capital) and reported an accumulated deficit of $78,092,605 (FY 2020 - $13,482,624). The Company will require additional funds to continue its planned operations and meet its obligations.

As at December 31, 2022, the Company had $5,162,991 in available cash (December 31, 2021— $1,990,203). 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 issuances of equity or other available financing alternatives to continue funding its operating, exploration and evaluation activities, and eventual development of 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 that uncertainty. Note 1 in the consolidated financial statements includes an explanatory paragraph regarding the Company’s ability to continue as a going concern.

In April 2022, PNRC completed a non-brokered private placement of 8,865,619 shares at a price of US$2.00 per share for gross proceeds of $22,388,599 (US$17,731,238). In connection with the private placement, the Company has paid to eligible finders (“Finders”) (i) cash commission equal to 6% of the gross proceeds raised from subscribers introduced to the Company by such Finders, being an aggregate of $1,535,727, and (ii) a number of Common Shares equal to 6% of the units attributable to the Finders under the private placement, being an aggregate of 70,548 shares with total value of $176,398 at the offer price of the private placement.

In April 2022, NAN completed a private placement offering of 21,118,000 subscription receipts (the “Subscription Receipts”) at a price of $0.48 per Subscription Receipt (in each case, prior to giving effect to the Company’s 5:1 consolidation of its Common Shares), including the partial exercise of the agents ‘option, for total gross proceeds of $10,136,640. Upon the closing of the RTO on August 3, 2022, the Subscription Receipts were converted into 4,223,600 Common Shares (post-consolidation), and the net subscription proceeds were released from escrow and delivered to the Company.

On November 25, 2022, the Company closed a $7 million bridge loan financing from Pinnacle Island LP with net proceeds of $6,740,000. The bridge loan is evidenced by the issuance of a promissory note by the Company to the lender with a principal amount of $7 million and bears interest at a rate of 10% per annum, calculated monthly and initially payable on February 22, 2023, being the maturity date of the Promissory Note. The Company extended the maturity to March 22, 2023 and subsequently to November 24, 2023.

During FY 2022 year, the Company received additional cash inflow of $569,399 from exercised warrants and $723,076 from exercised options.

On February 24, 2023, the Company closed a brokered private placement offering under which 4,437,184 Common Shares were issued at a price of $1.75 per share for gross proceeds of $7,765,072.

C. Research and development, patents and licenses, etc.

Not applicable.

D. Trend information

The major trends affecting the Company and its business include: the impact of commodity prices and demand for nickel, copper and cobalt; volatility in capital markets; globalization of commodity supplies; critical metals supply chain stabilization; increasing domestic expectations surrounding in-country ores and concentrates; and moves to increasing alternative energy solutions in an effort to reduce carbon footprints.

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, 2022.

Quantitative and Qualitative Disclosures about Market Risk

Not applicable.

E. Critical Accounting Estimates

Basis of preparation and accounting policies

The 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 the audited annual financial statements for the years ended December 31, 2022 and 2021.

Basic of consolidation

The consolidated financial statements include the financial statements of the Company and its wholly-owned subsidiaries (collectively, the “Group”). All intercompany transactions, balances, income and expenses are eliminated upon consolidation.

Effective August 3, 2022, NAN completed the 100% acquisition of the outstanding shares of PNRC (Note 4 of the consolidated financial statements). As the shareholders of PNRC obtained control of the Company through the exchange of their shares of PNRC for shares of NAN, the acquisition of PNRC has been accounted for in the consolidated financial statements as a reverse takeover. Consequently, the consolidated statements of comprehensive loss and cash flows reflect the results from the operations and cash flows of PNRC, the legal subsidiary, for the year ended December 31, 2022 and 2021, combined with those of NAN, the legal parent, from the acquisition on August 3, 2022 to December 31, 2022, in accordance with IFRS for reverse takeovers. The comparative balance sheet reflects the balance sheet of PNRC as at December 31, 2021.

Foreign currency translation

The Company’s functional and presentation currency is the Canadian dollar. 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 year-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 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 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.

Foreign operations

In the Group’s financial statements, all assets, liabilities and transactions of Group entities with a functional currency other than Canadian dollar are translated into Canadian dollar upon consolidation. The functional currencies of entities within the Group have remained unchanged during the reporting period. On consolidation, assets and liabilities have been translated into Canadian at the closing rate at the reporting date. Fair value adjustments arising on the acquisition of a foreign entity have been treated as assets and liabilities of the foreign entity and translated into Canadian dollar at the closing rate. Income and expenses have been translated into Canadian dollar at the average rate over the reporting period. Exchange differences are charged or credited to other comprehensive income and recognized in the currency translation reserve in equity. On disposal of a foreign operation, the related cumulative translation differences recognized in equity are reclassified to profit or loss and are recognized as part of the gain or loss on disposal.

Financial instruments

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:

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 consolidated 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 that 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.

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.

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 Statement of Comprehensive 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.

Impairment of assets

Impairment tests on non-financial assets, including exploration and evaluation assets, property, plant and equipment, 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.

Leases

At commencement of a contract, the Company assesses whether a contract is, or contains, a lease by determining whether the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. A right-of-use (the “ROU “) asset and lease liability are recognized at the lease commencement date. The lease liability is initially measured at the present value of all future lease payments that have not been paid as of the commencement date of the lease, discounted using the Company’s incremental borrowing rate, unless the rate implicit in the lease is readily determinable. The ROU asset is initially measured at cost, which is calculated as the initial amount of the lease liability, with an adjustment for any initial direct costs incurred, plus adjustments for any lease payments made in advance of the commencement date, and less any lease incentives received. Subsequent to initial recognition, the ROU asset is depreciated on a straight-line basis over the term of the lease or the estimated useful life, with inclusion for any options to extend that the Company reasonably expects to exercise.

ROU assets are tested for impairment in accordance with IAS 36 Impairment of Assets. The right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability. The lease liability is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the Company’s estimate of the amount expected to be payable under a residual value guarantee, or if the Company changes its assessment of whether it will exercise a purchase, extension or termination option. These adjustments are recorded through profit or loss.

Property, Plant and Equipment

Property, plant and 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 consolidated 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 is 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 rate applicable to each category of Property, plant and equipment is as follows:

Share capital

The Common Shares and warrants to purchase Common Shares are classified as equity instruments.

Incremental costs directly attributable to the issue of new shares, warrants 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.

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.

All equity-settled share-based payments are reflected in share-based payments reserve, until exercised. Upon exercise shares are issued from the treasury and the amount reflected in share-based payments reserve is credited to share capital along with any consideration paid.

Deferred Share Units (“DSUs”)

In the year ended December 31, 2022, the Company approved the adoption of a DSU plan (the “DSU Plan”). In accordance with IFRS 2 Share Based Payments, this plan is a cash-settled share-based compensation program whereby the Company records the fair value of the liability at the date upon which it is incurred and adjusts the liability to the fair value at the end of each reporting period and at the date of settlement, with any changes in fair value recognized in profit or loss for the period.

The DSU Plan enables the Company upon approval by the directors to grant DSU’s to eligible non-management directors. Upon granting DSU’s, the Company records stock-based compensation based on the amount of units granted multiplied by the volume weighted average price of Common Shares for the last five trading days on the TSXV (the “5-day-VWAP”) immediately preceding the date of the grant.

The DSUs credited to the account of a director may only be redeemed following the date upon which the holder ceases to be a director. Depending upon the country of residence of a director, the DSUs may be redeemed at any time prior to December 15 in the calendar year following the year in which the holder ceases to be a director, and may be redeemed in as many as four installments. Upon redemption, the holder is entitled to a cash payment equal to the number of units redeemed multiplied by the 5-day-VWAP of the Company’s common shares on that date. The Company may elect, in its sole discretion, to settle the value of the DSUs redeemed in the Company’s common shares on a one-for-one basis, provided shareholder approval has been obtained on or prior to the relevant redemption date.

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.

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 loss or equity is recognized in other comprehensive lost 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.

Accounting standards and amendments issued but not yet effective:

Certain pronouncements were issued by the IASB or the IFRIC that are mandatory for accounting periods commencing on or after January 1, 2023. Many are not applicable or do not have a significant impact to the Company and have been excluded. The following have not yet been adopted and are being evaluated to determine their impact on the Company.

IAS 1 – Presentation of Financial Statements (“IAS 1”) was amended in January 2020 to provide a more general approach to the classification of liabilities under IAS 1 based on the contractual arrangements in place at the reporting date. The amendments clarify that the classification of liabilities as current or non-current is based solely on a company’s right to defer settlement at the reporting date. The right needs to be unconditional and must have substance. The amendments also clarify that the transfer of a company’s own equity instruments is regarded as settlement of a liability, unless it results from the exercise of a conversion option meeting the definition of an equity instrument. The amendments are effective for annual periods beginning on January 1, 2024.

IAS 1 – In February 2021, the IASB issued ‘Disclosure of Accounting Policies’ with amendments that are intended to help preparers in deciding which accounting policies to disclose in their financial statements. The amendments are effective for year ends beginning on or after January 1, 2023.

IAS 8 – In February 2021, the IASB issued ‘Definition of Accounting Estimates’ to help entities distinguish between accounting policies and accounting estimates. The amendments are effective for year ends beginning on or after beginning on or after January 1, 2023.

Critical accounting judgments, estimates and assumptions

The preparation of the consolidated financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that can affect reported amounts of assets, liabilities, revenue 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 area involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are:

RTO – fair value

Fair value considerations for the RTO transactions are assessed in accordance with IFRS. These considerations are based on various factors such as the fair value of the assets acquired or liabilities assumed, the fair value of equity instruments issued, and any related acquisition costs.

The assumptions and estimates used in arriving at fair value figures are based on management’s judgments and relevant market data. The fair value of the equity instruments issued is determined based on market prices or valuation techniques that take into account factors such as expected share price volatility.

Recoverability of exploration and evaluation assets

The ultimate recoverability of the exploration and evaluation assets with a carrying value of $31,823,982 at December 31, 2022, is dependent upon the Company’s ability to obtain the necessary financing to complete the exploration and development and commence profitable production at its projects, or alternatively, upon the Company’s ability to dispose of its interests therein on an advantageous basis. A review of the indicators of potential impairment is carried out at least at each period end.

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.

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 no restoration obligations at December 31, 2022.

Going concern

Consolidated financial statements are prepared on a going concern basis unless management either intends to liquidate the Company 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.

Valuation of share-based compensation

The Company estimates the fair value of 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. Note 8 of the consolidated financial statements contains further details of significant assumptions applied to these areas of estimation.

Deferred income tax

Tax benefits from uncertain tax positions may be recognized when it is probable that the Company will be able to use deductible temporary differences against taxable profit: (i) whether a tax position, based solely on its technical merits, is probable to be sustained upon examination, and (ii) measuring the tax benefit as the expected value or most likely amount taking into consideration which method better predicts the realized amounts upon ultimate settlement.

Furthermore, the Company uses the asset and liability method in accounting for deferred income taxes and mining duties. Under this method, deferred income taxes are recognized for future income tax.

In preparing these estimates, management is required to interpret substantially enacted legislation as well as economic and business conditions along with management’s tax and corporate structure plans which may impact taxable income in future periods.

Estimated useful lives and depreciation of property, plant and equipment

Depreciation of property, plant and equipment is dependent upon estimates of useful lives which are determined through the exercise of judgment. The assessment of any impairment of these assets is dependent upon estimates of recoverable amounts that take into account factors such as economic and market conditions and the useful lives of the assets.

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

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. 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.

A. Directors and senior management.

B. Compensation.

Management compensation is determined by the Board of Directors for services provided. During the year ended December 31, 2022, aggregate compensation paid or accrued to all directors and officers, including private companies controlled by directors and officers, as a group, was $2,418,984.

The following table presents information concerning all compensation paid, payable, awarded, granted, given, or otherwise provided, directly or indirectly, to each officer and director by the Company and its subsidiaries for services in all capacities to the Company during the 2022 financial year:

Notes:

For the year ended December 31, 2022, the Company paid $373,472 (including cash and DSUs) in compensation to non-executive 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.

In connection with the RTO, the Company adopted an amended Incentive Stock Option Plan providing the authority to grant options to directors, officers, employees and consultants enabling them to acquire, in aggregate, up to 22,600,000 stock options of the Company. Under the Incentive Stock Option Plan, the exercise price of each option typically 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, 2022, the Company granted an aggregate total of 2,600,000 stock options to employees, directors and consultants with a maximum term of 5 years. All such options then outstanding vested immediately upon the completion of the RTO and are exercisable at $2.62 per share. The Company calculates the fair value of all stock options using the Black-Scholes Option Pricing Model. The fair value of all options, including those granted during the year ended December 31, 2022 as well as the ones granted in prior year but not vested until the completion of the RTO, amounted to $7,731,117 and was recorded as a share-based payment expense.

Effective December 2022, the Company approved a DSU Plan that enables the Company upon approval by the directors to grant DSUs to eligible non-management directors. The DSUs credited to the account of a director may only be redeemed following the date upon which the holder ceases to be a director. Depending upon the country of residence of a director, the DSUs may be redeemed at any time prior to December 15 in the calendar year following the year in which the holder ceases to be a director and may be redeemed in as many as four installments. Upon redemption, the holder is entitled to a cash payment equal to the number of units redeemed multiplied by the 5-day-VWAP of the Common Shares on that date. The Company may elect, in its sole discretion, to settle the value of the DSUs redeemed in the Common Shares on a one-for-one basis, provided shareholder approval has been obtained on or prior to the relevant redemption date.

During the year ended December 31, 2022, the Company granted 200,000 DSUs to the non-management directors at a fair value of $298,000 recorded as share based compensation, and a DSU liability of the same amount.

C. Board practices.

Pursuant to the provisions of the OBCA, the Company’s directors are elected annually at the regularly scheduled annual general meeting of shareholders. Each elected director is elected for a one-year term.

The Company has no arrangements in place for provision of benefits to its directors or upon their retirement except DSUs.

The Company has five committees of its Board of Directors in place:

The ARMC is made up of Don Newberry (Chair), John Hick and William O’Reilly. The ARMC is responsible for providing oversight of the Company’s financial reporting, internal controls, and risk management processes. Key responsibilities include ensuring the accuracy, completeness, and reliability of the financial statements and disclosures, effectiveness of internal controls, overseeing risk management processes, ensuring compliance with applicable laws, regulations, and internal policies and procedures.

The HRCC is made up of John Hick (Chair), Don Newberry and William O’Reilly. In addition to making recommendations to the Board of Directors of the Company as to appropriate salary and other compensation for senior executives and directors of the Company, the HRCC makes recommendations to the Board of Directors of the Company as to the level of stock option compensation and DSUs granted by the Company.

The Technical Oversight Committee is made up of Don Newberry, 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.

The CGNC is made up of William O’Reilly (Chair), Don Newberry and John Hick. The CGNC is responsible for ensuring that the Company’s governance practices are effective, transparent, and aligned with best practices. Key responsibilities include board composition and nominations, governance policies and practices, director orientation and education as well as board evaluation and succession planning.

The Disclosure Committee is made up of John Hick, Charles Riopel and Keith Morrison, and includes Sean Whiteford and Sarah Zhu as representatives from management. The purpose of the Disclosure 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 Disclosure Committee meets as required to oversee the dissemination of all corporate material.

D. Employees.

Botswana

Upon the closing of the asset acquisition of the Selebi Mine, the Company started to develop its own local workforce. As of December 31, 2022, The Company had 106 employees at its Botswana operations, of which 95 were engaged in technical work including geology, drilling, geophysics, engineering and care and maintenance, and 11 were engaged in back-office support and logistics. There were no salaried employee in Botswana prior to 2022.

The Company is committed to promoting a safe and healthy workplace environment, and actively participates in training programs to ensure employees are aware of proper safety and health procedures. The Company also provides resources and support for employees’ mental and emotional wellbeing.

The Company values diversity and inclusivity and strives to create a workplace culture that respects and values all employees’ backgrounds and identities.

The Company offers competitive compensation and benefits packages, including housing allowance, health insurance, and employee assistance programs. The employees receive performance evaluations and feedback regularly, and the Company encourages ongoing professional development and training.

The Company has implemented measures to protect employee data privacy and maintain confidentiality, in accordance with applicable laws and regulations.

Canada and Barbados

As of December 31, 2022, the Company had no salaried employees at its Canadian or Barbados operations, only contracted consultants.

E. Share ownership.

The following table sets forth certain information regarding beneficial ownership of the Company’s shares as of the date of this report by each of the Company’s directors and executive officers and all current directors and executive officers as a group. The table does not reflect Common Shares held of record by depositories.

The Company adopted an Incentive Stock Option Plan providing the authority to grant options to directors, officers, employees and consultants enabling them to acquire up to 22,600,000 stock options of the Company. Under the Incentive Stock Option Plan, the exercise price of each option typically equals to the last closing price per share on the trading day immediately preceding the day on which the Company announces the grant of the option, less applicable discount, if any, permitted by the policies of the TSXV and approved by the Board of Directors. The options can be granted for a maximum term of 10 years. The following table sets forth certain information regarding options granted to the Company’s directors and executive officers.

A total of twenty percent (20%) of the Common Shares outstanding from time to time to a maximum of 22,6000,000 are reserved for issuance pursuant to stock options under the Incentive Stock Option Plan. During the year 2022, the Company granted an aggregate total of 2,600,000 stock options to directors, officers, employees and consultants.

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 each person who is known to own beneficially more than 5% of the outstanding Common Shares. 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 date of this Annual Report, there were 120,958,527 Common Shares issued and outstanding, 65,659 preferred shares outstanding, 10,407,044 exercisable options, 1,510,399 warrants and 322,905 DSUs. On a fully-diluted basis on the date of the report, there were 133,212,006 Common Shares outstanding.

The change in the percentage ownership held by major shareholders during the past three years is as follows:

No major shareholder listed in this section has different voting rights than any other shareholders of the Company, which is one vote per Common Share owned.

Effective August 3, 2022, in connection with the closing of the RTO, the Company completed a share consolidation of the Company’s issued and outstanding Common Shares on the basis of one (1) post-consolidation Common Share for every five (5) pre-consolidation common shares issued and outstanding.

On August 3, 2022, PNRC combined with NAN in a reverse takeover transaction whereby shareholders of PNRC exchanged their shares at a rate of 1.054 shares of NAN for each share of PNRC, after giving effect to a 5-to-1 share consolidation for each outstanding share of NAN.

The Company issued 82,157,536 Common Shares (on a post-consolidation basis) in exchange for 77,948,368 outstanding shares of PNRC immediately prior to the effective time of the RTO. Immediately after giving effect to the RTO, the Company was owned approximately 72.1% by persons who were shareholders of PNRC prior to the RTO and 27.9% by persons who were shareholders of NAN prior to the RTO.

As at December 31, 2022, the Company had 116,521,343 Common Shares issued and outstanding, (December 31, 2021 – 80,820,623 and December 31, 2020 – 67,543,995).

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)

These amounts are unsecured, non-interest bearing and have no fixed terms of repayment.

During the year ended December 31, 2022, ThreeD Capital Inc. subscribed for a further 1,213,538 common shares of PNRC (1,279,069 shares on a post-RTO and post-consolidation basis), for a further investment of US$2,427,076 (2021 - $374,123). As of December 31, 2022, ThreeD Capital Inc. beneficially owned 8,662,347 shares (2021 - 7,383,278 shares) on a post-RTO and post-consolidation basis, constituting approximately 7.5% (2021 – 9.14%) of the current issued and outstanding shares of the Company.

Between March 2, 2022 and March 3, 2022, to meet its short-term liquidity needs, PNRC issued promissory notes to its officers and directors as well as its shareholders as below:

(All amounts in table are expressed in thousands of Canadian dollars)

The promissory notes had an interest rate of 10% per annum and the holder had an option to convert the principal amount thereunder plus any accrued interest thereon to common shares of PNRC prior to April 30, 2022.

On April 30, 2022, all amounts owing in respect of the above promissory notes were repaid in full by payment of cash in an amount of $2,018,568, including interest and fees, and by issuing 310,000 common shares of PNRC (326,740 Common Shares on a post-RTO and post-consolidation basis).

(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)

C. Interests of experts and counsel

Not required.

ITEM 8. FINANCIAL INFORMATION

A. Consolidated Statements and Other Financial Information

See Item 17 and the financial statements and accompanying notes beginning on page F-1.

B. Significant Changes

On April 26, 2022, PNRC and NAN entered into a definitive amalgamation agreement (the “Amalgamation Agreement”) in respect of their previously-announced RTO transaction, pursuant to which PNRC would be the surviving public entity following the closing of the RTO.

Transaction Particulars

Pursuant to the Amalgamation Agreement:

In connection with the RTO, NAN has, among other things: (i) changed its name to “Premium Nickel Resources Ltd.”; (ii) changed its stock exchange ticker symbol to “PNRL”; and (iii) reconstituted the Board of Directors and management of the Company. The outstanding options of PNRC immediately prior to the effective time of the RTO were exchanged and adjusted pursuant to the terms of the Amalgamation Agreement such that holders thereof were entitled to acquire, following the closing of the RTO, options of the Company after giving effect to the Exchange Ratio, as applicable.

Before the closing of the RTO, NAN owned 7,667,707 common shares of PNRC and a common shares purchase warrant which entitled NAN to purchase common shares of PNRC, for up to 15% of the capital of PNRC, upon payment of US $10,000,000 prior to the fifth anniversary of the date of issue (the “15% Warrant”). Prior to the date that the amalgamation became effective, the PNRC shares and the 15% warrant held by NAN were contributed to NAN Subco, resulting in such securities being cancelled by operation of the triangular amalgamation.

Pursuant to the Amalgamation Agreement, the Company issued 82,157,536 Common Shares (on a post-consolidation basis) in exchange for 77,948,368 outstanding shares of PNRC immediately prior to the effective time of the RTO. Immediately after giving effect to the RTO, the Company was owned approximately 72.1% by persons who were shareholders of PNRC prior to the RTO and 27.9% by persons who were shareholders of NAN prior to the RTO.

Prior to this exchange, NAN had 31,748,399 shares outstanding (on a post-consolidation basis). Taking into account the composition of the Board of Directors and senior management and the relative ownership percentages of NAN and PNRC shareholders in the newly combined enterprise, from an accounting perspective PNRC is considered to have acquired NAN, and hence the transaction has been recorded as a reverse takeover.

For financial reporting purposes, the Company is considered to be a continuation of PNRC, the legal subsidiary, except with regard to the authorized and issued share capital, which is that of NAN, the legal parent. The consolidated statements of operations and cash flows for the year ended December 31, 2022 include the results of operations and cash flows of PNRC for the period from January 1, 2022 to August 3, 2022, and the results of operations and cash flows of both PNRC and NAN for the period from August 3, 2022 to December 31, 2022. The primary reason for the business combination was to create a leading international nickel-copper-cobalt mineral exploration company. With a portfolio of nickel-copper cobalt assets, the Company will have the ability to execute a phased strategy and focus in the short term on developing the Selebi Mine in Botswana, its material property.

The substance of the transaction is a reverse acquisition of a non-operating company. The transaction does not constitute a business acquisition as the amalgamation does not meet the definition of a business combination under IFRS 3. As a result, the transaction is accounted for as a capital transaction with NAN being identified as the accounting acquiree and the equity consideration being measured at fair value (“FV”).

The purchase price has been determined based on the number of shares that PNRC would have had to issue on the date of closing to give the owners of NAN the same percentage equity (27.9%) of the combined entity as they hold subsequent to the reverse takeover.

The costs of the acquisition have been allocated as follows:

*Pre-existing relationship: Before the closing of the RTO, NAN owned 7,667,707 common shares of PNRC and a 15% warrant which entitled NAN to purchase common shares of PNRC, for up to 15% of the then outstanding capital of PNRC, upon payment of US $10,000,000 prior to the fifth anniversary of the date of issue. Prior to the date that the amalgamation became effective, the PNRC shares and the 15% warrant held by NAN were contributed to NAN Subco, as part of the securities contribution, resulting in such securities being cancelled by operation of the triangular amalgamation.

Prior to the RTO, the fair value of the 15% warrant and the shares held by NAN were $28,275,255 and $19,710,608, respectively. The fair value of the shares was calculated based on the last offer price of PNRC financing prior to the RTO, and the fair value of the warrants was calculated using the Black-Sholes Model with the following assumptions: expected life of 2.57 years, expected dividend yield of 0%, a risk-free rate of 3.14% and an expected volatility of 141.63%. As they were the securities contributed by NAN on the closing of the RTO, the fair value of the warrants and shares were included as part of the consideration on the acquisition date.

Pursuant to the RTO, an aggregate of 8,827,250 options to purchase Common Shares (“Replacement Options”) were issued (on a post 5:1 consolidation basis) to the former holders of options to purchase common shares of PNRC (prior to the RTO) (“PNRC Options”) in exchange for 8,375,000 PNRC Options. The Replacement Options issued to the former holders of PNRC Options were on the same terms and conditions as those exchanged by PNRC holders except all the previously unvested options vested immediately. Immediately prior to the completion of the RTO, PNRC had 2,383,333 unvested options outstanding which re-evaluated at a FV of $5,138,022 upon the completion of the RTO according to IFRS 2.

Given that the RTO has been accounted for as a reverse takeover of NAN by PNRC, from an accounting perspective, PNRC is deemed to have issued options and warrants to the former security holders of NAN. On August 3, 2022, NAN had 2,995,794 options and 2,228,340 warrants outstanding, respectively, as well as 118,186 preferred shares that could be converted to 13,131 common shares of NAN (on a post-consolidation basis). The aggregate fair value of such 2,995,794 options, 2,228,340 warrants and 118,186 preferred shares of NAN was $9,665,577, and this amount has been included as a component of the purchase price. Costs related to the transaction were $2,327,125 and were expensed as incurred.

For purposes of determining the fair value of the share consideration exchanged on the RTO, the shares of PNRC were valued at US$2.00 per share, the offering price for the PNRC shares on the last PNRC equity financing prior to the RTO.

The RTO resulted in a loss of $29,174,415 with respect to the fair value of the consideration transferred over the fair value of identifiable net assets, which has been recorded as a loss during the year in other income.

ITEM 9. THE OFFER AND LISTING

Effective December 21, 2006, the Company’s common shares became quoted on the United States OTC Bulletin Board, under the symbol “WSCRF”. On May 30, 2011, the common shares began trading under the symbol “NAN” on the TSXV. The trading in common shares of NAN on the TSXV was halted following the announcement of the RTO on February 17, 2022, with the closing share price of $0.58 per share. The Common Shares resumed trading on the TSXV on August 18, 2022, under the symbol “PNRL” and commenced trading on the OTCQX Best Market (“OTCQX”) on January 20, 2023. 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 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 account the effect of the RTO and the 5-old for 1-new consolidation which occurred on August 3, 2022.

The closing price of the Common Shares on the TSXV on December 31, 2022 was C$1.60. The closing price of the Common Shares on the OTC Bulletin Board on December 31, 2022 was US$1.197.

The Common Shares are issued in registered form. Computershare Investor Services Inc. is the registrar and transfer agent for the Common Shares.

The Company has no outstanding securities not listed on a marketplace other than incentive stock options, warrants and DSUs.

Since the beginning of the most recently completed financial year, warrants issued to purchase an aggregate 295,652 Common Shares were issued. The following table outlines the detail of each issuance:

Since the beginning of the most recently completed financial year, options issued to purchase an aggregate 2,740,400 Common Shares were issued. The following table outlines the detail of each issuance:

ITEM 10. ADDITIONAL INFORMATION

A. Share capital

The authorized capital of the Company comprises an unlimited number of Common Shares and 100,000,000 Series 1 convertible preferred shares without par value.

Effective July 27, 2022, in connection with the RTO, the Company completed a share consolidation of the Company’s issued and outstanding common shares, on the basis of one (1) post-consolidation Common Share without par value for every five (5) pre-consolidation common shares issued and outstanding.

a) Common Shares Issued and Outstanding

On August 3, 2022, PNRC combined with NAN in a reverse takeover transaction whereby shareholders of PNRC exchanged their shares at a rate of 1.054 shares of NAN for each share of PNRC, after giving effect to a 5-to-1 share consolidation for each outstanding share of NAN (Note 4 of the consolidated financial statements). The following table provides a continuity of share capital presented in the consolidation financial statements:

2022

In April 2022, PNRC completed a non-brokered private placement of 8,865,619 shares at a price of US$2.00 per share for gross proceeds of $22,388,599 (US$17,731,238). In connection with the private placement, the Company has paid to Finders (i) cash commission equal to 6% of the gross proceeds raised from subscribers introduced to the Company by such Finders, being an aggregate of $1,535,727, and (ii) a number of Common Shares equal to 6% of the units attributable to the Finders under the private placement, being an aggregate of 70,548 shares with total value of $176,398 at the offer price of the private placement.

In April 2022, NAN completed a private placement offering of 21,118,000 Subscription Receipts at a price of $0.48 per Subscription Receipt (in each case, prior to giving effect to the Company’s 5:1 consolidation of its common shares), including the partial exercise of the agents’ option, for total gross proceeds of $10,136,640. Upon the closing of the RTO on August 3, 2022, the Subscription Receipts were converted into 4,223,600 Common Shares (post-consolidation), and the net subscription proceeds were released from escrow and delivered to the Company.