McNickel completes $3.4M financing, starts drilling

“The successful completion of our financing was a feat in itself,” a company spokesman said. “It’s been very tough slugging for most junior resource companies going to the market these days.”

McNickel was formed earlier this year to explore a new grassroots copper-nickel prospect north of Lac St. Jean, Que.

During the past six months, the entire area surrounding the McNickel property has been staked by nearly 50 junior exploration companies.

McNickel is putting three drill machines on its property, where the company must spend at least $1 million by Oct 1 to earn an initial 25% direct interest in the claims.

The Toronto junior holds an option to earn a 60% interest in the property by spending $3.5 million over three years. Its other partners are Vancouver-based St. Philips Resources (VSE) with 30%, and sister company Ramcor Resources (VSE) with a 10% direct interest.

“It’s going to take a lot of drilling to get a good statistical sample along the entire sulphide horizon,” said McNickel geologist Steven Brunelle.

“The market is probably looking for some spectacular intersections from our property, but whether that will happen or not, I don’t know.”

Geophysical surveys have detected nearly four miles of conductive bedrock across the property. However, surface trenching has so far tested only a small fraction of that length.

“We’ll probably have some good holes and some bad holes, and everything in between.” said Brunelle. “Whether we’ll find something economic, it’s still to early to say.”

The McNickel prospect is situated in a virtually untested region of the Grenville geological province. Most of Ontario and Quebec’s big base metal deposits are found within Archean age volcanic rocks.

To date, trenching on the McNickel property has uncovered several lenses of massive sulphides (mostly pyrrhotite) over 5- to 10-m widths, separated by wider intervals of disseminated sulphides within gabbroic anorthosite.

A 300-lb bulk sample averaged 0.94% nickel and 0.15% copper, along with cobalt and platinum values.

To help make sense of the geological picture, the company has hired a doctoral geology student from Montreal’s McGill University to log drill core and oversee the program. Since the stock market crash of 1987, a number of factors have combined to make junior resource financing in Ontario and Quebec an extremely difficult task. Brunelle said his company had to make the financing deal attractive to investors, while at the same time contending with a new regulatory climate.

McNickel’s public offering, which was fully subscribed, consisted of 600,000 units at a price of $5.00 with each unit comprising a common share, a flow-through share, and warrants to purchase an additional common share and flow- through share.

The current market value of McNickel’s common shares has been around $2.75-$3.00, making the financing price of $2.45 per share quite attractive to investors. In addition to the flow-through tax shelter benefits, investors will also receive a 30% CEIP grant (about 70 cents per flow-through share) from the federal government.

“If exercised, the warrants will provide an opportunity for further funding to the company,” said Brunelle. “Since McNickel is still a junior speculative play, we had to make the units attractive to investors and spread the risk around.”

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