We spoke with North American Nickel management a few weeks back in order to get a better idea of what they thought about the first pass Greenland exploration program in 2012. The key takeaways in our opinion were:

(1) Maniitsoq is quickly becoming a district scale (hundreds of square kilometers) exploration project that already has a number of good sampling and drill targets for follow up;

(2) The regional geology has recently been postulated as associated with a large meteor impact crater and intrusive magmatism with a possible analogy to the Sudbury basin in Ontario Canada (note that Sudbury deposits are 10-15km shallower than Maniitsoq so the mineralogy and geological characteristics may in fact be quite different despite a similar macro setting on the outer rim of an impact crater);

(3) North American Nickel controls the majority of the onshore “rim” of this impact crater where the mineralization potential is presumed to be greatest … anomalies discovered so far appear to trace a curving path along a presumed crater rim;

(4) The ratio of nickel sulfides to total sulfides at Maniitsoq is very consistent and quite high (a remarkable 6-8% Ni to total sulfides) — this has several important implications as discussed below;

(5) A new style of mineralization upgraded in platinum group elements but with only a subtle sulfide geophysical signature has been identified during 2012 (this opens the door to finding new targets not based on normal sulfide anomalies and also establishes the potential that Maniitsoq contains PGM rich deposits).

With respect to the consistently high nickel-to-sulfide ratio throughout the Maniitsoq project, this is quite interesting. Among the positives are the fact that such consistent distribution suggests this is one big system involving large tonnages of intrusive over a huge area. This would tend to enhance the odds that an economic deposit exists at Maniitsoq simply based on statistical considerations. It further suggests that perhaps a very big world class deposit may be located here. Another positive is the fact that sulfides are relatively easy to find (they rust at surface and tend to have strong geophysical signatures even at depths of several hundred meters) and consequently nickel at Maniitsoq should also be relatively easy to find. Finally, where the sulfide grades are elevated so will be the nickel grades. Maniitsoq appears to have classic grade variability associated with intrusive activity suggesting that there should be high grade nickel deposits at Maniitsoq. All of these considerations together would ideally lead to a large, high grade nickel deposit being relatively easy to find at Maniitsoq … of course that’s only an “ideal” and there will need to be substantial additional exploration before we can obtain any level of certitude.

In the meantime, the company will begin evaluate the potential of developing a startup mine based on the mineralization that has already been discovered and soon to be expanded with follow up drilling. Management has some experience doing this at VMS Ventures where that company discovered and delineated copper sulfide deposit at Reed Lake and joint ventured it to Hudbay with production starting early next year. Indeed, a conservative way to play the discovery potential of North American Nickel might be to buy VMS Ventures given its ownership of ~20 million NAN shares (about 20% of the company fully diluted). VMS Ventures has a good valuation in its own right based on the Hudbay JV plus a strong treasury. If you’re looking for base metal exposure with a potential PGM kicker down the line, North American Nickel and VMS Ventures seem like good bets to us.