First Nickel Inc.
TSX : FNI

First Nickel Inc.

November 10, 2009 18:30 ET

First Nickel Reports Financial and Operating Results for the Three and Nine Month Period Ended September 30, 2009

TORONTO, ONTARIO--(Marketwire – Nov. 10, 2009) - First Nickel Inc. ("First Nickel" or the "Company")(TSX:FNI) announces that it has filed with the Canadian securities regulatory authorities its unaudited financial statements, and management's discussion and analysis for the three and nine month period ended September 30, 2009.

Complete results will also be available on SEDAR and on the Company's website at www.firstnickel.com. All dollar amounts are expressed in Canadian currency unless otherwise stated. 

Summary / Highlights

  • Third quarter net loss of $1,554,114 ($0.01 per share), compared to a net loss of $936,139 ($0.01 per share) in the third quarter of 2008.

  • At September 30, 2009, the Company had a net working capital of $10,403,391.

  • On July 23, 2009, the Company completed a US$10 million financing with Resource Capital Fund IV L.P (see press release No. 2009-08).

  • An update of the economic modeling in the April 2009 Feasibility Study was press released (No. 2009-11) on October 19, 2009.

  • 4,287 metres of drilling were completed on the West Graham Property.

Lockerby Mine Operations

The Lockerby Mine continues to be on a care and maintenance program. The focus since October 2008 has been to contain site costs, while ensuring compliance on all maintenance and safety inspection schedules. The care and maintenance costs during the third quarter averaged approximately $312,000 per month, compared to an average of approximately $426,000 per month incurred in the first six months of 2009.

Financial Results

The following table presents a summary of the results of operations for the three and nine month periods ended September 30, 2009 and 2008:

 Three months ended   Nine months ended 
 September 30,   September 30, 
 2009  2008   2009  2008 
 Unaudited   Unaudited 
                 
Sales Revenue$-  $12,541,220   $4,483,662  $36,085,014 
                 
Operating costs excluding amortization -   11,717,554    4,173,121   34,771,161 
Care and maintenance costs 935,230   -    3,494,172   - 
Accretion on asset retirement obligations 48,300   47,000    144,900   141,000 
Amortization of mining properties                
and equipment -   1,378,517    719,631   3,801,849 
  983,530   13,143,071    8,531,824   38,714,010 
                 
Operating loss from mining operations (983,530)  (601,851)   (4,048,162)  (2,628,996)
                 
General and administrative 350,620   483,988    1,423,826   1,571,890 
Stock-based compensation 5,181   196,153    352,218   641,396 
Depreciation and amortization 4,359   6,051    13,077   18,153 
Foreign exchange (gain) loss (64,979)  161,024    (122,209)  298,276 
Interest on convertible loan 177,948   -    177,948   - 
Accretion on convertible loan 95,525   -    95,525   - 
Interest and other expenses 20,045   71,676    179,865   290,395 
Loss on sale of marketable securities -   -    21,429   - 
Interest and other income (15,115)  (123,132)   (79,399)  (556,949)
  570,584   795,760    2,059,280   2,263,161 
                 
Loss before taxes (1,554,114)  (1,397,611)   (6,107,442)  (4,892,157)
                 
Recovery of future                
income and mining taxes -   (461,472)   -   (1,539,725)
                 
Net loss for the period$(1,554,114) $(936,139)  $(6,107,442) $(3,352,432)
                 
Net loss per share:                
Basic and diluted$(0.01) $(0.01)  $(0.04) $(0.02)
                 
Weighted average number of common                
shares outstanding 157,698,098   148,048,098    155,834,765   141,439,487 

For the three month period ended September 30, 2009, the Company recorded a net loss of $1,554,114, or $0.01 per share, compared to a net loss of $936,139, or $0.01 per share, recorded for the three month period ended September 30, 2008. The Company has continued to record a full valuation allowance against any income tax recovery for the period.
No sales revenue was recorded in the three month period ended September 30, 2009. The year-to-date revenue of $4,483,662 was from the settlement of the ore delivered to Xstrata in October 2008.

The following table sets out selected sales information for the periods indicated:

 Q 3
 2009
Q 3
 2008
YTD
 2009 (i)
YTD
 2008
Sales by Payable Metal    
 Nickel – pounds-1,031,267486,8492,596,393
 Copper – pounds-544,949287,8271,627,640
 Cobalt – pounds-18,5439,09648,659
Ave. price received – US$/lb    
 Nickel-$8.96$5.76$10.39
 Copper-$3.46$1.58$3.40
 Cobalt-$31.32$13.83$39.93
Ave. Exch. Rate Realized    
 US $ 1 = Canadian $-$1.0389$1.2280$1.0188

(i) only includes one month of sales

Care and maintenance costs of $935,230 recorded in the third quarter of 2009 are lower than budgeted, and include ongoing costs of the staff retained at the mine site, energy, taxes, insurance, equipment rentals and materials required to maintain the mine in good standing. The reduced costs reflect the continued efforts of the mine staff to pare all discretionary expenditures, and contain variable costs such as energy and outside services.

General and administrative expenses of $350,620 recorded in the third quarter of 2009 were approximately 35% lower than the expenditures recorded in the first two quarters of 2009, and are $133,368 (27%) lower than expenditures recorded in the third quarter of 2008. The decrease is mostly attributable to an overall reduction in costs that is part of the Company's goal of conserving cash.

Stock-based compensation costs of $5,181 recorded in the third quarter of 2009, relate to previously granted stock options with graded vesting schedules. In March of 2009, 390,000 stock options were granted to certain employees at an exercise price of $0.15. The fair value of the options granted was estimated at the grant date to be $17,993. This amount is being expensed over the vesting period.

A foreign exchange gain of $64,979 was recorded in the third quarter of 2009, versus an exchange loss of $161,024 in 2008. Exchange gains or losses arise from the revaluation of the US dollar cash account and the US dollar loan account.

The interest payable on the loan facility with RCF amounted to $177,948 during the third quarter. In October 2009, RCF notified the Company of their option to receive common shares of the Company in payment of this interest. A total of 1,412,534 common shares were issued to RCF in full satisfaction of this liability. 
Interest and other expenses of $20,045 recorded in the third quarter of 2009, include a provision for the interest to be paid to Canada Revenue Agency on the unspent flow-through funds (Part XII.6 tax), and costs incurred on mineral properties that were previously written off.
Interest and other income is mostly made up of interest earned on cash balances, and on short term deposits. The lower interest income in 2009, compared to 2008, reflects lower interest rates, and lower cash balances.

Exploration Activity

Exploration activities in the third quarter of 2009 are summarized as follows:

  • 4,287 metres of drilling were completed on the West Graham Property.
  • 789 metres of drilling were completed on the Belmont Project.

The Company has funding to complete its exploration programs through the remainder of 2009, and will meet all of the exploration expenditure requirements to maintain its prospective exploration projects in Ontario, including optioned and staked mining properties.

A total of 4,287 metres of diamond drilling was completed on the West Graham Property, focusing on the footwall units to the south of the basal contact of the Sudbury Igneous Complex. No significant nickel or platinum group metal intercepts have been reported. However, several sections of the favourable host rock for high-grade footwall-type deposits (Sudbury Breccia) were intersected. These holes will provide platforms for a RIM borehole geophysical survey that will be completed in conjunction with the surveying of the Lockerby South property in the fourth quarter. 

The Company will have spent the required $6 million on exploration by December 31, 2009 and, upon the final payment of $50,000, it will have earned a 70% interest in the West Graham Property from Landore Resources Canada Incorporated ("Landore"). No additional exploration expenditures are required on the property. Should Landore opt not to form a 70:30 joint venture with the Company, the Company can earn an additional 15% by financing a feasibility study on the project.

A total of 789 metres of diamond drilling was completed on the Belmont project in the third quarter of 2009. A total of 4 holes were drilled testing a target in Marmora Township. Drilling was ongoing at the end of the quarter and analytical results are pending.

Surface mapping and prospecting was completed on priority targets identified by the 2008 airborne geophysical survey on the Belmont and Raglan Hills projects in the third quarter. Selected grab samples were submitted for assay analysis. No anomalous nickel mineralization was identified during the prospecting program.

Outlook

The closing of the US$10 million financing in July resulted in a substantial improvement in the Company's balance sheet. There is sufficient working capital to cover current care and maintenance costs at the Lockerby Mine and general and administrative obligations to beyond the year 2010. More importantly, the new funds will be used to advance the engineering and planning for the Lockerby Depth project, and possibly initiate components of the capital program that can expedite the launch of the full project. With a stronger balance sheet, and the association with a respected and will-known resource investment group, the Company is optimistic that it will be successful in securing the full financing for its Lockerby Mine development in the months ahead.

Qualified Person

The foregoing scientific and technical information has been prepared or reviewed by Paul C. Davis, P.Geo., Vice-President Exploration of the Company. Mr. Davis is a "qualified person" within the meaning of National Instrument 43-101.

The Company follows rigorous quality control practices and procedures in full compliance of NI 43-101, and these are described on the Company's website and in all technical press releases.

First Nickel is a Canadian mining and exploration Company, whose principal asset is the Lockerby Mine near Sudbury, Ontario. In addition to its Lockerby operation, the Company maintains an active exploration program on projects near the mine around Sudbury, and elsewhere in Ontario. First Nickel's shares are traded on the TSX under the symbol FNI.

This news release contains forward-looking statements, which are subject to certain risks, uncertainties and assumptions, including the cash flows, metal prices, decrease costs, increase output, expected production, and expected exploration expenditures. A number of factors could cause actual results to differ materially from the results discussed in such statements, and there is no assurance that actual results will be consistent with them. Such factors include fluctuating metal prices, lower unit costs and other factors described in the Company's most recent Annual Information Form under the heading "Risk Factors" which has been filed electronically by means of the System for Electronic Document Analysis and Retrieval ("SEDAR") located at www.sedar.com. Such forward-looking statements are made as at the date of this news release, and the company assumes no obligation to update or revise them, either publicly or otherwise, to reflect new events, information or circumstances, except as may be required under applicable securities law.

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