First Nickel Inc.

First Nickel Inc.

July 03, 2008 08:22 ET

First Nickel Announces the Results of the Ni 43-101 Reserve Estimate and Mine Plan Prefeasibility Study Completed on Lockerby Depth Zone

- Probable Mineral Reserves of 1.84 million tonnes grading 1.69% Ni, 1.16% Cu and 0.06% Co - Estimated Net Cash Flow of $78.20 million over project life - 69.3% Internal Rate of Return ("IRR") - Net Present Value ("NPV") of $47 million at a 10% discount rate

TORONTO, ONTARIO--(Marketwire - July 3, 2008) - First Nickel Inc. ("First Nickel" or the "Company") (TSX:FNI) is pleased to announce that it has received the final report of the Prefeasibility Study ("Study") on the development and mining of the Lockerby Depth from Genivar Limited Partnership ("Genivar"), a consulting engineering firm based in Quebec City, Quebec.

First Nickel will hold an investor update conference call to discuss the mine plan and pre-feasibility study on the Lockerby Depth Zone today at 10:30 ET.

The Study indicates that the project has an IRR of 69.3% and would generate an undiscounted pre-tax cash flow of $78.20 million after capital recovery assuming average metal prices of US$10.23/lb Ni, US$ 2.31/lb Cu, and US$ 14.26/lb Co. An exchange rate of $C/$US 1.05 was used for this study. Based on a 10% discount rate the project has a $47.03 million NPV as calculated by Genivar.

Capital expenditures and ongoing investments, including a 15% contingency, are estimated to total $85.98 million of which $52.21 million is required during the preproduction phase.

Metal production would total 46 million pounds payable nickel, 37 million pounds payable copper, and 900 thousand pounds payable cobalt. The primary mining methods proposed were descendant longhole mining to the 65-1 Level (a continuation of the current plan) and ascendant longhole stoping between the 69 and 65-1 levels.

Unit cash operating costs net of by-product credits are estimated at US$6.08 per pound of nickel over the 5.2 year mine plan, attaining a low of US$5.70/lb in peak production years of 420,000tpy. Mine operating costs are estimated to average $130/tonne.

The Study derived the reserves from an estimated Indicated Mineral Resource of 2.89 million tonnes grading 1.78 percent nickel, 1.23 percent copper and 0.06 percent cobalt at a 1.0 percent nickel equivalent cut-off grade. Conversion of the upper part of the resources, above the 69 Level, to reserves yielded a Probable Mineral Reserve of 1.838 million tonnes grading 1.69 percent nickel, 1.16 percent copper and 0.06 percent cobalt. Reserves were estimated using a 1.5 percent nickel equivalent cut-off grade, 15 percent dilution, and 91 percent extraction.

Genivar believes that their Probable Mineral Reserve is conservative. Opportunities exist to reintroduce some of the stopes located on the margins of the deposit that were eliminated from the model, as a result of the increased cut off grade, once a new resource block model has been constructed using the higher cut off grade.

The Lockerby Depth Project Mine Plan schedule extracting the Probable Mineral Reserves would last 5.2 years consisting of 1.5 years of preproduction and 3.7 years of development and production at a full production rate of 1,200 tonnes per day or 420,000 tonnes per year. It also assumed launch of the program in 2008 with operations ongoing. The critical components of the capital plan that will increase output and reduce unit costs are the development program, replacing of the haulage fleet with electric trucks and optimized use of high speed personnel carriers. The plan now needs to be taken to feasibility level that will optimize the flow of funds by detailing the scheduling, determining the level of ongoing mining, and formalize the start dates.

"Our goal here, and the mandate we gave Genivar, was to build a plan that would allow us to bring our production up to the levels we need for economies of scale and generate strong cash flow with a capital outlay that is manageable and flexible," states William Anderson, President and CEO of First Nickel. "We now have the basis for a mine plan and capital program for the next 5-6 years within which we already see additional opportunities to increase cash flow, and maximize return.

"Significant additional upside potential remains for Lockerby. The production profile outlined in the Study does not incorporate any ore sourced from resources in other zones at the mine, and in the years ahead we also expect to continue to convert more of the resources in the Depth to reserves," concluded Mr. Anderson.

The foregoing technical information in this release was prepared or reviewed by Paul Davis, P.Geo., Vice President Exploration for First Nickel Inc., a "qualified person" as defined by National Instrument 43-101.

Genivar has reviewed this release and has confirmed that the information contained in this release is consistent with the Study. Marc Lavigne, Eng., M.Sc., Senior Mining Engineer and Project Manager, Luc Bourguignon, Eng., Senior Mining Engineer and Jacques Gauthier, P.Eng., Eng., MGP, Director Mining - Eastern Canada, are qualified persons as defined in NI43-101.

First Nickel will hold an investor update conference call to discuss the mine plan and pre-feasibility study on the Lockerby Depth Zone on Thursday July 3rd at 10:30 ET. The presentation by President and CEO Bill Anderson will be followed by a question and answer session.

To join the call:
Dial-in number(s): 416-641-6136 / 866-299-6655

Instant replay:
Dial-in number(s): 416-695-5800 / 800-408-3053 Passcode: 3265703
End date: July 10, 2008

First Nickel is a Canadian mining and exploration company. Its current activities are primarily focused on the Sudbury Basin in northern Ontario, the location of the company's producing property (the Lockerby Mine) and four of its exploration properties. First Nickel also has two exploration properties in the Timmins region of northern Ontario. First Nickel's shares are traded on the TSX under the symbol FNI.

This news release may contain forward-looking statements, which are subject to certain risks, uncertainties and assumptions. 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 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.

Contact Information

  • First Nickel Inc.
    William Anderson
    President & CEO
    (416) 362-7050 or Toll Free: 1-888-362-7050
    (416) 362-9050 (FAX)