First Nickel Inc.

First Nickel Inc.

May 12, 2009 16:45 ET

First Nickel Reports Financial and Operating Results for the Three Month Period Ended March 31, 2009

TORONTO, ONTARIO--(Marketwire - May 12, 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 month period ended March 31, 2009.

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

Summary / Highlights

- First quarter net loss of $2.5 million ($0.02 per share) compared to a net loss of $1.4 million in the first quarter of 2008. The first quarter 2009 only reflects one month of sales revenue as the Company suspended mining operations at the Lockerby Mine in October 2008, and therefore only had one month of production available for settlement in 2009.

- At March 31, 2009, the Company was debt-free, and had net working capital of $4,923,946.

- New resource estimate announced on the Lockerby Depth project.

- Full feasibility study completed on Lockerby Depth, showing robust economics, including an internal rate of return of 40.5%, assuming an average nickel price of US$7.00 per pound.

- New resource estimate announced on Conwest Deposit.

Lockerby Mine Operations

The Lockerby Mine was placed on a care and maintenance program on October 19, 2008 following the rapid decline in the price of nickel.

The focus during the winter months has been to contain site costs as much as possible, while ensuring all maintenance and safety inspection schedules were adhered to. The skeleton staff at the mine worked extremely hard through a difficult winter to keep systems functioning. Nonetheless costs for the period averaged over $400,000 per month, reflecting higher than anticipated energy costs, and additional expenses incurred for equipment rentals and materials required, when control points for the ponds within the mine surface water catchment area became taxed, due to unusually warm and wet weather periods.

Early in the winter, the large membrane-covered ore storage building collapsed due to a combination of snow and wind loading and then structural failure arising from improper assembly. The building has been removed and is being replaced by the supplier at its cost.

Financial Results

The following table presents a summary of the results of operations for
the three month periods ended March 31, 2009 and 2008:

March 31,
2009 2008

Sales Revenue $ 4,483,662 $ 9,962,797

Operating costs excluding amortization 4,173,121 10,422,444
Termination, care and maintenance costs 1,430,234 -
Amortization of mining properties and
equipment 719,631 907,452
Accretion of asset retirement obligations 48,300 47,000
6,371,286 11,376,896

Operating loss from mining operations (1,887,624) (1,414,099)

General and administration 525,338 516,425
Stock-based compensation 179,800 199,774
Foreign exchange (gain) loss (61,225) 60,057
Depreciation and amortization 4,359 6,051
Interest and other expenses 31,475 106,928
Interest and other income (48,881) (273,108)
652,007 616,127

Loss before taxes (2,539,631) (2,030,226)

Provision for (recovery of) income and
mining taxes - (606,109)

Net loss for the period $ (2,539,631) $ (1,424,117)

Loss per share - basic and diluted $ (0.02) $ (0.01)

Weighted average number
of common shares outstanding 155,548,098 140,308,515

For the three month period ended March 31, 2009, the Company recorded a net loss of $2,539,631, or $0.02 per share, compared to a net loss of $1,424,117, or $0.01 per share, recorded for the three month period ended March 31, 2008. The Company has continued to record a full valuation allowance against any income tax recovery for the period.

The three month period ended March 31, 2009, includes only one month of sales revenue as the Company suspended mining operations at the Lockerby Mine in October 2008, and therefore only had one month of production available for settlement in 2009.

Revenues in the first quarter of 2009 amounted to $4,483,662 and were based on the settlement of the ore delivered to Xstrata in October 2008.

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

Q 1 Q 1
2009 (i) 2008
Sales by Payable Metal
Nickel - pounds 486,849 620,944
Copper - pounds 287,827 480,639
Cobalt - pounds 9,096 12,571
Ave. price received - US$/lb
Nickel $5.76 $12.24
Copper $1.58 $3.07
Cobalt $13.83 $45.90
Ave. Exch. Rate Realized
US $ 1 equals Canadian $ $1.2280 $1.0031

(i) only includes one month of sales

Care and maintenance costs of $1,430,234 recorded in the first quarter of 2009 include ongoing costs of the staff retained at the mine site to maintain the mine in good standing, energy, taxes, insurance, equipment rentals and materials required.

General and administrative expenses in the first quarter of 2009 were $8,913 higher then 2008. The increase is attributable to an increase in compensation costs and consulting fees, offset by a decrease in investor relations costs.

Stock-based compensation costs of $179,800 recorded in the first quarter of 2009 include $173,802 of compensation expense related to previously granted stock options with graded vesting schedules. During the first quarter 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 will be expensed over the vested period.

A foreign exchange gain of $61,225 was recorded in the first quarter of 2009, versus an exchange loss of $60,057 in 2008. The exchange gain or loss is due to the timing on converting the US dollars between when advances are received from the ore shipped to Xstrata and when the final settlement occurs.

Interest and other expenses decreased by $54,312 in the first quarter of 2009, compared to 2008. Interest and other expenses is comprised of interest paid on advances received from Xstrata on the ore delivered to their facilities, and a provision for the interest on the unspent flow through funds (Part XII.6 tax) to be paid to Canada Revenue Agency.

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 achievements in the first quarter of 2009 are summarized as follows:

- 1,019 metres of drilling were completed on the Lockerby South Footwall Program.

- 2,637 metres of drilling were completed on the Raglan Hills property.

Exploration efforts in the first quarter included work on the Lockerby East, Lockerby South and Raglan Hills properties.

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

A total of 200 metres of surface diamond drilling was completed on the Lockerby East property finishing a hole started in the fourth quarter of 2008 testing the basal contact of the Sudbury Igneous Complex to the east.

A total of 1,019 metres of diamond drilling was completed on Lockerby South property. The program consisted of deepening existing holes from approximately 500 metres to a depth of approximately 1,500 metres. These drill holes will provide platforms for a Radio Imaging (RIM) borehole geophysical surveys planned for later in 2009. No significant footwall hosted sulphide mineralization has been observed to date, however, sections of Sudbury Breccia have been noted throughout the hole.

A new resource estimate was completed in the first quarter on the Conwest Deposit on the West Graham Property. Scott Wilson Roscoe Postle Associates Inc. was retained by First Nickel to carry out a resource estimate and prepare an independent technical report for the Conwest Zone on the West Graham Property, Sudbury area, Ontario. This technical report conforms to NI 43-101 Standards of Disclosure for Mineral Projects. Scott Wilson RPA visited the property on November 26, 2008. Results of the resource estimate were press released on February 10th, 2009.

A diamond drill program is scheduled to begin in the second quarter on the West Graham Property and will focus on the footwall units to the south of the basal contact of the Sudbury Igneous Complex. 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. The Company is required to expend an aggregate total of $6 million on exploration by December 31, 2009 to earn a 70% interest in the West Graham Property from Landore Resources Canada Incorporated. The overall budget for 2009 is $1.5 million.

A RIM geophysical survey is scheduled for the second quarter on the Morgan-Lumsden Property. The RIM geophysical survey was originally scheduled in 2008 but was postponed due to deteriorating safety conditions. The Company will determine whether to continue with the option on the Morgan-Lumsden Property after a review of the interpreted results of the RIM geophysical survey.

A total of 2,637 metres of diamond drilling was completed on Raglan Hills Joint Venture property in the first quarter of 2009. The program has been designed to test priority geophysical anomalies identified in the airborne survey completed in 2008. A total of three targets were drilled in February and March. Disseminated and/or veined sulphide mineralization, hosted in mafic intrusive units was identified in all three target areas. Assay results are pending.

Drilling will continue in the second quarter of 2009, testing targets identified on the recently optioned McCoy Mine property located to the east of the main property package. The McCoy Mine property has been added to the Raglan Hills Joint Venture and was optioned from a prospector due to the presence of two untested geophysical anomalies associated with mafic intrusive rocks.


The completion of the Feasibility Study on Lockerby Depth has provided the Company with an independent report which supports management's view of the value of the asset to the Company. The Company has initiated discussions with various groups with a view to securing funding for the project. Although there can be no assurance that it will succeed with a financing, the Company has noted that markets have recently become more receptive to mine financings, and it is of the view that risk in this instance is better controlled than many other projects seeking capital.

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.

Non-GAAP Performance Measures

This press release contains non-GAAP measures like operating cost per tonne of ore, net cash cost per pound of nickel, etc. Please see the Company's MD&A on SEDAR for discussion on non-GAAP performance measures.

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 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 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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