First Nickel Inc.
TSX : FNI

First Nickel Inc.

November 13, 2013 17:00 ET

First Nickel Reports Financial and Operating Results for the Three and Nine Months Ended September 30, 2013

TORONTO, ONTARIO--(Marketwired - Nov. 13, 2013) - First Nickel Inc. ("FNI" or the "Company") (TSX:FNI) announces its results for the three and nine months ended September 30, 2013. The Company's unaudited condensed interim financial statements and management's discussion and analysis for the period have been filed on SEDAR and will be available at www.sedar.com and on the Company's website at www.fnimining.com. This news release should be read in conjunction with the Company's financial statements and management's discussion and analysis for the period ended September 30, 2013. This news release contains forward-looking information that is subject to the risks and assumptions set out in our cautionary statement on forward-looking information, which is located at the end of this news release. (All dollar amounts herein are in Canadian funds unless otherwise indicated.)

HIGHLIGHTS FOR THIRD QUARTER 2013

  • Processing agreement: As announced in a press release dated September 27, 2013, effective July 12, 2013, the Company signed an amended processing agreement with Glencore Canada Corporation ("Glencore"), resulting in ore sales that are based on the gross metal value (or "GMV") of ore shipped, net of a specified percentage. Management expects that the amended agreement (or "GMV agreement") will allow the Lockerby Mine to achieve improved operating margins, and that it will reduce the volatility of FNI's earnings and increase the predictability of its cash flows in the future.
  • Production: The Lockerby Mine produced 3.1 million pounds of contained nickel and 1.7 million pounds of contained copper during the third quarter of 2013 and, in the year to date, 9.0 million pounds of contained nickel and 5.4 million pounds of contained copper were produced through September 30, 2013.
  • Guidance: The Company reaffirms its 2013 outlook for production and costs, which have been adapted to reflect the GMV agreement. See the "Reaffirmation of Outlook for 2013" section.
  • Revenue: Revenue for the three and nine months ended September 30, 2013 was $12.3 million and $54.1 million, respectively. Revenue in the third quarter includes a $0.4 million charge for the reduction in the price of nickel produced, compared to the price recorded as provisional revenue in prior periods.
  • Total cash production costs1: Cash production costs were $9.0 million and $36.5 million for the three and nine months ended September 30, 2013, respectively. In GMV terms, cash production costs per payable pound of nickel were $5.87 during the third quarter of 2013. See the "Reaffirmation of Outlook for 2013" section.
  • Development: Ramp development totaled 38 metres and 333 metres for the three and nine months ended September 30, 2013, respectively, and lateral development totaled 410 metres and 1,296 metres for the three and nine months ended September 30, 2013, respectively.
  • Net loss: The Company had a net loss of $33.0 million and $50.4 million for the three and nine months ended September 30, 2013, respectively, including non-cash impairment charges totalling $27.8 million recorded in the third quarter.
  • Liquidity: The unrestricted cash balance at September 30, 2013 was $0.9 million. The Company had US$7.1 million available to draw under the BNS credit facility at September 30, 2013.

CEO Commentary:

Mr. Thomas Boehlert, President and CEO of FNI, said "As a result of the nickel price environment, the Lockerby mine essentially broke even in the third quarter. In order to address continued market weakness, the Company has improved the terms of its ore off-take agreement and decided to stop ramp development at the 68 level, materially reducing planned 2014 capital expenditures. While the market environment has created challenges at Lockerby, we believe it will also provide opportunities to acquire attractive base-metal assets, consistent with our strategy."

1 For additional information, see Non-IFRS Financial Measures section.

Summary of Financial and Operating Results

Under the GMV agreement, the Company is paid for accountable GMV, which is based on the contained metal, multiplied by a specified percentage that is determined based on the average nickel grade of the ore delivered. There are no specifically-identified processing costs under the GMV agreement given that the specified GMV percentage results in revenues that are paid and recorded net of processing costs. As such, the change from the Original Agreement to the GMV agreement has resulted in a change in the classification of various revenue and expense items.

Under the GMV agreement, ore-treatment costs are no longer included in the cost of goods sold, but are netted against nickel and by- product revenues. All things being equal, the accounting under the GMV agreement would result in lower revenue, lower cost of goods sold and lower by-product revenue than under the Original Agreement.

The Company reported revenue of $54.1 million, total cash production costs of $36.5 million, and a net loss of $50.4 million for the nine months ended September 30, 2013.

The following table presents the unaudited statements of comprehensive loss for the three and nine months ended September 30, 2013:

For the three months ended For the nine months ended
Canadian $, except for share amounts September 30, 2013 September 30, 2012 September 30, 2013 September 30, 2012
Revenue $ 12,302,948 $ 23,860,876.00 $ 54,063,039 $ 23,043,241.00
Cost of goods sold 12,719,234 19,684,443 53,154,365 19,684,443
Depreciation 3,794,242 4,179,587 10,586,163 4,179,587
Impairment of tangible assets 23,352,776 - 23,352,776 -
Operating Loss (27,563,304 ) (3,154 ) (33,030,265 ) (820,789 )
Expenses
General and administrative 923,566 1,052,607 3,058,366 2,763,380
Impairment of mineral properties 4,427,529 - 4,427,529 -
Depreciation and amortization 2,557 3,060 7,577 9,180
Loss on disposal of mobile equipment - - 685,319 -
Loss on extinguishment of debt 28,634 - 5,085,990 -
Interest expense paid in equity 235,520 235,520 876,127 706,560
Change in fair value of equity conversion option (629,366 ) (890,852 ) (341,069 ) (3,155,067 )
Accretion on convertible loan 357,264 550,846 1,454,707 1,566,130
Accretion of reclamation liability 15,499 24,840 51,306 74,283
Stock-based compensation 145,896 242,295 446,638 822,112
Financing costs 95,792 77,853 371,186 77,853
Interest expense 125,372 70,696 419,088 103,708
Foreign exchange (gain) loss (558,609 ) 141,715 115,877 55,068
Other expenses 271,913 - 757,369 -
Other income - (1,506 ) - (80,894 )
5,441,567 1,507,074 17,416,010 2,942,313
Operating loss before taxes (33,004,871 ) (1,510,228 ) (50,446,275 ) (3,763,102 )
Income & mining taxes (recovery) - (79,684 ) - 41,909
Net loss and comprehensive loss $ (33,004,871 ) $ (1,430,544 ) $ (50,446,275 ) $ (3,805,011 )
Loss per share - basic and diluted $ (0.05 ) $ - $ (0.09 ) $ (0.01 )
Weighted average number of common shares outstanding - basic 607,669,686 515,478,202 578,090,529 512,554,417

Lockerby Mine Operating Results

Safety, Health & Environment

The Company's directors, management, employees and contractors continue to place the highest priority on safety, health and the environment. During the nine months ended September 30, 2013, there were no lost time injuries or reportable environmental incidents.

Production

The Lockerby Mine produced 3.1 million pounds of contained nickel and 1.7 million pounds of contained copper during the three months ended September 30, 2013. On a year-to-date basis, Lockerby produced 9.0 million pounds of contained nickel and 5.4 million pounds of contained copper during the nine months ended September 30, 2013. See the "Reaffirmation of Outlook for 2013" section.

In the third quarter, a total of 59,643 tonnes of ore were mined at Lockerby, which operated solely under the GMV agreement for the three- month period. The average estimated nickel head grade was 2.23%, which resulted in an estimated 1.6 million pounds of GMV-net payable nickel and 0.8 million pounds of GMV-net payable copper in the third quarter. The average estimated copper head grade in the third quarter was 1.39%.

For ore mined at Lockerby prior to July 2013, production was estimated on a provisional basis consistent with the Lockerby Ore Sales and Purchasing Agreement (the "Original Agreement"). Under the Original Agreement, which ceased to apply to Lockerby production after June 30, 2013, 115,828 tonnes of ore were mined at Lockerby during the first half of the year, producing an estimated 4.5 million pounds of payable nickel, and an estimated 3.4 million pounds of payable copper. The associated average estimated head grades for nickel and copper were 2.38% and 1.31% respectively, and the respective estimated metallurgical recovery rates averaged 80.5% and 92.1%.

For the three months ended For the nine months ended
September 30, 2013 September 30, 2012 September 30, 2013 September 30, 2012
Tonnes of ore produced 59,643 60,060 175,471 150,601
Production (estimated)
Estimated contained nickel (pounds) 3,059,052 3,018,936 9,046,810 6,607,158
Estimated payable nickel (pounds) - Original Agreement - 2,027,000 4,513,199 4,927,000
Estimated net payable nickel (pounds) - GMV agreement 1,530,784 - 1,530,784 -
Nickel head grade 2.33 % 2.28 % 2.36 % 1.99 %
Estimated contained copper (pounds) 1,691,837 1,959,660 5,405,993 4,216,628
Estimated payable copper (pounds) - Original Agreement - 1,396,000 3,367,544 3,396,000
Estimated net payable copper (pounds) - GMV agreement 802,636 - 802,636 -
Copper head grade 1.29 % 1.48 % 1.41 % 1.27 %
Tonnes of ore shipped 59,501 58,674 174,471 149,840

Revenue

The Company recorded total revenue of $12.3 million in the third quarter of 2013, and $54.1 million in the nine months ended September 30, 2013. Third-quarter revenues are below the prior-year third quarter by almost half, including the impact of lower realized nickel prices (by $0.77 per pound or 11%), partially offset by weaker Canadian-US dollar exchange rates, which lead to higher values for revenues as presented in Canadian dollars. However, the principal factor resulting in lower revenues during the third quarter of 2013 was the impact of GMV accounting, which resulted in Q3 gross metal values that were reduced by GMV deductions, whereas revenues under the Original Agreement in the prior year and first half of 2013 were recorded gross of processing costs. Under both the GMV and Original Agreements, revenue is provisionally recorded when the Corporation delivers mineral ores to Glencore for processing, at which point the risks and rewards of ownership of the mineral ores transfers to Glencore.

Management expects that the GMV agreement will enable the Lockerby Mine to achieve improved operating margins in the future, resulting from mutually favourable settlement terms for both parties. The settlement certainty under the GMV agreement is expected to reduce the volatility of FNI's revenues, and increase the predictability of future cash flows.

The change in accounting under the GMV agreement has resulted in a change to the Company's performance metrics, in order to ensure that the Company's performance is comparable to prior periods. Previously, the Company's performance metrics included payable nickel and copper, total cash production costs and cash production costs per pound of payable nickel produced. Under the GMV agreement, the Company's performance metrics will include contained nickel and copper, net-GMV nickel and copper payable pounds, total cash production costs and cash production costs per net-GMV pound of nickel produced. See the "Reaffirmation of Outlook for 2013" section for a discussion about the impact on operational metrics, and the manner in which the economic performance of the Lockerby Mine under the GMV agreement may be compared to prior periods.

Under the Original Agreement for ore sales to Glencore, estimated grade determined by the Company's geology department was subject to change following the receipt of milling results from Glencore, which could be protracted, depending on ore blending considerations at the Glencore processing facility. Differences between estimated Lockerby grade and final milled grade would result in quantity adjustments that were recorded in revenue in the period that the new information became available.

Under both the GMV agreement and the Original Agreement, revenues recorded on a provisional basis are subject to change due to changes in commodity prices and US-Canadian dollar exchange rates between initial delivery of ore and final settlement under the respective agreement. The Original Agreement had longer settlement timeframes than the GMV agreement, which increased the volatility arising from fluctuating market prices for metals. As at September 30, 2013, final pricing for ore processed under the Original Agreement was not yet available for all ore and, as such, changes in current market metal prices or currency exchange rates will continue to be recorded in revenue and reflected in the statement of comprehensive loss at each reporting date, and on final settlement, based on actual final prices. All such final settlements under the Original Agreement are expected to be substantially realized by the end of 2013.

For the three months ended For the nine months ended
Canadian $, September 30, 2013 September 30, 2012 September 30, 2013 September 30, 2012
Provisional nickel revenue - Original Agreement $ (126,191 ) $ 15,291,289 $ 32,954,156 $ 37,154,535
Provisional net nickel revenue - GMV agreement 9,090,476 - 9,090,476 -
Nickel quantity adjustment 171,365 (338,885 ) 808,006 (338,885 )
Nickel price adjustment (558,798 ) 1,864,487 (4,845,878 ) (1,004,904 )
Provisional by-product revenue - Original Agreement - 5,614,000 12,034,074 13,978,000
Provisional net by-product revenue - GMV agreement 3,765,287 - 3,765,287 -
By-product price and quantity adjustment - current period (39,191 ) 1,374,037 818,037 1,297,375
By-product price and quantity adjustment - previous period - - (446,682 ) -
Forward sales agreements - 55,948 (114,437 ) 94,719
Total Revenue $ 12,302,948 $ 23,860,876 $ 54,063,039 $ 51,180,840

Total cash production costs2

Total cash production costs, which are based on cost of sales less by-product revenue, were $9.0 million in the third quarter of 2013 and $36.5 million for the nine months ended September 30, 2013. Total cash production costs were principally composed of labour, underground mining costs, surface ore-handling and trucking costs, treatment costs prior to July 1, 2013, and principal payments on equipment leases, partly offset by by-product revenue. Due to the change from the Original Agreement to the GMV agreement, the third- quarter total cash production costs exclude treatment costs, and the associated by-product credits are on a net-GMV basis. As a result of this difference, cash production costs per payable pound of nickel are not comparable between the third quarter of 2013 and earlier periods. Accordingly, the table below shows two different metrics for cash production costs per pound: a GMV-net metric for the third quarter of 2013 ($5.87 per pound), and the previous metric reported for the six months ended June 30, 2013, consistent with the Original Agreement ($6.10 per payable pound). For additional information, see the "Reaffirmation of Outlook for 2013" section.

2 For additional information, see Non-IFRS Financial Measures section.

For the three months ended For the six months ended For the nine months ended For the three months ended For the nine months ended
Canadian $, except production amounts and USD amounts as specified September 30, 2013 June 30, 2013 September 30, 2013 September 30, 2012 September 30, 2012
Cost of goods sold1 $ 12,719,234 $ 40,435,131 $ 53,154,365 $ 19,684,443 $ 54,560,443
Provisional by-product revenue2 (3,765,287 ) (12,034,074 ) (15,799,361 ) (5,534,717 ) (13,898,717 )
By-product revenue - quantity and price adjustments - Original Agreement 39,191 (857,228 ) (818,037 ) (1,374,037 ) (1,297,375 )
Forward sales agreements related to by-products - (24,723 ) (24,723 ) (177,928 ) (216,699 )
Total cash production costs3 (net of by-product credits) $ 8,993,138 $ 27,519,106 $ 36,512,244 $ 12,597,761 $ 39,147,652
Estimated payable nickel production (pounds) - Original Agreement - 4,513,199 4,513,199 2,027,000 4,927,000
Cash production cost per pound of nickel3,4 produced - original agreement $ 6.10 $ 6.10 $ 6.21 $ 7.95
Estimated net payable nickel production (pounds) - GMV agreement 1,530,784 1,530,784 - -
Cash production cost per pound of nickel3,4 produced - GMV agreement $ 5.87 $ 5.87
1 Cost of goods sold does not include depreciation.
2 Revenue presented for the nine months ended September 30, 2013 includes revenue based on the Original Agreement from January 1, 2013 to June 30, 2013 and revenue net of GMV deductions per the GMV agreement, from July 1, 2013 to September 30, 2013.
3 For additional information, see Non-IFRS Financial Measures section.
4 Cash production cost per pound based on cash production cost for the commercial production period divided by associated net payable nickel production for the same period. Original Agreement unit costs for 6 months are not mixed with GMV unit costs for Q3. See "Reaffirmation of Outlook for 2013".

Capital

The Company made capital expenditures of $2.4 million in the third quarter and $9.4 million during the nine months ended September 30, 2013, mostly representing underground development costs at the Lockerby Mine.

The development rate for the three and nine months ended September 30, 2013 averaged 4.9 and 6.0 metres per day, respectively.

Impairment of tangible assets

The Company revised the Lockerby mine plan during the three months ended September 30, 2013, in response to the significant downturn in the market prices of nickel and copper, and the associated weakened economics for deeper levels of the mine. The change focused the revised mine plan on the Lockerby 67 and 68-level zones, which resulted in lower expected future production over the life of the mine, triggering a review for impairment. Upon assessment, including updated assumptions and estimates, the Company recorded an impairment charge of $23.4 million associated with the Lockerby Mine during the three months ended September 30, 2013.

Exploration

The Corporation's exploration strategy is focused on base metals and guided by the objectives of increasing resources and reserves in conjunction with the development and/or acquisition of quality projects, resulting in multiple mining operations. Due to the downturn in nickel prices seen through 2013, the Corporation has not incurred any significant exploration expenditures on its exploration properties since December 31, 2012.

Lockerby South

During the three months ended September 30, 2013, the Company recorded an impairment charge of $0.5 million in the statement of comprehensive loss associated with the Lockerby South exploration asset. The impairment assessment of this exploration asset was triggered by the failure of the exploration program at Lockerby South to find any significant mineralized zones with economic viability.

Link

During the three months ended September 30, 2013, the Company recorded an impairment charge of $4.0 million in the statement of comprehensive loss associated with the Link exploration asset. The impairment assessment of this exploration asset was triggered by the current low metal price environment and the low-grade mineralization discovered at the Link exploration area, which is not economically viable, at current metal prices.

REAFFIRMATION OF OUTLOOK FOR 2013

The amended ore sales contract that was implemented as of July 1, 2013 necessitates an adaptation of the Company's guidance, for comparability purposes. As discussed in the "Revenue" section, the GMV agreement resulted in revenues and by-product revenues that are net of processing-cost and metallurgical-accounting deductions, which generates lower values for net revenues and by-product revenues and cost of sales, making them not comparable to revenues, cost of goods sold or total cash production costs3 reported for the first half of 2013 or in prior periods. The underlying drivers of operational results that do not change, and are thus comparable before and after the GMV agreement, are as follows:

  • Contained metal production (pounds of nickel and copper); and
  • Mine site operating costs (site operating costs before deducting by-product credits).

Under the GMV agreement, the Company reaffirms its outlook for 2013, as follows:

  • Full production levels achieved by the end of Q1 2013;
  • 2013 production of between 12.1 million to 13.5 million pounds of contained nickel, which is consistent with previously-released guidance of 9.0 million to 10.0 million pounds of payable nickel;
  • Total cash production costs3 estimated to be between $35.3 million and $38.6 million in 2013 under the GMV agreement, which is consistent with previously-released guidance of total cash production costs1 between $61.0 million and $67.0 million under the Original Agreement; and
  • Cash production costs3 per net-GMV pound of nickel to be between $6.19 and $6.50 for the second half of 2013 under the GMV agreement, which is consistent with previously-released guidance of cash production costs3 per payable pound of nickel between $6.10 and $6.40 on a full-2013 basis, under the Original Agreement.

3 For additional information, see Non-IFRS Financial Measures section.

The tables below show the Corporation's guidance ranges that were announced during the first quarter of 2013, together with reaffirmed guidance ranges adapted to the GMV contract. In each table, contained-metal production and mine site operating costs are included and show the same values, thus demonstrating consistency between the original guidance and the reaffirmed guidance.

Original guidance (released Q1 2013)

Canadian $, except metal pounds H1 2013 Actual 2013
Payable nickel (millions of pounds) 4.5 9.0 - 10.0
Payable copper (millions of pounds) 3.3 6.1 - 6.7
Total cash production costs1 $ 27.5M $ 61.0M - $67.0M
Cash production cost per pound of nickel produced $ 6.10 $ 6.10 - $6.40
underlying drivers
Contained nickel (millions of pounds) 6.1 12.1 - 13.5
Contained copper lbs (millions of pounds) 3.3 7.2 - 7.9
Mine site operating costs $ 25.5M $ 55.3M - $60.8M
By-product credits $ (12.4M ) $ (27.8M) - $(30.7M )
Treatment costs $ 14.4M $ 33.5M - $36.9M
Total cash production costs $ 27.5M $ 61.0M - $67.0M
Assumptions: Cu per lb - US$3.50, CAD/USD $1.00
1 For additional information, see Non-IFRS Financial Measures section.
Reaffirmed guidance for 2013, adapted to the GMV contract
Canadian $, except payable pounds H2 2013 Outlook 2013
Contained nickel (millions of pounds) 6.1 - 6.7 12.1 - 13.5
Contained copper (millions of pounds) 4.2 - 4.4 7.2 - 7.9
Net GMV nickel (millions of pounds) 3.0 - 3.4
Net GMV copper (millions of pounds) 2.1 - 2.2
Total Cash Production Costs1 $ 19.2M - $21.0M $ 35.3M - $38.6M
Cash production cost per net GMV pound of nickel produced $ 6.19 - $6.50
underlying drivers
Mine site operating costs $ 27.6M - $30.4 $ 55.3M - $60.8M
By-product credits $ (8.4M) - $(9.3M ) $ (20.0M) - $(22.2M )
Total cash production costs $ 19.2M - $21.0M $ 35.3M - $38.6M
Assumptions: Cu per lb - US$3.50, CAD/USD $1.00
1 For additional information, see Non-IFRS Financial Measures section

Capital expenditures

Capital expenditures for 2013 are anticipated to be between $13 million and 16 million, the vast majority of which relates to underground development at the Lockerby Mine.

General and administrative

General and administrative expenses for 2013, excluding stock-based compensation, are estimated to be between $4 million and $5 million.

Financing costs are estimated to be approximately $5 million, including the prepayment of $2.4 million of interest on the RCF V and West Face loans, in connection with the debt restructuring in April 2013.

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 with National Instrument 43-101, and these are described on the Company's website and in all technical news releases.

About FNI

FNI is a Canadian mining and exploration Company. The Company's mission is to be the most dynamic North American emerging base metal mining company in which to work and invest, and to be respected in the communities in which we operate. FNI operates its Lockerby Mine in the Sudbury Basin in northern Ontario. The Lockerby Mine is producing at a rate of approximately 13 million pounds of contained nickel and approximately 8 million pounds of contained copper annually, providing a strong base from which to grow the Company. In addition to the Lockerby Mine, the Company owns exploration properties in the Sudbury Basin, the Timmins region of northern Ontario and the Belmont region of Eastern Ontario. FNI's shares are traded on the TSX under the symbol FNI.

Cautionary Statement Regarding Forward-Looking Information

Certain statements contained in this news release may contain forward-looking information about FNI. Forward-looking information can often be identified by the use of forward-looking terminology such as "anticipate", "believe", "continue", "budget", "forecast", "estimate", "schedule", "expect", "goal", "intend", "target", "potential", "objective", "may", "plan" or "will" or the negative thereof or variations thereon or similar terminology. Forward-looking information may include, but is not limited to: the continued operation of the Lockerby Mine; expectations of obtaining financing in the near term; future financial or operating performance of the Company and its projects; the future price of metals; the long term supply and demand for nickel; continuation of exploration activities; mineral reserve and mineral resource estimates; the realization of mineral resource estimates; costs of production and key supplies; capital, operating and exploration expenditures; forecasts of sales and production; costs and timing of the development of new and existing deposits; costs and timing of future exploration; the requirements for additional capital; government regulation of mining operations; environmental risks, reclamation expenses and/or title disputes or claims.

By its nature, forward-looking information is based on certain factors and assumptions which involve known and unknown risks, uncertainties and other factors which may cause the actual results, realization of mineral resources, performance or achievements of the Company, financial position or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking information. Accordingly, actual events may differ materially from those implied by any forward-looking information. Readers are cautioned not to place undue reliance on forward-looking information, which speak only as of the date the statements were made and readers are also advised to consider such forward-looking information while considering the risk factors set forth in the management's discussion and analysis for the year ended December 31, 2012 under the heading "Risks and Uncertainties" and under the heading "Risk Factors" in the Company's Annual Information Form for the year ended December 31, 2012. The Company disclaims any intention or obligation to publicly update or otherwise revise any forward-looking information whether as a result of new information, future events or other such factors which affect this information or to explain any material difference between subsequent actual events and such forward-looking information, except as required by applicable law.

1. Non‐IFRS Financial Measures The cash cost per pound of nickel produced, cash cost per net‐GMV pound of nickel produced and total production costs are non‐IFRS financial measures that do not have a standardized meaning under International Financial Reporting Standards ("IFRS") and, as a result, may not be comparable to similar measures presented by other companies. Management uses these statistics to monitor operating costs and profitability, and believes that certain investors use this information to evaluate the Company's performance and ability to generate cash flow in addition to conventional IFRS measures. Accordingly, it is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. On a GMV basis, total cash production costs include mining costs, surface ore‐handling and trucking costs, equipment operating lease costs, mine site general and administration costs, environmental costs and Vale royalties, less net‐GMV by‐product revenue, including forward sales gains and losses, and price adjustments from sales of copper, cobalt and PGE's.

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