First Nickel Inc.

First Nickel Inc.

August 11, 2009 19:01 ET

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

TORONTO, ONTARIO--(Marketwire - Aug. 11, 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 six month period ended June 30, 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

- Second quarter net loss of $2,013,697 ($0.01 per share) compared to a net loss of $992,176 ($0.01 per share) in the second quarter of 2008.

- At June 30, 2009, the Company had a net working capital of $2,215,833.

- Subsequent to June 30, 2009, the Company completed a US$10 million financing with Resource Capital Fund IV L.P.

- 1,979 metres of drilling were completed on the Raglan Hills Joint Venture property. The drill program has discovered a new zone of platinum and palladium mineralization.

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 since that time has been to contain site costs as much as possible, while ensuring compliance on all maintenance and safety inspection schedules. The care and maintenance costs are averaging approximately $400,000 per month. Technical and management staff has also been working on refining the capital costs and schedules for the Lockerby Depth project, in anticipation of securing full financing in the months ahead.

Financial Results

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

Three months ended Six months ended
June 30, June 30, June 30, June 30,
2009 2008 2009 2008
------Unaudited------- ---------Unaudited-------

Sales Revenue $ - $ 13,580,997 $ 4,483,662 $ 23,543,794
---------------------------- -----------------------------

amortization - 12,631,163 4,173,121 23,053,607
Care and
costs 1,128,708 - 2,558,942 -
Accretion of
obligations 48,300 47,000 96,600 94,000
of mining
and equipment - 1,515,880 719,631 2,423,332
---------------------------- -----------------------------
1,177,008 14,194,043 7,548,294 25,570,939
---------------------------- -----------------------------

loss from
operations (1,177,008) (613,046) (3,064,632) (2,027,145)
---------------------------- -----------------------------

General and
administration 547,868 571,477 1,073,206 1,087,902
compensation 167,237 245,469 347,037 445,243
and amortization 4,359 6,051 8,718 12,102
exchange loss
(gain) 3,995 77,195 (57,230) 137,252
Interest and
other expenses 107,204 111,791 159,820 218,719
Loss on
securities 21,429 - 21,429 -
Interest and
other income (15,403) (160,709) (64,284) (433,817)
836,689 851,274 1,488,696 1,467,401

Loss before
taxes (2,013,697) (1,464,320) (4,553,328) (3,494,546)

Recovery of
future income
and mining taxes - (472,144) - (1,078,253)

Net loss for
the period $ (2,013,697) $ (992,176) $ (4,553,328) $ (2,416,293)

Net loss per
Basic and
diluted $ (0.01) $ (0.01) $ (0.03) $ (0.02)

average number
of common shares
outstanding 155,548,098 140,548,098 155,548,098 140,397,503

For the three month period ended June 30, 2009, the Company recorded a net loss of $2,013,697, or $0.01 per share, compared to a net loss of $992,176, or $0.01 per share, recorded for the three month period ended June 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 June 30, 2009. The year-to-date revenue of $4,483,662 derives from the settlement of the ore delivered to Xstrata in October 2008.

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

2009 2008 2009(i) 2008
Sales by Payable Metal
Nickel - pounds - 944,182 486,849 1,565,126
Copper - pounds - 602,052 287,827 1,082,691
Cobalt - pounds - 17,545 9,096 30,116
Ave. price received - US$/lb
Nickel - $10.72 $5.76 $11.32
Copper - $3.61 $1.58 $3.37
Cobalt - $44.74 $13.83 $45.23
Ave. Exch. Rate Realized
US $ 1 equals Canadian $ - $1.0123 $1.2280 $1.0084

(i) only includes one month of sales

Care and maintenance costs of $1,128,708 recorded in the second quarter of 2009 are on budget, 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.

General and administrative expenses in the second quarter of 2009 were in line with expenditures recorded in the first quarter of 2009, and are $23,609 lower than 2008. The decrease is mostly attributable to lower investor relations, legal and travel costs, offset by an increase in compensation costs and consulting fees.

Stock-based compensation costs of $167,237 recorded in the second quarter of 2009, include $165,737 of compensation expense related 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 loss of $3,995 was recorded in the second quarter of 2009, versus an exchange loss of $77,195 in 2008. Exchange gains or losses arise from the revaluation of the US dollar accounts and from the timing on converting the US dollars between the time advances are received from the ore shipped to Xstrata and the final settlement.

Interest and other expenses of $107,204 recorded in the second 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), interest paid on advances received from Xstrata on the ore delivered to their facilities, 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 achievements in the second quarter of 2009 are summarized as follows:

- 1,066 metres of drilling were completed on the Lockerby South Footwall property.

- 1,979 metres of drilling were completed on the Raglan Hills Joint Venture property.

-- FNB004: 5.80 metres grading 0.47% Ni and 0.64% Cu

-- FNB005: 1.0 metres grading 0.86% Ni and 2.50% Cu

-- FNB009: 5.05 metres grading 0.762 gpt Pt and 1.216 gpt Pd

-- FNB010: 2.7 metres grading 0.659 gpt Pt and 1.052 gpt Pd

- 1,078 metres of drilling were completed on the West Graham Property, host to the NI 43-101 compliant Conwest Deposit which is the interpreted up-plunge extension of the Company's Lockerby East Zone.

The Company has funding to complete its exploration programs through the remainder of 2009. The Company 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 1,066 metres of diamond drilling was completed on the Lockerby South Property. The program consisted of deepening an existing hole from 484 metres to a depth of 1,500 metres. Now the two drill holes deepened on the Lockerby South Property in 2009 will provide geophysical platforms for Radio Imaging (RIM) borehole geophysical surveys planned for later in 2009. No significant footwall hosted sulphide mineralization has been observed to date, however, numerous zones of Sudbury breccia have been observed and are known to be the host rock for many of the copper and platinum group element rich Sudbury Footwall Deposits.

For the West Graham Property the Company received the final report from SGS Lakefield Research Limited on the Conwest Deposit metallurgical test program. A representative composite sample from the Conwest Deposit was subjected to a conceptual level metallurgical test program that included chemical characterization of the sample, preliminary rougher and cleaner floatation tests and environmental characterization of the rougher tails to quantify the acid-generating potential. SGS concluded that the Conwest sample fell in line with similar ore types from the Sudbury region.

A total of 1,078 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. 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, which is sufficient for the Company to earn a 70% interest in the West Graham Property that includes the Conwest Deposit.

On June 18, 2009, the Company submitted a letter to Xstrata Nickel notifying Xstrata of the Company's intention to terminate the Morgan-Lumsden Option Agreement. The decision to terminate the option was based on the exploration results to date and the limited potential to discover an economically sized deposit within the property boundaries. A total of $38,993 remained to be expended from the 2008 exploration commitment, which will be applied to environmental reclamation on the property in the third quarter.

A total of 1,979 metres of diamond drilling was completed on Raglan Hills Joint Venture property in the second quarter of 2009. A total of seven targets were tested with 29 holes since February 2009. The drill program has discovered a new zone of platinum and palladium mineralization on the ML North target and confirmed the presence of nickel and copper mineralization on the Raglan Nickel Mines showing. Assay results for 19 of the 29 holes have been received and a total of eight holes are still pending analysis. A summary of the significant results to date is provided in the following table.

Hole ID From To(m) Width Ni(%) Cu Pt Pd Pt+Pd
(m) (m) (gpt) (gpt) (gpt)
Raglan Nickel Mines Showing
FNB004 24.00 29.80 5.80 0.47 0.64 0.037 0.168 0.205
FNB005 19.40 20.40 1.00 0.86 2.50 0.020 0.315 0.335
ML North Target
FNB009 9.95 15.00 5.05 0.03 0.00 0.762 1.216 1.978
and 41.70 43.00 1.30 0.01 0.00 0.812 1.276 2.008
FNB010 137.90 140.60 2.70 0.01 0.00 0.659 1.052 1.711
and 144.60 150.60 6.00 0.01 0.00 0.508 0.829 1.337
FNB011 134.00 134.80 0.80 0.00 0.00 0.490 0.706 1.196
FNB012 128.00 129.40 1.40 0.00 0.00 0.420 0.675 1.095

Borehole UTEM geophysical surveys were completed on all drill holes by Lamontagne Geophysics Limited. The Company has forwarded the results of these surveys for geophysical interpretation.


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 capital estimates 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 addition of a respected and credible investment group, the Company is optimistic that if the financial and metal markets remain stable and continue to improve, 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.

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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