First Nickel Inc.
TSX : FNI

First Nickel Inc.

March 30, 2007 16:45 ET

First Nickel Reports on Annual Financial Statements for the Year Ended December 31, 2006 and Restates 2005 Comparative Financial Statements

TORONTO, ONTARIO--(CCNMatthews - March 30, 2007) - First Nickel Inc. ("First Nickel" or the "Company") (TSX:FNI) announces that it has filed with the Canadian securities regulatory authorities its audited financial statements, and management's discussion and analysis for the year ended December 31, 2006, and has restated its comparative financial statements for the year ended December 31, 2005.

The Company recorded a net loss of $949,914, or $0.01 per share, compared to a restated net loss of $3,479,848, or $0.07 per share in 2005. The 2005 net loss has been restated to reflect an error in the amount of $521,646 in the calculation of the recovery of future income taxes for the 14 month period ended December 31, 2005. The 2005 recovery of future taxes (a non-cash item) was understated by this amount, resulting in the Company's net loss, deficit and future tax liability being overstated by $521,646.

The Company will restate its comparative financial statements for the year ended December 31, 2005 with the filing of its financial statements for the year ended December 31, 2006. The Company will also restate its comparative interim financial statements for the first three quarters of 2006 when it files its interim financial statements for the first three quarters of 2007, respectively.

The following table presents a summary of the results for the twelve month period ended December 31, 2006 and for the 14 month period ended December 31, 2005.



2006 2005
---------(Unaudited)----------
(12 Months) (14 Months)
(Restated - see Note)
Sales revenue $28,893,857 $ -
---------------------------------
Operating costs excluding amortization 22,089,758 -
Amortization of properties & equipment 2,160,000 -
Accretion of asset retirement obligations 177,000 -
---------------------------------
24,426,758 -
---------------------------------

Operating profit 4,467,099 -
---------------------------------

General and administrative 2,381,160 1,757,423
Debenture and other interest expense 3,302,429 1,938,330
Stock-based compensation 530,585 1,491,330
Amortization 40,794 19,790
Write-down of deferred exploration costs - 488,500
Interest and other income (383,658) (390,054)
---------------------------------

5,871,310 5,305,319
---------------------------------

Loss before recovery of income taxes (1,404,211) (5,305,319)

Recovery of future income taxes (454,297) (1,825,471)
---------------------------------
Net loss for the period $ (949,914) $ (3,479,848)
---------------------------------


Note: In the course of the preparation of the financial statement for the year ended December 31, 2006, an error in the amount of $521,646 was identified in the calculation of the recovery of future income taxes for the 14 month period ended December 31, 2005. The 2005 recovery of future income taxes (a non-cash item) was understated by this amount, resulting in the Company's net loss, deficit and future tax liability being overstated by $521,646. As a result, the Company's 2005 financial statements have been restated. See note 3 to the Company's audited financial statements for the year ended December 31, 2006 and 2005 for more details.

Sales revenue in 2006 amounted to $28,893,857 from the sale of 1,972,657 pounds of nickel and 1,309,500 pounds of copper. The average price realized for 2006 was US$10.61 for nickel and US$3.01 for copper. The revenues represent only nine months of value of the metal contained in the ore shipped for milling, as the value of the ore shipped in the fourth quarter of 2006 will be recorded as revenue in the first quarter of 2007 as per the Company's revenue recognition policy.

Metal sales by quarter were as follows:



---------------------------------------------------------------------------
1st Q 2nd Q 3rd Q 4th Q Total
---------------------------------------------------------------------------
Payable Nickel (pounds) nil 788,027 747,731 436,899 1,972,657
---------------------------------------------------------------------------
Nickel price - US$ per pound nil $8.30 $11.44 $13.36 $10.61
---------------------------------------------------------------------------
Payable Copper (pounds) nil 469,574 474,596 365,330 1,309,500
---------------------------------------------------------------------------
Copper price - US$ per pound nil $2.56 $3.33 $3.15 $3.01
---------------------------------------------------------------------------


The operating costs were constant throughout 2006. However, due to operating problems related to underperformance of some of the underground mobile equipment, along with delays in the advancement of development work, which resulted in lower then anticipated metal production, the net cash operating costs per pound of nickel sold during 2006 averaged US$7.56. With the operational problems having been resolved, it is expected that the average cash operating costs per pound of nickel for 2007 will decrease.

General and administrative expenses totalled $2,381,160 in 2006. This is an increase of $623,737, or 35%, from 2005. The increase reflects generally higher costs as a result of the change in the nature of the Company's activity along with severance and terminations payments of approximately $213,000 as a result of the management changes in mid-2006.

Debenture and other interest expense totalled $3,302,429 in 2006 and includes the amortization of the premium on the debentures (being the difference between the face value and the net proceeds attributed to the debenture) in the amount of $1,450,000 on the 11% Series A Debentures issued in conjunction with the completion of the Lockerby Mine acquisition in 2005. This expense will cease once the debentures are redeemed on June 1, 2007.

As at December 31, 2006, the Company had $6,497,756 in unrestricted cash and cash equivalents and a working capital deficiency of $6,627,826. The deficiency results from the Series A Debentures of $13,895,833 becoming a current liability with a maturity date of June 1, 2007. The Company anticipates that cash flows will be sufficient to enable the Company to meet its obligations. However, if a shortfall in cash flow should arise, the Company may have to complete a financing to cover the shortfall.

Lockerby Mine Operations

Selected operating statistics for the twelve month period ended December 31, 2006 were as follows:



---------------------------------------------------------------------------
Item 1st Q 2nd Q 3rd Q 4th Q Total
---------------------------------------------------------------------------
Ore Delivered to
Mill - Tonnes 24,495 30,636 24,967 17,519 97,617
---------------------------------------------------------------------------
Nickel Mill Head Grade % 1.95 1.48 1.09 1.52 1.51
---------------------------------------------------------------------------
Copper Mill Head Grade % 1.04 0.82 .78 .90 .88
---------------------------------------------------------------------------
Payable Nickel (pounds) 788,027 747,731 436,899 437,780 2,410,437
---------------------------------------------------------------------------
Payable Copper (pounds) 469,574 474,596 365,330 295,085 1,604,585
---------------------------------------------------------------------------


Production at Lockerby in 2006 was well below what had been forecast. A total of 97,617 tonnes of ore was delivered for milling. The total operating costs for the full year, including treatment and refining equalled $305 per tonne of ore milled, or a net cash cost of US$8.35 per pound of nickel produced. The mobile equipment availability issues have been addressed, new work areas have now been prepared, and with 2007 production forecast at 152,000 tonnes, unit costs are expected to decrease.

During the fourth quarter, 17,519 tonnes of ore were delivered to the treatment facilities for processing. The reduction in tonnes in the fourth quarter was as a result of the deteriorating ground conditions on 63 Level which were causing excessive dilution in the third quarter and continued into the fourth quarter until the decision was made in late October to cease mining activity in that area. Movement of material at the start of the period was below requirements because the re-built 40 tonne truck acquired in September was not in service until late October.

The most important achievement at Lockerby Mine was the significant increase in the resource base (previously announced on March 5, 2007), which resulted from the diamond drilling completed in 2006. The new estimate provides the Company with the level of recoverable metals to justify the improvements in mine infrastructure and development work that will yield a longer mine life, increased production, and lower operating costs.

2007 Outlook

For 2007 the Company has previously issued guidance (December 18, 2006) press release that calls for mine production of 152,000 tonnes of ore, 50% above 2006 level, yielding approximately 4.7 million pounds of payable nickel, 3.2 million pounds of payable copper, and 86,000 pounds of payable cobalt.

At the following prices, US$16.00 nickel, US$2.75 copper, and US$12 cobalt, the operation is expected to generate net cash flow of approximately $38 million.

The Company has commenced the engineering and technical investigations for a new life of mine development and production plan, with the goal of determining the investment capital needed to substantially increase mine production, extend the mine life, and significantly improve operating efficiencies.

The Company's Premiere Ridge project will progress through full feasibility during the first half of the year, and the Company will continue an aggressive focused exploration program around Lockerby mine, and will also maintain its share of funding in the programs operated by Xstrata Nickel.

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 may contain forward-looking statements, which are subject to certain risks, uncertainties and assumptions, including the cash flows. 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, 2007 production forecast, 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.

Contact Information