First Nickel Inc.

First Nickel Inc.

November 14, 2007 08:00 ET

First Nickel Reports Third Quarter 2007 Results

Continued Progress on Production and Cash Costs

TORONTO, ONTARIO--(Marketwire - Nov. 14, 2007) - First Nickel Inc. ("First Nickel" or the "Company") (TSX:FNI) today reports financial and operating results for the quarter ended September 30, 2007.

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


- Nickel production of 1,021,739 pounds in the third quarter is the highest in the Company's history, an increase of 16% over the second quarter, and 46% over the first quarter.

- Cash cost per pound of nickel declined to US$8.10 in Q3, from US$9.58, and US$10.42, in Q2 and Q1 2007, respectively.

- The mining rate at Lockerby Mine during Q3 2007 continued at a steady rate of 400 tonnes per day, a 60% increase from the 250 tonnes per day that was being mined earlier in 2007.

- Nickel and copper metal sold in Q3 of 2007 of 878,866 pounds and 640,733 pounds, respectively, are the highest in the Company's history.

- Operating cash flow in Q3 2007 was $2.7 million compared to a cash usage of $1.1 million in Q3 2006. For the nine months ended September 30, 2007, operating cash flow improved significantly to $13.0 million, compared to cash usage of $1.5 million in 2006.

"I'm pleased to report that First Nickel continued to make progress, particularly on nickel production levels and cash costs", said William Anderson, President and CEO. "Earnings were positive, although slightly below last year's level largely as a result of a very strong Canadian dollar, and higher operating costs. The Company is debt free, and has working capital of $24.8 million, including cash of $26 million. First Nickel is continuing to advance engineering and economic studies on its development projects at Premiere Ridge and Lockerby Depth. An 8,000 metre diamond drill program was started on the West Graham Property that is expected to enable us to produce a resource estimate on the Conwest Deposit to NI-43-101 standards after mid-2008", concluded Mr. Anderson.

A Conference call and web-cast will be held at 2:00 pm ET on November 14, 2007.

President and CEO Bill Anderson will review the operations and financial results and First Nickel's key development projects. VP Exploration Paul Davis will join the call for the investor question and answer session. A slide presentation, available at and via the link below will accompany the executives' remarks.

To join the call, please dial in at approximately 1:50 pm ET

Local: 416-641-6139 / Toll free: 866-300-7687 Passcode 3242213

To access the replay: 314-695-5800 or 800-408-3053 Passcode: 3242213

Link to access the web-cast,

Financial Results

The following table presents a summary of the results of operations for the three and nine month periods ended September 30, 2007 and 2006:

Three months ended Nine months ended
September 30, September 30,
2007 2006 2007 2006
---------Unaudited--------- ---------Unaudited--------

Sales Revenue $14,180,959 $11,685,111 $41,591,381 $20,666,777
--------------------------- --------------------------

Operating costs
amortization 11,232,423 7,562,892 29,087,823 15,040,246
Accretion of asset
obligations 45,000 --- 135,000 ---
Amort. of mining
& equipment 1,018,896 720,000 2,626,792 1,440,000
--------------------------- --------------------------
12,296,319 8,282,892 31,849,615 16,480,246
--------------------------- --------------------------

Operating profit 1,884,640 3,402,219 9,741,766 4,186,531
--------------------------- --------------------------

General and
administrative 226,600 438,630 1,432,443 1,823,179
compensation 27,942 27,942 2,103,707 159,461
Amortization 7,485 10,149 22,455 30,447
Debenture and
other interest 184,025 848,652 1,720,909 2,445,312
Interest and
other income (297,439) (76,382) (688,057) (234,008)
--------------------------- --------------------------
148,613 1,248,991 4,591,457 4,224,391
--------------------------- --------------------------

Earnings (loss)
before the
following 1,736,027 2,153,228 5,150,309 (37,860)

Provision for
(recovery of)
future income
and mining taxes 466,619 729,019 2,626,728 (69,268)
--------------------------- --------------------------

Earnings for
the period $ 1,269,408 $ 1,424,209 $ 2,523,581 $ 31,408
--------------------------- --------------------------

Earnings per share:
Basic $ 0.01 $ 0.02 $ 0.02 $ Nil
Fully diluted $ 0.01 $ 0.01 $ 0.02 $ Nil

Sales revenue from the sale of nickel, copper and cobalt for the three month period ended September 30, 2007 (the "third quarter of 2007") increased by $2.5 million (21%) compared with the three month period ended September 30, 2006 (the "third quarter of 2006"). Higher volumes of nickel and copper metal sold of 18% and 35%, respectively, along with a 9% increase in the nickel price accounted for this increase, which was partially offset by a stronger Canadian dollar. On a year-to-date basis, the 2007 revenues reflect nine months of sales compared to only six months in 2006, as there were no revenues recognized in the first quarter of 2006.

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

3rd Q 2007 3rd Q 2006 YTD 2007 YTD 2006
Sales by Payable Metal
Nickel - pounds 878,866 747,731 2,050,147 1,535,758
Copper - pounds 640,733 474,596 1,373,903 944,170
Cobalt - pounds 16,526 14,787 36,184 30,364
Average price received - US$/lb
Nickel $12.51 $11.44 $15.82 $9.83
Copper $3.29 $3.33 $3.02 $2.95
Cobalt $25.75 $15.50 $26.43 $14.77
Average Exch. Rate Realized
US $ 1 equals Canadian $ $1.0399 $1.1193 $1.1004 $1.1206

Mine operating costs, including treatment and refining charges, increased by 48% to $11.2 million in the third quarter of 2007 from $7.6 million in the third quarter of 2006. Higher tonnes treated (15%), and an overall increase in manpower of 40% at the Lockerby Mine, mostly accounted for the increase in operating costs. A nickel bonus of $895,000 is included in the third quarter of 2007 operating costs. In the third quarter of 2006, the nickel bonus was $414,000. The bonus is defined in the Company's collective agreements and is tied to the price of nickel.

General and administrative expenses in the third quarter of 2007, and for the nine month period ended September 30, 2007, decreased by 48% and 21%, respectively, compared to the same periods for 2006. Lower legal and audit fees, a reduction in the cost of producing the annual report and a recovery of capital tax, accounted for most of the decrease in costs. The 2006 expenditures included severance and termination costs of approximately $213,000 as a result of the management changes made during the year.

The stock-based compensation costs in the third quarter of 2007 reflect the fair value of options granted in previous years that have vested in the current period. No stock options were granted in the third quarter. The 2007 year-to-date costs include the fair value of the options granted and vested to directors, employees and consultants in June 2007. The higher cost in 2007 compared to 2006, mostly reflects the higher volume of stock options granted. The Company uses the Black-Scholes pricing model in the valuations of the options.

Debenture and other interest expense in the third quarter of 2007, and for the nine month period ended September 30, 2007, have been substantially reduced due to the repayment of the Series A Debentures on June 1, 2007. The interest expense in the third quarter mostly reflects the interest paid on advances received from Xstrata on the ore delivered to their facilities.

Interest and other income is mostly made up of interest earned on cash balances, and on short term deposits. The higher interest income in 2007, compared to 2006, results from the Company having substantially higher cash balances in 2007 to invest.

The increase in the value of the Canadian dollar relative to the US dollar in 2007 has resulted in lower revenue in Canadian dollars that would otherwise have been realized had the Canadian dollar remained at the beginning of 2007 rate of $1.17 per US dollar. In this event, revenues would have been approximately $2 million higher in the third quarter of 2007, and approximately $3 million higher for the year-to-date, had the US dollar remained at $1.17 Canadian.

Lockerby Mine Operations

During the third quarter of 2007, 36,258 tonnes of ore were delivered to the Xstrata treatment facilities. The payable metal content in the ore is estimated to be approximately 1,021,739 pounds of nickel (an increase of 16% and 46% over the second and first quarter of this year, respectively) and 619,522 pounds of copper. Year-to-date nickel production has increased 32%, and payable copper is up 29% over the comparable period in 2006.

Selected operating statistics for the nine month period ended September 30, 2007 compared to the same period in 2006 are as follows:

Item 1st Q 2007 2nd Q 2007 3rd Q 2007 YTD 2007 YTD 2006
Ore Delivered
to Mill (tonnes) 21,564 35,343 36,258 93,165 80,098
Nickel Mill
Head Grade (%) 1.90 1.50 1.69 1.67 1.52
Copper Mill
Head Grade (%) 1.06 0.95 0.91 0.96 0.87
Payable Nickel
(pounds) 699,622 878,866 1,021,739 2,600,227 1,972,657
Payable Copper
(pounds) 433,409 640,733 619,522 1,693,664 1,309,500
Mine operating
costs per tonne $354 $254 $239 $273 $209
Cash cost per
pound of
nickel (i) US$10.42 US$9.58 US$8.10 US$9.22 US$7.67

(i) Cash cost per pound of nickel is net of other metal credits, and does
not include amortization of mining properties and equipment, but does
include the nickel bonus defined in the Company's collective agreements
which is tied to the price of nickel.

Production has steadily increased through the year, and, with the better grades achieved in the present quarter, payable nickel production is the highest to date. Cash costs per pound of payable nickel have dropped by US$2.32 per pound from the first quarter, and in the third quarter were US$7.26 per pound before payment of a nickel bonus of $0.84 per pound. Mine operating costs for the period before the nickel bonus were $214 per tonne. This marks over two quarters of steady production accompanied by increases in head grade for the quarter. Monthly mine production is targeted at 13,500 tonnes per month going into 2008, and, with a cost reduction plan underway at the mine, unit costs are expected to decline further. In addition to an ongoing wide-ranging review of operating cost components, a new maintenance program is being implemented in the fourth quarter. The latter will incorporate systems to track equipment availability and utilization, and a 5-year equipment fleet plan will be forthcoming.

Development rates in both the Depth and the East zones have improved. Improvements in the Depth can be attributed to the introduction of the re-furbished MacLean Bolter, and an increase in active headings that allows for better deployment of equipment. The development on 64 Level will allow for stope mining to continue on this level until April 2008. The initial access to 65-4 Level is slated for November 2007, with development in ore in January 2008. The East Zone development has proceeded well with the Ramp driven to 35 Level, and access to ore on that level scheduled for early in the fourth quarter.

The value of the third quarter 2007 payable metal will be recorded as revenue based on settlement prices in the fourth quarter of 2007 in accordance with the Company's revenue recognition policy. The Company has received an advance payment totaling $5,512,189 towards the final settlement of the third quarter ore delivered to Xstrata. This is shown as deferred revenue on the balance sheet as at September 30, 2007.

Diamond Drilling

A diamond drill was dedicated in the Depth Zone since the beginning of the year to convert the Inferred Resources component of the resource estimate announced on March 4, 2007 into an Indicated Resource Category. This program wrapped up in August. The drilling has tested the Depth Zone at approximately 50 metre centres down to the 72 Level. Results (see press release No. 2007-18, dated November 1, 2007 on SEDAR) are being compiled and will be incorporated in a new estimate that will also be integrated into a life of mine plan to be completed early in 2008.

Life of Mine Planning

The resource estimate announced earlier this year, coupled with the recently completed drilling, is being integrated into studies by outside engineering consultants to estimate the operating and development costs and economic value associated with extending one of the surface shafts to better exploit the expanded resources. At the same time, a reserve estimate and life of mine plan will be completed.

Exploration Activity

Exploration achievements in the third quarter of 2007 are summarized as follows:

- 8,000 metres diamond drill program started on the West Graham property that is expected to result in a resource estimate on the Conwest Deposit to NI 43-101 standards. The relatively shallow Conwest Deposit is interpreted as the up dip projection of the Lockerby East Zone

- Exploration continues on the Morgan-Lumsden property to define the boundaries of the mineralized system

- Continued development of the Lockerby Mine 3-D model to identify exploration targets adjacent to the existing mine infrastructure

- The Dundonald Property was optioned

The work program on the Morgan-Lumsen property included diamond drilling, borehole UTEM geophysical surveys and Radio Imaging (RIM) borehole surveys. Exploration results to date indicate an embayment feature with a broad zone of lower grade nickel sulphide mineralization. Potential exists to define higher nickel grade lenses within the overall trend with the assistance of the borehole geophysics. There is good potential for footwall-style mineralization given the volume of Sudbury breccia with anomalous copper and PGE mineralization. The drill program continues to define the boundaries of the mineralized system, and will be targeting the up-plunge extension to the northwest in the fourth quarter.

As previously reported, an 8,000 metres diamond drill program was initiated on the West Graham property in September. The goal of the drill program is to define a NI 43-101 compliant resource estimate by the end of the second quarter of 2008.

The exploration program proposed for the Lockerby Mine has been deferred until the fourth quarter due to an expansion of the definition drill program on the Lockerby Depth Zone. Drilling is scheduled to begin in November, to test targets close to existing infrastructure in the upper portions of the mine and the down-plunge extension of the Lockerby Depth Zone.


In the next six months, the Company expects to:

- Continue ramping up production at Lockerby Mine

- Refine and complete the capital and operating estimates on Premiere Ridge, and make a production decision

- Advance the engineering studies on the expansion of Lockerby Mine

- Increase the drilling program at Lockerby Mine to investigate new resources near previous workings, and explore for footwall targets

Non-GAAP Performance Measures

This press release contains non-GAAP measures such as operating cost per tonne of ore, and net cash cost per pound of nickel. Please see the Company's MD&A on SEDAR for a 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 Toronto Stock Exchange ("TSX") under the symbol FNI.

Certain statements included in this press release are forward-looking statements. Forward-looking statements are frequently characterized by words such as "plan," "expect," "project," "intend," "believe," "anticipate" and other similar words, or statements that certain events or conditions "may" or "will" occur. Forward-looking statements include but are not limited to those with respect to resource estimates on the West Graham Property, 5-year equipment fleet plan, development rates, new resource estimates in the Depth Zone, resource estimates on the West Graham Property, ramp up in production, 2007 production forecast, lower unit costs, new discoveries, cash flows. Forward-looking statements are based on the opinions and estimates of management at the date the statements are made, and are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking statements. These factors include the inherent risks involved in the exploration and development of mineral properties, the uncertainties involved in interpreting drilling results and other geological data, fluctuating metal prices, equipment problems, air quality in the mine and other factors described in the Company's most recent Annual Information Form under the heading "Risks Factors" which has been filed electronically by means of the System for Electronic Document Analysis and Retrieval ("SEDAR") located at The Company disclaims any obligation to update or revise any forward-looking statements if circumstances or management's estimates or opinions should change. The reader is cautioned not to place undue reliance on forward-looking statements.

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