 | | | Published : November 11th, 2008 | Reports Financial And Operating Results For The Three And Nine Month Period Ended September 30, 2008 |
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Re: News Release - Monday, November 10, 2008
Title: First Nickel Reports Financial And Operating Results For The Three And Nine Month Period Ended September 30, 2008
Toronto, Ontario -- November 10, 2008 -- 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 nine month period ended September 30, 2008.
Complete results will also be available on SEDAR and on the Company's website at www.firstnickel.com. All dollar amounts are expressed in Canadian currency unless otherwise stated.
Summary
- Third quarter net loss of $936,139 ($0.01 per share), compared to net earnings of $1,269,408 in the third quarter of 2007. The third quarter 2008 loss reflects weaker nickel prices realized by the Company.
- At September 30, 2008, the Company had no debt and a working capital of $15.7 million, including cash of $13 million, of which $4 million relates to flow-through funds.
- A decrease in revenues of $1,639,739 (12%) in the third quarter of 2008, compared to 2007. An increase of $416,097 (74%) in the cobalt and other metal revenues (resulting from overall higher sales volume and price), was offset by a decrease of $1,818,321 (16%) in the nickel revenues, and a decrease of $237,515 (11%) in the copper revenues. Although the pounds of nickel sold during the third quarter of 2008 was 152,401 pounds (17%) higher in 2008 versus 2007, a drop (28%) in the average realized nickel price offset the higher volume.
- Record high production in the third quarter of 2008 of 1,253,964 pounds of payable nickel, an increase of 22% over the 1,031,267 pounds produced in the second quarter of 2008, and 33% higher than the 944,182 pounds produced in the first quarter of 2008.
- Cash cost per pound of nickel reduced by $1.10 (13%) to $7.09 per pound in the third quarter of 2008.
- 6,206 metres of underground drilling were completed on the Lockerby East and Lockerby Footwall.
- 7,610 metres of surface drilling were completed on the Lockerby East and Morgan Lumsden properties.
Subsequent Events - Suspension of Operations at Lockerby
On October 19, 2008, the Company announced it was placing the Lockerby Mine on a care and maintenance program, following the rapid decline in the price of nickel from around $10 per pound at the beginning of the third quarter, to under $6 per pound at the beginning of October. Although the mine made great strides in reducing site operating costs over the course of the year, with metal prices well below cost, the decision to suspend operations was made to stem cash outflow and preserve the ore reserves until conditions improve. Sufficient personnel have been retained to ensure the workings and assets are secure and properly maintained, especially critical components such as pumps. Total severance and termination costs for the Lockerby Mine are expected to total approximately $1,800,000, with ongoing monthly care and maintenance costs totaling approximately $200,000.
Financial Results
The following table presents a summary of the results of operations for the three and nine month periods ended September 30, 2008 and 2007:
Three months ended Nine months ended.
September 30, September 30,
2008 2007 2008 2007
---------------------------------------------------------------------------
---------Unaudited--------- -----------Unaudited------
Sales Revenue $12,541,220 $14,180,959 $36,085,014 $41,591,381
--------------------------- --------------------------
Operating costs
excluding
amortization 11,717,554 11,232,423 34,771,161 29,087,823
Accretion of asset
retirement
obligations 47,000 45,000 141,000 135,000
Amortization of
mining properties
and equipment 1,378,517 1,018,896 3,801,849 2,626,792
--------------------------- --------------------------
13,143,071 12,296,319 38,714,010 31,849,615
--------------------------- --------------------------
Operating profit
(loss) (601,851) 1,884,640 (2,628,996) 9,741,766
--------------------------- --------------------------
General and
administration 645,012 226,600 1,870,166 1,432,443
Stock-based
compensation 196,153 27,942 641,396 2,103,707
Depreciation
and amortization 6,051 7,485 18,153 22,455
Debenture interest
and accretion --- --- --- 1,266,201
Other interest 71,676 184,025 290,395 454,708
Interest and other
income (123,132) (297,439) (556,949) (688,057)
-------------------------------------------------------
795,760 148,613 2,263,161 4,591,457
-------------------------------------------------------
Earnings (loss)
before taxes (1,397,611) 1,736,027 (4,892,157) 5,150,309
Provision for
(recovery of)
future income and
mining taxes (461,472) 466,619 (1,539,725) 2,626,728
-------------------------------------------------------
Net earnings
(loss) for the
period $ (936,139) $ 1,269,408 $ (3,352,432) $ 2,523,581
-------------------------------------------------------
Net earnings
(loss) per share:
Basic and
diluted
(note 12) $ (0.01) $ 0.01 $ (0.02) $ 0.02
Weighted average
number of common
shares outstanding 148,048,098 131,277,931 141,439,487 110,041,715
For the three month period ended September 30, 2008 (the "third quarter of 2008"), the Company recorded a net loss of $936,139, or $0.01 per share, compared to net earnings of $1,269,408, or $0.01 per share, recorded for the three month period ended September 30, 2007 (the "third quarter of 2007").
Significant differences between the two periods include:
- A decrease in revenues of $1,639,739 (12%) in 2008, compared to 2007. An increase of $416,097 (74%) in the cobalt and other metal revenues (resulting from overall higher sales volume and price) was offset by a decrease of $1,818,321 (16%) in the nickel revenues, and a decrease of $237,515 (11%) in the copper revenues. Although the pounds of nickel sold during the third quarter of 2008 was 152,401 (17%) higher in 2008 versus 2007, a drop in the average realized nickel price of $3.55 (28%) from $12.51 to $8.96 more than offset the higher volume. The lower copper revenue was mostly due to the lower pounds sold during the third quarter of 2008 of 95,784 pounds (15%).
Revenue by Product:
Q3 Year-to date
2008 2007 2008 2007
Nickel $9,606,146 $11,424,467 $27,474,370 $35,756,717
Copper 1,957,056 2,194,571 5,635,317 4,512,565
Cobalt 601,413 442,412 1,974,825 1,044,372
Other 376,605 119,509 1,000,502 277,727
-------------------------- ---------------------------
$12,541,220 $14,180,959 $36,085,014 $41,591,381
-------------------------- ---------------------------
Revenue from the sale of nickel accounts for more than 75% of the total revenues. Therefore, any movement in the nickel price will have a great impact on revenues and ultimately affect earnings.
The following table sets out selected sales information for the periods indicated:
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Q3 2008 Q3 2007 YTD 2008 YTD 2007
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Sales by Payable Metal
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Nickel - pounds 1,031,267 878,866 2,596,393 2,050,147
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Copper - pounds 544,949 640,733 1,627,640 1,373,903
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Cobalt - pounds 18,543 16,526 48,659 36,184
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Ave. price received - US$/lb
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Nickel $8.96 $12.51 $10.39 $15.82
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Copper $3.46 $3.29 $3.40 $3.02
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Cobalt $31.32 $25.75 $39.93 $26.43
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Ave. Exch. Rate Realized
---------------------------------------------------------------------------
US $ 1 equals Canadian $ $1.0389 $1.0399 $1.0188 $1.1004
---------------------------------------------------------------------------
- An increase in total mine operating costs, including treatment and refining charges, of 4% in the third quarter of 2008, compared to the third quarter of 2007. An overall increase in material and supplies along with higher trucking, treatment and refining charges have accounted for the increase in operating costs. On a cost per unit basis however, mine operating costs in 2008 were 28% lower per tonne milled, and 12% lower on a cash cost per pound of nickel. As the operations generated a loss, no nickel bonus was paid in the third quarter of 2008. The third quarter 2007 operating costs include a nickel bonus of $895,000.
- An increase of $418,412 in general and administrative expenses in the third quarter of 2008, compared to the third quarter of 2007. The increase is mostly attributable to a foreign exchange loss, along with an increase in director's fees and tax consulting.
- The $196,153 stock-based compensation costs in the third quarter of 2008 reflect the fair value of options granted in prior periods, which have vested in the third quarter of 2008, to directors, employees and consultants. The Company uses the Black-Scholes pricing model in the valuations of the options.
- A decrease of $112,349 in other interest in the third quarter of 2008, versus the third quarter of 2007. Other interest is mostly comprised of 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 lower interest income in the third quarter of 2008, compared to the third quarter of 2007, is as a result of lower cash balances in 2008.
Lockerby Mine Operations
During the third quarter of 2008, 47,321 tonnes of ore were delivered to the Xstrata treatment facilities. The payable metal content in the ore is estimated to be approximately 1,253,964 pounds of nickel and 835,990 pounds of copper. Both ore production and payable metal content were the highest in the Company's history. The higher metal production, along with a reduction in costs, resulted in the cash cost per pound of nickel dropping to $7.09 in the third quarter. This is $1.10 (13%) lower than the second quarter, and $2.64 (27%) lower than the first quarter of 2008.
For the first nine months of 2008, 118,906 tonnes were delivered to the Mill, an increase of 25,691 tonnes, or 28%, over the 93,215 tonnes of ore delivered in the first nine months of 2007. The payable metal content in the ore is estimated to be approximately 3,229,413 pounds of nickel (an increase of 24% over 2007) and 1,982,991 pounds of copper (an increase of 16% over 2007).
Selected operating statistics for the nine month period ended September 30, 2008, compared to the same period in 2007 are as follows:
----------------------------------------------------------------------------
Item 1st Q 2nd Q 3rd Q
2008 2008 2008 YTD 2008 YTD 2007
----------------------------------------------------------------------------
Ore Delivered to
Mill (tonnes) 39,655 31,930 47,321 118,906 93,215
----------------------------------------------------------------------------
Nickel Mill Head
Grade (%) 1.46 1.90 1.59 1.63 1.68
----------------------------------------------------------------------------
Copper Mill Head
Grade (%) 0.82 0.89 0.93 0.88 0.96
----------------------------------------------------------------------------
Payable Nickel (pounds) 944,182 1,031,267 1,253,964 3,229,413 2,610,822
----------------------------------------------------------------------------
Payable Copper (pounds) 602,052 544,949 835,990 1,982,991 1,705,429
----------------------------------------------------------------------------
Payable Cobalt (pounds) 17,545 18,543 25,944 62,032 46,720
----------------------------------------------------------------------------
Mine operating cost per
tonne $238 $277 $172 $222 $272
----------------------------------------------------------------------------
Cash cost per pound of
nickel(i) $9.73 $8.19 $7.09 $8.21 $9.42
----------------------------------------------------------------------------
(i) Cash cost per pound of nickel is a non GAAP measure and is net of other
metal credits, and does not include amortization of mining properties
and equipment.
Production in the quarter was derived from stopes on 64 and 65 Level, development work on 65-3 Level, and from the East Zone.
The value of the third quarter 2008 payable metal will be recorded as revenue based on settlement prices in the fourth quarter of 2008 in accordance with the Company's revenue recognition policy.
Exploration
Exploration achievements in the third quarter of 2008 are summarized as follows:
- 1,371 metres of drilling were completed on the Lockerby East Zone.
- FNI-3512: 9.60 metres grading 3.38% Ni and 1.06% Cu
- FNI-3446: 12.65 metres grading 3.17% Ni and 1.31% Cu
- FNI-3447: 8.40 metres grading 2.33% Ni and 0.43% Cu
- 3,643 metres of drilling were completed on the Lockerby East Property from surface.
- FNI-4002: 2.60 metres grading 1.82% Ni and 0.96% Cu
- FNI-4003: 10.40 metres grading 1.33% Ni and 0.64% Cu
- 4,835 metres of drilling were completed on the Lockerby Footwall.
- 3,967 metres of drilling were completed on the Morgan-Lumsden property.
Exploration efforts in the third quarter included work on the Lockerby Mine, West Graham, Morgan-Lumsden, Raglan Hills and Belmont properties. Full details of the work completed and assay results were press released (No. 2008-19) on November 7, 2008.
The Company has the required funding to complete its exploration programs through 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.
Outlook
The Company will continue to explore its properties located in the Sudbury basin, as well as northern and eastern Ontario. The Company has the required funding to complete its exploration programs through 2009.
Placing the mine on a care and maintenance footing is the best option to conserve cash and position the operation for future success, while maintaining the long-term benefit to the community and our shareholders. The Company will continue to firm up plans and pursue ways to bring the operation back on line when conditions improve.
The Company is continuing the engineering work on the final stages of a feasibility study for the development of the Lockerby Depth Zone. The feasibility study is scheduled for completion by early 2009.
In the coming weeks, the Company will examine its alternatives for advancing the Lockerby Depth. These alternatives will include investigating ways to source the capital needed to execute the mine plan contemplated in the ongoing feasibility study. In addition, both the Depth and other zones at Lockerby are very robust and can be modeled at higher cut-off grades. Development and extraction at different scales with potentially higher cut-offs will be investigated internally as part of current activities.
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 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, 2008 production forecast, lower unit costs, severance and termination costs, care and maintenance 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.
For further information contact:
William Anderson, President & CEO
First Nickel Inc.
Telephone: (416) 362-7050
Fax: (416) 362-9050
Email: wanderson@firstnickel.com
Or: Forbes West, Investor Relations Advisor
416-203-2200 / 1-888-655-5532 / forbes@sherbournegroup.ca
Copyright � 2008 FIRST NICKEL INC. (FNI) All rights reserved. For more information visit our website at http://www.firstnickel.com/ or send email to info@firstnickel.com ..
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First Nickel Inc.
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DEVELOPMENT STAGE |
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CODE : FNI.TO |
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ISIN : CA33582W1068 |
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First Nickel is a nickel exploration company based in Canada. First Nickel develops nickel, cobalt, copper, gold, palladium, platinum and silver in Canada, and holds various exploration projects in Canada. Its main assets in development are LOCKERBY MINE and PREMIERE RIDGE in Canada and its main exploration properties are RAGLAN HILLS, LANDORE/ WEST GRAHAM, MORGAN-LUMSDEN, BELMONT PROJECT, WEST GRAHAM, FOY MOUTH, KAMISKOTIA and DUNDONALD in Canada. |
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