======================================================================
Re: News Release - Tuesday, May 13, 2008
First Nickel Reports Financial and Operating Results for the
Three Month Period Ended March 31, 2008
======================================================================
News Release No. 2008-09
Toronto, Ontario - May 13, 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
month period ended March 31, 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
.. First quarter net loss of $1.4 million ($0.01 per share) compared to
net earnings of $0.5 million in the first quarter of 2007. The first
quarter 2008 loss reflects weak 2007 fourth quarter production.
.. Production during the first quarter of 2008 increased to 930,854
pounds of payable nickel, an increase of 33% over the 699,622 pounds
produced in the first quarter of 2007. Production of payable copper in
the first quarter of 2008 was 611,537 pounds, an increase of 41% over
the 433,409 pounds of payable copper produced in first quarter of 2007.
.. Mine operating cost per tonne of ore for the first quarter of 2008
declined by $116 per tonne, or 33%, to $238 per tonne from the
equivalent period in 2007.
.. 6,075 metres of drilling were completed on the historic Lockerby
Main Zone, where the target is contact and shallow footwall
mineralization, approximately 1,300 metres above current mining levels.
.. 2,869 metres of drilling was completed on the West Graham Property
on the Conwest Deposit, the up-dip equivalent of the Lockerby East
Zone. The property is under option from Landore Resources Ltd. A
deposit amenable to bulk mining is the target.
Production at Lockerby Mine was brought back in line with planned
rates, with first quarter production aligned with forecasts.
Continued strong metal prices helped to limit the loss for the quarter
that, in accordance with the Company's revenue recognition policy was
based on revenue from the reduced production in the fourth quarter of
2007.
Under an ore sale agreement with Xstrata, production from the Lockerby
Mine is shipped to Xstrata's Strathcona Mill (the "Mill") for
processing. Revenue is recognized when the metal content of the ore
sold to the Mill, and the pricing of the metals contained therein are
determined, and title transferred. For nickel, the most significant
component of the revenue, the final settlement is determined three
months following the month of mine production.
The Company remains in a strong financial position with working capital
of $18,536,072 at March 31, 2008 after investments of $5,164,465 in
development, exploration and mine equipment acquisitions in the
quarter. The Company is debt free.
Financial Results
The following table presents a summary of the results of operations for
the three month periods ended March 31, 2008 and 2007:
March 31,
2008 2007
----------------------------------------------------------------------
----------------------------------------------------------------------
---------(Unaudited)----------
Sales Revenue $ 9,962,797 $ 10,459,410
-----------------------------
-----------------------------
Operating costs excluding
amortization 10,422,444 7,787,022
Amortization of mining properties
and equipment 907,452 589,000
Accretion of asset retirement
obligations 47,000 45,000
-----------------------------
-----------------------------
11,376,896 8,421,022
-----------------------------
-----------------------------
Operating profit (loss) (1,414,099) 2,038,388
-----------------------------
-----------------------------
General and administration 576,482 527,488
Stock-based compensation 199,774 14,479
Depreciation and amortization 6,051 7,485
Debenture interest and accretion -- 755,788
Other interest 106,928 125,141
Interest and other income (273,108) (128,764)
-----------------------------
-----------------------------
616,127 1,301,617
-----------------------------
-----------------------------
Earnings (loss) before taxes (2,030,226) 736,771
Provision for (recovery of)
income and mining taxes (606,109) 206,502
-----------------------------
-----------------------------
Net earnings (loss) for the period $ (1,424,117) $ 530,269
-----------------------------
-----------------------------
Net earnings (loss) per share
- basic and diluted $ (0.01) $ 0.01
-----------------------------
-----------------------------
Weighted average number of
common shares outstanding 140,308,515 97,953,799
For the three month period ended March 31, 2008, the Company recorded a
net loss of $1,424,117, or $0.01 per share, compared to net earnings of
$530,269, or $0.01 per share, recorded for the three month period ended
March 31, 2007.
Significant differences between the two periods include:
.. A decrease in revenues of $496,613 (5%) in 2008 compared to 2007.
An increase of $1,078,759 (86%) in the copper, cobalt and other metal
revenues (resulting from overall higher sales volume and price) was
offset by a decrease of $1,575,372 in the nickel revenues. Although
the pounds of nickel sold during the quarter was 149,285 (32%) higher
in 2008 versus 2007, a drop in the average realized nickel price of
$4.43 (27%) from $16.67 to $12.24 more than offset the higher volume.
Also contributing to the decrease in revenues is the substantial
increase in the value of the Canadian dollar relative to the U.S.
dollar. During the first quarter of 2007 the U.S. dollar averaged
about $1.17 compared to an average of $1.00 in the first quarter of
2008. This works out to approximately $1.5 million difference in
revenues.
The following table sets out selected sales information for the periods
indicated:
---------------------------------------------------------------------
Q1 2008 Q1 2007 Change
---------------------------------------------------------------------
Sales by Payable Metal
---------------------------------------------------------------------
Nickel -- pounds 620,944 471,659 149,285
---------------------------------------------------------------------
Copper -- pounds 480,639 299,761 180,878
---------------------------------------------------------------------
Cobalt -- pounds 12,571 7,837 4,734
---------------------------------------------------------------------
Ave. price received -- US$/lb
---------------------------------------------------------------------
Nickel $12.24 $16.67 $(4.43)
---------------------------------------------------------------------
Copper $3.07 $2.70 $0.37
---------------------------------------------------------------------
Cobalt $45.90 $25.77 $20.13
---------------------------------------------------------------------
Ave. Exch. Rate Realized
---------------------------------------------------------------------
US $ 1 equals Canadian $ $1.0031 $1.1704 $(0.1673)
---------------------------------------------------------------------
.. An increase in mine operating costs, including treatment and
refining charges, of 34% in 2008 compared to 2007. Higher tonnes
treated (84%), and an overall increase in manpower of 20% at the
Lockerby Mine, mostly accounted for the increase in operating costs,
however the greater physical quantities allowed for lower unit costs.
A nickel bonus of $945,000 is included in the first quarter 2007
operating costs, whereas in 2008 there was no nickel bonus as the
operations generated a loss. The bonus is defined in the Company's
collective agreements and is tied to the price of nickel.
.. An increase of $48,994 (9%) in general and administrative expenses
in 2008. The increase is mostly attributable to an increase in
salaries, director's fees and tax consulting, offset by a recovery of
capital tax.
.. An increase in stock-based compensation costs in 2008 of $185,295
reflects the fair value of options granted in prior periods, which have
vested in this period, to directors, employees and consultants. The
Company uses the Black-Scholes pricing model in the valuations of the
options.
.. A reduction of $755,788 in debenture interest and accretion. The
$14,500,000 debentures were fully repaid on June 1, 2007.
.. A decrease of $18,213 in other interest. 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 higher interest income
in 2008, compared to 2007, results from the Company having
substantially higher cash balances in 2008 to invest.
Lockerby Mine Operations
During the first quarter of 2008, 39,686 tonnes of ore were delivered
to the Xstrata treatment facilities, an increase of 18,122 tonnes, or
84%, over the 21,564 tonnes of ore delivered in the first quarter of
2007. The payable metal content in the ore is estimated to be
approximately 930,854 pounds of nickel (an increase of 33% over 2007)
and 611,537 pounds of copper (an increase of 41% over 2007).
Selected operating statistics for the first quarter of 2008 compared to
the first quarter of 2007 are as follows:
--------------------------------------------------------------------
Item 1st Q 2008 1st Q 2007
--------------------------------------------------------------------
Ore Delivered to Mill (tonnes) 39,686 21,564
--------------------------------------------------------------------
Nickel Mill Head Grade (%) 1.43 1.90
--------------------------------------------------------------------
Copper Mill Head Grade (%) 0.82 1.06
--------------------------------------------------------------------
Payable Nickel (pounds) 930,854 699,622
--------------------------------------------------------------------
Payable Copper (pounds) 611,537 433,409
--------------------------------------------------------------------
Payable Cobalt (pounds) 17,018 11,821
--------------------------------------------------------------------
Mine operating cost per tonne $238 $354
--------------------------------------------------------------------
Cash cost per pound of nickel (i) $10.23 $10.42
--------------------------------------------------------------------
(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, but does include the nickel bonus defined
in the Company's collective agreements which is tied to the
price of nickel.
Following completion of repairs to the crusher in late December 2007,
production including ore grades returned to planned levels going into
2008.
The majority of the ore was generated from stopes on 64 Level in the
Depth Zone and to a minor extent from development and stopes in the
East Zone. At the end of the quarter some ore was being sourced from
initial development on 65-3 Level.
Although ore grades were lower than anticipated, the amount of material
handled was an all time high for a quarter, with both waste and ore at
new levels. Development advance rates improved against the previous
quarter, and equipment availabilities and utilization levels reflected
positive changes to maintenance planning.
Premiere Ridge
Discussions continued with Xstrata Nickel on an off-take agreement.
Exploration Activity
Exploration efforts were focused on the Lockerby Mine and West Graham
properties in the first quarter of 2008. A total of 2 underground
drills and one surface drill were utilized during this time period.
Exploration activities including drilling highlights are summarized as
follows:
.. 6,075 metres of drilling were completed on the Lockerby Main Zone,
which occurs about 1,300 metres closer to surface than where current
mining is taking place. Highlights include:
o FNI1704: 17.50 metres grading 1.36% Ni and 0.84% Cu
o FNI1714: 12.35 metres grading 1.90% Ni and 0.93% Cu
o FNI1715: 3.25 metres grading 2.17% Ni and 0.58% Cu
o FNI1734: 7.00 metres grading 1.48% Ni and 1.63% Cu
.. 2,869 metres of drilling were completed on the West Graham Property
which hosts the Conwest Deposit, the up dip continuation of Lockerby
East mineralization. The target is a deposit with potential for bulk
mining
o FNI2045: 70.20 metres grading 0.59% Ni and 0.44% Cu, including
10.50 metres grading 1.14% Ni and 0.60% Cu
o FNI2050: 86.70 metres grading 0.55% Ni and 0.43% Cu, including
12.70 metres grading 1.15% Ni and 0.71% Cu
.. 1,506 metres of drilling were completed on the Lockerby East Zone
o Assays pending
.. 1,758 line kilometres of airborne Mag and EM completed over the
Raglan Hills project area
.. 6,130 line kilometres of airborne Mag and EM completed over the
Belmont project area
Outlook
For the full year, the company expects:
.. To produce between 3.8 and 4.4 million pounds of payable nickel, and
.. To produce between 2.3 and 2.7 million pounds of payable copper.
First Nickel has budgeted $17 million for development and capital
improvements at the Lockerby Mine and expects to spend approximately $7
million on exploration the majority of which will be spent on targets
around the existing Lockerby Mine infrastructure, Lockerby East and
footwall areas. Funding for these expenditures will come from existing
cash balances and cash flow generated from the Lockerby operations.
First Nickel is completing a new life of mine study using the new
Lockerby resource estimate announced in January (see January 16, 2008
press release). The study includes engineering and economic comparisons
of development options and mine design. FNI anticipates that
infrastructure improvements, based on the new resource model, will
yield increased output, better productivity, reduced costs and will
substantially extend the mine life. Results of this study should be
available early in the third quarter.
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, 2008 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.
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
View News Release in PDF Format:
http://www.firstnickel.com/i/pdf/2008-05-13_NR.pdf
46 KB in size, approx. 10 seconds to download at 56.6Kbps
======================================================================
Copyright (c) 2008 FIRST NICKEL INC. (FNI) All rights reserved. For
more information visit our website at http://www.firstnickel.com/ or
send mailto:info@firstnickel.com
======================================================================
.
![]()