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First Nickel Reports Financial And Operating Results For The Year
Ended December 31, 2007
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Toronto, Ontario -- March 27, 2008 -- 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, 2007.
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.
Highlights
- Net earnings of $814,354 were recorded in 2007. The first profitable
year in the Company's history.
- Achieved a mine operating profit of $13.6 million in 2007, an increase
of $9.1 million (202%) over the $4.5 million achieved in 2006.
- Nickel production of 3,259,095 pounds and copper production of 2,185,023
pounds in 2007, highest in the Company's history. An increase of 33% and
36%, respectively, over 2006.
- Nickel and Copper metal sold in 2007 was 3,082,481 pounds and 2,005,190
pounds, respectively. An increase of 56% and 53%, respectively, over 2006.
- Increased operating cash flow in 2007 to $15.8 million compared to a
cash usage of $0.1 million in 2006.
- Overall increase in cash balance of $17.1 million during 2007.
- The Company is debt free and had working capital of $24.0 million.
- In Q4, the Company wrote off $5.4 million of deferred exploration
costs incurred on the Foy Mouth Property, following the termination
of the option agreement with Xstrata.
Financial Results
The following table presents a summary of the results of operations for
the three and twelve month periods ended December 31, 2007 and 2006:
Three months ended Twelve months ended
December 31, December 31,
2007 2006 2007 2006
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Sales Revenue $ 15,333,945 $ 8,227,080 $ 56,925,326 $ 28,893,857
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Operating costs
excluding
amortization 10,402,686 7,049,512 39,490,509 22,089,758
Accretion of
asset retirement
obligations 47,310 177,000 182,310 177,000
Amort. of mining
properties &
equipment 1,018,896 720,000 3,645,688 2,160,000
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11,468,892 7,946,512 43,318,507 24,426,758
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Operating profit 3,865,053 280,568 13,606,819 4,467,099
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General and
administrative 376,832 557,981 1,809,275 2,381,160
Stock-based
compensation 639,271 371,124 2,742,978 530,585
Amortization 7,485 10,347 29,940 40,794
Debenture interest
and accretion - 764,527 1,266,201 3,045,000
Other interest 409,379 92,590 864,087 257,429
Interest and
other income (329,610) (149,650) (1,017,667) (383,658)
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1,103,357 1,646,919 5,694,814 5,871,310
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Earnings (loss)
before the
following 2,761,696 (1,366,351) 7,912,005 (1,404,211)
Write off of
mineral resource
properties
and deferred
exploration
costs 5,396,955 - 5,396,955 -
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Earnings (loss)
before taxes (2,635,259) (1,366,351) 2,515,050 (1,404,211)
Provision for
(recovery of)
future income
and mining taxes (926,032) (385,029) 1,700,696 (454,297)
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Net earnings
(loss) for
the period $ (1,709,227) $ (981,322) $ 814,354 $ (949,914)
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Net earnings
(loss)
per share:
- basic and
diluted $ (0.02) $ (0.01) $ 0.01 $ (0.01)
A net loss of $1,709,227 was recorded in the fourth quarter of 2007
compared with a net loss of $981,322 in the fourth quarter of 2006.
The fourth quarter loss is mostly due to the write off of $5,396,955 of
deferred exploration costs incurred on the Foy Mouth Property, as the
Company has terminated the option agreement with Xstrata. These
expenditures were mostly incurred prior to 2007 and did not have a
material impact on the 2007 cash flow. For the year ended December 31,
2007, the Company recorded net earnings of $814,354, or $0.01 per
share, compared to a net loss of $949,914, or $0.01 per share in 2006.
Sales revenue from the sale of nickel, copper and cobalt for the three
month period ended December 31, 2007 (the "fourth quarter of 2007")
increased by $7.1 million (86%) compared with the three month period
ended December 31, 2006 (the "fourth quarter of 2006"). Higher nickel
and copper metal sold of 136% and 73%, respectively, offset by a
reduction in the realized nickel price of 7% and a weaker U.S. dollar
compared to the Canadian dollar, accounted for this increase.
On a full year basis, the 2007 revenues increased by $28.0 million
(97%) over 2006. Higher volumes of nickel and copper metal sold of 56%
and 53%, respectively, along with a 38% increase in the realized
average nickel price accounted for this increase, which was partially
offset by a stronger Canadian dollar.
The following table sets out selected sales information for the periods
indicated:
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4th Q 2007 4th Q 2006 2007 Total 2006 Total
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Sales by Payable Metal
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Nickel - pounds 1,032,334 436,899 3,082,481 1,972,657
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Copper - pounds 631,287 365,330 2,005,190 1,309,500
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Cobalt - pounds 18,373 9,286 54,557 39,650
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Average price
received US$/lb
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Nickel $12.40 $13.36 $14.67 $10.61
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Copper $3.25 $3.15 $3.09 $3.01
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Cobalt $32.36 $18.19 $28.43 $15.57
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Average Exch. Rate
Realized
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US $ 1 equals
Canadian $ $0.9794 $1.1374 $1.0650 $1.1254
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Mine operating costs, including treatment and refining charges,
increased by 48% to $10.4 million in the fourth quarter of 2007 from
$7.0 million in the fourth quarter of 2006. Higher tonnes treated
(79%) and an overall increase in manpower of 23% at the Lockerby Mine,
mostly accounted for the increase in operating costs. A nickel bonus
of $941,000 is included in the fourth quarter of 2007 operating costs.
In the fourth quarter of 2006, there was no nickel bonus. The bonus is
defined in the Company's collective agreements and is tied to the price
of nickel.
On a year-to-date basis, mine operating costs, including treatment and
refining charges, increased by 79% in 2007 compared to 2006. The 2007
year was for the full 12 months, whereas 2006 only included costs for 9
months. Higher tonnes treated (28%), and an overall increase in
manpower of 23% at the Lockerby Mine, mostly accounted for the increase
in operating costs. A nickel bonus of $3,975,576 is included in the
2007 operating costs, whereas in 2006, the nickel bonus was $414,000.
General and administrative expenses in the fourth quarter of 2007 and
for the year ended December 31, 2007, decreased by 32% and 24%,
respectively, compared to the same periods for 2006. The lower 2007
expenditures reflect an overall reduction 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 higher stock-based compensation costs in the fourth quarter and for
the 2007 year reflect the fair value of options granted that have
vested in the current period. The Company uses the Black-Scholes
pricing model in the valuations of the options.
Debenture and other interest expense in the fourth quarter of 2007 and
for the year ended December 31, 2007 have been substantially reduced
due to the repayment of the Series A Debentures on June 1, 2007. The
interest expense in the fourth quarter mostly reflects the interest on
advances received from Xstrata on the ore delivered to their facilities
and a one time interest charge on the Part XII.6 tax regarding the
timing of flow through expenditures.
Interest and other income is mostly made up of interest earned on term
deposits. The higher interest income in 2007 compared to 2006 results
from the Company having substantially higher cash balances in 2007 to
invest.
Lockerby Mine Operations
During 2007, 124,492 tonnes of ore were delivered to the Xstrata
treatment facilities, an increase of 26,883 tonnes, or 27%, over the
97,609 tonnes of ore delivered in 2006. Payable metal content in ore
for 2007 is estimated to be approximately 3,259,095 pounds of nickel
(an increase of 33% over 2006) and 2,185,023 pounds of copper (an
increase of 36% over 2006).
Selected operating statistics for the twelve month period ended
December 31, 2007 compared to the total 2006 year are as follows:
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Item 1st Q 2nd Q 3rd Q 4th Q Total Total
2007 2006
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Ore Delivered
to Mill (tonnes) 21,564 35,343 36,308 31,277 124,492 97,609
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Nickel Mill
Head Grade (%) 1.90 1.50 1.72 1.23 1.57 1.52
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Copper Mill
Head Grade (%) 1.06 0.95 0.91 0.78 0.92 0.88
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Payable Nickel
(pounds) 699,622 878,866 1,032,334 648,273 3,259,095 2,444,316
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Payable Copper
(pounds) 433,409 640,733 631,287 479,594 2,185,023 1,609,261
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Payable Cobalt
(pounds) 11,821 16,526 18,373 12,705 59,425 47,487
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Mine operating
cost per tonne $354 $254 $239 $278 $268 $232
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Cash cost per
pound of
nickel (i) $10.42 $9.58 $8.60 $14.26 $10.13 $8.14
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(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.
>From the beginning of the year until the end of the third quarter
nickel production increased and unit operating costs declined, a trend
which was interrupted in the fourth quarter. In the latter period,
failure of the wear plates in the 4300 Level crusher resulted in a
shutdown of production while repairs were being made. During the fourth
quarter production was sourced from lower grade areas which further
reduced nickel production. Following completion of repairs to the
crusher in late December, production including ore grades returned to
planned levels.
Excepting for the reduced output in the fourth quarter, the operation
demonstrated improved productivity over the course of the year,
increasing mine daily production from under 300 tonnes per day at the
beginning to 400 tonnes per day going into 2008. Development continued
satisfactorily toward 65-3L, the source for much of 2008 production. A
maintenance program for the mobile fleet was launched, and vacancies in
the technical and supervisory staff levels were filled.
For the full year the mine achieved a cash operating margin of $146 per
tonne milled. Metal prices are expected to remain strong, but are
unlikely to be as robust as early 2007, and therefore the emphasis at
the mine in 2008 will be to continue to drive costs down, and increase
output so as to preserve these margins.
Development productivity improved somewhat in 2007 but still lags, and
the resulting limit in the number of working areas and therefore
operating flexibility, means production scheduling has been vulnerable
to short term interruptions. New development scenarios are being
examined for the East Zone in 2008, which should add to production
plans. The forthcoming mine development plan for Lockerby Depth is
being built around the latest resource estimate (January 16, 2008), and
will result in a long term production schedule and capital plan for the
mine infrastructure, along with increased production.
The value of the fourth quarter 2007 payable metal will be recorded as
revenue based on settlement prices in the first quarter of 2008 as per
the Company's revenue recognition policy. The Company has received an
advance payment totaling $2,970,681 towards the final settlement of the
fourth quarter ore delivered to Xstrata.
Life of Mine Planning
On January 16, 2008, First Nickel reported a 289% increase in Indicated
Resources at the Lockerby Mine. This resource estimate, 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 shafts to better exploit the expanded resources. At the same time a
reserve estimate and life of mine plan is expected to be completed.
A feasibility study was completed on Premiere Ridge in July, and
subsequently an additional round of metallurgical work was undertaken
at Xstrata's Process Centre. Permitting was advanced, a closure plan
prepared, and further detailed engineering was undertaken by year-end.
Discussions with Xstrata are underway in early 2008 to finalize offtake
agreement terms, following which the Company will make a decision on
development.
Exploration Activity
Exploration programs continued to focus on the Company's two other
Sudbury properties in 2007. The majority of the Company's exploration
costs were expended on the Morgan-Lumsden and West Graham properties.
A total of 52 drill holes representing 17,400 metres of core were
completed on 4 properties in 2007 (refer to the table below) and
selected holes were surveyed using the latest in borehole geophysical
techniques.
Diamond drilling statistics: January 1, 2007 to December 31, 2007
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SURFACE UNDERGROUND TOTALS
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# Holes Metres # Holes Metres # Holes Metres
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Lockerby 1 932 22 2,690 23 3,622
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Premiere 0 0 0 0 0 0
Ridge
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West Graham 21 5,190 0 0 21 5,190
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Dundonald 0 0
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Foy Mouth(a) 2 980 0 0 2 980
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Morgan- 6 6,853 0 0 6 7,608
Lumsden(a)
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TOTALS 30 13,955 22 2,690 52 17,400
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The year also marked an expansion of exploration beyond the Sudbury
Basin with the staking of unpatented mining claims in Eastern Ontario.
The Company staked in excess of 7,000 hectares of claims within this
area.
The Company and Pacific Northwest Capital Corp entered into a 50:50
Joint Venture Agreement on the Raglan Hills Property in southeast
Ontario.
The Company optioned the Dundonald Property to Avion Resources Corp.
The Company provided Xstrata Nickel with formal notification to
terminate the Foy Mouth Option Agreement.
2008 Outlook
For 2008 the Company has previously issued guidance (February 12, 2008
press release) whereby the Company expects to produce between 3.8 and
4.4 million pounds of payable nickel, and between 2.3 and 2.7 million
pounds of payable copper. The Company 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.
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
continues.
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
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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
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