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Re: News Release - Wednesday, November 14, 2007
First Nickel Reports Third Quarter 2007 Results
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Continued Progress on Production and Cash Costs
News Release No. 2007-19
Toronto, Ontario - November 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 www.firstnickel.com. All dollar amounts are expressed in
Canadian currency unless otherwise stated.
Highlights
.. 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 www.firstnickel.com
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,
http://events.onlinebroadcasting.com/firstnickel/111207/index.php
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
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---------Unaudited--------- ---------Unaudited--------
Sales Revenue $14,180,959 $11,685,111 $41,591,381 $20,666,777
--------------------------- --------------------------
Operating costs
excluding
amortization 11,232,423 7,562,892 29,087,823 15,040,246
Accretion of asset
retirement
obligations 45,000 --- 135,000 ---
Amort. of mining
properties
& equipment 1,018,896 720,000 2,626,792 1,440,000
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12,296,319 8,282,892 31,849,615 16,480,246
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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
Stock-based
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)
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148,613 1,248,991 4,591,457 4,224,391
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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)
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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 $2.5 million (21%) compared with the three month period
ended September 30, 2006 (the "third quarter of 2006"). Higher volumes
of nickel and copper metal sold of 18% and 35%, respectively, along
with a 9% increase in the nickel price accounted for this increase,
which was partially offset by a stronger Canadian dollar. On a
year-to-date basis, the 2007 revenues reflect nine months of sales
compared to only six months in 2006, as there were no revenues
recognized in the first quarter of 2006.
The following table sets out selected sales information for the periods
indicated:
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3rd Q 2007 3rd Q 2006 YTD 2007 YTD 2006
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Sales by Payable Metal
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Nickel - pounds 878,866 747,731 2,050,147 1,535,758
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Copper - pounds 640,733 474,596 1,373,903 944,170
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Cobalt - pounds 16,526 14,787 36,184 30,364
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Average price received - US$/lb
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Nickel $12.51 $11.44 $15.82 $9.83
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Copper $3.29 $3.33 $3.02 $2.95
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Cobalt $25.75 $15.50 $26.43 $14.77
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Average Exch. Rate Realized
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US $ 1 equals Canadian $ $1.0399 $1.1193 $1.1004 $1.1206
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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:
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Item 1st Q 2007 2nd Q 2007 3rd Q 2007 YTD 2007 YTD 2006
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Ore Delivered
to Mill (tonnes) 21,564 35,343 36,258 93,165 80,098
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Nickel Mill
Head Grade (%) 1.90 1.50 1.69 1.67 1.52
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Copper Mill
Head Grade (%) 1.06 0.95 0.91 0.96 0.87
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Payable Nickel
(pounds) 699,622 878,866 1,021,739 2,600,227 1,972,657
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Payable Copper
(pounds) 433,409 640,733 619,522 1,693,664 1,309,500
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Mine operating
costs per tonne $354 $254 $239 $273 $209
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Cash cost per
pound of
nickel (i) US$10.42 US$9.58 US$8.10 US$9.22 US$7.67
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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.
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.
Outlook
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
www.sedar.com. 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.
For further information contact:
William Anderson, President & CEO
First Nickel Inc.
Telephone: (416) 362-7050
Fax: (416) 362-9050
Email: wanderson@firstnickel.com
Forbes West Investor Relations Advisor
416-203-2200 / 888-655-5532 / forbes@sherbournegroup.ca
View News Release in PDF Format:
http://www.firstnickel.com/i/pdf/2007-11-14_NR.pdf
50 KB in size, approx. 10 seconds to download at 56.6Kbps
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Copyright (c) 2007 FIRST NICKEL INC. (FNI) All rights reserved. For
more information visit our website at http://www.firstnickel.com/ or
send mailto:info@firstnickel.com
Message sent on Wed Nov 14, 2007 at 7:07:40 AM Pacific Time
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