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, 2010.
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 / Summary
-- Significant progress made toward becoming fully funded for its capital
and corporate needs
-- On August 25, 2010, the Company entered into an engagement letter with
two international banks to arrange for a $30 million project loan
facility
-- On September 1, 2010, the Company received a bridge loan of US$5 million
from Resource Capital Fund IV L.P.
-- Subsequent to September 30, 2010, the Company announced a $25 million
public equity offering and filed a final short form prospectus on
November 5, 2010
-- The net loss for the three month period ended September 30, 2010 was
$1,532,483, or $0.01 per share, compared to a net loss of $1,554,114, or
$0.01 per share in the same quarter of 2009
-- Care and maintenance expenditures at Lockerby Mine in the third quarter
were $1,078,515, bringing the year-to-date amount to $3,641,117
-- At September 30, 2010 the Company had net working capital of $4,956,385
-- Refurbishment activities have been initiated at Lockerby Mine
LOCKERBY DEPTH ZONE DEVELOPMENT FINANCING
The Company made great progress in the last several months toward securing full
financing of its Lockerby Depth Development Project. The series of transactions
as described below will, if successful, position the Company for a full launch
of the development program early in 2011.
Bridge Loan - US$5 million
On September 1, 2010, the Company received a US$5 million Bridge Loan from
Resource Capital Fund IV L.P. ("RCF IV"). The Bridge Loan matures on December
31, 2013 and bears an interest rate of 15% per annum, paid quarterly in cash or,
at RCF's option, in common shares of the Company valued at the market price
which equals the 5-day weighted average trading price of the Company's shares.
The full amount of the loan will be used to commence capital development
activities at the Lockerby Mine, including detailed engineering and commencement
of activities to address a number of bottleneck items to ensure a smooth
start-up of the main development program once full financing is arranged.
Proposed Senior Debt Facility - $30 million
On August 25, 2010, the Company entered into an engagement letter to appoint
Societe Generale (Canada Branch) ("SocGen") and Commonwealth Bank of Australia
("CBA") (together the "Lead Arrangers") to act as exclusive lead arrangers for a
senior secured project loan facility up to $30 million (the "Facility"). Any
commitment by either Lead Arranger will be subject to, among other things,
internal credit approval, due diligence, receipt of any government and
regulatory approvals and definitive legal documentation, including the provision
of a separate commitment letter.
An initial cash arrangement fee was paid to the Lead Arrangers upon signing of
the engagement letter and further arrangement fees are payable to the Lead
Arrangers upon the acceptance of a commitment letter and upon the execution of
the credit agreement evidencing the Facility. The engagement is also subject to
a termination fee being paid to the Lead Arrangers in certain circumstances.
The proceeds of the Facility will be used to partially fund the direct and
indirect development and start-up costs at the Company's Lockerby Depth Zone
Project
At the end of the quarter the banks had completed their technical due diligence,
and were well-advanced in legal due diligence.
Public Equity Offering - $25 million
The Company announced on October 28, that it is proceeding with an offering (the
"Public Offering") of up to approximately 208,333,333 units of the Company
("Units") at a price of $0.12 per Unit for gross proceeds to the Company of
approximately $25 million. Each Unit will be comprised of one common share in
the capital of the Company (a "Common Share") and one-half of one Common Share
purchase warrant (each whole warrant, a "Warrant"). Each Warrant will entitle
the holder thereof to acquire one Common Share at a price of $0.17 until the
second anniversary of the closing of the Public Offering.
In addition, it is expected that RCF IV will exchange approximately
US$3,171,059.20 of its US$5 million Bridge Loan for 28,132,580 Units based on an
exchange rate of C$1.0646/US$1.00 and a price of $0.12 per Unit in connection
with the Public Offering. The remaining US$1,828,940.80 of the Bridge Loan is to
be exchanged (for 16,225,753 Units) upon the Company obtaining the requisite
shareholder approval (either by written shareholder approval or at a special
meeting to be held as soon as possible after the closing of the Public
Offering).
LOCKERBY MINE OPERATIONS
The Lockerby Mine has been on care and maintenance since October 19, 2008.
The mine staff and a skeleton crew have continued to work hard at maintaining
the facility at minimal cost and within budget. Securing the bridge loan from
RCF allowed some capital activities to be initiated in anticipation of a full
go-ahead upon completing financings. The Company has awarded the contract for
detailed engineering studies, begun work on refurbishment of some of the
infrastructure and started modifications to the materials handling system. By
engaging in these activities now it hopes to eliminate potential bottlenecks for
the development work.
On April 27, 2010 the Company signed a new collective agreement with the United
Steelworkers who represent OCT (Office, Clerical and Technical) employees, and
on July 23, 2010 an agreement was reached with the CAW for the P&M (Production
and Maintenance) workers. Both of these agreements have three year terms to
2013.
RESULTS OF OPERATIONS
The following table presents a summary of the results of operations for the
three and nine month periods ended September 30, 2010 and 2009:
Three months ended Nine months ended
September 30, September 30,
2010 2009 2010 2009
----------------------------------------------------------------------------
(Unaudited) (Unaudited)
Sales Revenue $ - $ - $ - $ 4,483,662
----------------------------- -----------------------------
Operating costs
excluding
amortization - - - 4,173,121
Care and
maintenance
costs 1,078,515 935,230 3,641,117 3,494,172
Accretion on
asset
retirement
obligations 49,800 48,300 149,400 144,900
Amortization of
mining
properties and
equipment - - - 719,631
----------------------------- -----------------------------
1,128,315 983,530 3,790,517 8,531,824
----------------------------- -----------------------------
Operating loss
from mining
operations (1,128,315) (983,530) (3,790,517) (4,048,162)
----------------------------- -----------------------------
General and
administrative 367,950 350,620 1,472,336 1,423,826
Stock-based
compensation 1,500 5,181 4,500 352,218
Depreciation and
amortization 4,260 4,359 12,780 13,077
Foreign exchange
loss (gain) (404,081) (64,979) (292,392) (122,209)
Interest on loan
facilities 302,058 177,948 773,098 177,948
Accretion on
convertible
loan 136,081 92,525 398,587 92,525
Interest and
other expenses 5,297 20,045 20,428 179,865
Loss on sale of
marketable
securities - - - 21,429
Interest and
other income (8,897) (15,115) (26,875) (79,399)
----------------------------- -----------------------------
404,168 570,584 2,362,462 2,059,280
----------------------------- -----------------------------
Net loss for the
period $ (1,532,483) $ (1,554,114) $ (6,152,979) $ (6,107,442)
----------------------------- -----------------------------
Net loss per
share-Basic and
diluted $ (0.01) $ (0.01) $ (0.04) $ (0.04)
Weighted average
number of
common shares
outstanding 164,945,644 157,698,098 162,132,502 155,834,765
For the three month period ended September 30, 2010 the Company recorded a net
loss of $1,532,483, or $0.01 per share, compared to a net loss of $1,554,114, or
$0.01 per share, recorded for the three month period ended September 30, 2009.
The Company has recorded a full valuation allowance against any income tax
recovery.
No sales revenue was recorded in the three and nine month period ended September
30, 2010. The nine month period ended September 30, 2009 included only one month
of sales revenue as the Company suspended mining operations at the Lockerby Mine
in October 2008, and therefore only had one month of production available for
settlement in 2009.
Care and maintenance costs of $1,078,516 recorded in the third quarter of 2010
are on budget, and are $140,186 (12%) and $265,384 (20%) lower than the costs
recorded in the first and second quarter of 2010, respectively. These
expenditures include ongoing costs of the staff retained at the mine site,
energy, taxes, insurance, equipment rentals and materials required to maintain
the mine.
General and administrative expenses totaled $367,950 in the third quarter of
2010, slightly higher than the $350,620 recorded in the third quarter of 2009.
The increase is mostly attributable to higher consulting fees.
Stock-based compensation costs of $1,500 recorded in the third quarter of 2010
relate to previously granted stock options with graded vesting schedule. No
stock options were granted during the first nine months of 2010.
A foreign exchange gain of $404,081 was recorded in the third quarter of 2010,
versus an exchange gain of $64,979 in 2009. Exchange gains or losses arise from
the revaluation of the US dollar cash balances, and the US dollar Convertible
Loan and Bridge Loan account.
The interest on the loan facilities amounted to $302,058 ($235,520 on the
Convertible Loan and $66,538 on the Bridge Loan) in the third quarter of 2010.
RCF notified the Company of its option to receive common shares of the Company
in payment of this interest. A total of 3,069,392 common shares were issued to
RCF in full satisfaction of this liability.
Interest and other expenses of $5,297 recorded in the third quarter of 2010
include costs incurred on mineral properties that were previously written off.
Interest and other income is mostly made up of interest earned on cash balances,
and on short term deposits. The lower interest income in 2010, compared to 2009,
mainly reflects lower interest rates.
2010 - 2011 Outlook
The Company is confident that its financing goals will be satisfied by year-end,
and therefore it expects to fully launch the Lockerby Depth Zone Project in
2011, with first shipments of ore by mid-year 2011.
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 -
Standards of Disclosure for Mineral Projects ('NI 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.
First Nickel is a Canadian mining and exploration Company, whose principal asset
is the Lockerby Mine near Sudbury, Ontario. In addition to its Lockerby
operation, the Company maintains an active exploration program on projects near
the mine around Sudbury, and elsewhere in Ontario. First Nickel's shares are
traded on the TSX under the symbol FNI.
Some of the statements contained in this news release are forward-looking
statements, such as statements that describe First Nickel's future plans,
intentions, objectives or goals, and specifically include but are not limited to
the completion of the proposed Facility and additional financing initiatives,
and the launch of the full development program on Lockerby Depth Zone Project in
2011. In certain cases, forward-looking statements can be identified by the use
of words such as "expects", "will", "enable", "anticipates", "estimated" or
words of similar effect. Since forward-looking statements are not statements of
historical fact and address future events, conditions and expectations,
forward-looking statements inherently involve unknown risks, uncertainties,
assumptions and other factors well beyond the Company's ability to control or
predict. Actual results and developments may differ materially from those
contemplated by such forward-looking statements depending on, among others, such
key factors as negotiating and entering into definitive agreements for the
Facility, completion of the Facility, fluctuating metal prices, completion of
additional financing initiatives, maintaining operating and exploration teams,
continued care and maintenance of the Lockerby Mine, and other factors described
in the Company's most recently filed 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.
The forward-looking statements included in this document represent First
Nickel's views as of the date of this document and subsequent events and
developments may cause First Nickel's views to change. These forward-looking
statements should not be relied upon as representing First Nickel's views as of
any date subsequent to the date of this document. Although First Nickel has
attempted to identify important factors that could cause actual actions, events
or results to differ materially from those described in forward-looking
statements, there may be other factors that cause actions, events or results not
to be as anticipated, estimated or intended. Accordingly, readers should not
place undue reliance on any forward-looking statements.
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