First Nickel Reports Financial and Operating Results for the Period Ended June 30, 2011
TORONTO, ONTARIO -- (Marketwire) -- 08/11/11 -- First Nickel Inc. ('First Nickel' or the 'Company') (TSX: FNI) announces that it has filed with the Canadian securities regulatory authorities its condensed unaudited financial statements, and management's discussion and analysis for the six month period ended June 30, 2011.
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
-- A $30 million senior debt facility closed on June 29, 2011
-- The Company subsequently completed the metals and foreign exchange hedge
contracts required under the credit agreement
-- A private placement of $5 million, also required under the credit
agreement, was completed on July 19, 2011
-- The Company is fully funded to complete the re-start and ramp-up to full
production, which will double the pre-2008 production level in 2012
-- Development work commenced at the Lockerby Mine in May 2011
-- A private placement of $2 million of flow-through funds was completed in
May 2011
Results of Operations
The following table presents a summary of the results of operations for the three and six month periods ended June 30th:
(Unaudited) For the three months For the six months
ended June 30, ended June 30,
2011 2010 2011 2010
---------------------------- ----------------------------
Expenses
Care and
maintenance costs $ - $ 1,218,702 $ - $ 2,562,602
General and
administrative
excluding share-
based payments 672,617 570,066 1,291,275 1,104,386
Share-based
payments 57,717 1,500 115,434 3,000
Depreciation and
amortization 3,060 4,260 6,120 8,520
Foreign exchange
(gain) loss (42,845) 387,081 (249,330) 111,689
Financing costs on
convertible loan 235,520 235,520 471,040 471,040
Change in fair
value of equity
conversion option (1,169,184) (2,665,139) 827,007 (1,444,783)
Accretion on
convertible loan 141,458 135,706 279,251 262,506
Accretion of asset
retirement
obligations 41,652 49,800 83,066 99,600
Financing costs on
bridge loan - - 16,226 -
Interest and other
expenses 283 - 2,288 -
Financial income -
net (52,824) (535) (156,714) (2,847)
---------------------------- ----------------------------
(112,546) (63,039) 2,685,663 3,175,713
---------------------------- ----------------------------
Net earnings
(loss) and
comprehensive
earnings
(loss) for the
period $ 112,546 $ 63,039 $ (2,685,663) $ (3,175,713)
---------------------------- ----------------------------
---------------------------- ----------------------------
Earnings (loss)
per share - basic
and diluted $ 0.00 $ 0.00 $ (0.01) $ (0.02)
---------------------------- ----------------------------
---------------------------- ----------------------------
Weighted average
number of common
shares
outstanding -
basic 463,825,098 162,768,568 459,145,933 161,527,931
---------------------------- ----------------------------
---------------------------- ----------------------------
As a result of a change in fair value on the equity conversion option of the convertible loan, the Company recorded a gain of $1,169,184 in the second quarter, which resulted in the Company showing net earnings of $112,546, or $ Nil per share, in the three months ended June 30, 2011. On a year-to-date basis, the change in fair value on the equity conversion option is a loss of $827,007, which brings the loss for the six months ended June 30, 2011 to $2,685,663, or $0.01 per share. Under IFRS, the equity component of the convertible loan will be fair valued at each reporting period, and any change in the fair value will be recorded in income or loss in the reported period. The Company has recorded a full valuation allowance against any future income tax assets.
General and administrative expenses, excluding stock-based compensation, totaled $1,291,275 in the first half of 2011, compared to $1,104,386 recorded in the same period of 2010. The increase is mostly attributable to including the wages and related costs of the Chief Operating Officer with the corporate costs. In the prior year, these costs were included with the care and maintenance costs at the Lockerby Mine.
Share-based payments costs in the first six months of 2011 amounted to $115,434 (2010 - $3,000). This cost relates to the vested value of the stock options that were granted to directors, officers and employees in December 2010. The fair value of the options granted was estimated at the grant date to be $468,155. Of this amount, $167,596 was expensed in 2010, with the balance amortized over the vesting period of the options. The Company uses the Black-Scholes pricing model in the valuations of the options.
An increase in the value of the Canadian dollar relative to the U.S. dollar during the first half of 2011 resulted in a foreign exchange gain of $249,330 being recorded. Exchange gains or losses arise from the revaluation of the US dollar cash balances, and the US dollar Convertible Loan account.
The interest on the loan facilities with Resource Capital Fund IV ('RCF IV') for the first half of 2011 amounted to $487,266 ($471,040 on the Convertible Loan and $16,226 on the Bridge Loan). RCF IV notified the Company of its option to receive Common Shares in payment of this interest. A total of 3,116,797 Common Shares were issued to RCF IV in full satisfaction of this liability. The Bridge Loan was fully exchanged into Common Shares in January of 2011, and therefore will not incur any interest going forward.
Financial income is mostly made up of interest earned on cash balances, and on short term deposits. The higher interest income in 2011, compared to 2010, mostly reflects the higher cash balance as a result of the equity financing completed in 2010.
2011 Outlook for Lockerby Mine
The Company successfully completed key re-commissioning tasks and has moved ahead with launching the mine capital development program. Project activities are on track and on budget for commencement of production late in the third quarter of 2011 and then a ramp-up to full annualized production of 10 million pounds of nickel and 7 million pounds of copper per year by mid-2012.
The most critical component of the re-commissioning phase, the installation of the ore/waste handling system on 51L, was completed on time and on budget.
The Capital program designed to develop and mine the Depth zone was fully underway in the second quarter.
The mine contractor charged with carrying out the development work mobilized in May 2011 and at the end of the period activities centered on advancing the ramp toward 65-2 level, opening up 65-3 level in anticipation of production, excavating remuck (storage) areas and increasing the excavation for the future maintenance shop on 60 level.
Part of the capital plan is to replace major elements in the underground mobile equipment fleet. Delivery of the first 42T truck took place in March 2011, and the balance of the equipment, including three additional trucks, three 6 yard LHDs and a drill jumbo are scheduled to be on site and in service in the next few months.
Needed improvements to the mine backfill delivery system to satisfy the new mine plan were started. One of two boreholes to deliver backfill slurry to the 53 level was completed, the second is underway, and changes to improve the piping and control systems in the backfill plant were also launched.
As the pace of the capital program has increased, a number of unionized employees have been recalled to provide mine support and maintenance services. Recruiting is also underway for supervisory and additional technical personnel.
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.
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.
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, 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.
Contacts:
First Nickel Inc.
William Anderson
President & CEO
(416) 362-7050
(416) 362-9050 (FAX)
wanderson@firstnickel.com
www.firstnickel.com