First Nickel Reports Financial and Operating Results for the Period Ended September 30, 2011
TORONTO, ONTARIO -- (Marketwire) -- 11/14/11 -- 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 nine month period ended September 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
-- Private placements of $5 million and $500,000 were completed on July 19,
2011, and September 13, 2011, respectively
-- The Company settled the derivative contracts implemented under the
Lockerby Depth project facility and realized net cash proceeds of $36
million
-- Working capital at September 30, 2011 was $39.4 million
-- The Company has the funds required to complete the Lockerby Depth
project
-- First ore from the Lockerby Depth project was delivered to Xstrata in
September 2011
Results of Operations
The following table presents a summary of the results of operations for the three and nine month periods ended September 30th:
(Unaudited) For the three months For the nine months
-------------------------- -------------------------
ended September 30, ended September 30,
-------------------------- -------------------------
2011 2010 2011 2010
-------------------------- -------------------------
Expenses
Care and maintenance
costs $ - $ 1,078,515 $ - $ 3,641,117
General and
administrative,
excluding share-based
compensation 815,702 367,950 2,106,977 1,472,336
Share-based
compensation 366,595 1,500 482,029 4,500
Depreciation and
amortization 3,060 4,260 9,180 12,780
Foreign exchange loss
(gain) 314,788 (265,039) 65,458 (153,350)
Financing costs on
convertible and bridge
loan 235,520 302,058 722,786 773,098
Change in fair value of
equity conversion
option (4,059,983) (1,104,819) (3,675,564) (1,821,628)
Accretion on
convertible loan 84,525 223,093 749,820 485,599
Accretion of asset
retirement obligations 41,892 49,800 124,958 149,400
Gain on settlements of
derivative contracts -
net (33,117,041) - (33,117,041) -
Financial income - net (35,661) (3,600) (190,087) (6,447)
-------------------------- -------------------------
(35,350,603) 653,718 (32,721,484) 4,557,405
-------------------------- -------------------------
Earnings (loss) before
taxes 35,350,603 (653,718) 32,721,484 (4,557,405)
Recovery of future
income and mining
taxes (46,771) - (46,771) -
-------------------------- -------------------------
Net earnings (loss) and
comprehensive earnings
(loss) for the period $ 35,397,374 $ (653,718)$ 32,768,255 $(4,557,405)
-========================= =========================
Earnings (loss) per
share - basic $ 0.07 $ - $ 0.07 $ (0.03)
- diluted $ 0.05 $ - $ 0.05 $ (0.03)
-========================= =========================
The net gain on settlements of derivative contracts of $33,117,041, and a gain on the change in fair value on the equity conversion option of the convertible loan of $4,059,983 in the third quarter, resulted in the Company showing net earnings after tax of $35,397,374, or $0.07 per share, in the three months ended September 30, 2011. This brings the year-to-date net earnings after tax to $32,768,255, or $0.07 per share.
The Company took advantage of the drop in nickel and copper prices in the latter part of September 2011 and monetized its entire derivative contracts entered into pursuant to the project debt facility and realized proceeds of $36 million. Costs incurred initially in establishing the project debt facility of approximately $2.9 million have been netted against the proceeds resulting in a net gain of $33.1 million being recorded.
Under IFRS, the equity component of the convertible loan is being fair valued at each reporting period, and any change in the fair value is being recorded in income or loss in the reported period. As a result of the stock price dropping from $0.165 at June 30, 2011 to $0.115 at September 30, 2011, the fair value of the equity component of the convertible loan reduced by $4,059,983.
General and administrative expenses, excluding stock-based compensation, totaled $2,106,977 in the first nine months of 2011, compared to $1,472,336 recorded in the same period of 2010. The increase is mostly attributable to recruiting and compensation costs.
Share-based compensation costs in the first nine months of 2011 amounted to $482,029 (2010 - $4,500). This cost relates to the vested value of the stock options that were granted to directors, officers and employees in December 2010, and to a senior officer in September 2011. The fair value of the options granted in 2010 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 fair value of the options granted in 2011 was estimated at the grant date to be $810,000, of which $289,973 has been expensed in the third quarter of 2011, 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.
A decrease in the value of the Canadian dollar relative to the US dollar during the third quarter of 2011 resulted in a foreign exchange loss of $314,788 being recorded, bringing the year-to-date amount to a loss of $65,458. 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 nine months of 2011 amounted to $722,786 ($706,560 on the convertible loan and $16,226 on the Bridge Loan). RCF IV exercised its option to receive common shares of the Company ('Common Shares') in payment of this interest. A total of 4,888,624 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 financings completed in 2010 and 2011.
Lockerby Mine
The Company has made steady progress on the Lockerby Depth Development Project which was launched in October 2010.
Part of the capital plan is to replace major components of the underground mobile equipment fleet. Delivery and commissioning of the second 42T haul truck, the first 6 yard scooptram, a 2 boom development jumbo and a scissor truck have taken place. Delivery of the remaining units, comprising two haul trucks, one scooptram and one scissor / bolter will take place in the fourth quarter of 2011.
Re-commissioning of the surface backfill plant was completed as planned, and mobilization, installation and commissioning of the surface ore crushing facility and the sample tower were also completed as scheduled. Commissioning of the underground backfill receiving and delivery system was delayed by one month as a result of difficulties encountered during the initial startup, impacting the filling of a key stope. Issues encountered during commissioning have been addressed and the system is now operating as per design.
Mine development work began in May 2011. Development targets were behind schedule through September 2011, having achieved 494 metres versus the plan of 859 metres. This shortfall was the result of development crews having difficulty following standard quality control drilling and blasting techniques, commissioning issues with the new haulage trucks and effective utilization of resources during each of the development cycles. Improvements have been made in these areas resulting in targeted development rates being achieved in the second half of October 2011.
The Company has spent approximately $27 million on the Lockerby Depth project to September 30, 2011.
Ore shipments to Xstrata's Strathcona mill were initiated on September 26, 2011. Production in September 2011 was 2,203 tonnes versus 13,242 tonnes planned. The shortfall was caused primarily by the development delay and backfill system commissioning items noted above.
Average production is expected to increase to approximately 400 tonnes per day during November and December of 2011 and to the full production rate of 800 tonnes per day by mid-2012. Once in full production, the mine is expected to produce 10 million pounds of nickel and 7 million pounds of copper annually.
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.
Thomas Boehlert
President & CEO
(416) 362-7050
(416) 362-9050 (FAX)
tboehlert@firstnickel.com