First Nickel Inc. Reports First Quarter 2012 Financial and Operating Results
16.05.2012 | Marketwire
Steady Progress Towards Full Production at LockerbyTORONTO, ONTARIO -- (Marketwire) -- 05/16/12 -- First Nickel Inc. ("First Nickel", "FNI" or the "Company") (TSX: FNI) announces results for the first quarter ended March 31, 2012. The Company's condensed unaudited financial statements, and management's discussion and analysis for the period have been filed with SEDAR and will be available at www.sedar.com and on the Company's website at www.firstnickel.com. This news release should be read in conjunction with the Company's financial statements for the period ended March 31, 2012 and management's discussion and analysis. This news release contains forward-looking information that is subject to the risks and assumptions set out in our Cautionary Statement on Forward-Looking Information located at the end of this news release (All dollar amounts herein are in Canadian funds unless otherwise indicated.)
HIGHLIGHTS
-- Strong Balance Sheet: Ended the quarter with current assets of $26.7
million including $12.8 million in unrestricted cash.
-- Increased Production: Ore extraction from the Depth Zone of the Lockerby
Mine in the first quarter totalled 40,565 tonnes, an increase of 87%
over the last quarter.
-- Revenue: Capitalized nickel revenue during the first quarter of 2012
totalled $10.7 million.
-- Exploration: 1,345 metres of diamond drilling at our Belmont project.
-- Development: Ramp development totalled 73.8 metres and lateral
development totalled 471 metres during the first quarter of 2012.
-- Full Production: The Company expects the mine to be near or at full
production of 10.0 million pounds of nickel and 7.0 million pounds of
copper per annum in the fourth quarter of 2012.
CEO Commentary
Mr. Thomas M. Boehlert, President and CEO of First Nickel commented, "The Lockerby mine had a very solid first quarter. With production having increased by 87% compared to the prior quarter, and costs in line with our targets, we are well on our way to achieving our objectives of full production at cash production costs of approximately $6.00 per pound of nickel by the end of this year."
Summary of Financial and Operating Results
The Company reported an operating loss of $2.5 million or a loss of $0.01 per share. The Lockerby Project is in the pre-commercial production stage and as a result, sales under the existing Off-take Agreement are not classified as revenues, but as a reduction in capital costs, and operating costs are capitalized. The Company defines commercial production as maintaining a consistent level of output greater than 65% of full production for a period of three months. During the three month period ended March 31, 2012 the Company recorded $10.7 million in nickel sales and recognized $12.9 million of capitalized cash production costs (net of by-product credits) on the Lockerby Depth Project.
The following table presents a summary of the results of operations for the three-month periods ended March 31st.
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For the three months ended
First Nickel Inc. March 31
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2012 2011
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Expenses
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General and administrative $ 894,293 $ 618,658
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Share-based compensation $ 334,970 $ 57,717
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Depreciation and amortization $ 3,060 $ 3,060
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Foreign exchange gain $ (86,647) $ (206,485)
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Change in fair value of equity conversion option $ 663,765 $ 1,996,191
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Financing costs on convertible loan $ 235,520 $ 235,520
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Accretion on convertible loan $ 423,501 $ 137,793
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Accretion of asset retirement obligations $ 24,682 $ 41,414
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Finance costs on bridge loan $ - $ 16,226
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Interest and other income $ (57,020) $ (101,885)
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Operating loss before taxes $ (2,436,124) $ (2,798,209)
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Income and mining taxes $ 62,284 $ -
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Net loss and comprehensive loss for the period $ (2,498,408) $ (2,798,209)
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Loss per share - basic and diluted $ (0.01) $ (0.01)
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Weighted average number of common shares
outstanding 510,230,857 456,583,322
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Lockerby Mine Operating Results
Safety, Health & Environment
The Company's directors, management, employees and contractors continue to place the highest priority on safety, health and the environment. In the first quarter 2012 there were zero lost time injuries. Subsequent to March 31, 2012, the Ministry of Labour of Ontario identified safety concerns related to the No. 2 shaft manway. Normal operations were halted on April 23rd to correct the deficiencies and normal operations resumed on April 29th. The Company does not anticipate any negative impact on second quarter production as a result of the shutdown as the shutdown coincided with a period of planned maintenance.
Sales
The Company recognized $10.7 million in nickel sales and $3.6 million in by-product revenue for the first quarter of 2012. The Company is in the pre-commercial production stage, during which time sales are not classified as revenues but as a reduction in capital costs, and operating costs are capitalized to property plant and equipment.
Production
First Nickel produced 1,174,353 pounds of nickel and 816,242 pounds of copper at Lockerby in the first quarter of 2012 and incurred $12.9 million of capitalized cash production costs (net of by-product credits). Ore production, during the first quarter 2012 was 40,565 tonnes (451 tonnes per day) an 87% increase over fourth quarter 2011 production of 21,721 tonnes (241 tonnes per day). Ore production is expected to average between 500 and 550 tonnes per day in the second quarter as the project ramps up over the course of the year.
Development
The development program for the depth project commenced from the 65-3 level in May 2011. A total advance of 1,226 metres was achieved in 2011. The ramp bottom was located just above the 65 level at the end of 2011. In the first quarter of 2012, the ramp was advanced 73.8 metres, in addition to 471 metres of lateral development.
Exploration
Significant additional upside potential remains at Lockerby. The production profile outlined in the current mine plan as defined in the GENIVAR feasibility study (updated in November 2010) does not incorporate any production from ore sourced from resources identified in other areas of the mine including the Lockerby East and Upper West Zones. As the mineralization is open at depth below the 70 Level, opportunities exist to further expand the Depth Zone.
During the quarter the Company announced an increase in the 2012 exploration budget to $3.4 million to include the following drilling:
- 5,000 metres of surface drilling on the Link zone
- 3,000 metres of surface drilling on the Belmont Project
- 3,000 metres of surface drilling on the Raglan Hill Project
During the first quarter of 2012, exploration expenditures totaled $659,487 with one drill active on the Belmont Property.
Belmont Project- A total of 1,345 metres of diamond drilling was completed in 7 holes in Limerick and Wollaston Townships. Drilling was focused on priority targets identified by airborne geophysical surveys completed by the Company in 2008. Drilling tested areas with an increased magnetic response with a corresponding electromagnetic anomaly. Analytical results to date have not identified any anomalous metal values. A total of 3,000 metres are proposed for the Belmont project in 2012.
Raglan Hills - Preparations were completed on the ML North target that included the identification of drill platforms in the field. Drilling is designed to define the size of the ML North platinum group element showing discovered in 2009 and test for the presence of nickel-copper sulphides associated with a moderate electromagnetic anomaly in the area. A total of 3,000 metres are proposed for the Raglan Hills project in 2012.
Link Zone - The Link Zone lies between the Conwest and Lockerby East Deposits in Sudbury, Ontario, and is wholly located within the Company's property boundaries. Preparations began on the proposed 5,000 metre drill program that included the identification of drill locations and sourcing of a diamond drill rig to complete the work. Drilling is schedule to begin in the second quarter.
Developments Subsequent to March 31, 2012
Subsequent to quarter end the Company negotiated a surety bond guaranteeing the full amount of the closure plan for Lockerby mine in the amount of $5.9 million. The Company posted cash security in the amount of $2.4 million in support of the bond. The bank has released the restriction on our term deposit of $5.9 million, which was previously used as security for a letter of credit in support of the closure plan, making the funds available for the Company's use.
The Company entered into multiple forward sales agreements and option collar agreements to protect against near-term decreases in the price of copper. The Company has agreements outstanding to sell approximately 932,000 pounds of copper at a price of $3.81 per pound. These agreements mature at various dates from May, 2012 to October, 2012. No cash premiums were paid or received under the net zero cash structures. Monthly settlements will be made where necessary for the contracts.
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 news releases.
About First Nickel Inc.
First Nickel is a Canadian mining and exploration Company. The Company's mission is to be the most dynamic North American emerging base metal mining Company in which to work and invest and to be respected in the communities in which we operate. FNI is in the process of ramping up production at its Lockerby nickel / copper mine in the Sudbury Basin in northern Ontario. Once the Lockerby Mine reaches full production (expected by end of 2012), it is expected to produce at a rate of approximately 10 million pounds of nickel and approximately 7 million pounds of copper annually, providing a strong base of cash flow from which to grow the Company. In addition to the Lockerby nickel mine, the Company owns exploration properties in the Sudbury Basin, the Timmins region of northern Ontario, and the Belmont region of Eastern Ontario. First Nickel's shares are traded on the TSX under the symbol FNI.
Cautionary Statement Regarding Forward-Looking Information
Certain statements contained in this news release may contain forward-looking information about First Nickel. Forward-looking information can often be identified by the use of forward-looking terminology such as "anticipate", "believe", "continue", "budget", "forecast", "estimate", "schedule", "expect", "goal", "intend", "target", "potential", "objective", "may", "plan" or "will" or the negative thereof or variations thereon or similar terminology. Forward-looking information may include, but is not limited to: the resumption of operations at Lockerby mine and the continued operation thereof; expectations of obtaining financing in the near term; future financial or operating performance of the Company and its projects; the future price of metals; the long term supply and demand for nickel; continuation of exploration activities; mineral reserve and mineral resource estimates; the realization of mineral resource estimates; costs of production and key supplies; capital, operating and exploration expenditures; forecasts of sales and production; costs and timing of the development of new and existing deposits; costs and timing of future exploration; the requirements for additional capital; government regulation of mining operations; environmental risks, reclamation expenses and/or title disputes or claims.
By its nature, forward-looking information is based on certain factors and assumptions which involve known and unknown risks, uncertainties and other factors which may cause the actual results, realization of mineral resources, performance or achievements of the Company, financial position or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking information. Accordingly, actual events may differ materially from those implied by any forward-looking information. Readers are cautioned not to place undue reliance on forward-looking information, which speak only as of the date the statements were made and readers are also advised to consider such forward-looking information while considering the risk factors set forth in the management's discussion and analysis for the year ended December 31, 2011 under the heading "Risks and Uncertainties" and under the heading "Risk Factors" in the Company's Annual Information Form for the year ended December 31, 2011. The Company disclaims any intention or obligation to publicly update or otherwise revise any forward-looking information whether as a result of new information, future events or other such factors which affect this information or to explain any material difference between subsequent actual events and such forward-looking information, except as required by applicable law.
(i) Non-GAAP Financial Measures The cash cost per pound of nickel produced, and total cash production costs are non-GAAP financial measures that do not have a standardized meaning under Canadian Generally Accepted Accounting Principles ("GAAP"), and as a result may not be comparable to similar measures presented by other companies. Management uses these statistics to monitor operating costs and profitability, and believes that certain investors use this information to evaluate the Company's performance and ability to generate cash flow in addition to conventional GAAP measures. Accordingly, it is intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. Cash production costs include mining costs, treatment and smelting costs, equipment operating lease costs, mine site general and administration costs, environmental costs, transportation, and refining of concentrate, less by-product credits from sales of copper, cobalt and PGEs. The cash cost per pound of nickel produced is cash production costs divided by pounds of nickel produced.
Contacts:
First Nickel Inc.
Thomas Boehlert, President & CEO
416 362-7050
tboehlert@firstnickel.com
CHF Investor Relations
Robin Cook, Senior Account Manager
416 868 1079 x 228
robin@chfir.com