First Nickel on firmer ground

First Nickel (FNI-T) wants to put market uncertainty around its Lockerby nickel mine in Sudbury to bed.

And with the release of prefeasibility results and a reserve estimate, it is well on its way to doing so.

“I think we’ve removed uncertainty,” says president and chief executive Bill Anderson on a conference call connected with the release. “We’ve shown the market this is where we’re going folks and if you like it come on board.”

Getting investors on board has proven a challenge for the company of late.

In May of last year its share price was in the $1.80 range, but it has since been on a steady decline.

On July 2, the day before the latest news was released, its shares touched a 52-week low of 26 before correcting slightly and finishing the day at 28.

“It has been concern in the past as to what kind of operating mine we have,” says Anderson of Lockerby which has been both producing nickel and hosting an aggressive exploration campaign. “Our production profile was a bit erratic and it was difficult to explain that. We needed reserves first.”

That wait is over as First Nickel announced probable reserves of 1.84 million tonnes grading 1.69% nickel, 1.16% copper and 0.06% cobalt.

And the market nodded its approval, moving the company’s shares 2 higher to 29 on roughly 320,000 shares traded.

Other key metrics for the project put forth in the prefeasibility study include an estimated 69.3% internal rate of return (IRR) and a net present value (NPV) of $47 million at a 10% discount rate.

Mine life is estimated at just over 5 years with total capital expenditures coming in at $85.98 million — roughly $52 million of that will be to build the expansion while the remaining $34 million will be for sustaining operations.

Anderson says that the relatively humble capital requirements mean the prospect for debt financing look good, with more than a half dozen banks already having expressed an interest in possibly providing funds.

He expects construction to begin by the end of the year.

Once built metal production would total 46 million lbs of nickel, 37 million lbs of copper, and 900,000 lbs cobalt.

Cash operating costs net of by-product credits are estimated to average out at US$6.08 per lb of nickel with full production milling of 1,200 tonnes per day or 420,000 tonnes per year.