Transcript fni_corp_oct_09

FIRST NICKEL INC.
PRESENTATION
OCT 2009
Forward Looking Statement
Some of the statements contained in this presentation are “forward-looking statements”, within the
meaning of Section 21E of the Securities Exchange Act of 1933. such as statements that describe First
Nickel’s expectations in regard to project start-up, expected cumulative cash flows, IRR, pay back
period, mineral reserve and resource estimates, expected revenue and profit, development
performance rates, expected US/Canada exchange rate and mine production estimates. In certain
cases, forward-looking statements can be identified by the use of words such as “plans”, “expects” or
“does not expect”, “is expected”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates”,
or “does not anticipate”, or “believes” or variations of such words and phrases, or state that certain
actions, events or results “may”, “could”, “would”, “might” or “will” be taken, occur or be achieved.
Since forward-looking statements are not statements of historical fact and address future events,
conditions and expectations, forward-looking statements by their nature 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 copper, nickel and cobalt
prices, US/Canada exchange rate and mine operating costs. The forward-looking statements included
in this presentation represent First Nickel’s views as of the date of the presentation. While First Nickel
anticipates that subsequent events and developments may cause First Nickel’s views to change, First
Nickel specifically disclaims any obligation to update these forward-looking statements unless required
by law. 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 presentation. 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.
OVERVIEW
• Owns and operates the Lockerby NickelCopper mine in the world class Sudbury
district
• Robust high grade reserve to support a
development plan for production 20112016+, with additional resources defined
and ready for development
• Very capable and experienced operating
and exploration teams
• Major shareholder with established
resource industry investment record
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TSX- listed “FNI”
Market Cap (Oct 19)
Shares outstanding – 9/30/09
Fully-diluted
52 week price range
Working Capital – 9/30/09
Long term debt**
** Convertible Loan
$19 M
159,110,632
164,789,490
$0.035-0.195
$10.4M
US$10M
We have a strong and capable management team with many years
operating and exploration experience, and a strong board with diverse
backgrounds
Management –
W.J. Anderson Pres., CEO
J. Del Campo, CFO
G. Bilodeau, Vice President
Operations
Paul Davis, Vice President
Exploration
Board of Directors –
T. Pugsley, Chairman
W.J. Anderson, Pres., CEO
R. Hallisey
L. Hepburn
D. Comba
R. Whittall
R. Cranswick
Lockerby Mine – well-maintained mine with 30 year production history
with demonstrated potential to discover more ore
•
Sudbury Basin Properties
•
First NickelBasin
property
Sudbury
Properties
Sudbury Igneous Complex
First Nickel property
Cu, Ni, PGE
Deposits
Sudbury
Igneous Complex
Footwall
deposits
Cu,
Ni, PGE
Deposits
Contact deposits
Footwall
deposits
Offset
deposits
ContactMill
depositsStrathcona Mill
Strathcona
Offset deposits ge Strathcona Mill
Strathcona MillRan
e
rth
ng
No
Ra
th
r
No
•
Chelmsford
Chelmsford
Azilda
h
ut
So
Azilda
e
ng
Ra
h
ut
So
e
ng
Ra
Copper Cliff
Copper Cliff
Lockerby Mine
& West
Graham Mine
Lockerby
& West Graham
Sudbury
N
Sudbury
0
5
0
N
•
10
kilometers
5
kilometers
10
Purchased from Falconbridge in
2005 for ~$8 million
No milling facility needed – life-ofmine processing offtake agreement in place with Xstrata Nickel
From 2006-08 FNI produced 9.4M
lbs nickel, and 6.1M lbs copper
while exploring and building the
resource base
Experienced strong management
operating team in place
Lockerby mine has a hoisting capacity of ~1M tpy, two shafts from
surface, an internal (#3) shaft, and a haulage ramp down to the current
workings (65-3L)
Lockerby Mine – When we purchased it we believed we would discover
more ore. From 2006-2008 we grew the recoverable nickel contained
within Indicated Resources from 8M lbs to 78 M lbs
Lockerby Mine: Resource Estimates
Lockerby Depth Indicated
Lockerby Depth Inferred
Lockerby East Indicated
Lockerby East Inferred
Lockerby Upper West Indicated
Indicated Resource Ni lbs
100
90
Resources Tonnes (000)
2,500
80
70
2,000
60
1,500
50
40
1,000
30
20
500
10
0
0
2005
2007
2009
Indicated Resourc Ni lbs (000,000)
3,000
Lockerby Mine – 2008 – in the face of declining metal prices we placed the
operation on care and maintenance. In that year the mine team achieved a
number of performance goals which have built credibility for the future.
 Achieved metal production of 3.8M lbs
payable nickel in 10 months vs target of 3.84.1M for 12 months
 Reduced cash cost per pound payable nickel
to US$5.64/lb - 33% below budget
 Reduced mine operating costs over the year
so that in the last four months costs were
down to $165/tonne – 30% below budget for
the year
Lockerby Mine 2009 – we concentrated on controlling care and
maintenance expenses, and pursued further technical studies seeking to
minimize risk by reducing capital and targeting higher margins by raising
the cutoff grade
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Feasibility study prepared by
GENIVAR consultants announced
in March 2009
GENIVAR prepared an update to
the study in October 2009
The new reserve grade is 22%
higher than the previous reserve,
thereby yielding better margins
Study demonstrates robust
economics
Lockerby Depth Project Reserves – the grades and tonnage place the
project as one of the best in the world at a development-ready stage
Total Depth Zone
Mining
Level
65-2
65
66
67
68
69
70
Total *
Diluted
Tonnes
Tonnes
per
Vertical
Meter
Ni
(%)
Cu
(%)
Co
(%)
NiEq
(%)
131,000
185,500
194,900
306,000
293,500
182,400
142,900
2.05
2.33
2.34
2.27
2.23
2.25
2.03
1.26
1.44
1.41
1.42
1.34
1.43
1.07
0.075
0.086
0.084
0.084
0.085
0.087
0.079
2.49
2.83
2.84
2.76
2.70
2.75
2.42
3,970
5,620
5,910
9,270
8,890
5,530
4,330
1,436,200
2.23
1.36
0,083
2.71
6,810
* From “Technical Report and Feasibility Study on the Depth Zone of the Lockerby
Deposit.GENIVAR Limited Partnership. April 10, 2009
Cut-off grade 1.5% NiEq
NiEq = Ni% +(0.32xCu%)+(0.53xCo%)
Lockerby Depth Mine Plan – the mine design is simple and conservative
– the existing ramp haulage infrastructure will be extended, the mine
development and extraction of the ore embraces a conservative
geotechnical approach of transverse access, and the current mine
ventilation layout will be extended and cooling capacity added.
The mine design is conservative, encompassing primary and secondary
transverse blasthole mining with backfill.
•
The Depth Zone has been delineated into two distinct zones;
– Contact Zone
– Hangingwall Zone
Hangingwall Zone
Contact Zone
The stope sequencing requires primary stopes in the Contact zone to be
mined first, which leads to higher grades at the start – the Contact zone
reserves average 2.83% Ni Eq
Primaries
Secondaries
(After Primaries are filled)
The April feasibility study was updated in October 2009. Mine operating
and capital estimates remained the same, but metal prices and exchange
rates were adjusted as were treatment charges and revenue from PGE’s
Base Case Assumptions:
Nickel price
US$8.00
Copper “
US$2.75-3.00
Cobalt “
US$15.00
US$/C$
US$0.85
Capex Preprod
C$37.6M
Capex Sustaining
C$32.2M
C$69.8M
Metal production 2011-2016+
Full production 800tpd/280,000tpy
51.7 M lbs payable nickel
34.4 M lbs “
copper
~1 M lbs “
cobalt
Evaluation outcomes:
IRR –
NPV @ 10% Cumulative Cash Flow
(Undiscounted, pre-tax)
74%
C$67M
C$112M
Cash Cost/lb Ni
US$4.56
(net of Byproduct credits)
Total Capital Cost/lb Ni
US$1.15
Payback Period
14 Months
Lockerby Feasibility Update – Cash Flow Model – Base Case
Year
2010
Year
2011
Year
2012
Year
2013
Year
2014
Year
2015
Year
2016
0
0
0.00
0.00
0.00
600
157,500
2.36
1.38
0.09
800
280,000
2.57
1.61
0.10
800
280,000
2.05
1.12
0.08
800
280,000
2.48
1.48
0.09
800
280,000
2.19
1.28
0.08
516
158,652 1,436,153
1.46
2.23
1.24
1.36
0.05
0.08
Revenue ('000 C $)
0
66,775
131,686
101,405
129,997
113,809
44,815
588,488
Treatment ('000 C $)
0
19,619
38,945
32,475
39,746
36,740
15,801
183,326
Net Value ('000 C $)
0
47,156
92,742
68,930
90,251
77,069
29,014
405,162
UG mine Operating costs ('000 C $)
0
25,007
43,700
43,560
43,523
43,301
24,032
223,123
0
20,291
22,150
27,968
49,041
10,371
25,370
4,217
46,728
3,097
33,769
3,006
4,982
894
182,039
69,843
Undiscounted Cash flow ('000 C $)
-20,291
-5,818
38,670
21,153
43,631
30,763
4,088
112,196
Cumulative Undisc. Cash flow ('000 C $)
-20,291
-26,109
12,561
33,714
77,345
108,108
112,196
Mine daily output (tpd)
Tonnes (wet)
Nickel (%)
Copper (%)
Cobalt (%)
Operating margin ('000 C $)
Capital costs ('000 C $)
TOTAL
PROJECT
Lockerby Depth Project Risk - The project is most sensitive to US$/C$
exchange and metal price
CCF Sensitivity (before taxes and financing)
CCF Sensitivity (before taxes and financing)
180
160
140
120
100
80
60
40
20
0
250
CCF (M$)
CCF (M$)
200
150
100
50
0
0.70
0.75
0.80
0.85
0.90
0.95
Exchange Rate (US $/C $)
1.00
7.00 7.25 7.50 7.75 8.00 8.25 8.50 8.75 9.00
Ni Price (US $ per pound)
Project technical risks – we view these as low - the capital plan for Lockerby
Depth is straightforward underground development at an existing mine with all
services etc. in place…
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FNI mine management and the supervisory team have extensive
experience managing and running such projects, both as contractors and as
owners
•
FNI has been operating the mine for over three years
•
The project in the capital development phase will be executed by
contractors
•
There are high quality contract crews available for this work
•
The cost estimates and productivity expectations have been conservatively
built and there will be opportunities to improve on outcomes and therefore
reduce risk
In the Update GENIVAR was asked to assess the impact that improvements in
development performance would have on the project. Besides potentially
shortening the payback period by up to 2 months there would be capital savings as
well
Assumptions:
10% increase in dev. rates
20%
“
“
“
20% decrease in dev. costs
Outcomes:
Capex
68.1M
66.5M
64.5M
Cum CF
113.9M
115.5M
120.0M
Lockerby Depth Project Upside – the Feasibility study is based on a
reserve carved out of resources outlined in the past three years. We expect
further conversion of resources to reserves in the current mine plan that
will see a mine life well beyond 2016
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•
FNI has been very successful at
both finding additional resources
and converting these to reserves
At present there are ~14M lbs
contained nickel in Indicated
resources, and ~23M lbs
contained nickel in Inferred
resources and these will increase
and be assessed for mining in the
next several years
Lockerby mining in the future can potentially encompass Upper West,
Lower Depth, and East Zone plus extensions.
Lockerby – looking ahead we plan to continue to convert resources to reserves
and integrate them into the mine plan …, which could add ~C$60-70M to
overall cash flow, and some of that activity would likely overlap with the
feasibility schedule, which would further improve economics
LOCKERBY 2010-2020
(Ni $8.25, Cu $2.87, Co $15, US$/C$0.90)
40,000
CASH FLOW $ '000'S
30,000
Resources to Reserves
Feasibility Schedule
20,000
10,000
0
2010
-10,000
-20,000
-30,000
2011
2012
2013
2014
2015
2016
2017
2018
2019
First Nickel has a strong exploration group with an excellent track record
at Lockerby and vicinity, a pipeline of projects in place and the experience
and skills to source and generate new projects
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Very successful and cost effective
ongoing exploration at Lockerby
Taken West Graham property to
advanced status by establishing a
significant indicated resource
Generated new regional
grassroots program in SE Ontario
Actively investigating new
exploration/acquisition
opportunities, domestic and
international
West Graham Property – adjacent to Lockerby, exploration has confirmed
a significant resource
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FNI will be vested at 70% on Dec.
31, 2009
The property has no obligations to
either XNI or Vale, hence the
product can be sold anywhere
Metallurgical testing is ongoing
Footwall exploration potential
Tonnes
(000's)
8,550
2,000
Ni%
Cu%
Co%
Ni Eq%
Indicated Resource*
0.45
0.31
0.01
Inferred Resource*
0.4
0.3
0
* 43-101 Resource Estimate SWRPA, Jan. 2009
0.55
0.5
Grassroots exploration – new projects in SE Ontario initiated in 2008,
drilling in 2009
• Grassroots exploration
program
• Targets – Voisey’s Bay and
Eagle style nickel copper
PGE deposit
• Over 40 known nickel-
copper occurrences
• Under-explored region of
Ontario
Sudbury
Sudbury
Raglan Hills JV
Raglan Hills JV
Belmont Project
Belmont Project
Toronto
Toronto
Nickel and copper are our main revenue metals and we are confident the
markets and demand for both of these will remain strong
LOCKERBY REVENUE
Copper, 18%
Cobalt, 3%
PGE's 1%
Nickel , 78%
 Significant cuts in nickel production in 2008
 Costs are increasing and new supply from S.
hemisphere projects requires huge capital
 Nickel prices at >US$8.00 long term is reasonable
 Copper demand also fueled by China, India etc, with
similar concerns over supply and cost of production
Our near term plans – Through a combination of very hard work and
dedication from our people, coupled with the working capital facility
secured in July 2009 the Company has emerged from the worst of the
downturn with a well-constructed and economically strong business plan
•
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We will focus on securing financing for Lockerby Depth and expect to
launch the project in 2010
Key team members are all on board and detailed engineering and other
preparations in advance of a go ahead decision are underway
Exploration will continue through 2009, and on through 2010 at levels
matching flow-through funding
First Nickel’s long term vision…. We see the mining business as a sector
that will fare better than many in the times ahead, we need and want to
grow well beyond a single site operation.
•
We have the people to find, build, and manage mines
•
We will continue an organic growth track through our own exploration but
realize that to achieve our goals will require deals for producing or nearproduction assets
•
The present is a good time to be seeking opportunities
•
The board is committed to a growth strategy, and we have the support of
the largest shareholder
SUMMARY
 Nickel-Copper miner
 Capital Development plan
that is low risk, and modest
in size
 Experienced operating and
management team in place
 Growth-oriented
 Large shareholder available
to lend financial support