First Nickel finally finishes feasibility at Premiere Ridge

After negotiating two extensions, First Nickel’s (FNI-T) feasibility study for the Premiere Ridge project outside of Sudbury, Ont., has at last been submitted to Xstrata (XTA-L, XSRAF-O).

Initially due on Aug. 1, 2006, the study’s deadline was pushed to Jan. 31 and then July 1 — a deadline that First Nickel met.

First Nickel president and CEO Bill Anderson says the extensions were granted for nominal fees, and were needed to “cross the T’s and dot the I’s.”

And while the submission of the study meets one requirement of its deal with Xstrata for the Premiere Ridge property, First Nickel is still under the gun to meet another deadline. That’s because the same deal — which was originally signed with Falconbridge, since taken over by Xstrata — requires it to begin pulling ore out of the ground by July 1, 2008.

Anderson says the plan is to start mining a few months ahead of that deadline, in March 2008. But to get there, the project must still meet with a positive production decision from the board, which will meet in August, and then attain the full basket of provincial and federal permits that greenfield projects in Ontario require.

While Anderson admits that getting to production on time will require an aggressive schedule, he says the permitting process should not be complicated.

“We’re not anticipating any sort of problems,” Anderson says.

The deposit is near surface and relatively flat, requires no smelting or tailings ponds, and is not near any communities.

The agreement with Xstrata calls for First Nickel to spend $1.5 million on exploration and a feasibility study; First Nickel can earn a 100% interest in the property for $2 million in cash and by meeting the production deadline.

First Nickel has yet to make the $2-million payment.

If it does, it will be the operator of the mine and will sell the ore to Xstrata for processing at its Strathcona mill. Xstrata would deduct milling charges from the price it would pay for the ore.

First Nickel and Xstrata have a similar arrangement for ore being mined at First Nickel’s nearby Lockerby mine.

The feasibility study for Premiere Ridge puts the project’s internal rate of return (IRR) at 37.1% and says it could generate an undiscounted pretax cash flow of $27.8 million after capital recovery, assuming average metal prices of US$7.62 per lb. for nickel, US$2.19-per-lb. copper and US$9-per-lb. cobalt over a 5-year mine life.

Based on a 10% discount rate, the project has a $14.3-million net present value. The preproduction and sustaining capital requirements have been estimated at $42.8 million and $4.2 million, respectively. Unit cash operating costs net of byproduct credits are estimated at US$5.49 per lb. of nickel.

The project’s probable reserves now stand at 1.15 million tonnes grading 1.33% nickel and 0.53% copper. Reserves were estimated at a 1% nickel-equivalent cutoff grade with 12% dilution.

It also has an indicated resource of 1.44 million tonnes grading 1.42% nickel and 0.54% copper.

The study looked at various mining methods including room-and-pillar, blasthole, and ramp pillar recovery.

The company estimates yearly output will average 230,000 tonnes, reaching a maximum of 291,000 tonnes in 2009.

“With a short mine life and relatively high capital cost, the project will require strong project controls and good metal markets,” Anderson said in a statement.

First Nickel is primarily focused on the Sudbury basin, where it has the producing Lockerby mine and four exploration properties. It also has two exploration properties near Timmins, Ont.

On the announcement that the feasibility was complete, First Nickel shares climbed 13%, or 15, to $1.37 on 3.7 million shares traded. Over the last year, the stock has traded at between 30 and $1.98; the company has 127 million shares outstanding.