UPDATE:First Nickel gets feasibility on Premiere Ridge

After negotiating for two extensions, First Nickels (FNI-T) feasibility study for the Premiere Ridge project has at last been submitted to Xstrata (XTA-L, XRAF-O).

While initially the study was due on Aug. 1 of 2006, First Nickel secured an extension to Jan. 31 and unable to meet that, secured another which gave it until July 1 a deadline that it met.

First Nickels president and chief executive 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 start pulling ore out of the ground by another deadline. Thats because the same deal which was originally signed with Falconbridge requires it to begin mining ore by July 1 of 2008.

Anderson says the plan is to begin mining a few months ahead of that deadline in March of 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 any greenfield project in Ontario requires.

While Anderson admits that getting to production by the said date will require an aggressive schedule and means the company will have to keep its eyes open, he says the nature of the deposit its a near surface and relatively flat deposit as well as the fact that the mine is not near any communities and requires no smelting or tailings ponds means the permitting process should be uncomplicated.

Were not anticipating any sort of problems, Anderson says.

The agreement with Xstrata calls for First Nickel to spend $1.5 million on exploration and a feasibility study, and lets First Nickel take a 100% interest in the property by paying Xstrata $2 million in cash and getting to commercial production by March of 2008.

First Nickel is 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 be paying for the ore.

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

The feasibility study for Premier Ridge puts the projects internal rate of return (IRR) at 37.1% and says it could generate an undiscounted pre-tax cash flow of $27.8 million after capital recovery assuming average metal prices of US$7.62 per lb nickel, US$2.19 per lb copper and US$9.00 per lb cobalt over a five year mine life.

Based on a 10% discount rate the project has a $14.3 million net present value (NPV). The pre-production and sustaining capital requirements have been estimated at $42.8 million and $4.2 million respectively. Unit cash operating costs net of by-product credits are estimated at US$5.49 per pound of nickel.

The projects probable reserves now stand at 1.15 million tonnes grading 1.33% nickel and 0.53% copper from a total resource of 1.44 million tonnes grading 1.42% nickel and 0.54% copper.

Reserves were estimated at a 1% nickel equivalent cut-off grade, 12% dilution, and 78% extraction.

First Nickel says the flat-lying nature of the deposit meant the mining methods employed for the study were room and pillar, blasthole, and ramp pillar recovery.

The company estimates yearly output will average 230,000 tonnes, attaining 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.

On July 9, the day that the completion of the feasibility study was announced, First Nickel shares climbed 13% or 15 to $1.37 on 3.7 million shares. Over the last year its shares have traded between $1.98 and 30 and it has 127 million shares outstanding.