Shareholders of First Nickel (FNI) look to report for guidance.
In resource news this morning, First Nickel Inc. (TSX: T.FNI, Stock Forum) announced that it is in receipt of results of a prefeasibility study conducted with respect to its Lockerby Depth. Genivar Limited Partnership was the consulting engineering firm hired to do the study. A summary of results was included in the news release:
The Study indicates that the project has an IRR of 69.3% and would generate an undiscounted pre-tax cash flow of $78.20 million after capital recovery assuming average metal prices of US$10.23/lb Ni, US$ 2.31/lb Cu, and US$ 14.26/lb Co. An exchange rate of $C/$US 1.05 was used for this study. Based on a 10% discount rate the project has a $47.03 million NPV as calculated by Genivar.
There is an investor update conference call scheduled for this morning at 10:30am EST. President and CEO of First Nickel, Bill Anderson, will present, and a question and answer period will follow.
It hasn’t been easy for First Nickel shareholders over the last few years. The stock was trading under 50 cents in late 2004 before it spiked to near $1.50, drifted back, then popped again to near $2.00 in early 2006. Later that year shares were back down to sub-50 cents before once again hitting the $2.00 level in early 2007 – and now, after a full-year decline, they’re down to 27 cents.
Investors on the Bullboard have been discussing this very pattern. Stockhouse member jwallisca said, “The following SH link shows FNI over five years. It is quite clear that we are at the same five year low found twice before. Amazing rewards for those who were long and patient then.” The investor included a link to the five-year chart for FNI.
Some, however, are not so positive. spenny63 said:
But this time there are two factors working against FNI. First and most importantly, FNI is a high cost producer, somewhere around 10 bucks a pound. Nickel prices have fallen dramatically over the past year and right now FNI does not come close to breaking even. Second, the strong canadian dollar wipes out a nice premium when nickel is sold in yankee greenbacks. I think that FNI is in some serious trouble. Unless nickel bounces back to at least 14 or 15 bucks a pound, they are mining for nothing. [sic]
The investor continued with more remarks about the company’s prospects:
My point is it doesn't matter what the shares are worth it is what investors are willing to pay for them.
With respect to FNI, my opinion is based purely on market conditions. Yes FNI does have a producing mine and last year when I doubled my money on FNI stock it was a nice little operation when nickel was over 20 bucks a pound. FNI does have a few exploration properties, but lets be honest, Premiere Ridge will never get developed without a joint venture. It is too costly to develop even if nickel was 20 bucks a pound today. The only reason I would jump in right now is if there was a chance that FNI was going to be snapped up by FNX at 50 or 60 cents a share. I don't think that FNI can survive without a partner or buyout. [sic]
In response to this, victor75 said, not long before this morning’s prefeasibility study results hit the wires:
Yes, the nickel price is certainly down (currently @ $9.56/lb), although Q2 financials, based on Q1 production (good) and average Q2 nickel price, about $12.75/lb, should also be positive. The Lockerby resource study (details tomorrow) should increase production capacity, and hence with economies of scale should also reduce the nickel cost of prod/lb. Remember also the Cu @ $4/lb and Co @ $42/lb.
To continue the discussion, join members on the FNI Bullboard.
