First Nickel Inc. - Lockerby - Fri Nov 21, 2008

Overview

Lockerby Mine Site
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The Lockerby Mine is located southwest of the city of Sudbury. The mine was developed and operated by Falconbridge Ltd. from 1974 until September 2004, and over 8 million tonnes of ore were extracted. First Nickel acquired the mine in June 2005, and commenced commercial production at the start of 2006.

As a result of persisting low metal prices, production at the mine was suspended and the facility placed on care and maintenance status in October 2008

The mine is remains a cornerstone of First Nickel's Sudbury operations. The key to Lockerby's future and the basis for our long term business in Sudbury is a capital program to improve the infrastructure., following a recovery in metal prices. The major increase in the resource base that arose from our 2006 drilling program has enabled us to undertake a life of mine and engineering study which will determine key infrastructure improvements and targeting changes to the mine configuration which will allow us to increase production, achieve higher operating efficiencies, and mine at greater depth.

Genivar Prefeasibility Study 2008

3D Depth
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A July 2008 Prefeasibility Study on the development and mining of the Lockerby Depth, prepared by Genivar Limited Partnership, estimated:

an IRR of 69.3%
undiscounted pre-tax cash flow of $78.20 million after capital recovery*
metal production totaling 46 million pounds payable nickel, 37 million pounds payable copper, and 900 thousand pounds payable cobalt.
unit cash operating costs net of by-product credits are estimated at US$6.08 per pound of nickel over the 5.2 year mine plan, attaining a low of US$5.70/lb in peak production years of 420,000tpy.

* 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.

The primary mining methods proposed were descendant longhole mining to the 65-1 Level (a continuation of the current plan) and ascendant longhole stoping between the 69 and 65-1 levels. Mine operating costs are estimated to average $130/tonne.

Capital expenditures and ongoing investments, including a 15% contingency, are estimated to total $85.98 million of which $52.21 million is required during the preproduction phase.

The Study derived the reserves from an estimated Indicated Mineral Resource of 2.89 million tonnes grading 1.78 percent nickel, 1.23 percent copper and 0.06 percent cobalt at a 1.0 percent nickel equivalent cut-off grade. Conversion of the upper part of the resources, above the 69 Level, to reserves yielded a Probable Mineral Reserve of 1.838 million tonnes grading 1.69 percent nickel, 1.16 percent copper and 0.06 percent cobalt. Reserves were estimated using a 1.5 percent nickel equivalent cut-off grade, 15 percent dilution, and 91 percent extraction.

Genivar believes that their Probable Mineral Reserve is conservative. Opportunities exist to reintroduce some of the stopes located on the margins of the deposit that were eliminated from the model, as a result of the increased cut off grade, once a new resource block model has been constructed using the higher cut off grade.

The Lockerby Depth Project Mine Plan schedule assumes that extracting the Probable Mineral Reserves would last 5.2 years consisting of 1.5 years of preproduction and 3.7 years of development and production at a full production rate of 1,200 tonnes per day or 420,000 tonnes per year.. The critical components of the capital plan that will increase output and reduce unit costs are the development program, replacing of the haulage fleet with electric trucks and optimized use of high speed personnel carriers. The plan is to being taken to feasibility level that will optimize the flow of funds by detailing the scheduling, determining the level of ongoing mining, and formalize the start dates.

Exploration and Development

Lockerby Mine
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On January 16, 2008 First Nickel Inc reported an updated mineral resource estimate for its Lockerby Mine in Sudbury.

First Nickel has estimated a NI 43-101 compliant Mineral Resource that contains Indicated Resources of 2.89 million tonnes grading 1.78% Ni, 1.23% Cu and 0.07% Co, from the 65 to 72 levels, and Inferred Resources of 0.38 million tonnes grading 1.37% Ni, 1.05% Cu and 0.05% Co, below the 72 Level. A 1.0% nickel equivalent cut-off grade was used for this resource estimate. The resource estimate does not include the 64 Level, which was part of the March 2007 resource estimate and is currently being mined.

This upgraded resource estimate equates to a total of 113 million pounds of contained nickel in the Indicated Resource Category for the Lockerby Depth Zone and represents a net increase of 68 million pounds as compared to those previously reported in March 2007.

"The potential of the Lockerby Depth Zone has expanded significantly with an increase of the Indicated Resources by 289% above the March 2007 Resource Estimate. We are gratified that, when compared to the Indicated Resources at the time of purchase of the Lockerby Mine in 2005, we have increased the Indicated Resources more than ten-fold in less than 3 years." stated William Anderson, President and CEO. "Based on this new Resource Estimate, the Lockerby Mine currently has in excess of 100 million pounds of contained nickel in the Indicated Resource category which should allow First Nickel to plan for mine expansion and increased production."

Mineral Resource Estimate

The Mineral Resource model was prepared by the FNI Technical Team. The model and modelling procedures have been reviewed by Scott Wilson Roscoe Postle Associates Inc. (Scott Wilson RPA), an independent, geological and mining consulting firm. In Scott Wilson RPA's opinion the mineral resource modeling and the Mineral Resource estimation, conform to NI 43-101 standards. In Scott Wilson RPA's opinion, the density of drilling and continuity of mineralization is sufficient to classify the estimated resources between the 65 and 72 levels on the Lockerby Depth Zone as Indicated Mineral Resources and below the 72 Levels on the Lockerby Depth Zone and the previously reported Lockerby East Zone as Inferred Mineral Resources. This resource estimate will form a portion of a more comprehensive Technical Report being prepared by Scott Wilson RPA.

The total Indicated Mineral Resource estimate is tabulated as follows:

Classification	Tonnes (000's)	Ni%	Cu%	Co%
Indicated
Depth Zone	2,890	1.78	1.23	0.07
Total Indicated	2,890	1.78	1.23	0.07

Inferred
Depth Zone (1)	380	1.37	1.05	0.05
East Zone (2)	470	1.86	0.67	0.04
Total Inferred	850	1.64	0.84	0.04

1.0% nickel equivalent (NiEq) cut-off grade used for Lockerby Depth Resource Estimate (NiEq equals Ni grade + (0.32 X Cu grade) + (0.53 X Co grade));
A 1.2% nickel equivalent (NiEq) cut-off grade was used for Lockerby East Resource Estimate where 16,254 tonnes have been produced from the Lockerby East Zone since the publication of the Resource Estimate in March 2007 (NiEq equals Ni grade + (0.32 X Cu grade) + (0.53 X Co grade));
Mineral resources which are not mineral reserves do not have demonstrated economic viability. The estimate of mineral resources may be materially affected by environmental, permitting, legal, taxation, sociopolitical, marketing, or other relevant issues;
The quantity and grade of reported inferred resources in this estimation are conceptual in nature and there has been insufficient exploration to define these inferred resources as an indicated or measured mineral resource and it is uncertain if further exploration will result in upgrading them to an indicated or measured mineral resource category.

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A total of 164 First Nickel drill holes comprising 32,453 metres of diamond drill core and 5,096 assay samples have been used for the Lockerby Depth Resource Estimate. The Mineral Resource estimate for the Lockerby Mine was derived from block models created with Datamine(c) software, applying industry standard resource modelling procedures. Grade was interpolated into the blocks using Ordinary Kriging, and results were compared to that derived from Inverse Distance Squared weighting (ID2). Multiple iterations of the model were completed with varying input criteria and compared for accuracy and reproducibility. A cut-off value of 1.0% NiEq was selected as a base case for the Lockerby Depth model.

First Nickel's diamond drill program was carried out under the supervision of First Nickel's Chief Mine Geologist, Stephen Conquer, P.Geo. and First Nickel's Sudbury Exploration Manager, Phil Vicker, P.Geo., "qualified persons" as defined by National Instrument 43-101. The Mineral Resource modelling was carried out under the supervision of First Nickel's Sudbury Exploration Manager, Phil Vicker, PGeo, a "qualified person" as defined by National Instrument 43-101. The independent audit of the Mineral Resource estimate was completed by Richard Routledge, M.Sc. PGeo. of Scott Wilson Roscoe Postle Associates, a "qualified person" as defined by National Instrument 43-101. The information in this release was prepared under the direction of Paul Davis, PGeo, Vice President of Exploration for First Nickel Inc., a "qualified person" as defined by National Instrument 43-101. First Nickel Inc. follows a rigorous QA/QC protocol on all of its exploration projects.

Lockerby

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