Mine Development

Ramp development at the Redstone mine is complete to the 488m level and a drill drift is partially completed from that level to allow the Company to drill down to the 671m level. However, due to low nickel prices, all further development and drilling plans have been suspended unti l prices recover sufficiently to justify these activities. Subsequent to the end of the quarter, on October31, 2008, the Company placed the Redstone mine on care and maintenance as the price per pound of nickel continued to weaken to the US$4.27 to US$5.30 range.

Development activity continued to progress at the McWatters mine through the third quarter of 2008. Preproduction commenced from the 65m level on September 15, 2008. As above, the McWatters mine was also placed on care and maintenance on October 31, 2008. At that time, 39 meters of development was required to reach the ore zone on the 100 meter level. The sump was completed on the 100 meter level and the ventilation system for the level was installed. The ramp was complete to the 105 meter level, well on its way to the 150m level.

Permitting for the Hart nickel project continued to progress with the goal to be fully permitted by mid 2009. The estimated completion of permitting at Hart is a forward looking statement and contains a number of risks and uncertainties and other factors that could cause the final date to differ materially from the time period projected in this forward looking statement which would have material impacts on the timing of future cash flows of the Company. The specific risks and uncertainties around the estimated completion of permitting result from delays in the Ministry review process, delays that result from public consultation and delays in providing additional information as requested by the Ministry. Management has estimated the completion of permitting for the Hart project by mid 2009 based on the average time lines provided by the Ministry.

Mill Operations

Processing costs for the Redstone mill averaged $53.72 and $48.26 per tonne for the three and nine month periods ended September 30, 2009 compared to $48.61 in the previous quarter of 2008. The increase in the mill processing cost per tonne is a result of additional operating salaries and wages as capital projects slowed compared to previous quarters.

The mill received 3,894 tonnes of ore from the disseminated upper zone of the 65m level of the McWatters mine for metallurgical testing. The metallurgical recovery of ore grading 0.59%-0.61% nickel varied from 87.1% to 88%, which was 3%-4% higher than predicted.

Resources and Reserves.

An updated technical report for Redstone Mine is to be issued by December 2, 2008.

An updated technical report for the McWatters mine is to be issued by December 2, 2008.

A technical report for a preliminary assessment of the Hart Nickel project is expected to be released in the spring of 2009.

Exploration

Shaw Dome Nickel Belt – One drill tested some grassroots targets and results are pending analysis.

Sothman Nickel Project – Some drilling at the known mineralized deposit was completed. Exploratory drilling of an anomaly approximately 3 km from that zone was also completed. All results are pending analysis.

McAra Lake Cobalt Project – Diamond drilling at the surrounding claims that extend north into Ray Township was complete with results pending analysis.