Just had a review of the Q2 financials. A few things jump out and I will add some observations for each in a seperate note. The data I quote is directly off the company's reports and I will add page numbers so individuals can compare for themselves.

While the company discusses its cost to produce a pound of nickel (top of page 2 of the MD&A) of $5.17 US per pound, be aware that that is a non-gaap statistic that is used for internal purposes.

If anyone is thinking that the true "selling costs" of a pound of nickel is in the $5 range (and dropping) while earning $10 for spot nickel less the Xstrata processing fees, that is clearly wrong.

At the top of page three of the MD&A, it states that the Redstone Mill has produced 699,554 lbs of nickel, 43,342 lbs of copper, and 8601 lbs of cobalt. To keep the math simple I'll add these volumes up and assume a total nickel volume of 750,000 lbs of nickel for Q2.

On page 6 of the MD&A is a breakdown of all the various costs incurred. By looking at the revenue line at the top for the three months ended to June 30th, it shows $7,352,163 was earned. Dividing that by the 750,000 volume above you can see that about $10 per pound was earned. Give or take a bit is similiar to nickel prices over that period.

The "site operational costs" of $6,643,647 divided by the same 750,000 pounds of nickel produced shows a more accurate cost per pound of $8.85. Then as the documents state that this does not include the amortization, depletion etc which is a further $2,528,479 write off. Yes this is a non-cash expense but thats because the capital has already been spent. Via borrowed funds I might add.

Corporate expenses for the quarter are a further $550,530, and interest and long term interest is a further $744,367. The dividends accrued to the Preferred Shares adds another $437,734.

I won't add the other expenses mentioned in their spreadsheet as they are more one off items or too small. Still the above tally of expenses is $10,904,757. Divide that by the 750,000 pounds of nickel produced at the Redstone Mill and it avg about $14.50 per pound to produce.

That would explain why a further loss of almost $5,000,000 occurred in Q2.

What is interesting is how little impact the interest and preferred dividends have on the cost per pound. With increased production at the mill, as stated, these numbers should come down. Question is by how much. And that is another interesting point to be mentioned in a further post.