Reserves and Resources

Table 4: FNX Reserves (December 31, 2008)

FNX’s resource and reserve profile changed significantly in 2008 as a result of the current commodity price environment. The Ni deposit resources have been restated with the application of a 1% Ni cut-off grade to better reflect the available resource given the current metal price. Mineral reserves for Levack contact Ni ores have decreased to zero from the 2007 numbers, due both to 2008 production activities and, primarily, due to a decrease in the metal revenues with the new metal accountabilities received in 2008 and higher processing costs.

FNX’s development and mining activities have shifted focus toward the higher margin, multi commodity Cu-Ni-precious metal footwall deposits, which account for nearly half of the 2008 reserve tons. The Podolsky Mine completed its first year of commercial production in the 2000 Deposit, and limited mining commenced in Rob’s Deposit during 2008.

FNX reviews its reserves and resources annually at year-end using a variety of techniques appropriate for the type of orebody and relevant dataset. Block modeled resources are defined by detailed geological modeling, wireframing and internal peer-review with subsequent block modeling using Datamine software and, typically, inverse distance grade interpolation. Cut-offs may be established by grade or value, depending on the style of mineralization. Converted historical resources largely remain defined by sectional polygonal techniques with grade cut-offs appropriate for the style of Ni mineralization. Reserves are further defined using appropriate mining parameters and economic analysis. FNX has established an on-going relationship with independent consultants, to provide technical review services of all drill hole and assay databases, as well as geological, resource, reserve modeling for FNX going forward. FNX resources and reserves conform to NI 43-101 standards.

FNX’s 2008 reserves and resources were estimated using the following assumptions: Ni = US$6.50/lb, Cu = US$1.50/lb, Co = US$10.00/lb, Pt = US$800/oz, Pd = US$350/oz, Au = US$400/oz and an exchange rate of US$/CDN$ = 0.80. FNX uses a 1% Ni cut-off grade and a minimum true width of 8 ft for Ni orebodies and a value cut-off appropriate to the various mining methods for polymetallic Cu-Ni-Pt-Pd-Au orebodies.

Table 5: FNX Resources (December 31, 2008)

McCreedy West
Nickel Deposits – Inter Main 

Ni reserves at McCreedy West Mine are entirely within the Inter Main Deposit and contain a total of 1.32 million tons of proven and probable grading 1.4% Ni and 0.2% Cu as at December 31, 2008. This is an increase compared to the 1.28 million tons of proven and probable reserve at 1.4% Ni and 0.2% Cu at the end of 2007. Measured and indicated mineral resources for the Ni ores (including those resources modified to produce the reserve estimates) total 1.84 million tons at 1.8% Ni and 0.3% Cu.

Inferred Ni mineral resources are 1.88 million tons grading 1.6% Ni and 0.3% Cu. Despite McCreedy West total Ni production of 431,000 tons in 2008, total resources in the Ni deposits increased through aggressive drilling by geological staff. Continued limited diamond drilling and interpretation during 2009 is expected to continue to upgrade the category of these resources.

Footwall Deposits: PM and 700 Deposits

Probable reserves at PM and 700 deposit were 0.67 and 0.07 million tons, respectively, grading 1.1% Cu, 0.2% Ni and 5.0 g/t Pt+Pd+Au, and 4.5% Cu, 0.5% Ni and 1.0 g/t Pt+Pd+Au (Table 4). Total proven and probable reserves at McCreedy West’s Inter Main, PM and 700 deposits for 2008 are 2.07 million tons compared to 2.21 million tons at the end of 2007.

Indicated mineral resources (includes those resources modified to produce reserves) for the PM Deposit are 2.32 million tons grading 1.1% Cu, 0.3% Ni and 5.0 g/t  Pt+Pd+Au (Table 5). Indicated mineral resources (includes those resources modified to produce reserves) for the 700 Deposit total 0.32 million tons at 10.0% Cu, 1.0% Ni and 8.7 g/t Pt+Pd+Au. Inferred mineral resources for the PM deposit are 0.22 million tons grading 1.1% Cu, 0.3% Ni and 7.8 g/t Pt+Pd+Au.

Levack Mine

Probable mineral reserves for Levack contact Ni ores have decreased to zero and all Ni production was suspended late in 2008. The combination of low commodity prices and new accountability terms have resulted in the Levack Ni deposits currently being uneconomic. For the first time reserves were developed in Rob’s Deposit Cu-Ni ores with probable reserves of 0.09 million tons grading 1.3 % Cu, 1.9% Ni and 1.2 g/t Pt+Pd+Au. Measured and indicated mineral resources  within the Ni deposits total 5.97 million tons grading 2.1% Ni and 1.1% Cu at the end of 2008, compared to 9.40 million tons at 1.6% Ni and 0.9% Cu at the end of 2007. The difference is largely due to re-establishing a 1% Ni cut-off grade for the Ni deposits in contrast to the 0.5% Cu+Ni cut-off applied in 2007. The initial indicated resource for a portion of the LFD was estimated in 2008 and currently stands at 687,000 tons grading 8.8% Cu, 1.4% Ni and 7.8 g/t Pt+Pd+Au. The initial resource estimate is restricted to a 250-ft. vertical slice centered on the 4000 Level crosscut. Diamond drilling from the 4000 Level exploration platform provided sufficient infill diamond drilling to allow detailed geological interpretation and resource estimation within this limited volume. Levack inferred mineral resources are 1.10 million tons averaging 1.9% Ni and 0.9% Cu within the Ni deposits and 0.20 million tons grading 1.6% Ni, 26% Cu and 2.8 g/t Pt+Pd+Au within Rob’s Deposit.

Podolsky Footwall Deposits – 2000 Deposit

The Podolsky Mine completed its first year of production and continued development. Infill drilling replaced those reserves mined in 2008. Probable reserves as at December 31, 2008, stood at 0.42 million tons grading 4.6% Cu, 0.4% Ni and 4.7 g/t TPM. The mineral resources of the Cu-Ni-Pt-Pd-Au 2000 Deposit have been re-estimated and measured and indicated mineral resources for the 2000 and North deposits total 1.83 million tons of 4.2% Cu, 0.4% Ni and 3.7 g/t TPM.

Contact Nickel Deposit: Nickel Ramp Deposit

Indicated Ni mineral resources at Podolsky property were estimated at the Nickel Ramp Deposit as a result of the historical resource review process and stand at 6.68 million tons grading 0.8% Ni and 0.2% Cu.

Victoria and Kirkwood Properties

Indicated and Inferred mineral resources were added in 2007 to the FNX resource base at both the Victoria and Kirkwood properties as a result of the technical review and re-definition of the pre-existing, historical resource base. The 2007 evaluation was based on a 0.5 % Cu+Ni cut-off grade and, given the current commodity environment, the resources were re-stated by the end of 2008 based on a 1% Ni cut-off grade and a US$6.50 per pound Ni price, compared to US$10.00 per pound used in 2007. As a result, indicated mineral resources at Victoria are now reported as 0.53 million tons grading 1.4% Cu and 1.2% Ni, whereas inferred resources total 0.44 million tons of 0.9% Cu and 1.4% Ni. At Kirkwood, indicated mineral resources are 0.62 million tons grading 0.5% Cu and 1.2% Ni, with 1.75 million tons at 1.0% Cu and 1.3% Ni in the inferred category.