First Nickel Operational Update and Progress Report for the Lockerby Mine

First Nickel Inc. (TSX: FNI) is pleased to provide an update and progress report on its underground operations and plans for the Lockerby Mine located in Sudbury, Ontario.

First Nickel is currently producing ore from the 61 and 63 levels on the Depth Zone. Development work is ongoing, advancing ramps on both the Depth and East zones to access ore below the 63 and 34 levels, respectively. Production in the first half of 2006 ranged from an average of 270 tonnes per day in the first quarter to an average 340 tonnes per day in the second.

At the beginning of the year the amount of rehabilitation work, conditions in remnant stopes, and limited mine development restricted production. In recent weeks daily throughput has stabilized and the company now anticipates that overall production from Lockerby for the second half of 2006 will be 60,000 tonnes.

Operational Improvements Anticipated Q3 – Q4 2006

– Increased head grades related to primarily mining from 63 and 64 levels in the Depth Zone

– New stopes have been prepared

– Detailed examination of the materials handling at the mine is underway and potential solutions may include additions to the mine truck fleet

– Production is planned from East Zone to supplement the Depth Zone

This production guideline does not include any increases that can be achieved through the addition of a haulage truck in the Depth Zone fleet. After the company reports its second quarter results it plans to issue a financial forecast for the balance of the year that will incorporate changes to the mine plan.

2006 Exploration – Looking Forward

The Company has been continuously drilling on the Depth Zone since the last exploration update in 2006 (see press releases dated February 7, 2006 and May 29, 2006). In the remainder of 2006, the Company is planning an underground diamond drill program that will form the basis of an updated resource/reserve estimate for the Depth and East zones. This drill program will be designed to build upon phase one results and provide the drill density required to define a resource in the Indicated category below the 64 level on the Depth Zone.

Diamond drill results to date on both the Depth and East zones have met or exceeded the Company’s expectations and indicate a strong potential to extend the life of mine well beyond the 2 year time frame used in the initial mine plan.

Additional exploration targets close to the existing mine infrastructure include the footwall to the south of the Lockerby Mine, Depth and East zones and laterally to the previously mined out portions of the Lockerby Main.

“We acquired Lockerby Mine on the basis of the considerable exploration opportunities in and around the mine infrastructure, a view that is continuing to be substantiated by our drilling results” states William Anderson, President. “We are naturally disappointed in the early production figures, but I am confident we have resolved many of the issues that contributed to reduced output, and looking ahead we will be able to take advantage of the current robust metal markets.”

About the Company

First Nickel acquired 100% of the Lockerby Mine from Falconbridge Limited as part of the Asset Purchase Agreement formalized on June 1, 2005. The Lockerby Mine operated from 1971 to 2004 and produced 8.26 million tonnes from the Main, Depth and East zones averaging 1.79% Ni and 1.07% Cu to December 31, 2003. The Lockerby Mine represents significant value with its considerable surface and underground infrastructure, in addition to its exploration potential.

Paul Davis, P.Geo., Vice President Exploration of First Nickel Inc., is the designated “qualified person” as defined by National Instrument 43.101 and responsible for the verification and quality assurance of First Nickel’s exploration data and analytical results. Leo Hwozdyk, P.Eng., Lockerby’s Mine Engineer, oversees mine engineering activities on behalf of First Nickel Inc.

First Nickel Inc. follows a rigorous QA/QC protocol on all of its exploration projects. Whole drill core is sampled and sent to a commercial laboratory, SGS Laboratories in Garson for preparation and specific gravity measurements and shipped internally by SGS to Toronto for assay. A rigorous quality assurance/quality control program is employed which includes the insertion of standards and blanks for each batch of samples. Historic analytical work completed by Falconbridge was completed by a commercial laboratory, Lakefield Laboratories.

First Nickel is a Canadian mining and exploration company. Its current activities are primarily focused on the Sudbury Basin in northern Ontario, the location of the company’s producing property (the Lockerby Mine) and four of its exploration properties. First Nickel also has two exploration properties in the Timmins region of northern Ontario. First Nickel’s shares are traded on the TSX under the symbol FNI.

This news release may contain forward-looking statements, which are subject to certain risks, uncertainties and assumptions. A number of factors could cause actual results to differ materially from the results discussed in such statements, and there is no assurance that actual results will be consistent with them. Such forward-looking statements are made as at the date of this news release, and the company assumes no obligation to update or revise them, either publicly or otherwise, to reflect new events, information or circumstances, except as may be required under applicable securities law.

Contacts: First Nickel Inc. William Anderson President & CEO (416) 362-7050 (416) 362-9050 (FAX)

wanderson@firstnickel.com

SOURCE: First Nickel Inc.