Here goes...

Figures from page 8 of the McWatters Technical Report:

REVENUE:

Tonnes of ore produced 596,797
Tonnes of Ni sold (mill recovered) 5,232.15
Total Revenue $107,165,695 (at $12.50 Ni prices)

If we take $107,165,695 / (5,232.15 x 2,205 lb/mt) we get $9.29 revenue per pound of nickel.
This equates to a 74.3% milling return ($9.29/$12.50).
This is what we get back from XStrata/JJNICL (plus credits) and I believe also includes the royalties we have to pay on our production.

COSTS:

Total operating costs: $36,883,154
Total capital costs: $16,354,592 (of which we had already spent $4.66mm as of Mar 31, 2008)

Total operating cost per pound of nickel: $36,883,154/(5,232.15*2,205)=$3.20
Total capital costs per pound of nickel: $16,354,592/(5,232.15*2,205)=$1.42

Total cost per pound of nickel: $4.62 per pound

This equates to a pre tax cash flow of $9.29 - $4.62 = $4.67 / lb.

Now we drop nickel prices down to various levels to test sensitivity:

$10.00 Ni = $2.82 / lb
$ 9.00 Ni = $2.07 / lb
$ 8.00 Ni = $1.33 / lb
$ 7.00 Ni = $0.59 / lb

Now we note that this only indicates the pre tax cash flow from McWatters operations directly. The profit/cash flow we generate from McWatters and Redstone then needs to be applied to general corporate expenses such as G&A (the G&A for McWatters applied only to those G&A expenses directly tied to McWatters production), stock based compensation, amortization of our mill and other non mine-specific assets, interest expense, etc. In Q1-2008 this totalled around $3mm. Annualized, this amounts to $12mm for 2008. This is assuming no additional corporate costs are required once McWatters comes online, that any additional costs are bound up in its G&A cost estimates.

If at $9.00 Ni we make $2.07/lb pre tax cash flows, and we mine 11,536,891 pounds of nickel over the life of McWatters, this is a total pre tax cash flow of $23,881,000. Apply this against 2 years of the above stated corporate costs and we see ourselves close to $0. Silver lining, however: This is putting McWatters 100% in charge of offsetting corporate G&A expenses and leaving our 200 tpd Redstone mine free to generate some additional profits.

From a cash flow perspective, the picture is a bit brighter, as some expense items (amortization and depletion costs to date) have already been paid for by cash (primarily from capital issuances in the past) and therefore even if our profits are full production are paltry, our cash flow will be healthy and able to help fund future developments (Hart, etc).

It seems that $9.00/lb nickel is our absolute minimum in order to generate some semblence of return on our investment.

I'd love some constructive criticism on the above, it's midnight and my brain may have missed something.