Continental Nickel Receives Initial Mineralogical Assessment Results from Nachingwea Project, Tanzania

Continental Nickel Limited (TSX VENTURE:CNI) announced today that it has received the results from an initial mineralogical assessment of the Company's new Sleeping Giant nickel-copper sulphide discovery on the Nachingwea Project in Tanzania, a 75:25 Joint Venture between CNI and IMX Resources Limited of Australia.

The study was completed by the Xstrata Process Support Centre ("XPS") in Sudbury, Ontario and has estimated that a nickel recovery of up to 88% is possible using conventional flotation concentration mineral processing. This compares favourably with nickel recoveries at some of the best mining and milling operations in the industry. For example, recoveries at the Xstrata owned Strathcona operation in Sudbury, Ontario and the Raglan operation in Quebec have been reported to be 82% and 86%, respectively (Canadian Mining Journal 2008 Mining Source Book).

Field activities from the Company's 2010 exploration program were completed in December 2010 and were highlighted by the discovery of the new Sleeping Giant nickel-copper sulphide zone with drill intersections up to 2.58% nickel and 0.41% copper over 23.3 metres (Press Release December 13, 2010).

An initial mineral characterization study of samples from the newly discovered Sleeping Giant zone as well as samples from the G zone at Ntaka Hill was completed by XPS. A total of twenty (20) core samples that represent a range of nickel grades from both mineralized zones were examined using Quantitative Evaluation of Materials by Scanning Electron Microscope ("QEMSCAN") and Electron Probe Microanalysis ("EPMA"). This study followed on from a previous study by XPS of samples from five mineralized zones (H, J, L, M and NAD013) at Ntaka Hill completed in 2009 (Press Release July 15, 2009).

The objectives of the study were to quantify modal analysis, grain size and grain size distributions, mineral associations, nickel, copper and cobalt deportments as well as composition of sulphide and non-sulphide mineral species. Of particular interest is the analysis of nickel deportment which allows for an estimate of possible nickel recovery.

The key findings of the study include:

• Sulphide mineralization consists of massive, net-textured and disseminated sulphides at G zone and disseminated to blebby sulphides at Sleeping Giant with pentlandite being the dominant nickel sulphide bearing mineral.

• An evaluation of nickel deportment indicates that the majority of nickel occurs in pentlandite which suggests that high nickel recoveries are possible under conventional flotation concentration mineral processing.

• The grain sizes of pentlandite in the two zones studied were found to average between 105 to 115 microns, similar to nickel sulphide deposits in other parts of the world, and should liberate well with an appropriate grinding strategy.

• A calculation of the recovery of nickel to a concentrate in a conventional flotation concentrator or mill is estimated at 88.0% for Sleeping Giant and 79.6% for G zone. The high results at Sleeping Giant are similar to the estimates from the 2009 study of the H, L, J, M and NAD013 zones and compare favourably to some of the industry's best performing existing operations such as at Strathcona in Sudbury, Ontario and Raglan in Quebec where reported operational recoveries were 82% and 86% for nickel respectively in 2008. (The estimated recoveries are calculated based on the measured nickel composition of the various sulphide and silicate mineral species and assuming a 92% recovery of pentlandite, 50% of pyrite and 20% of pyrrhotite at the milling stage. The recoveries above are estimates only. A flotation testing program on representative samples is required to confirm recoveries as well as concentrate grades).

• Pyrrhotite : pentlandite ratios, which provide process engineers with an indication of the amenability of upgrading the mineralization to a metal concentrate, were determined and compared to other typical nickel sulphide deposits. Zone G was found to be at the high end of the range, while the ratio for the Sleeping Giant Zone is very low and similar to the results from the 2009 study for the other zones at Ntaka Hill. A low ratio indicates that pyrrhotite dilution into a nickel concentrate is expected to be low and may allow processing to achieve a higher grade of concentrate.

Craig MacDougall, President & CEO of Continental Nickel Limited, said "The results of the mineral characterization program at the new Sleeping Giant sulphide zone are very encouraging. They continue to indicate that the bulk of the nickel-copper sulphide mineralization in the Ntaka Hill area displays highly favourable metallurgical characteristics that should be amenable to conventional grinding and flotation concentration mineral processing. The estimated recovery of nickel is high and is comparable to some of the best nickel operations in the industry. The completion of this characterization work is an important step in preparation for a more comprehensive metallurgical testing program."

Next Steps

Data compilation and design of 2011 exploration program is currently in progress and is expected to be submitted to the exploration partners for approval in February.

A revised Mineral Resource estimate for the Ntaka Hill area, including the new Sleeping Giant discovery, is currently in progress. Current NI 43-101 compliant Mineral Resources at Ntaka Hill (Measured and Indicated) total 3.1 million tonnes grading 1.31% nickel and 0.24% copper at a US$23/tonne Net Smelter Return cut-off (Press Release July 15, 2009). The study is being updated by Scott Wilson Roscoe Postle Associates Inc. of Toronto and the results are expected in February.

Qualified Persons

Expert services relating to the Mineral Characterization study were provided by the Xstrata Process Support Centre in Sudbury, Ontario under the supervision of Ms. Lori Kormos, P. Geo., Chief Geoscientist with XPS.

The quality control, technical information and all aspects of the exploration program are supervised by Patricia Tirschmann, P. Geo., Vice President, Exploration for CNI. The information in this release was prepared under the direction of Craig MacDougall, P. Geo., President and CEO for Continental Nickel Limited. Both Ms. Tirschmann and Mr. MacDougall are qualified persons as defined by National Instrument 43-101.