---

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C.
20549

FORM 20-F

[   ] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b)
OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended **December 31,
2007**

OR

[   ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________

OR

[   ] SHELL COMPANY PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report
_____________

For the transition period from ____________ to ____________

Commission file number 000-52326

HARD CREEK NICKEL
CORPORATION(Exact name of Registrant as specified in
its charter)

Not Applicable(Translation of Registrants
name into English)

British Columbia, Canada(Jurisdiction of
incorporation or organization)

1060  1090 West Georgia Street Vancouver, British
Columbia V6E 3V7 Canada(Address of principal executive offices)

Copy of communications to: **Bernard Pinsky,
Esq.Clark Wilson LLP Barristers and Solicitors Suite 800  885 West
Georgia Street Vancouver, British Columbia, Canada V6C 3H1 Telephone:
604-687-5700 Facsimile: 604-687-6314**

Securities registered or to be registered pursuant to Section
12(b) of the Act.

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- 2 -

|Title of Class | Name of each exchange on which registered
|-------------- | -----------------------------------------
|Not Applicable | Not Applicable                           

Securities registered or to be registered pursuant to Section
12(g) of the Act.

Common Shares Without Par Value(Title of
Class)

Securities for which there is a reporting obligation pursuant to
Section 15(d) of the Act.

Not Applicable(Title of Class)

Indicate the number of outstanding shares of each of the
issuers classes of capital or common stock as of the close of the period
covered by the annual report.

There were 60,370,592 Common Shares without par value
issued and outstanding as at June 20, 2008.

Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities Act. YES [ 
 ]   NO [X]

If this report is an annual or transition report, indicate by
check mark if the registrant is not required to file reports pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934. [   ]
YES   [X] NO

Note  Checking the box above will not relieve any registrant
required to file reports pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 from their obligations under those Sections.

Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.[   ]
YES   [X] NO

Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, or a non-accelerated filer. See
definition of accelerated filer and large accelerated filer in Rule 12b-2 of
the Exchange Act. (Check one): Large accelerated filer [ 
 ]      Accelerated
filer      [ 
 ]      Non-accelerated filer [X]

Indicate by check mark which financial statement item the
registrant has elected to follow.[   ] ITEM 17   
[X] ITEM 18

If this is an annual report, indicate by check mark whether the
registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). [   ] YES   [X] NO

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TABLE OF CONTENTS

|                                                |                                                       |                                                      | Page
|----------------------------------------------- | ----------------------------------------------------- | ---------------------------------------------------- | ----
|Forward-Looking Statements                      | 4                                                    
|PART I                                          | 4                                                    
|Financial Information And Accounting Principles | 4                                                    
|Item 1                                          | Identity of Directors, Senior Management and Advisers | 5                                                   
|                                                | A.                                                    | Directors and Senior Management                      | 5   
|                                                | B.                                                    | Advisers                                             | 6   
|                                                | C.                                                    | Auditors                                             | 6   
|Item 2                                          | Offer Statistics and Expected Timetable               | 6                                                   
|Item 3                                          | Key Information                                       | 6                                                   
|                                                | A.                                                    | Selected Financial Data                              | 6   
|                                                | B.                                                    | Capitalization and Indebtedness                      | 7   
|                                                | C.                                                    | Reasons for the Offer and Use of Proceeds            | 8   
|                                                | D.                                                    | Risk Factors                                         | 8   
|Item 4                                          | Information on our Company                            | 14                                                  
|                                                | A.                                                    | History and Development of our Company               | 14  
|                                                | B.                                                    | Business Overview                                    | 16  
|                                                | C.                                                    | Organizational Structure                             | 19  
|                                                | D.                                                    | Property, Plant and Equipment                        | 19  
|Item 5                                          | Operating and Financial Review and Prospects          | 29                                                  
|                                                | A.                                                    | Operating Results                                    | 29  
|                                                | B.                                                    | Liquidity and Capital Resources                      | 31  
|                                                | C.                                                    | Research and Development, Patents and Licenses, etc. | 33  
|                                                | D.                                                    | Trend Information                                    | 34  
|                                                | E.                                                    | Off-Balance Sheet Arrangements                       | 34  
|                                                | F.                                                    | Tabular Disclosure of Contractual Obligations        | 34  
|Item 6                                          | Directors, Senior Management and Employees            | 34                                                  
|                                                | A.                                                    | Directors and Senior Management                      | 34  
|                                                | B.                                                    | Compensation                                         | 36  
|                                                | C.                                                    | Board Practices                                      | 37  
|                                                | D.                                                    | Employees                                            | 38  
|                                                | E.                                                    | Share Ownership                                      | 38  
|Item 7                                          | Major Shareholders and Related Party Transactions     | 39                                                  
|                                                | A.                                                    | Major Shareholders                                   | 40  
|                                                | B.                                                    | Related Party Transactions                           | 40  
|                                                | C.                                                    | Interests of Experts and Counsel                     | 41  
|Item 8                                          | Financial Information                                 | 41                                                  
|                                                | A.                                                    | Financial Statements and Other Financial Information | 41  
|                                                | B.                                                    | Significant Changes                                  | 43  
|Item 9                                          | The Offer and Listing                                 | 43                                                  
|                                                | A.                                                    | Offer and Listing Details                            | 43  
|                                                | B.                                                    | Markets                                              | 46  
|Item 10                                         | Additional Information                                | 46                                                  
|                                                | A.                                                    | Share Capital                                        | 46  
|                                                | B.                                                    | Articles of Incorporation and By-laws                | 49  
|                                                | C.                                                    | Material Contracts                                   | 55  
|                                                | D.                                                    | Exchange Controls                                    | 56  

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|         | E.                                                                                 | Taxation                                                                      | 56
|-------- | ---------------------------------------------------------------------------------- | ----------------------------------------------------------------------------- | --
|         | F.                                                                                 | Dividends and Paying Agents                                                   | 61
|         | G.                                                                                 | Statement by Experts                                                          | 62
|         | H.                                                                                 | Documents on Display                                                          | 62
|         | I.                                                                                 | Subsidiary Information                                                        | 63
|Item 11  | Quantitative and Qualitative Disclosures About Market
      Risk                   | 63                                                                           
|Item 12  | Description of Securities Other than Equity Securities                             | 63                                                                           
|PART II  |                                                                                    | 63                                                                           
|Item 13  | Defaults, Dividend Arrearages and Delinquencies                                    | 63                                                                           
|Item 14  | Material Modifications to the Rights of Security Holders
      and Use of Proceeds | 63                                                                           
|Item 15  | Controls and Procedures                                                            | 63                                                                           
|Item 16  | [Reserved]                                                                         | 63                                                                           
|         | A.                                                                                 | Audit Committee Financial Expert                                              | 63
|         | B.                                                                                 | Code of Ethics                                                                | 63
|         | C.                                                                                 | Principal Accountant Fees and Services                                        | 63
|         | D.                                                                                 | Exemptions from the Listing Standards for Audit Committees.                   | 64
|         | E.                                                                                 | Purchases of Equity Securities by the Issuer and Affiliated
      Purchasers. | 64
|PART III |                                                                                    | 64                                                                           
|Item 17  | Financial Statements                                                               | 64                                                                           
|Item 18  | Financial Statements                                                               | 64                                                                           
|Item 19  | Exhibits                                                                           | 64                                                                           
|         | SIGNATURE                                                                          | 66                                                                           

FORWARD-LOOKING STATEMENTS

Except for the statements of historical fact contained herein,
some information presented in this registration statement constitutes
forward-looking statements. When used in this registration statement, the words
estimate, project, believe, anticipate, intend, expect, predict,
may, should, the negative thereof or other variations thereon or comparable
terminology are intended to identify forward-looking statements. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause the actual results, performance or achievements of
our company to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. Such
factors include, among others, changes in project parameters as plans continue
to be refined, future prices of nickel, as well as those factors discussed in
the section entitled Risk Factors on page 8. Although our company has
attempted to identify important factors that could cause actual results to
differ materially, there may be other factors that cause actual results not to
be as anticipated, estimated or intended. There can be no assurance that such
statements will prove to be accurate as actual results and future events could
differ materially from those anticipated in such statements. Accordingly,
prospective investors should not place undue reliance on forward-looking
statements. The forward-looking statements in this registration statement speak
only as to the date hereof. Our company does not undertake any obligation to
release publicly any revisions to these forward-looking statements to reflect
events or circumstances after the date hereof or to reflect the occurrence of
unanticipated events.

Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee future results,
levels of activity, performance or achievements. Except as required by
applicable law, including the securities laws of the United States, we do not
intend to update any of the forward-looking statements to conform these
statements to actual results.

As used in this prospectus, the terms we, us, our and
Hard Creek mean Hard Creek Nickel Corporation, unless otherwise indicated.

PART I

FINANCIAL INFORMATION AND ACCOUNTING PRINCIPLES

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The financial statements and summaries of financial information
contained in this document are reported in Canadian dollars ($) unless
otherwise stated. A tonne is one metric ton or 2204.6 pounds. All such
financial statements have been prepared in accordance with United States
generally accepted accounting principles.

The financial statements of Hard Creek for the years ended December
  31, 2005, 2006 and 2007 have been reported on by Dale Matheson Carr-Hilton LaBonte
  LLP, Chartered Accountants, Suite 1500  1140 West Pender Street, Vancouver,
  British Columbia, V6E 4G1.

Item 1        
 Identity of Directors, Senior Management and Advisers

*A.*      
*Directors and Senior Management*

The Directors and the senior management of our company as of
June 20, 2008 are as follows:

Name
      Business Address
      FunctionMark Jarvis
    1060  1090 W. Georgia St. Vancouver, BC
      V6E 3V7 Canada
    As President, Chief Executive Officer and director, Mr.
      Jarvis is responsible for the development of our strategic direction and
      the management and supervision of our overall business.George Sookochoff
    1305  1323 Homer Street Vancouver, BC V6B
      5T1 Canada
    As a non-executive director, Mr. Sookochoff is
      responsible for the corporate governance of our company.Tom Milner
    84 Fairview Drive Williams Lake, BC V2G 3T1
      Canada
    As a non-executive director, Mr. Milner is responsible
      for the corporate governance of our company.Lyle Davis
    2838 Carnation Street North Vancouver, BC
      V7H 1L8 Canada
    As a non-executive director, Mr. Davis is responsible for
      the corporate governance of our company.Brian Fiddler
    408 Shiles Street New Westminster, BC V3L
      3K4 Canada
    As Controller and Chief Financial Officer, Mr. Fiddler is
      responsible for the financial and corporate management and supervision of
      the affairs and business of our company.Tony Hitchins
    1060-1090 West Georgia Street Vancouver, BC
      V6E 3V7 Canada
    As Chief Operating Officer, Mr. Hitchins is responsible
      for the project management, field management and logging core, supervision
      of exploration on the Turnagain Nickel Project, hiring field staff and
      maintaining claims in good standing.Neil Froc
    42621 Canyon Road Lindell Beach, BC V2R 5B8
      Canada
    As Executive Vice President, Mr. Froc is responsible for
      the management of engineering and technical studies including
      infrastructure and socio-economic project development.Leslie Young
    1060  1090 W. Georgia St. Vancouver, BC
      V6E 3V7 Canada
    As Corporate Secretary, Ms. Young is responsible for the
      internal accounting and record keeping, general administration, and making
      all necessary filings and financial reporting for our company.


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*B.*      
*Advisers*

Our legal advisers are Clark Wilson LLP, Barristers &
Solicitors, with a business address at Suite 800, 885 West Georgia Street,
Vancouver, British Columbia, Canada V6C 3H1.

*C.*       *Auditors*

Our auditors are Dale Matheson Carr-Hilton LaBonte LLP,
Chartered Accountants (DMCL LLP) with a business address at Suite 1500 1140
West Pender Street, Vancouver, British Columbia, V6E 4G1. DMCL LLP is a member
of the Canadian Institute of Chartered Accountants and the Institute of
Chartered Accountants of British Columbia. DMCL is also registered with the
Canadian Public Accounting Board and the Public Company Accounting Oversight
Board (United States).

Item 2        
 Offer Statistics and Expected Timetable

Not Applicable.

Item 3        
 Key Information

*A.*      
*Selected Financial Data*

The following table summarizes selected financial data for our
company for the years ended December 31, 2007, 2006, 2005, 2004 and 2003
respectively. The information in the table was extracted from the detailed
financial statements and related notes included in this registration statement
and should be read in conjunction with such financial statements and with the
information appearing under the heading, Item 5  Operating and Financial
Review and Prospects.

Selected Financial Data 
  (Stated in Canadian Dollars)

Fiscal Years Ended December 31

US GAAP
      2007 Audited
      2006 Audited
      2005 Audited
      2004 Audited
      2003 UnauditedNet Sales or Operating Revenue
    NIL
    NIL
    NIL
    NIL
    NILNet Loss
    $9,522,698
    $5,383,528
    $3,332,394
    $4,648,724
    $3,215,856Net Loss from Operations (January 17, 1983
      (inception to December 31, 2007)
    $34,807,285
    $25,284,587
    $19,901,059
    $16,568,665
    $11,919,941Depreciation
    $14,528
    $7,493
    $6,780
    $6,076
    $2,511General and Administrative Expenses
    $1,654,437
    $1,049,305
    $570,745
    $1,104,084
    $462,604Mineral Property Exploration Costs
    $7,182,030
    $5,509,087
    $2,679,212
    $2,987,287
    $2,069,772Other Income
    $440,586
    $1,660,137
    $237,508
    $249,376
    $63,228Basic and Diluted Net Loss per Share
    $0.17
    $0.13
    $0.11
    $0.20
    $0.28Assets
    $11,767,456
    $2,220,698
    $1,697,951
    $1,303,553
    $498,557


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Current Assets
    $11,529,201
    $1,834,442
    $846,465
    $607,583
    $282,752Capital Stock
    $40,847,875
    $23,800,546
    $18,632,327
    $15,059,286
    $10,363,422Common Stock (adjusted to reflect changes in
      capital)
    60,220,592 common shares
    49,322,614
    37,675,494
    28,310,394
    17,390,189Basic and Diluted Net Loss per Common Share
    $0.17
    $0.13
    $0.11
    $0.20
    $0.28Cash Dividends per Common Share
    NIL
    NIL
    NIL
    NIL
    NIL


*B.*      
*Capitalization and Indebtedness*

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- 8 -

Our authorized capital consists of an unlimited number of
Common Shares without par value and an unlimited number of Class A Preference
Shares without par value. As of June 20, 2008, we had 60,370,592 Common Shares
and no Class A Preference Shares issued and outstanding.

The table below sets forth our total indebtedness in Canadian
dollars and capitalization as of December 31, 2007. You should read this table
in conjunction with the audited and unaudited financial statements and
accompanying notes included in this registration statement.

As at December 31, 2007 (Stated in Canadian Dollars)

|Liabilities                           |   |             |  
|------------------------------------- | - | ----------- | -
|Current, unsecured and unguaranteed   | $ | 742,316     |  
|Current, secured and
      guaranteed |   | -           |  
|                                      | $ | 742,316     |  
|                                      |   |             |  
|Shareholders Equity                  |   |             |  
|Common stock                          | $ | 40,847,875  |  
|Additional paid-in capital            |   | 4,984,550   |  
|Deficit                               |   | (34,807,285 | )
|                                      | $ | 11,025,140  |  

*C.*      
*Reasons for the Offer and Use of Proceeds*

Not applicable.

*D.*      
*Risk Factors*

This Registration Statement contains forward-looking statements
which relate to future events or our future performance, including our future
financial performance. In some cases, you can identify forward-looking
statements by terminology such as may, should, expects, plans,
anticipates, believes, estimates, predicts, or potential or the
negative of these terms or other comparable terminology. These statements are
only predictions and involve known and unknown risks, uncertainties and other
factors, including the risks in enumerated in this section entitled Risk
Factors, that may cause our companys or our industrys actual results, levels
of activity, performance or achievements to be materially different from any
future results, levels of activity, performance or achievements expressed or
implied by these forward-looking statements.

While these forward-looking statements, and any assumptions
upon which they are based, are made in good faith and reflect our current
judgment regarding the direction of our business, actual results will almost
always vary, sometimes materially, from any estimates, predictions, projections,
assumptions or other future performance suggested in this Registration
Statement. Except as required by applicable law, including the securities laws
of the United States, we do not intend to update any of the forward-looking
statements to conform these statements to actual results.

An investment in our common stock involves a number of very
significant risks. You should carefully consider the following risks and
uncertainties in addition to other information in this prospectus in evaluating
our company and our business before purchasing shares of our companys common
stock. Our business, operating results and financial condition could be
seriously harmed due to any of the following risks. You could lose all or part
of your investment due to any of these risks.

Risks Associated with Mining

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- 9 -

Our company and all of our properties are in the
exploration stage. We have no revenues from operations and limited ongoing
mining operations. It is unlikely that any of our properties contain any mineral
resources in commercially exploitable quantities. The chances of us ever
reaching the development stage are extremely remote. If we do not discover any
mineral resource in a commercially exploitable quantity, our business will fail
and investors may lose all of their investment in our company.

Despite exploration work on our mineral properties, we have not
established that any of them contain any commercially exploitable mineral
reserves. It is unlikely that we will ever find commercially exploitable mineral
reserves. We have no revenues from operations and limited ongoing mining
operations. The probability of any of our properties or any individual prospect
ever having a commercially exploitable mineral reserve is extremely remote; in
all probability our mineral resource properties do not contain any reserves and
any funds that we spend on exploration will probably be lost. The chances of us
ever reaching the development stage are remote. The search for valuable minerals
as a business is extremely risky. It is not likely that additional exploration
on our properties will establish that commercially exploitable reserves of
minerals exist on our mineral properties. Additional potential problems that may
prevent us from discovering any reserves of minerals on our property include,
but are not limited to, unanticipated problems relating to exploration and
additional costs and expenses that may exceed current estimates. Most of these
factors are beyond our control, and any of them could increase costs and make
extraction of any identified mineral resource unprofitable.

If we are unable to establish the presence of commercially
exploitable reserves of minerals on our property, our ability to fund future
exploration activities will be impeded, we will not be able to operate
profitably and investors may lose all of their investment in our company.

We face intense competition in the mineral exploration
and exploitation industry and we compete with our competitors for financing, for
new mineral resource properties and for qualified managerial and technical
employees. If we are unable to obtain the financing, new mineral properties or
qualified personnel that we require, then we will likely have to cease
operations and investors will lose all of their investment in our company.

Our competition includes large established mining companies
with substantial capabilities and with greater financial and technical resources
than we have. As a result of this competition, we may have to compete for
financing and we may be unable to acquire financing on terms we consider
acceptable. Our competition could adversely affect our ability to acquire
suitable prospects for exploration in the future. We may also have to compete
with the other mining companies in the recruitment and retention of qualified
managerial and technical employees. If we are unable to successfully compete for
financing, mineral properties or qualified employees, we will likely have to
cease operations. If we are unable to successfully compete for the acquisition
of suitable prospects or interest for exploration in the future, we will not
acquire any interest in additional mineral resource properties and have no
further chance of discovering minerals. The occurrence of any of these things
would likely cause us to cease operations as a company and investors would lose
their entire investment in our company.

Because of the inherent dangers involved in mineral
exploration and exploitation, there is a risk that we may incur liability or
damages as we conduct our business. If we are liable to pay for any damages
resulting from the conduct of our business, our financial position could be
adversely affected and we may have to slow down or cease operations and
investors could lose their investment in our company.

The search for valuable minerals involves numerous hazards. As
a result, we may become subject to liability for such hazards, including
pollution, cave-ins and other hazards against which we cannot insure or against
which we may elect not to insure. At the present time we have no coverage to
insure against these hazards. The payment of such liabilities may have a
material adverse effect on our financial position. If so, we may have to slow
down or cease operations and investors could lose their investment in our
company.

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- 10 -

Mineral operations are subject to government regulations
which could have the effect of preventing us from exploiting any possible
mineral reserves on our properties. If this occurs, we may have to cease
operations and investors could lose their investment in our company.

Exploration activities are subject to national and local laws
and regulations governing prospects, taxes, labor standards, occupational
health, land use, environmental protection, mine safety and others which may in
the future have a substantial adverse impact on our companys prospects. In
order to comply with applicable laws, we may be required to make capital
expenditures until a particular problem is remedied. Existing and possible
future environmental legislation, regulation and action could cause additional
expense, capital expenditure, restriction and delay in the activities of our
company, the extent of which cannot be reasonably predicted. If we violate any
applicable law or regulation, we could be forced to stop work and we could be
fined. If we are forced to suspend our activities or if we are required to pay a
large fine for a violation of these applicable laws and regulations, our
business could be adversely affected and investors could lose their investment
in our company.

Our operations are subject to environmental regulations,
which require us to obtain permits and pay bonds and may result in the
imposition of fines and penalties. If we are unable to obtain the permits or pay
the bonds that we require in the future, we will have to cease the exploration
activity in question. Ceasing such exploration activities could reduce our
chances of ever discovering mineral resources on our properties. Environmental
fines or liability could cause expenses for us, reducing the funds we have for
our exploration program and potentially causing us to cease operations. If this
happens, investors may lose their entire investment in our company.

Our operations are subject to environmental regulations
promulgated by government agencies. Environmental legislation provides for
restrictions and prohibitions on spills, releases or emissions of various
substances produced in association with certain mining industry operations, such
as seepage from tailings disposal areas, which would result in environmental
pollution. A breach of such legislation may result in the imposition of fines
and penalties. Environmental legislation is evolving in a manner which means
stricter standards, and enforcement; fines and penalties for non-compliance may
become more stringent. Environmental assessments of proposed projects carry a
heightened degree of responsibility for companies and directors, officers and
employees. Prior to conducting exploration involving surface disturbance in
British Columbia, we are required to obtain a Work Permit from the Ministry of
Energy, Mines and Petroleum Resources. Where significant surface disturbance
through road building and drill site preparation is planned, the Ministry
requires a Reclamation Bond to cover the estimated reclamation costs if we fail
to complete the reclamation. The cost of compliance with governmental
regulations, permits and bond requirements has the potential to reduce the
profitability of operations by curtailing our exploration activities.

We are not aware of any existing environmental liability
associated with any of our exploration properties but if such liability should
arise, we may have to pay a lot of money to fix it or pay compensation, which
would reduce the amount of money we have to spend on exploration and could
possibly cause us to go out of business. Our potential exposure to liability for
environmental damage is very high and we have no reserves established to pay for
such liability. If we are found to be liable for a large amount of environmental
damage, we will likely have to cease operations. If that happens, investors
would likely lose all of their investment in our company.

Please see the section entitled Governmental Regulations on
page 18 for more information.

Risks Related To Our Company

We have a limited operating history and have not
generated any operating revenues since our incorporation. This raises
substantial doubt about our ability to continue as a going concern and
does not provide a meaningful basis for an evaluation of our prospects. If
we are unable to generate revenue from our business, we may be forced to delay,
scale back, or cease our exploration activities. If any of

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- 11 -

these actions were to become necessary, we may not be
able to continue to explore our properties or operate our business and there is
a substantial risk our business would fail, causing investors to lose all of
their investment in our company.

We have not generated any operating revenues since our
incorporation and we will, in all likelihood, continue to incur operating
expenses without revenues until our mining properties are fully developed and in
commercial production, which may never happen. We had cash in the amount of
$9,707,914 and cash equivalents of $1,725,421 as of December 31, 2007. We
estimate our average monthly operating expenses to be approximately $119,000 to
$130,000 each month. As a result, we need to generate significant revenues from
our operations or obtain financing. We cannot provide assurances that we will be
able to successfully explore and develop our mining properties or assure that
viable reserves exist on the properties for extraction. It is unlikely that we
will generate any funds internally unless we discover commercially viable
quantities of ore. If we are unable to generate revenue from our business during
the fiscal year 2008, we may be forced to delay, scale back, or eliminate our
exploration activities. If any of these actions were to become necessary, we may
not be able to continue to explore our properties or operate our business and if
either of those events happen, then there is a substantial risk our business
would fail and investors would lose their investment in our company.

We have not generated any revenue from our business and
we will need to raise additional funds in the near future. If we are not able to
obtain future financing when required, we might be forced to discontinue our
business.

Because we have not generated any revenue from our business and
we cannot anticipate when we will be able to generate revenue from our business,
we will need to raise additional funds for the further exploration and future
development of our mining claims and to respond to unanticipated requirements or
expenses. We anticipate that we have sufficient funds for the 12 month period
ending December 31, 2008, but we will need to raise further capital very soon
thereafter in the approximate amount of $20,000,000 to $30,000,000. We do not
currently have any arrangements for financing and we may not be able to find
such financing if required. We cannot be sure that additional funding will be
available to us for further exploration and development of our projects or to
fulfill our obligations under any applicable agreements. Although we have been
successful in the past in obtaining financing through the sale of equity
securities, it is possible that we will not be able to obtain adequate financing
in the future or that the terms of such financing will be unfavorable and
unacceptable to us. Failure to obtain such additional financing would likely
result in a delay or indefinite postponement of further exploration and
development of our projects with the possible loss of such properties, our
company would never increase in value and investors would never see a return on
their investment.

Our Articles of Incorporation indemnify our officers and
directors against all costs, charges and expenses incurred by them , which may
discourage suits against directors or officers for breaches of fiduciary duties
even though such suits, if successful, could benefit our company and our
shareholders.

Our Articles of Incorporation contain provisions limiting the
liability of our officers and directors for their acts, receipts, neglects or
defaults and for any other loss, damage or expense incurred by our company which
shall happen in the execution of the duties of such officers or directors,
unless the officers or directors did not act honestly and in good faith with a
view to the best interests of our company. Such limitations on liability may
reduce the likelihood of derivative litigation against our officers and
directors and may discourage or deter our shareholders from suing our officers
and directors based upon breaches of their duties to our company, though such an
action, if successful, might otherwise benefit our company and our
shareholders.

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Risks Relating to our Securities

Trading in our common shares on the TSX Venture Exchange
is limited and sporadic, making it difficult for our shareholders to sell their
shares or liquidate their investments.

Our common shares are currently listed on the TSX Venture
Exchange under the symbol HNC. The trading price of our common shares
has been and may continue to be subject to wide fluctuations. Trading prices of
our common shares may fluctuate in response to a number of factors, many of
which are beyond our control. In addition, the stock market in general, and the
market for base metal exploration companies, including companies exploring for
nickel in particular, has experienced extreme price and volume fluctuations that
have often been unrelated or disproportionate to the operating performance of
such companies. These broad market and industry factors may adversely affect the
market price of our shares, regardless of our operating performance. If you
invest in our common shares, you could lose some or all of your investment.

In the past, following periods of volatility in the market
price of a companys securities, securities class-action litigation has often
been instituted. Such litigation, if instituted, could result in substantial
costs and a diversion of managements attention and resources.

Investors will suffer dilution in their net book value
per share if we issue additional shares, raise funds through the sale of equity
securities or issue employee/director or consultant options.

We are currently without a source of revenue and will most
likely be required to issue additional shares to finance our operations and,
depending on the outcome of our exploration programs, may issue additional
shares to finance additional exploration programs of any or all of our projects
or to acquire additional properties or through the exercise of options by our
employees, directors and consultants. If we are required to issue additional
shares to raise financing, your interests in our company will be diluted and you
may suffer dilution in your net book value per share depending on the price at
which such securities are sold. As at June 20, 2008, there were outstanding an
aggregate number of common share purchase warrants and share purchase options
as, upon exercise, would result in the issue of an additional 7,899,802 of our
common shares which, if exercised, would represent approximately 12 % of our
issued and outstanding common shares. If all of these share purchase warrants
and share purchase options are exercised and these common shares are issued,
such issuance also will cause a reduction in the proportionate ownership and
voting power of all other shareholders. The dilution may result in a decline in
the market price of our common shares.

We do not expect to declare or pay any dividends, so
investors will realize a return on their investment only if the price of shares
of our stock goes up. There are no guarantees that will ever happen and
investors may lose their entire investment in our company.

We have not declared or paid any dividends on our Common Shares
since our inception, and we do not anticipate paying any such dividends for the
foreseeable future. Therefore, investors will only realize a return on their
investment if the price of our stock goes up. There are no guarantees that that
will ever happen and investors may never realize a return on their investment in
our company.

All of our directors, officers and control persons live
outside of the U.S. U.S. investors may not be able to enforce their civil
liabilities against us, our directors officers or control persons. Therefore,
investors may be discouraged from bringing suits or may be unsuccessful even if
they do try. Suits against directors or officers for breaches of fiduciary
duties may be discouraged, even though such suits, if successful, could benefit
our company and our shareholders.

It may be difficult to bring and enforce suits against us or
our directors, officers and control persons. We were incorporated under the
Company Act (British Columbia) and transitioned under the Business
Corporations Act (British Columbia) in June of 2004. All of our directors
and officers are residents of

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- 13 -

countries other than the United States and all of our assets
are located outside of the United States. Consequently, it is a risk that
Canadian courts may not enforce the judgments of U.S. courts or enforce, in an
original action, liabilities predicated on the U.S. federal laws directly.Therefore, investors may be discouraged from bringing suits or may be
unsuccessful even if they do try.

Some of our directors and officers are employed elsewhere
and their time and efforts will not be devoted to our company full-time.

Some of our directors and officers are employed in other
positions with other companies. They will manage our company on a part-time
basis. Because of this fact, the management of our company may suffer and our
company could under-perform or fail. Brian Fiddler, our Controller and Chief
Financial Officer, will devote approximately 20 hours per week, which is
approximately 50% of his working hours, to the management of our company. George
Sookochoff, a director of our company, will devote approximately 4 hours per
week, which is approximately 10% of his working hours, to the management of our
company. Lyle Davis, a director of our company, will devote approximately 4
hours per week, which is approximately 10% of his working hours, to the
management of our company. Tom Milner a director of our company, will devote
approximately 4 hours per week, which is approximately 10% of his working hours,
to the management of our company.

Trading of our stock may be restricted by the SEC's penny
stock regulations, which may limit a shareholder's ability to buy and sell our
stock.

The Securities and Exchange Commission has adopted regulations
which generally define "penny stock" to be any equity security that has a market
price (as defined) less than $5.00 per share or an exercise price of less than
$5.00 per share, subject to certain exceptions. Our securities are covered by
the penny stock rules, which impose additional sales practice requirements on
brokers or dealers who sell to persons other than established customers and
"accredited investors". The term "accredited investor" refers generally to
institutions with assets in excess of $5,000,000 or individuals with a net worth
in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly
with their spouse. The penny stock rules require a broker or dealer, prior to a
transaction in a penny stock not otherwise exempt from the rules, to deliver a
standardized risk disclosure document in a form prepared by the SEC, which
provides information about penny stocks and the nature and level of risks in the
penny stock market. The broker or dealer also must provide the customer with
current bid and offer quotations for the penny stock, the compensation of the
broker or dealer and its salesperson in the transaction and monthly account
statements showing the market value of each penny stock held in the customer's
account. The bid and offer quotations, and the broker or dealer and salesperson
compensation information, must be given to the customer orally or in writing
prior to effecting the transaction and must be given to the customer in writing
before or with the customer's confirmation. In addition, the penny stock rules
require that prior to a transaction in a penny stock not otherwise exempt from
these rules, the broker or dealer must make a special written determination that
the penny stock is a suitable investment for the purchaser and receive the
purchaser's written agreement to the transaction. These disclosure requirements
may have the effect of reducing the level of trading activity in the secondary
market for the stock that is subject to these penny stock rules. Consequently,
these penny stock rules may affect the ability of brokers or dealers to trade
our securities. We believe that the penny stock rules discourage investor
interest in and limit the marketability of our common stock. This may limit your
ability to buy and sell our stock and cause the price of the shares to decline

NASD sales practice requirements may also limit a
shareholder's ability to buy and sell our stock.

In addition to the "penny stock" rules described above, the
National Association of Securities Dealers (NASD) has adopted rules that require
that in recommending an investment to a customer, a broker or dealer must have
reasonable grounds for believing that the investment is suitable for that
customer. Prior to recommending speculative low priced securities to their
non-institutional customers, brokers or dealers must make reasonable efforts to
obtain information about the customer's financial status, tax status, investment
objectives and other information. Under interpretations of these rules, the NASD
believes that there is a high probability that speculative low priced securities
will not be suitable for at least some

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- 14 -

customers. The NASD requirements make it more difficult for
brokers or dealers to recommend that their customers buy our common stock, which
may prevent you from reselling your shares and may cause the price of the shares
to decline.

U.S. investors could suffer adverse tax consequences if
we are characterized as a passive foreign investment company.

We may be treated as a passive foreign investment company, or
PFIC, for United States federal income tax purposes during the 2003 tax year or
in subsequent years. We may be deemed a PFIC because previous financings
combined with proceeds of future financings may produce, or be deemed to be held
to produce, passive income. Additionally, U.S. citizens should review the
section entitled Taxation-U.S. Federal Income Taxation - Passive Foreign
Investment Companies contained in this Registration Statement for a more
detailed description of the PFIC rules and how those rules may affect their
ownership of our capital shares.

If we are or become a PFIC, our U.S. shareholders may be
subject to the following adverse tax consequences:

- they will be taxed at the highest ordinary income tax rates in effect
  during their holding period on certain distributions on our capital shares,
  and gains from the sale or other disposition of our capital shares;
- they will be required to pay interest on taxes allocable to prior periods;
  and
- the tax basis of our capital shares will not be increased to fair market
  value at the date of their date.

Item 4         
Information on our Company

*A.*       *History and Development of our Company*

We were originally incorporated in British Columbia Canada
under the Company Act (British Columbia) on January 17, 1983, under the
name Bren-Mar Resources Limited, with an authorized capital of 50,000,000
Common Shares without par value. On March 15, 2000, we changed our name to
Bren-Mar Minerals Ltd. to reflect our change in business to strictly
exploration mining and consolidated our then issued and outstanding common
shares on the basis of 1 post-consolidation common share for 5 pre-consolidation
common shares, and we increased our post-consolidation authorized capital to
50,000,000 common shares. There were no changes in our directors or management.
On November 22, 2000, we changed our name to Canadian Metals Exploration Ltd.
to reflect the Companys focus on mineral exploration in Canada, there were no
changes in directors or management.

The Business Corporations Act (British Columbia) came
into force on March 29, 2004, repealing the Company Act(British
Columbia.) Our company now operates under the Business Corporations Act
(British Columbia). On June 25, 2004, we changed our name to Hard Creek Nickel
Corporation to reflect the primary type of mineral exploration the Company is
engaged in, altered our authorized capital to comprise an unlimited number of
common shares and an unlimited number of Class A preferred shares, and adopted
our current Articles of Incorporation, which are attached as an exhibit to this
form. The previous directors and management were replaced by Mark Jarvis as
President and Director , Brian Fiddler as CFO, Leslie Young as Corporate
Secretary, George Sookochoff as Director, Tom Milner as Director and Lyle Davis
as Director.

We have our head office and principal place of business at
Suite 1060  1090 West Georgia Street, Vancouver, British Columbia V6E 3V7
Canada (Telephone: 604.681.2300) . We do not have an agent in the United
States.

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Our common shares are listed on the TSX Venture Exchange under
the symbol HNC.

Since inception, we have been engaged in natural resource
exploration and development primarily in British Columbia and, since 1996, have
focused on the Turnagain Property in the Liard Mining Division of northern
British Columbia. We first acquired the mineral claims on the Turnagain Property
in 1996 under an option agreement with John Schussler and Ernie Hatzl. The
original option agreement gave us the right to earn a 100% interest in the
mineral claims on the Turnagain Property in exchange for the issuance of 200,000
of our common shares and the expenditure of CAN$1,000,000 on exploration of the
property within 5 years of acquisition. We have now earned the 100% interest and
it is subject to a 4% net smelter royalty on possible future production. We have
the right to pay out the net smelter royalty for CAN$1,000,000 for each 1% of
the royalty. So, to pay out all 4% of the royalty, we would be required to pay
CAN$4,000,000.

On April 25, 2001, we entered into an agreement with Northwest
Petroleum Inc. of Bakersfield, California to acquire rights to two separate oil
and gas projects located in the state of California, consisting of the
Buttonwillow Oil and Gas Leases in Kern County, California and the Moffat Ranch
Gas Field in Madera County, California. We subsequently determined in March of
2002 that the Buttonwillow oil and gas leases and the Moffat Ranch Gas Field gas
project were not feasible. Accordingly, the agreement with Northwest Petroleum
Inc. was terminated on March 21, 2002 and our investment of $143,717 was written
off.

On November 28, 2002, we entered into an agreement with John
Schussler and Ernie Hatzl to acquire an additional 34 mineral claims, adjacent
to the Turnagain Property, Laird Mining Division, British Columbia, in exchange
for an aggregate total of 100,000 common shares.

Between November, 2003 and March, 2005 we staked additional
claims, enlarging the Turnagain property from 3,700 hectares to approximately
27,500 hectares. With claim conversions in April 2005 and November 2007 the
Turnagain property now covers 30,300 hectares.

In April, 2004, we staked three claim blocks in northern
British Columbia. The staked properties vary in size from 1,500 to 5,500
hectares and total 9,000 hectares and are located in northern British Columbia,
between 20km west and 100km northwest of the Turnagain property. These three
claim blocks are known as the Green, Serp and Cot properties. After preliminary
site investigations it was decided that both the Serp and Cot claims did not
warrant further work and subsequently these claims were allowed to lapse. The
Green claims were downsized on April 4, 2007 to 457 hectares and are still being
held by the company. No work is anticipated on these claims in 2008.

In January and February, 2005 we acquired, by staking, four
additional claim blocks in central and northern British Columbia for a total
area of approximately 27,140 hectares. Some reconnaissance prospecting was
completed on the claims with no further work warranted. All of the claims were
allowed to lapse and are no longer owned by the company.

In September, 2005 we acquired by staking on-line, one
additional claim block of approximately 1,906 hectares located approximately
50km north of the Turnagain property. Some reconnaissance prospecting was
completed on the claim with no further work warranted. The claim was allowed to
lapse and is no longer owned by the company.

In March, 2006 we acquired by staking on-line, one additional
claim block which is known as the Lunar property. It consists of approximately
4,489 hectares and is located approximately 130km southeast of the Turnagain
property. Some reconnaissance prospecting was completed in the summer of 2006
with the claim coverage down sized to 2,409 hectares. Additional field work on
the property is planned for 2008.

In May, 2006 we acquired by staking on-line, two additional
claim blocks which are known as the Lime 1 and Lime 2 properties. They consist
of approximately 1,133 hectares and are located approximately 15km and 35km west
of the Turnagain property. Some reconnaissance prospecting was completed in the
summer of 2006 with follow up work to be completed in 2008.

In July, 2006 we acquired by staking on-line, one additional
claim block which is known as the Conuma property. It consists of approximately
18,050 hectares and is located on the west side of Vancouver Island
approximately 130km west of Campbell River, B.C. Some reconnaissance prospecting
was completed in late 2006. The claims were allowed to lapse and were restaked
on October 16, 2007 covering a smaller area of 5,827 hectares. Additional work
is also planned for the 2008 field season.

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- 16 -

On October 11, 2006 we acquired by legal action, one additional
claim block which is known as the Bobner property. It consists of approximately
150 hectares and is located approximately 8km west of the Turnagain property. No
work has been completed on the property to date but is scheduled for the summer
of 2008.

On April 16, 2007 we acquired by staking on-line, one
additional claim block which is known as the Nootka property. It consists of
approximately 1,971hectares and is located on the west side of Vancouver Island
approximately 45km southwest of Gold River, B.C. Field review of this property
is planned for the summer of 2008.

Present Operations of Our Company

Turnagain Property Project

Our current mineral exploration activities on the Turnagain
Property include core drilling, geological mapping, geochemical surveying
downhole geophysical surveying, baseline environmental and engineering studies,
and metallurgical testing. From 2001 to December 31, 2007, we have drilled 258
core holes for a total depth of 72,262m (237,080 feet). Approximate total
exploration expenditure during this period was CAN$21,900,000.

As of December 31, 2007, we had approximately $11,433,000 in
cash or cash equivalents on hand, which is sufficient to cover our operating
costs for at least 50 months based on an estimated $130,000 per month plus our
anticipated 2008 exploration program of approximately $5,000,000.

B.Business Overview

Nature of Operations and Principal Activities

We are in the mineral resource business. This business
generally consists of three stages: exploration, development and production. We
are a mineral resource company in the exploration stage because we have not yet
found mineral resources in commercially exploitable quantities, and are engaged
in exploring land in an effort to discover them. Mineral resource companies that
have located a mineral resource in commercially exploitable quantities and are
preparing to extract that resource are in the development stage, while those
engaged in the extraction of a known mineral resource are in the production
stage.

Mineral resource exploration can consist of several stages. The
earliest stage usually consists of the identification of a potential prospect
through either the discovery of a mineralized showing on that property or as the
result of a property being in proximity to another property on which exploitable
resources have been identified, whether or not they are or have in the past been
extracted.

After the identification of a property as a potential prospect,
the next stage would usually be the acquisition of a right to explore the area
for mineral resources. This can consist of the outright acquisition of the land
or the acquisition of specific, but limited, rights to the land (e.g., a
license, lease or concession). After acquisition, exploration would probably
begin with a surface examination by a prospector or professional geologist with
the aim of identifying areas of potential mineralization, followed by detailed
geological sampling and mapping of this showing with possible geophysical and
geochemical grid surveys to establish whether a known trend of mineralization
continues underground, possibly trenching in these covered areas to allow
sampling of the underlying rock. Exploration also commonly includes systematic
regularly spaced drilling in order to determine the extent and grade of the
mineralized system at depth and over a given area, as well as gaining
underground access by ramping or shafting in order to obtain bulk samples that
would allow one to determine the ability to recover various commodities from the
rock. If minerals are found, exploration might culminate in a feasibility study
to ascertain if the mining of the minerals would be economic. A feasibility
study is a study that reaches a conclusion with respect to the economics of
bringing a mineral resource to the production stage.

Our primary natural resource property is the Turnagain Property,
  located in the Liard Mining Division of northern British Columbia. We also own
  seven very early stage, mineral properties in British Columbia. We have not
  identified the existence of any commercially viable mineral deposits at any
  of our mineral properties. We intend to conduct prospecting and sampling on
  several of these properties in 2008.

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It is unlikely that a commercially viable mineral deposit
exists on any of our properties, and further exploration is required before we
can evaluate whether any exist and, if so, whether it would be economically and
legally feasible to develop or exploit those resources. Even if we complete our
current exploration program and we are successful in identifying a mineral
deposit, we would be required to spend substantial funds on further drilling and
engineering studies before we could know whether that mineral deposit will
constitute a reserve (a reserve is a commercially viable mineral deposit).
Please refer to the section entitled Risk Factors, beginning on page 8 of this
registration statement, for additional information about the risks of mineral
exploration.

Revenues

To date we have not generated any revenues from any of our
properties.

Principal Market

We do not currently have any market, as we have not yet
identified any mineral resource on any of our properties that is of a
commercially exploitable quantity. If we succeed in identifying a mineral
resource in commercially exploitable quantities, our principal markets should
consist of metals refineries and base metal traders and dealers.

Seasonality of our Business

Our mineral exploration activities are subject to seasonal
variation due to the winter season in northern British Columbia. Field work is
best carried out between mid-May and late-November when day time temperatures
average 10 to 15 degrees Celsius. Our other operations, such as metallurgical
review and analysis of geochemical survey results, can be carried out all year
round.

Sources and Availability of Raw Materials

Other than a paved highway and the small community of Dease
Lake, located 70km west of the Turnagain property, there is no infrastructure
close to the Turnagain property. A small amount of hydroelectric power is
generated near Dease Lake, to supply the town, but there is little excess
capacity. The closest suitable source of hydroelectric power for mine
development is the transmission line at Meziaden Junction, 300km south along the
highway. If a mineral resource is found on our Turnagain property, power
generation would be required.

Patents and Licenses; Industrial, Commercial and
Financial Contracts; and New Manufacturing Processes

In conducting our business operations, we are not dependent on
any patented or license processes, technology, industrial, commercial or
financial contract or new manufacturing processes.

Competitive Conditions

We compete with other mining companies, some of which have
greater financial resources and technical facilities, for the acquisition of
mineral interests, as well as for the recruitment and retention of qualified
employees. Exploration in British Columbia has experienced a dramatic revival in
the past two years and increased activity is forecast for the future. We compete
for qualified employees with Vancouver based companies, including Hunter
Dickenson Inc., Equity Engineering and Ivanhoe Mines, and international mining
companies, including Billiton-BHP, Rio Tinto and Anglo American.

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Governmental Regulations

Mining operations are subject to a wide range of national and
provincial government regulations such as restrictions on production, price
controls, tax increases, expropriation of property, environmental protection,
protection of agricultural territory or changes in conditions under which
minerals may be marketed. Mining operations may also be affected by claims of
native peoples, any of which could have the effect of reducing or preventing us
from exploiting any of our properties.

Mineral claims in British Columbia are of two types. Cell
mineral claims are established by electronically selecting the desired land on
government claim maps, where the available land is displayed as a grid pattern
of open cells, each of approximately 450-500 hectares. Payment of the required
recording fees is also conducted electronically. This process for claim staking
has been in effect since January, 2005, and is now the only way to stake claims
in British Columbia. Prior to January, 2005, legacy claims were staked by
walking the perimeter of the desired ground and erecting and marking posts at
prescribed intervals. Legacy claims, staked before January, 2005, remain valid
and may be converted into cell claims.

Cell mineral claims may be kept in good standing by incurring
assessment work or by paying cash-in-lieu of assessment work in the amount of
CAN$4.00 per hectare per year during the first 3 years following the location of
the mineral claims. This amount is increased to CAN$8.00 per hectare in the
fourth and succeeding years.

Legacy mineral claims in British Columbia may be kept in good
standing by incurring assessment work or by paying cash-in-lieu of assessment
work in the amount of $100 per mineral claim unit per year during the first
three years following the location of the mineral claim. This amount increases
to $200 per mineral claim unit in the fourth and succeeding years.

We will be required to comply with all regulations, rules and
directives of governmental authorities and agencies applicable to the
exploration of minerals in the Province of British Columbia and in Canada
generally. Under these laws, prior to production, we have the right to explore
the property. We are required to file a Notice of Work and Reclamation with
the British Columbia Ministry of Energy and Mines to conduct exploration works
on mineral properties in British Columbia. To obtain a work permit, a company
may be required to post a bond. In addition, the production of minerals in the
Province of British Columbia requires prior regulatory approval.

Our mineral claims entitle our company to continue exploration
activities on our properties, subject to our compliance with various Canadian
federal and provincial laws governing land use, the protection of the
environment and related matters.

If we locate a commercially viable mineral resource on any of
our properties, we would be required to conduct extensive community
consultations in northern British Columbia with both Aboriginal and non-
Aboriginal groups, environmental surveys both on the property and along
transportation corridors. We also would be required to develop a mining plan and
a mine closure plan. These surveys and plans would be combined into a
comprehensive Environmental Impact Statement and submitted to the British
Columbia government for review and approval. Any development or exploitation of
such a mineral resource would be subject to Canadian federal and provincial laws
governing land use, protection of the environment, occupational health, waste
disposal, toxic substances, mine safety and other matters. We had no material
costs related to compliance and/or permits in recent years, and anticipate no
material costs in the next year.

We will have to sustain the cost of reclamation and
environmental mediation for all exploration work undertaken. The amount of these
costs is not known at this time as we do not know the extent of the exploration
program that will be undertaken beyond completion of the recommended work
programs. The Company has posted $187,900 in total reclamation bonds towards the
reclamation of existing exploration drill sites and access roads on the
Turnagain property. Permits and regulations will control all aspects of any
production program if the project continues to that stage because of the
potential impact on the environment.

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Our operations are subject to environmental regulations
promulgated by various levels of governments and their agencies. Existing
environmental legislation provides for restrictions and prohibitions on spills,
releases or emissions of various substances produced in association with certain
mining industry operations, such as from disposal areas, which would result in
environmental pollution. A breach of such legislation may result in the
imposition of fines and penalties. Prior to conducting exploration involving
surface disturbance in British Columbia, we are required to obtain a Work Permit
from the Ministry of Energy, Mines and Petroleum Resources. So far, we have
obtained the permits we needed to conduct our exploration program but if we are
unable to obtain the permits that we require in the future, we will have to
cease the exploration activity in question. Ceasing such exploration activities
could reduce our chances of ever discovering mineral resources on our
properties.

Where significant surface disturbance through road building and
drill site preparation is planned, the Ministry of Energy, Mines and Petroleum
Resources requires a Reclamation Bond to cover the estimated reclamation costs
if we fail to complete the reclamation. From 1996 to present, we have posted
$187,900 in total reclamation bonds with the Ministry of Energy, Mines and
Petroleum Resources.

We are not aware of any existing environmental liability
associated with any of our exploration properties but if such liability should
arise, we may have to pay a lot of money to fix it or pay compensation, which
would reduce the amount of money we have to spend on exploration and could
possibly cause us to go out of business. Our potential exposure to liability for
environmental damage is very high and we have no reserves established to pay for
such liability. If we are found to be liable for a large amount of environmental
damage, we will likely have to cease operations.

*C.*      
*Organizational Structure*

We have one wholly-owned subsidiary, Canadian Metals
Exploration Ltd., incorporated under the Canada Business Corporation Act
(Canada) on July 14, 2004. This wholly-owned subsidiary is currently inactive.
The Company is currently looking at other property acquisitions in Canada but
outside the Province of British Columbia. Hard Creek Nickel Corporation is
incorporated in the Province of British Columbia only and is not registered to
do business outside this province. Canadian Metals Exploration Ltd. is
incorporated nationally across Canada and is registered to do business in each
province. If the Company were to acquire exploration properties outside British
Columbia but still in Canada, these properties would be registered in the
subsidiary Canadian Metals Exploration Ltd.

*D.*      
*Property, Plant and Equipment*

This section summarizes the assets of the company including its
executive office in Vancouver, B.C., sample storage warehouse near Vancouver and
its most important assets, mineral exploration properties. The company has 100%
interest in a number of mineral exploration properties located in British
Columbia, of which the Turnagain and Lunar properties are presently considered
the most significant and are described below. The Bobner, Conuma, Nootka, Green,
Lime 1 and Lime 2 are believed to contain favorable geology and all but the
Green will be examined in 2008.

Our executive office is located at 1060  1090 West Georgia
Street, Vancouver, British Columbia V6E 3V7, Canada. The Company leases the
2,500 square feet of space for $48,880 per year and the lease expires on
September 30, 2011. This space accommodates all of our executive and
administrative offices. We believe that this existing space is adequate for our
current needs. Should we require additional space, we believe that such space
can be secured on commercially reasonable terms.

The company has recently rented a warehouse near Vancouver in
which to store drill core samples and to prepare composite samples for
metallurgical testwork. We have also installed a walk-in freezer in this space
and are storing samples presently within the freezer to limit the possible
oxidation of select samples which may be used in future metallurgical testwork.
This facility rents for $1850 per month on a six-month renewable lease. The cost
to run the freezer is $105 per month. Additional warehouse space was added to
the original rented space in 2007 and more space is still available if required.
We own office equipment with

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a cost of approximately $88,000 and it is located at our
Vancouver Office. We lease a photocopier at the rate of $700 per three months.
The company leases a borehole survey tool at $7,000 per month during the
June-November field season. Satellite internet and telephone service at our
Turnagain camp costs $250 per month.

Our two main mineral properties are described more fully
below:

|1. | The Turnagain Property;
|-- | -----------------------
|2. | Lunar                  



The Turnagain Property

This section provides a summary of the geology and exploration
activities on the Turnagain Property. The technical information regarding the
Turnagain Property included in this section is based, in large part, on three
technical reports:

1) Report on the 2003 Exploration Program, Turnagain Nickel
Property, dated April 21,2004, prepared by N. C. Carter Ph.D., P.Eng., in
compliance with the requirements of National Instrument 43-101 and Form
43-101F1.

2) Preliminary Assessment on the Turnagain Property dated
September 25, 2007 prepared by Tony Lipiec, P.Eng., Gerrit Vos, P. Eng. and Greg
Kulla, P. Geo. of AMEC Americas Limited in conjunction with Ron Simpson, P.Geo,
in compliance with the requirements of National Instrument 43-101 and Form
43-101F1 as adopted by the British Columbia Securities Commission.

3) Technical Report and Mineral Resource Estimate prepared by
Ronald G. Simpson, P.Geo., dated March 29, 2007, and prepared in compliance with
the requirements of National Instrument 43-101 and Form 43-101F1 as adopted by
the British Columbia Securities Commission.

The Technical Reports were used as supporting documentation and
were filed with the British Columbia Securities Commission and the TSX Venture
Exchange. Dr. Carter, Tony Lipiec, Gerrit Vos, Greg Kulla and Mr. Ronald G.
Simpson are qualified persons as the term is defined under National Instrument
43-101.

Exploration data collected during the 2003 to 2007 exploration
programs, was done under the supervision of Neil Froc, P. Eng., and Tony
Hitchins, M.Sc., all employees of Hard Creek Nickel Corporation.

---

- 21 -

Location and Accessibility

The Turnagain Property consists of 57 neighboring mineral
claims situated in the Liard Mining Division of northern British Columbia, 70 km
east of Dease Lake and 1350 km north-northwest of Vancouver. Please see the
above map to see where the property is located in the province of British
Columbia, Canada. The mineral claims collectively cover an area of 30,300
hectares The Turnagain Property is situated in the Stikine Ranges of the Cassiar
Mountains. Elevations range from about 1,000 meters above sea level along the
Turnagain River, in the central claim area, to 2,200 meters at an unnamed summit
in the north central property area.

The Turnagain Property straddles the Turnagain River near where
it joins Hard Creek. The community of Dease Lake, on Highway #37 some 400 km
north of the port of Stewart, is 70 km west of the property. Helicopter access
from Dease Lake involves a 20 minute flight. A secondary road extending easterly
from Dease Lake has been used by large, articulated 4-wheel drive vehicles to
convey large jade boulders from the Kutcho Creek area and to supply placer gold
operations at Wheaton Creek over the past number of years. A branch of this road
network extends into the Turnagain Property with road distance to Dease Lake of
about 100 km.

A dirt airstrip, measuring approximately 700 meters long,
constructed in the 1960s,and upgraded in early 2007, is situated within the
claims on the northwest side of the Turnagain River and can accommodate small
fixed wing aircraft. This airstrip is immediately adjacent to our current camp
facility and core storage. Previous exploration programs have made use of camp
facilities at Wheaton Creek (Boulder), which is about 15 km by road west of the
Turnagain Property.

Three times a week, Dease Lake has scheduled airline service
and offers some supplies and services. The communities of Terrace and Smithers,
both several hundred km south, offer a range of services and supplies which can
be trucked to Dease Lake via Highway #37.

The area between Dease Lake and the Turnagain Property features
maturely dissected mountains rising to elevations of between 2,000 and 2,425
meters above sea level and separated by wide, drift-filled valleys in which
elevations average 1,000 meters. Forest cover, present in valley areas, is
replaced by typical alpine flora above 1500 meters. Bedrock is reasonably well
exposed in the areas above tree line and along drainages.

Description of Claims

Our Turnagain Property consists of 57 neighboring mineral
claims. Hard Creek Nickel Corporation owns a 100% interest in all of these
mineral claims subject to a 4% net smelter royalty on possible future production
on one mineral claim (Tenure No. 511330 formerly the Cub claim). We retain the
right to purchase all or part of the net smelter royalty for CAN $1,000,000 per
1%. The following table summarizes the claim name, size, and expiry date for the
57 claims in the Turnagain property as of June 20, 2008

The following table shows details relating to Hard Creek
Nickel Corporations Turnagain claims and the expiry dates of those claims:

Tenure
        Number
      Claim Name
      Area (ha)
      Record Date
      Expiry DateLegacy
        Mineral Claim407627
      PUP
        4
      500
      Jan
        1, 2004
      Jan
        1, 2018Cell Mineral
        Claims501131
      DRIFT
        1
      422
      Jan
        12, 2005
      Jan
        12, 2018


---

- 22 -

501168
      DRIFT
        2
      422
      Jan
        12,2005
      Jan
        12,2018501234
      DRIFT
        3
      422
      Jan
        12,2005
      Jan
        12,2018501298
      DRIFT
        4
      422
      Jan
        12,2005
      Jan
        12,2018508218
      DINAH
        1
      407
      Mar
        3,2005
      Mar
        3,2018508219
      DINAH
        2
      407
      Mar
        3,2005
      Mar
        3,2018508221
      DINAH
        3
      407
      Mar
        3,2005
      Mar
        3,2018508222
      DINAH
        4
      407
      Mar
        3,2005
      Mar
        3,2018508223
      DINAH
        5
      407
      Mar
        3,2005
      Mar
        3,2018508225
      DINAH
        6
      407
      Mar
        3,2005
      Mar
        3,2018508226
      DINAH
        7
      255
      Mar
        3,2005
      Mar
        3,2018508227
      DINAH
        8
      407
      Mar
        3,2005
      Mar
        3,2018508228
      DINAH
        9
      136
      Mar
        3,2005
      Mar
        3,2018508229
      DINAH
        10
      203
      Mar
        3,2005
      Mar
        3,2018528780
      T1
      68
      Feb
        23, 2006
      Feb
        23, 2018528781
      T2
      203
      Feb
        23, 2006
      Feb
        23, 2018528782
      T3
      153
      Feb
        23, 2006
      Feb
        23, 2018528784
      T4
      288
      Feb
        23, 2006
      Feb
        23, 2018528787
      T5
      170
      Feb
        23, 2006
      Feb
        23, 2018528788
      T6
      270
      Feb
        23, 2006
      Feb
        23, 2018528789
      T7
      422
      Feb
        23, 2006
      Feb
        23, 2018528790
      T8
      254
      Feb
        23, 2006
      Feb
        23, 2018Cell
        Claims Converted from Legacy Claims - April, 2005503365
      HARD
        2
      793
      Jan
        14, 2005
      Feb
        18, 2018510889
      FLAT
        10,13,15
      1628
      April
        7, 2004
      Apr
        7, 2018510892
      FLAT
        2,6
      1219
      April
        6, 2004
      Apr
        7, 2018510910
      FLAT
        9,12,14
      1424
      April
        18, 2004
      Apr
        7, 2018510911
      FLAT
        1,5
      1067
      April
        6, 2004
      Apr
        7, 2018510912
      FLAT
        8,11
      780
      April
        7, 2004
      Apr
        7, 2018511214
      HARD
        4,6
      980
      Feb
        18, 2004
      Feb
        18, 2018511226
      HILL
        1,2
      1216
      Feb
        18, 2004
      Feb
        18, 2018511227
      HILL
        3
      507
      Feb
        18, 2004
      Feb
        17, 2018511230
      HILL
        4,5
      760
      Feb
        18, 2004
      Feb
        17, 2018511234
      HILL
        6
      186
      Feb
        16, 2004
      Feb
        16, 2018511244
      HARD
        5,7
      490
      Feb
        18, 2004
      Feb
        18, 2018511251
      HARD
        8
      473
      Feb17,
        2004
      Feb
        17, 2018511257
      HILL
        9,10
      1014
      Feb17,
        2004
      Feb
        17, 2018


---

- 23 -

511279
      HARD
        9,10
      897
      Feb
        17, 2004
      Feb
        17, 2018511304
      HILL
        7,8
      1150
      Feb
        17, 2004
      Feb
        17, 2018511305
      HOUND
        3
      271
      Sept.
        27, 2003
      Sept
        27, 2018511306
      TURN
        2,FLAT 7
      881
      Feb
        19, 2004
      Feb
        19, 2018511329
      HOUND
        1,2
      1015
      Sept.
        27, 2003
      Sept.
        27, 2018511330
      CUB
      593
      May
        5, 1996
      Dec
        1, 2017511337
      CUB
        10,18,PUP 1
      1066
      July-Dec.,1996
      Dec
        1, 2017511340
      CUB
        17
      254
      Sept.17, 2002
      Dec
        1, 2017511344
      TURN
        1
      271
      Feb
        19, 2004
      Feb
        19, 2018511347
      FLAT
        3,4
      474
      Apr
        5,21, 2004
      Apr
        7, 2018511348
      CUB
        2
      389
      June
        20, 1996
      Dec
        1, 2017511586
      PUP
        2
      237
      Jan
        1, 2004
      Jan
        1, 2018511593
      PUP
        3
      102
      Jan
        1, 2004
      Jan
        1, 2018511627
      CUB
        11
      592
      July
        17, 1996
      Dec
        1, 2017511628
      HARD
        1
      709
      Feb
        18, 2004
      Feb
        18, 2018511629
      HARD
        3
      473
      Feb
        18, 2004
      Feb
        18, 2018Cell
        Claims Converted from Legacy Claims Nov 22, 2007 (previous
        Bear Claims)570454
      
      457
      Nov
        22, 2007
      May
        26, 2018570455
      
      237
      Nov
        22, 2007
      May
        26, 2018570456
      
      220
      Nov
        22, 2007
      May
        26, 2018570457
      
      17
      Nov
        22, 2007
      May
        26, 2018


The cell claims converted on November 22, 2007 indicates a
group of claims once held in trust by the Supreme Court of British Columbia. In
February 2004, we filed an action in the Supreme Court of British Columbia
against Mr. Wolf Wiese, a former consultant to our company. The action sought
the transfer to our company of claims neighboring the Turnagain property, which
were staked in the name of Mr. Wiese. We believe that these claims should have
been staked in the name of the Company. On July 10, 2006 the Supreme Court of
British Columbia ordered that the claims be transferred to our company. The
transfer of ownership was completed on October 11, 2006. Mr. Wiese has
subsequently filed a Notice of Appeal of the Order. The appeal was heard and
dismissed on April 30, 2007 in the British Columbia Court of Appeals with costs
payable to the Company.

The map labeled Figure 2.4 shows the claims for the Turnagain
property listed above.

---

- 24 -



Exploration History

Nickel and copper sulphides were discovered within the current
Turnagain property area in a bedrock exposure along the Turnagain River in 1956.
Mineral claims covering the area where these sulphides were found as well as
other traces of sulphides were acquired by Falconbridge Nickel Mines Limited in
1966.

---

- 25 -

Falconbridge Nickel Mines Limited also completed work over the
following seven years, including surface and airborne geophysical surveys,
geological mapping, geochemical surveys and 2895 meters of conventional and
packsack diamond drilling in 40 widely spaced drill holes.

Our Turnagain Property represents a unique style of sulphide
mineralization associated with a zoned, ultramafic complex (a suite of rocks
high in iron and magnesium but low in silica.) Iron and nickel sulphides are
widespread in dunite (ultramafic rock comprising more than 90% olivine) and
wehrlite (ultramafic rock comprising less than 90% olivine and >10% pyroxene)
near dunite-wehrlite contacts. Exploration on the Turnagain Property between
1967 and 2002 was sporadic and was concentrated in the Horsetrail area or near
other small exposures of net-textured sulphides. We acquired the property in
1996.

Work Completed by the Registrant

We acquired the Turnagain River property in 1996 and our
exploration work that year included 400 line km of airborne magnetic surveys and
795.5 meters of diamond drilling in 5 holes. Additional diamond drilling
completed by our company in 1997 and 1998 amounted to 3,123 meters in 14 holes.
Related work included 18 line km of surface magnetic surveys covering two areas
of the property, bore hole pulse-electromagnetic surveys in four of the
1997-1998 drill holes and preliminary metallurgical test work on drill core
composites.

In 2002, we performed ground magnetic and Induced Polarization
geophysical surveys over part of the claim area and completed 1,687 meters of
diamond drilling in 7 holes. Exploratory work in 2003 included geological
mapping and prospecting with bedrock, stream sediment and limited soil sampling
and 8,669 meters of diamond drilling in 22 holes, including the deepening of one
hole started in 2002. Preliminary metallurgical test work was conducted on
composite 2002-2003 core samples.

In 2004, we conducted a comprehensive exploration program that
included a helicopter borne magnetic and electromagnetic survey covering 1,866
line km, 14 km of ground magnetic and electromagnetic surveys, 1:20,000 scale
aerial photography of the entire property, the collection of more than 3,000
geochemical soil samples, geological mapping, and 7522 meters of diamond
drilling in 49 holes. We analyzed the approximately 4,000 core samples for 30
elements including nickel, copper, cobalt, sulphur and often platinum and
palladium. Extensive metallurgical test work has been completed on 2003-2004
composite core samples and is in progress on 2005-2006 composite core samples.

Our 2005 exploration program consisted of geological mapping,
bedrock and soil sampling, and 7,143 meters of diamond drilling in 37 holes. We
also undertook various mineralogical, environmental baseline surveys,
engineering, metallurgical and analytical studies on the property.

Our 2006 exploration program was completed by early November
and included 19,111 meters of diamond drilling in 68 holes, surface mapping and
sampling in several areas and continuation of fish habitat surveys and water
sampling. Metallurgical testwork on composite samples from our 2005 and 2006
drill core was also completed during 2007.

Our 2007 exploration program was completed by early November
and included 24,600 meters of diamond drilling in 75 holes, surface mapping and
sampling in several areas and continuation of fish habitat surveys and water
sampling. Metallurgical testwork is on-going and will continue through 2008.

Present Condition of the Property

No mining operations have taken place on the property. Diamond
drill casings have been left in place and the locations of the bore holes marked
with labeled fence posts. There are approximately 32 km of unpaved roads and
trails on the property, constructed from the late 1960s to the present.
Reclamation work has been and will be performed on disused roads.

A camp, consisting of 17 wall tents, 3 trailers and drill core
storage facilities, capable of accommodating approximately 30 people, has been
constructed. A 700 meter unpaved air strip is adjacent to the camp. Power is
provided by an on-site diesel generator.

The property is without known reserves and our proposed work
program is exploratory in nature.

---

- 26 -

Mineralization

A number of mineral showings, located during early exploration
on the Turnagain property, consist of scattered to semi-massive (15-30%)
magmatic pyrrhotite (a common iron sulphide mineral) with minor pentlandite (an
iron and nickel sulphide mineral) in altered ultramafic rock, which is rock rich
in iron and magnesium, low in silica and modified by hot, water-rich fluids.
Extensive drilling in the Horsetrail Zone on the Turnagain property during the
2002-2006 period has outlined broad zones of disseminated to intercumulus
(between silicate grains) sulphide mineralization near the gradual transition
from dunite to wehrlite. Textures observed in surface exposures and drill core
samples suggest that both the sulphide and silicate minerals settled, under the
influence of gravity, from a hot, liquid magma, originally located several miles
beneath the earths surface.

Within the broad zone of disseminated intercumulus
mineralization, which is sulphide grains located between silicate minerals in
the Horsetrail area, the sulphide grains range in size from 0.5mm to 5mm with
curved contacts against oval olivine grains. Pyrrhotite is the most abundant
sulphide but usually encloses conspicuous pentlandite crystals
(nickel-iron-sulphur mineral), especially in the higher grade intervals.
Chalcopyrite (copper-iron sulphide), when present, is often along the margins of
the pyrrhotite and has on been found during our exploration of the property] as
minute streaks extending away from the sulphide grain. We have also identified
trace to minor quantities of bornite (another copper-iron sulphide), native
copper, valleriite, mackinawite, smythite (complex iron-nickel-cobalt-copper
sulphide minerals), and several unnamed Ni-Fe-Cu-Co sulphides in metallurgical
concentrates in our exploration of the property.

The Horsetrail Zone is the most significant zone of nickel
sulphide mineralization on the property. The exploration drilling that we
conducted between 2002 and the end of 2007 has expanded the area of
mineralization from the original surface showing of weathering sulphides, to
encompass an area 1.8km long by 0.8km wide. The mineralization in the Horsetrail
Zone is made up of several northwest to west-northwest striking zones averaging
greater than 0.25% sulphide nickel separated by intervals of lower grade nickel
sulphide mineralization. Because of the results of our exploration on the
property, we believe that mineralization in the Horsetrail Zone dips steeply to
the north. We have intersected the mineralization 300m below the surface.

Our exploration drilling has intersected nickel sulphide
mineralization in several other areas, located within a km of the Horsetrail
Zone. Additional drilling is necessary to determine extent and significance of
these mineralized areas. However, since the mineralization and host rocks in the
Horsetrail and at least one of the other areas are very similar in appearance
and composition, we believe that additional drilling will establish that the
Horsetrail nickel sulphide mineralization is connected to the nickel sulphide
mineralization in at least one of the other areas (the Hatzl Zone). Therefore,
we believe that the nickel sulphide mineralization that we have found evidence
of likely extends an additional kilometer in length past the Horsetrail Zone.

In the Horsetrail Zone, we have found evidence of low-grade
nickel near the surface, which could likely be mined using open-pit mining.
Also, a number of our drilling samples indicate the possibility that there are
higher grade zones farther down (0.4% to 1.0% nickel).

Platinum and palladium mineralization has been intersected in
several drill holes in the D.J. Zone, located on the Turnagain property
approximately three km northwest of the Horsetrail Zone. This mineralization is
usually found in a light to medium colored rock composed dominantly of pyroxene
(calcium-magnesium silicate) crystals with variable amounts of magnetite and
minor sulphide grains.

Textural and analytical data suggest an interpreted location
near the roof of the original ultramafic intrusion. Platinum and palladium
values in drill holes include 2407 parts per billion over 2 meters in hole
04-59, 1645 parts per billion over 2.15 meters in hole 04-44, 1530 parts per
billion over 13 meters in hole 05-88 and 2320 parts per billion over 2 meters in
hole 05-101. Preliminary analysis has identified minor arsenic and antimony in
association with platinum and palladium, respectively, but it is not clear
whether the mineralization is dominantly derived directly from magma or the
result of a post-crystallization hydrothermal (involving water rich fluid)
event.

---

- 27 -

Environmental Surveys

Since the timely collection of long lead-time baseline data on
the Turnagain property, such as meteorological, hydrological, water quality, and
wildlife, is important to the environmental permitting process, we initiated
collection of water quality data and wildlife observations in 2003. The program
was expanded in 2004, 2005, 2006, and 2007 to include hydrological measurements
on Hard Creek, ground water quality in the Horsetrail Zone on the Turnagain
property, and meteorological data (temperature, precipitation, evaporation, wind
speed and direction). A preliminary study to determine the presence and species
of fish in the Turnagain River and tributaries of Hard Creek was conducted in
2004 and expanded in 2006. A detailed fish habitat study of Hard Creek and Hard
Lake was completed in 2007.

Although the primary purpose of a geochemical soil survey that
we conducted in 2003 was to locate mineralization, it also provided information
on background levels of 38 elements in the soil, over the ultramafic complex,
prior to any significant future surface disturbance. Our collection of water
quality, hydrological, meteorological, and wildlife data on the Turnagain
property will continue throughout the exploration phase, including the next
twelve months.

Metallurgical Test Work

Metallurgical test work has been an integral part of our
Turnagain property exploration programs; primarily to address the feasibility of
producing an acceptable nickel sulphide concentrate from low grade
mineralization where much of the nickel was thought to be locked in the olivine
crystals and thus unavailable for economic recovery. Between 1998 and 2005
approximately 33 drill core composite samples and subjected them to a series of
preliminary metallurgical studies to establish the process response of the
nickel and cobalt, mineralization. Mineral process testing included conventional
froth flotation and some scoping work for gravity and magnetic separation
techniques. The metallurgical studies were conducted by recognized, independent
testing laboratories, including Lakefield Research, of Lakefield, Ontario;
Process Research Associates Ltd., of Vancouver, British Columbia; Billiton
Process Research, in South Africa; and Cominco Engineering Services Ltd. (CESL),
in Vancouver. All test work by Hard Creek Nickel Corp. and predecessor companies
was supervised by consulting metallurgist and former Company Director, Frank
Wright, P. Eng up until October 2007.

Since October 2007 to the present John Hoffert, P.Eng. a
consulting metallurgical engineer with Hoffert Processing Services has been
contracted as the Turnagain Project Manager and is supervising all metallurgical
and mill process design work. Present ongoing testwork includes;

|- | Crushing, grinding and abrasion testwork at SGS,
      Lakefield, Ontario                                                                                        
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------
|- | Quantitative mineralogy, mineral processing flotation
      testing including QEMSCAN and Microprobe analyses at Xstrata Process
      Services, Sudbury, Ontario
|- | Flotation and optical mineralogy test work at G&T
      Laboratories, Kamloops, British Columbia                                                                 
|- | Various hydrometallurgical tests at SGS Lakefield,
      Ontario under the supervision of Dr. David Dreisinger.                                                  

Completion of this work is intended to define the reagent
scheme and nickel flotation kinetics for future pilot plant testing.

Recommendations and Cost Estimate

The following program for the complete 2008 year for the
Turnagain Property was recommended to our company by Neil Froc, P. Eng., and
Tony Hitchins, M.Sc. in May of 2008. Drilling commenced on June 9, 2008 and
should be completed by September 2008. Metallurgical testing will continue into
2009.

Diamond Drilling 
      5,830 meters @ $125/metre  Drilling Contract
    $933,250Sample Analysis
    $
      156,500Project Management
      (Geologists, etc.).
    $842,000


---

- 28 -

Camp costs 
      cooks, room and board, maintenance, etc.
    $235,000Transportation
      (Helicopter, airfare, trucks, etc.)
    $285,000Relational
      Database Software and Training
    $40,000Drill Hole Surveys
    $10,000Access Road Design
      Work
    $21,000Maintenance of
      Airstrip and Roads
    $9,000Fire and Safety
      Training and Upgrades
    $12,100Water Sampling
    $32,000Permitting Studies (Further detailed engineering,
      environmental and First Nations traditional use studies)
    $750,000Metallurgical test
      work and related studies
    $958,000Contingencies @
      10%
    $428,385Total
    $4,712,235


- The diamond drilling program is directed towards both improving the
  confidence level of the nickel resources within the main Horsetrail Deposit,
  and to test the continuity of the recently discover Cliff Zone. The Cliff Zone
  has been identified as an area with anomalous nickel, cobalt, copper, platinum
  and palladium values..
- Studies required as part of the Provincial and Federal environmental
  review process are being initiated in 2008 with completion anticipated in
  early 2010.
- Further metallurgical testing is focusing primarily on mill process design

The Lunar Property

The Lunar property consists of six mineral cell claims covering
an area of 2,409 hectares located in central northern British Columbia, within
the Stikine Ranges of the Omineca Mountains, approximately 160 km south east of
the Turnagain Property. The property covers a large mafic-ultramafic
complex.

Access to the claims is by helicopter.

British Columbia Geological Survey geologists reported a rock
sample assay of 1017 parts per billion platinum in chromite (reported in the
Province of British Columbia Ministry of Energy, Mines and Petroleum Resources
Open File 1990-12) on the Lunar property. The presence of sulphide was reported,
although apparently not investigated for nickel mineralization. Hard Creek
geologists have made an initial property visit.and carried out some preliminary
reconnaissance prospecting work

---

- 29 -

These claims came into the possession of our company through
the process of electronic staking of claims, as described on page 18 of this
document under the title Governmental Regulations. Cell mineral claims may be
kept in good standing by incurring assessment work or by paying cash-in-lieu of
assessment work in the amount of CAN$4.00 per hectare per year during the first
3 years following the location of the mineral claims. This amount is increased
to CAN$8.00 per hectare in the fourth and succeeding years. Our claims on the
Lunar Property were to expire on March 31, 2007. Assessment work was done and
filed on March 26, 2007 to keep the claims in good standing until March 31,
2009.

Other than the sample assays conducted by government
geologists, as noted above, and our removal of 40 rock samples from the
property, we are not aware of any previous operations that have taken place on
these claims prior to our company acquiring them. The present condition of the
property is untouched and without sign of mining activity. We have no plant,
equipment or improvements on the claims.

The Lunar property is in the exploration stage, without known
reserves and any work program that our company may decide to undertake thereon
will be exploratory in nature.

If we conduct a work program on the property, our source of
power will likely be on-site diesel power generation.

Item 5        
 Operating and Financial Review and Prospects

The following discussion and analysis of our financial
condition and results of operations for the fiscal years ended December 31, 2007
and 2006 should be read in conjunction with our financial statements and related
notes included in this registration statement in accordance with Item 8 
Financial Information. Our financial statements included in this registration
statement were prepared in accordance with United States generally accepted
accounting principles.

*A.*      
*Operating Results*

Our results of operations have been, and may continue to be,
affected by many factors of a global nature, including economic and market
conditions, the availability of capital, the level and volatility of prices and
interest rates, currency values, commodities prices and other market indices,
technological changes, the availability of credit, inflation and legislative and
regulatory developments. Factors of a local nature, which include the political,
social, financial and economic stability, the availability of capital,
technology, workers, engineers and management, geological factors and weather
conditions, also affect our results of operations. See Key Information  Risk
Factors. As a result of the economic and competitive factors discussed above,
our results of operations may vary significantly from period to period.

Year Ended December 31, 2006 Compared to Year Ended December
31, 2005

For the years ended December 31, 2006 and 2005, we did not
receive any revenue from our interest in any of our properties.

During the year ended December 31, 2006 we incurred a net loss
of $5,383,528 ($0.13 per share) compared to a net loss of $3,332,394 ($0.11 per
share) for the year ended December 31, 2005. Our General and administrative
expenses for 2006 were $1,049,305, up from $570,745 in the prior year. The
increase of $478,560 can be attributed to the $237,837 increase in stock-based
compensation and the $186,402 increase in investor relations expenses.
Consulting fees in 2006 were $281,023 while in 2005, consulting fees were
$218,528, an increase of $62,495. Professional fees of $204,250 in 2006 were
down significantly from $101,417 the previous year. The current year expenses
were higher due to legal and accounting expenses from preparing Form 20-F to
allow the Company to register its securities in the United States and costs
associated with the May 2006 trial against Mr. Wolf Wiese. In July 2006, a
judgment in favor of the Company was rendered and Mr. Wiese appealed the
decision which was heard and dismissed on April 30, 2007 in favor of the
Company.

---

- 30 -

During the year ended December 31, 2006, we incurred
exploration expenses of $5,509,087 on our properties, compared to $2,679,212 in
2005, an increase of $2,829,875. Field activity resumed in May 2006, and prior
thereto, efforts were focused on compiling and analyzing data from the 2005
program. Before drilling resumed in June, field crews were prospecting and
sampling EM conductors identified in the 2004 air borne EM survey, channel
sampling in the vicinity of nickel soil anomalies and refining the 2006 drill
targets. The drill program, which began in early June and ended in early
November, comprised of 68 holes and approximately 19,120 meters of drilling. The
initial drilling was designed to test for extensions of mineralization along the
north side of the Horsetrail zone before the drill rigs were moved west to test
the north, west and south limits of the Northwest mineralization. New zones of
disseminated, intercumulus mineralization were also drill tested in the Hatzl
area, located southeast of the Turnagain River but on strike from the Horsetrail
zone, and in the Duffy area, located one kilometer north of the Horsetrail zone.
Several holes were drilled along the north side of the DJ area, to test the
diorite contact, and in the vicinity of the previously intersected platinum and
palladium mineralization. Helicopter supported drilling was also conducted in
the Highland area, discovered in 2005, and on geophysical targets, located west
of the DJ-DB area. Field work is seasonal on the Turnagain property and was
concluded in early November. The most notable results of 2006 came from drilling
in the Northwest area and included a 71.5 meters intercept of 0.40% Ni starting
6.5 meters from surface, and a 128 meters intercept of 0.31% Ni starting 72
meters from surface. An updated resource estimate for the property,
incorporating the 2006 results, was released in February 2007.

Extensive bench scale testwork, conducted in 2006 on composite
drill samples from the 2005 program, focused on the concentration of nickel
sulfide minerals using flotation techniques. For head grades between 0.14% to
0.20% sulfide nickel, the flotation concentrate ranged from approximately 5% to
13% nickel. For head grades over 0.2% sulfide nickel, the flotation concentrate
ranged from approximately 7% to 17% nickel. The bulk recovery ranges from about
70% to 83% for open cycle testing. Testwork in 2007 will include bench scale
flotation tests on composites from the 2006 drill holes and flotation tests,
including column flotation, on bulk composites weighing several tonnes.

In early 2007, the Company retained AMEC Americas Limited to
update their 2006 Preliminary Assessment (PA) of the Turnagain project with
completion scheduled for the third quarter of 2007. The study will provide a
base case scoping level engineering study of the Turnagain project using the
increased resource estimate and evaluate the production of a saleable nickel
concentrate. Knight Piesold will update their 2006 initial study of possible
tailings sites and also determine extent and timing of additional environmental,
groundwater studies and potential for generation or consumption of acid water
drainage from mineralized and waste rock.

The 2006 exploration program was more than double the 2005
exploration program and as a result, there were significant increases in all of
the major components of the 2006 field work. Drilling expenses for the year
ended December 31, 2006 were $2,866,509, an increase of $1,762,499 from the
$1,104,010 spent in 2005 Geological and geophysical services expenses of
$899,894 were incurred during the year and relate to the air-borne survey,
ground and down-hole geophysical surveys, and data analysis compared to $633,739
spent in 2005. Assay and analytical expenses of $391,696 were incurred during
the year, an increase of $123,595 over the previous year. Other major components
of the 2006 field work included metallurgical testing $300,646, transportation
$415,050, and exploration data management $193,050. When compared to 2005, these
expenses in aggregate increased by $389,902.

Year Ended December 31, 2007 Compared to Year Ended December
31, 2006

For the years ended December 31, 2007 and 2006, we did not
receive any revenue from our interest in any of our properties.

During fiscal 2007, the Company incurred a net loss of
$9,522,698 ($0.17 per share) compared to a net loss of $5,383,528 ($0.13 per
share) in fiscal 2006. Our General and administrative expenses for 2007 were
$1,654,437, up from $1,049,305 in the prior year. The increase of $605,132 can
be attributed to the $273,201 increase in investor relations stock-based
compensation and the $399,872 increase in investor relations expenses.
Consulting fees in 2007 were $979,706 while in 2006, consulting fees were
$281,023, the increase of $698,683 is due primarily from the $683,707 increase
in consulting stock based compensation. Professional fees of $147,111 in 2007
were down $57,000 from $204,250 the previous year.

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- 31 -

During the year ended December 31, 2007, the Company incurred
exploration expenses of $7,182,030 on the Turnagain property (2006: $5,509,087).
Drilling expenses for 2007 were 54% of the total exploration expense up slightly
from the 52% in 2006. Field activity resumed in May 2007, and prior thereto,
efforts were focused on compiling and analyzing data from the 2006 program. The
drill program, which began in early June and ended in mid November, comprised of
75 holes and approximately 24,600 metres of drilling. The focus of the 2007
drill program was to (i) determine the spatial limits of the Horsetrail deposit
with step-out drill holes; (ii) upgrade the confidence in the inferred portion
of the Horsetrail deposit; (iii) collect large diameter drill core samples for
further detailed metallurgical testwork; (iv) further explore the extent of the
PGE mineralization in the DJ and DB areas; and (v) drill test three exploration
target areas; the Mandible, Central and the Cliff Areas.

In December 2007, AMEC Americas Limited completed a Preliminary
Assessment. The Assessment is based on a measured, indicated and inferred
mineral resource estimate completed by AMEC. This estimate incorporates a
revised and expanded geological interpretation of the Horsetrail zone and
peripheral area which includes 19 drill holes from the 2007 drilling
program.

The next phase of metallurgical testwork will be primarily
directed towards refining the parameters necessary for projecting actual mill
performance. This testwork will be carried out by Xstrata Process Support (XPS)
in Falconbridge, Ontario, G&T Laboratories in Kamloops, B.C., and at SGS in
Lakefield Ontario. The XPS testwork consists of quantitative mineralogy, mineral
processing flotation testing including QEMSCAN and Microprobe analyses, one
rougher and one cleaner test for mineralogy and metallurgical alignment.
Additional hydrometallurgical testwork is also being completed at SGS for
completion in early 2008. The G&T testwork includes locked cycle, open cycle
testing. The SGS testwork will also be focused on completing a variety of
crushing, grinding and abrasion testwork.

Plan of Operation

As of June 20, 2008, we had approximately $7,900,000 in cash
and $1,270,00 in cash equivalents, which is sufficient to cover our operating
costs for at least 32 months based on an estimated $130,000 per month plus our
anticipated 2008 exploration program of approximately $5,000,000. We plan on
funding the 2009 exploration program through additional private placements and
the exercise of share purchase warrants by the holders of those warrants.

We will hire contractors, consultants and additional employees
over the next twelve months and intend to purchase additional office equipment
for these new employees.

*B.*      
*Liquidity and Capital Resources*

At December 31, 2007, we had working capital of $10,786,885.
Accounts payable and accrued liabilities and amounts due to related party at
December 31, 2007 were $742,316.

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- 32 -

During the year ended December 31, 2007, we raised $17,836,023
in cash proceeds, net of issue costs, from the issuance of shares, details are
below.

| | i)   | 292,500 share purchase options were exercised for total
      proceeds of $192,250.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | ii)  | 3,760,907 share purchase warrants were exercised for
      total proceeds of $3,077,626.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | iii) | The Company completed two non-brokered private placements
      at prices ranging from $2.00 - $2.80 per unit for net proceeds totaling
      $643,960. The private placements resulted in the issuance of 285,700 flow-
      through common shares and 20,000 non flow-through common shares. In
      addition, the Company issued 10,000 share purchase warrants exercisable
      into one common share at $3.00 per share on or before November 29, 2008.
      On April 3, 2008, the Company extended the expiry date from November 29,
      2008 to May 29, 2009 and re-priced the warrants from $3.00 to
  $1.00.         
| |      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | iv)  | The Company completed one brokered private placement at
      prices ranging from $2.20 - $2.80 per unit for net proceeds totaling
      $13,922,187. The private placement resulted in the issuance of 1,119,268
      flow- through common shares and 5,419,603 non flow-through common shares.
      In addition, the Company issued 2,709,802 share purchase warrants
      exercisable into one common share at $3.00 per share on or before November
      22, 2008. On April 3, 2008, the Company extended the expiry date from
      November 22, 2008 to May 22, 2009 and re-priced the warrants from $3.00 to
      $1.00.

The Company does not have any source of external liquidity such
as bank loans or lines of credit to draw upon and relies on private placement
funding and the exercise of share purchase warrants to fund ongoing operations
and exploration programs.

As of June 20, 2008, we had approximately $7,900,000 in cash
and $1,270,00 in cash equivalents, which is sufficient to cover our operating
costs for at least 32 months based on an estimated $130,000 per month plus our
anticipated 2008 exploration program of approximately $5,000,000. We plan on
funding the 2009 exploration program through additional private placements and
the exercise of share purchase warrants by the holders of those warrants.

The Companys treasury policies are to receive cash in advance
of any issuance of commons shares through private placements or the exercise of
share purchase warrants or stock options. Issue the common shares in a timely
manner and invest any excess cash in an interest bearing redeemable term
deposit. These treasury policies are controlled by the board of directors and
reviewed by the audit committee on an annual basis.

All cash and cash equivalents are held in Canadian dollars.

Application of Critical Accounting Policies

The preparation of financial statements in conformity with
applicable generally accepted accounting principles requires our management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting periods.

Our management routinely makes judgments and estimates about
the effects of matters that are inherently uncertain. As the number of variables
and assumptions affecting the probable future resolution of the uncertainties
increase, these judgments become even more subjective and complex. We have
identified certain accounting policies, described below, that are the most
important to the portrayal of our current financial condition and results of
operations. Our significant accounting policies are disclosed in Note 1 to our
financial statements included in this registration statement.

Going concern

Our financial statements are prepared on the basis that we will
continue as a going concern. The going concern basis of presentation assumes we
will continue in operation for the foreseeable future, which is a minimum of one
year from the balance sheet date, and will be able to realize our assets and
settle our liabilities and commitments in the normal course of business. Our
ability to continue as a going concern

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- 33 -

and to realize our assets and discharge our liabilities when
due in the normal course of business is dependent upon the existence of
economically recoverable mineral reserves and our ability to raise adequate
financing from lenders, shareholders and other investors to support such
business activities. During the year ended December 31, 2007, we raised
proceeds, net of issue costs, of $17,836,023 through the issuance of common
shares. Management believes that proceeds from this and subsequent financings
and the exercise of share purchase warrants will be sufficient for the planned
operating and exploration activities during the next twelve months. If
expenditures in the next twelve months exceed planned levels and we are not able
to obtain financing, we will be required to curtail operations and exploration
activities. The financial statements do not reflect adjustments, which could be
material, to the carrying values of assets and liabilities which may be required
should we be unable to continue as a going concern.

Stock based compensation

The Company follows SFAS No. 123 Accounting for Stock-based
Compensation as amended by SFAS No. 148 Accounting for Stock-Based
CompensationTransition and Disclosure, an amendment of SFAS No. 123. The
Company applies the fair value method using the Black-Scholes option-pricing
model in accounting for options granted to employees, directors and
consultants.

Use of estimates

The preparation of financial statements in conformity with
United States generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the period. Significant areas requiring the use of estimates include the
determination of fair value for stock-based compensation, and the allocation of
proceeds relating to flow-through shares issued. Actual results could differ
from those estimates.

Foreign Currency

Substantially all of our transactions are conducted in Canadian
dollars.

Derivative Instruments

Derivatives are financial instruments, the payments of which
are linked to the prices, or relationships between prices, of securities or
commodities, interest rates, currency exchange rates or other financial
measures. Derivatives are designed to enable parties to manage their exposure to
interest rates and currency exchange rates, and security and other price
risks.

We do not have any derivative instruments which are subject to
the requirements of SFAS No. 133,

Accounting for Derivative Instruments and Hedging
Activities.

Inflation

We do not believe that inflation has had a material impact on
our revenues or income over the past two fiscal years. However, increases in
inflation could result in increases in our expenses. To the extent that
inflation results in rising interest rates and has other adverse effects on
capital markets and the economy, it could adversely affect our financial
position and profitability.

*C.*      
*Research and Development, Patents and Licenses, etc.*

We do not currently, and did not previously, have research and
development policies in place. Over the past three fiscal years, we have not
expended any material amounts on research or development.

---

- 34 -

*D.*      
*Trend Information*

Our business is the exploration for and development of nickel
mineral deposit, so the commodity price of nickel has a direct impact on our
revenue prospects and our ability to raise capital. Although we do not know when
this trend will stop, management is optimistic that the current price level will
continue for the foreseeable future.

*E.*      
*Off-Balance Sheet Arrangements*

We do not have any off-balance sheet arrangements that have, or
are reasonably likely to have, a current or future effect on our financial
condition, changes in financial condition, revenues or expenses, results of
operations, liquidity, capital expenditures or capital resource that is material
to investors.

*F.*      
*Tabular Disclosure of Contractual Obligations*

We do not have any contractual obligations and commitments as
of December 31, 2005 that will require significant cash outlays in the
future.

Item 6        
 Directors, Senior Management and Employees

*A.*      
*Directors and Senior Management*

The following table sets forth the names, business experience
and function/areas of expertise of each of our directors and officers:

Name Office Held Age
      Area of Experience and Functions in Our
      CompanyMark Jarvis Director and Chief Executive Officer
      Age: 53
    Mr. Jarvis has been a director of our company and our
      Chief Executive Officer since January of 2004. As director, Mr. Jarvis is
      responsible for the management and supervision of our board of directors
      and of the affairs and business of our company. As Chief Executive
      Officer, Mr. Jarvis is responsible for the development of our strategic
      direction and the management and supervision of our overall business.George Sookochoff Director Age: 56
    Mr. Sookochoff has been a director of our company since
      November of 2003. As a non- executive director, Mr. Sookochoff is
      responsible for the corporate governance of our company.Tom Milner Director Age: 62
    Mr. Milner has been a director of our company since
      October of 2007. As a non- executive director, Mr. Milner is responsible
      for the corporate governance of our company.Lyle Davis Director Age: 52
    Mr. Davis was a director of our company in November of
      2003 for a short period of time. He was later elected again as a director
      of our company in June of 2004. As a non- executive director, Mr. Davis is
      responsible for the corporate governance of our company.Brian Fiddler Controller and Chief Financial Officer
      Age: 46
    Mr. Fiddler has served as our controller and Chief
      Financial Officer since January of 2003. As Controller and Chief Financial
      Officer, Mr. Fiddler is responsible for the financial and corporate
      management and supervision of the affairs and business of our company.Tony Hitchins
    Mr. Hitchins was appointed as Chief Operating Officer on
      January 7, 2005. As our Chief


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- 35 -

Chief Operating Officer Age: 60
    Operating Officer, Mr. Hitchins is responsible for the
      project management, field management and logging core, supervision of
      exploration on the Turnagain Nickel Project, hiring field staff and
      maintaining claims in good standing.Neil Froc Executive Vice President Age: 46
    Mr. Froc was appointed as our executive vice president in
      June 2006. As Executive Vice President, Mr. Froc is responsible for
      responsible for the management of engineering and technical studies
      including infrastructure and socio-economic project development.Leslie Young Corporate Secretary Age: 49
    Ms. Young was appointed as our corporate secretary in
      June of 2004. As Corporate Secretary, Ms. Young is responsible for the
      internal accounting and record keeping, general administration, and making
      all necessary filings and financial reporting for our company.


Mark Jarvis  Director and Chief Executive
Officer

Mr. Jarvis has considerable experience in the financing and
operations of public companies, primarily in exploration and production of
mining and oil and gas projects. After a career in financing exploration
projects as a stockbroker, Mr. Jarvis moved to the corporate side of the
business by joining the Board of Ultra Petroleum, at the time a small oil and
gas exploration and development company, in 1996. As Director responsible for
Corporate Finance, he raised the equity capital necessary for proof of concept
and to establish enough production to leverage further growth through debt
financing. Ultra Petroleum has grown through the drill bit from a market
capitalization of U.S. $10 million to its current capitalization of more than
U.S. $3 billion. From November 1996 to November 2003, Mr. Jarvis was the
President of Gemini Energy Corp., another successful oil and gas company. Mr.
Jarvis has held the position of CEO and President of Hard Creek Nickel
Corporation since January 7th 2004. During his tenure he has taken control of
management, reorganized the Board and significantly advanced our Turnagain
project by focusing our company on best practice in exploration techniques. Mr.
Jarvis is committed 100% to the business of Hard Creek Nickel Corporation.

George Sookochoff  Director

Mr. Sookochoff has been a director of our company since
November of 2003. Mr. Sookochoff is a graduate of the University of British
Columbia. He is responsible for computer systems management providing Graphical
Information Systems (GIS). Mr. Sookochoff has been providing GIS and exploration
data management services to mining companies since 1983. Mr. Sookochoff serves
as a director of PBX Ventures Ltd. (TSX  PBX) which explores for Copper, Gold
and Molybdenum in Chile and is committed 75% to the business of Hard Creek
Nickel Corporation.

Tom Milner  Director

Mr. Milner has been a director of our company since October of
2007. Mr. Milner is a consulting professional engineer with experience in mine
planning and development. Mr. Milner has held various senior mine operational
and mine development positions with large scale open pit mining operations. He
was responsible for the Gibraltar Mine restart, including securing contracts for
copper and molybdenum concentrate sales. Mr. Milner successfully built up the
operations to put the Gibraltar Mine on a sound financial footing and is
committed 10% to the business of Hard Creek Nickel Corporation.

---

- 36 -

Lyle Davis - Director

Mr. Davis was a director of our company in November of 2003 for
a short period of time. He was later elected again as a director of our company
in June of 2004. Mr. Davis previously worked in the corporate finance practices
of Ernst & Young, an accountancy firm, and in a similar capacity at C.M.
Oliver, a brokerage firm. Before that, Mr. Davis was with the Vancouver Stock
Exchange where he was responsible for trading operations during the transition
from floor based to screen based trading, prior to which he was a senior member
of the VSEs corporate finance division. Since 1999, Mr. Davis has been the
President of Ellardee Group Capital Inc. a firm specializing in consulting for
public companies. Mr. Davis is a director of Condor Resources Inc.(TSX  CN)
which explores for Copper and Gold in Latin America and is committed 10% to the
business of Hard Creek Nickel Corporation.

Brian Fiddler  Chief Financial Officer

Mr. Fiddler has served as our controller and Chief Financial
Officer since January of 2003. Before joining our company, Mr. Fiddler had been
involved in providing financial consulting services to private and public
companies in Canada, U.S.A., Hong Kong and China since 1992. His business
experience includes mining, oil and gas, technology, health/nutrition and
environmental products as well as assisting public companies in raising
investment capital. He has been a member of the Certified General Accountants
Association of British Columbia and the Certified General Accountants
Association of Canada since 1992. Mr. Fiddler is the proprietor of Brian
Fiddler, CGA, a public accounting firm since 1992 specializing in financial
consulting, Mr. Fiddler is committed 50% to the business of Hard Creek Nickel
Corporation.

Tony Hitchins  Chief Operating Officer

Mr. Hitchins has been an officer of our company since January
2005. Before joining our company, Mr. Hitchins was a geologist with
International Taurus Resources from 1998 to 2004 and a district manager for
Cyprus Gold in Australia from 1994 to 1998. He attended University of Toronto
and has M.Sc. and BA Sc degrees. Mr. Hitchins is committed 100% to the business
of Hard Creek Nickel Corporation.

Neil Froc  Executive Vice President

Mr. Froc has been an officer of our company since June 2006 and
has provided engineering services to the company for two years prior to this
time. He is an engineering graduate from the University of Saskatchewan. Mr.
Froc has been involved in various aspects of geological engineering and resource
development in British Columbia since 1979. Mr. Froc has been the President of
Mountain Geoscience Inc. since 2000. Mr. Froc is committed 100% to the business
of Hard Creek Nickel Corporation.

Leslie Young  Corporate Secretary

Ms. Young was appointed as our corporate secretary in June of
2004. Ms. Young has previous experience working in brokerage firms, beginning
with C.M. Oliver and most recently with Raymond James from 1999 to 2004. She has
had experience in operations and executive administration. Ms. Young is
committed 100% to the business of Hard Creek Nickel Corporation.

There are no family relationships between any of our executive
officers or directors of our company. There are no arrangements or
understandings with major shareholders, customers, suppliers or others pursuant
to which any person referred to above was selected as a director or executive
officer.

*B.*      
*Compensation*

During the fiscal year ended December 31, 2006 the aggregate
remuneration paid to directors in their capacity as directors of our company was
$NIL. Management fees totaling $88,750 were paid to our directors and officers.
Geological and consulting fees totaling $422,761 in cash, together with 295,773
worth of our securities were paid to directors and officers.

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- 37 -

During the fiscal year ended December 31, 2007 the aggregate
remuneration paid to directors in their capacity as directors of our company was
$NIL. Management fees totaling $109,000 were paid to our directors and officers.
Geological and consulting fees totaling $456,978 in cash, together with $282,924
worth of our securities were paid to directors and officers.

Executive Compensation

The following table provides a summary of compensation paid by
  us during the fiscal year ended December 31, 2007 and 2006 to our chief executive
  officer and to our next four most highly paid executive officers who received
  a combined salary and bonus during such period in excess of $100,000 (collectively,
  with the chief executive officer, the Named Executive):

SUMMARY COMPENSATION TABLEName and
        Principal Position
      Year
      Annual Compensation(1)
      Long Term Compensation
      All other Compen- sationSalary
      Bonus
      Other
        Annual Compen- sation(2)
      Securities
        Under Options/ SARs Granted
      Shares or
        units subject to resale restrictions.Mark Jarvis 
        CEO and 
        Director(3)
      2007 
        2006
      Nil 
        Nil
      Nil 
        Nil
      Nil 
        Nil
      Nil 
        400,000
      Nil 
        Nil
      Nil 
        NilNeil Froc 
        VP (4)
      2007 
        2006
      $150,000 
        $86,364
      $10,000 
        Nil
      Nil 
        Nil
      Nil 
        225,000
      Nil 
        Nil
      NilAnthony Hitchins 
        COO (5)
      2007 
        2006
      $120,000 
        $120,000
      $60,000 
        $35,000
      Nil 
        Nil
      Nil 
        100,000
      Nil 
        Nil
      NilBrian Fiddler 
        CFO (6)
      2007 
        2006
      $ 55,500 
        $ 42,000
      $5,000 
        Nil
      Nil 
        Nil
      Nil 
        50,000
      Nil 
        Nil
      Nil 
        Nil


| | (1) | On a cash basis, unless otherwise stated.                                                                                                                                                                                                                                                          
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (2) | The value of perquisites and other personal benefits,
      securities and property for the Named Executives that do not exceed the
      lesser of $50,000 or 10% of the total of the annual salary and bonus are
      not reported herein.                                                      
| | (3) | Mark Jarvis was appointed as Chief Executive Officer and
      President of our company on January 9, 2004. The long term compensation is
      made up of 1,200,000 stock options with exercise prices ranging from $0.60
      - $1.00 expiring January 16, 2011.                                
| | (4) | Neil Froc was appointed as Executive Vice President of
      our company on June 16, 2006. The long term compensation is made up of
      300,000 stock options with exercise prices ranging from $0.60 - $1.00
      expiring on dates ranging from August 24, 2009 to June 16, 2011.             
| | (5) | Anthony Hitchins was appointed as Chief Operating Officer
      of our company on January 7, 2005. The long term compensation is made up
      of 300,000 stock options with exercise prices ranging from $0.40 - $1.00
      expiring on dates ranging from January 7, 2009 to January 16,
  2011.
| | (6) | Brian Fiddler has served as Chief Financial Officer of
      our company since January 2003. The long term compensation is made up of
      150,000 stock options with exercise prices ranging from $0.35 - $0.60
      expiring on dates ranging from October 1, 2008 to January 16,
  2011.      

*C.*      
*Board Practices*

The election and retirement of directors are provided for in
our Articles. An election of directors shall take place at each annual meeting
of shareholders and all the directors then in office shall retire but, if
qualified,

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- 38 -

shall be eligible for re-election. A director shall retain
office only until the election of his successor. The number of directors to be
elected at such meeting shall be the number of directors then in office unless
the directors or the shareholders otherwise determine. The election shall be by
ordinary resolution of shareholders. If an election of directors is not held at
the proper time, the incumbent directors shall continue in office until their
successors are elected.

Our Articles also permit the directors to add additional
directors to the board between annual general meetings so long as the number
appointed does not exceed more than one-third of the number of directors elected
at the last annual general meeting. Individuals appointed as directors to fill
casual vacancies created on the board or added as additional directors hold
office like any other director until the next annual general meeting at which
time they may be re-elected or replaced.

The members of our companys audit committee include Lyle
Davis, Tom Milner, George Sookochoff and Brian Fiddler. The audit committee
reviews and approves the scope of the audit procedures employed by our
independent auditors, reviews the results of the auditors examination, the
scope of audits, the auditors opinion on the adequacy of internal controls and
quality of financial reporting, if applicable, and our accounting and reporting
principles, policies and practices, as well as our accounting, financial and
operating controls. The audit committee also reports to the board of directors
with respect to such matters and recommends the selection of independent
auditors. Before financial statements that are to be submitted to the
shareholders at an annual general meeting are considered by the board of
directors, such financial statements are submitted to the audit committee for
review with the independent auditors, following which the report of the audit
committee on the financial statements is submitted to the board of
directors.

We currently do not have a remuneration or compensation
committee.

*D.*      
*Employees*

As of June 20, 2007, we have ten full-time employees, including
two of our officers. We do not have any relationship with any labor unions.

*E.*      
*Share Ownership*

There were 60,370,592 Common Shares issued and outstanding as
of June 20, 2008. Of the shares issued and outstanding, warrants held and stock
options granted, our directors and officers owned the following Common Shares as
of June 20, 2008:

Name
      Number of Common Shares Beneficially Owned as
      of June 20, 2008
      Percentage(1)Mark Jarvis
    5,363,756(2)
    7.86%George Sookochoff
    284,000(3)
    0.42%Tom Milner
    260,000(4)
    0.38%Lyle Davis
    276,000(5)
    0.40%Anthony Hitchins
    378,750(6)
    0.55%Brian Fiddler
    204,368(7)
    0.30%Leslie Young
    160,000(8)
    0.23%Neil Froc
    300,000(9)
    0.44%


|(1) | Based on 60,370,592 Common Shares issued and outstanding
      as at June 20, 2008, and the number of shares issuable upon the exercise
      of issued and outstanding stock options and warrants which are exercisable
      within 60 days of June 20, 2008.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

- 39 -

|(2) | Includes stock options to purchase up to 1,200,000 of our
      Common Shares at exercise prices ranging from $.50 - $1.00 per share
      expiring up to January 16, 2011.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(3) | Includes stock options to purchase up to 250,000 of our
      Common Shares at exercise prices ranging from $.35 - $1.00 per share
      expiring up to January 16, 2011.  
|(4) | Includes stock options to purchase up to 250,000 of our
      Common Shares at exercise prices ranging from $2.15 - $2.20 per share
      expiring up to October 10, 2012. 
|(5) | Includes stock options to purchase up to 250,000 of our
      Common Shares at exercise prices ranging from $.54 - $1.00 per share
      expiring up to January 11,2011.   
|(6) | Includes stock options to purchase up to 300,000 of our
      Common Shares at exercise prices ranging from $.40 - $1.00 per share
      expiring January 16, 2011.        
|(7) | Includes stock options to purchase up to 150,000 of our
      Common Shares at exercise prices ranging from $.35 - $.75per share
      expiring January 16, 2011.          
|(8) | Includes stock options to purchase up to 150,000 of our
      Common Shares at exercise prices ranging from $0.60 - $1.00 per share
      expiring January 16, 2011.       
|(9) | Includes stock options to purchase up to 300,000 of our
      Common Shares at exercise prices ranging from $0.60 - $.80 per share
      expiring June 16, 2011.           

The voting rights attached to the Common Shares owned by our
officers and directors do not differ from those voting rights attached to shares
owned by people who are not officers or directors of our company.

Stock Option Plan

We have an incentive stock option plan that provides for the
grant of incentive stock options to purchase our common shares to our directors,
officers and key employees and other persons providing ongoing services to us.
Our stock option plan is administered by our board of directors. The maximum
number of our common shares which may be reserved and set aside for issuance
under our stock option plan is equal to 10% of the number of common shares
outstanding from time to time on a non-diluted basis. Each option upon its
exercise entitles the grantee to one Common Share. The exercise price of Common
Shares subject to an option will be determined by the board of directors at the
time of grant and will be not less than the discounted market price of the
Common Shares at the date of grant, as determined under the policies of the TSX
Venture Exchange. Options may be granted under our stock option plan for an
exercise period of up to five years from the date of grant of the option or such
lesser periods as may be determined by our board of directors.

During the fiscal year ended December 31, 2007 we have the
following stock options outstanding to our directors and officers:

Name
      Number of Options
      Exercise Price
      Expiry DateMark Jarvis
    1,200,000
    $0.60  1.00
    January 16, 2011Tom Milner
    250,000
    $2.15  2.20
    October 10, 2012George Sookochoff
    250,000
    $0.35  1.00
    January 16, 2011Lyle Davis
    237,500
    $0.60  1.00
    January 16, 2011Anthony Hitchins
    300,000
    $0.40  1.00
    January 16, 2011Brian Fiddler
    150,000
    $0.35  0.75
    January 16, 2011Leslie Young
    150,000
    $0.60 - $1.00
    January 16, 2011Neil Froc
    300,000
    $0.60 - $1.00
    June
      16, 2011


Item 7Major
  Shareholders and Related Party Transactions

---

- 40 -

*A.*      
*Major Shareholders*

The following table sets forth, as of June 20, 2008, the only
person known to us to be the beneficial owner of more than five (5%) of our
Common Shares:

Name of Shareholder
    No. of Common Shares Owned
    Percentage of Outstanding Common
      Shares(1)Mark
      Jarvis
    5,363,756(2)
    7.86%


|(1) | Based on 60,370,592 Common Shares issued and outstanding
      as at June 20, 2008, and the number of shares issuable upon the exercise
      of issued and outstanding stock options and warrants which are exercisable
      within 60 days of June 20, 2008.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                
|(2) | Includes stock options to purchase up to 1,200,000 of our
      Common Shares at exercise prices ranging from $0.50  1.00 per share
      expiring January 16, 2011.                                                                                          

Over the last three years, there has been only one significant
change in the percentage held by a major shareholder, Mark Jarvis acquired more
than 5% of the Company during the fiscal year 2004, details of his holdings are
listed in the above table.

The voting rights of our major shareholders do not differ from
the voting rights of holders of our common shares who are not major
shareholders.

As at June 20, 2008, the registrar and transfer agent for our
  company reported that there were 60,370,592 common shares of our company issued
  and outstanding. Of these, 58,096,557 were registered to Canadian residents
  (20 shareholders), 2,078,208 were registered to residents of the United States
  (7 shareholders) and 195,827 were registered to residents of other foreign countries
  (24 shareholders).

To the best of our knowledge, our company is not directly or
indirectly owned or controlled by another corporation, by any foreign government
or by any other natural or legal person.

There are no arrangements known to us, the operation of which
may at a subsequent date result in a change in the control of our company.

*B.*      
*Related Party Transactions*

Other than as disclosed below, to the best of our knowledge,
there have been no material transactions since formation of our company to which
we were or are a party and in which any of our directors or officers, any
relative or spouse of any director or officer, or any individual owning,
directly or indirectly, an interest in our voting power that gives it
significant influence over us, has or will have a direct or indirect material
interest nor were any of our directors or officers, any relatives or spouses of
such directors or officers, or any individuals owning, directly or indirectly,
an interest in our voting power that gives them significant influence over us,
indebted to us during this period. The services provided by the related parties
were billed to the Company at standard industry rates.

Year Ended December 31,2007
      2006
      2005Frank Wright (Former 
        Director) Exploration Expenditures
      $98,688
      $72,543
      $34,783


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- 41 -

Tom Milner (Director) Exploration Expenditures
    $5,600
    $NIL
    $NILGeorge Sookochoff (Director) Exploration Expenditures
    $82,690
    $102,375
    $112,645Anthony Hitchins (COO) Exploration Expenditures
    $180,000
    $155,000
    $132,000Neil Froc (VP) Exploration Expenditures
    $160,000
    $86,364
    $NILNeil Froc (VP) Consulting Fees
    $NIL
    $4,429
    $NILLyle Davis (Director) Consulting Fees
    $Nil
    $2,050
    $2,800Brian Fiddler (CFO) Management fees
    $60,500
    $42,000
    $42,000Leslie Young (Secretary) Management fees
    $63,500
    $46,750
    $42,000


The terms of these transactions were determined through
negotiations between our company and the related party. In determining the terms
of these transactions, the company looked at rates of other mining consultants,
both past and present, contracted by the company as well as reviewing
remuneration statistics published by various human resource firms specializing
in the mining industry. We believe that each of these transactions was on terms
at least as favorable as we could have obtained from unaffiliated third
parties.

Mr. Wright (Former Director), a consultant, is a professional
engineer who oversees the metallurgical testing of the Turnagain Nickel Project
for the company; his fees are expensed as mineral property exploration costs.
Mr. Milner (Director), a consultant, is a professional engineer who oversees the
metallurgical testing of the Turnagain Nickel Project for the company; his fees
are expensed as mineral property exploration costs. Mr. Sookochoff (Director), a
consultant, is a computer professional who oversees the exploration data
management of the Turnagain Nickel Project for the company, his fees are
expensed as mineral property exploration costs. Mr. Hitchins (COO), an employee,
is a mining professional who oversees the exploration program and project
management of the Turnagain Nickel Project for the company, his salary is
expensed as mineral property exploration costs. Mr. Froc (VP), an employee, is a
professional engineer who oversees the engineering and technical studies of the
Turnagain Nickel Project for the company; his salary is expensed as mineral
property exploration costs. Before Mr. Froc, became an employee, he was a
consultant to the company and part of his non Turnagain Project fees were
expensed as consulting fees. Mr. Davis (Director), a consultant, is a
professional executive who oversees the corporate governance of the company, his
fees are expensed as consulting fees. Mr. Fiddler (CFO), a consultant, is a
professional accountant who oversees the financial, corporate management and
supervision of the affairs and business of the company, his fees are expensed as
management fees. Ms. Young (Corporate Secretary), an employee, is responsible
for the internal accounting and record keeping, general administration and
treasury functions of the company, her salary is expensed as management
fees.

*C.*      
*Interests of Experts and Counsel*

None of the named experts or counselors employed on a
contingent basis owns shares in our company or our subsidiary or has a material,
direct or indirect economic interest in our company or that depends on the
offering.

Item 8Financial Information

*A.*      
*Financial Statements and Other Financial Information*

Our financial statements are stated in Canadian dollars and are
prepared in accordance with accounting principles generally accepted in the
United States of America.

---

- 42 -

*Financial Statements filed as part of this annual report
  :*

Financial Statements of Hard Creek Nickel Corporation for
the years ended December 31, 2006 and 2005 reported on by Dale Matheson
Carr-Hilton LaBonte, Chartered Accountants.

| | Report
      of Independent Registered Public Accounting Firm Dale Matheson Carr-Hilton
      LaBonte, Chartered Accountants dated April 8, 2008
| | ------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                 
| | Consolidated
      Balance Sheets as at December 31, 2007 and 2006                                                                              
| |                                                                                                                                                 
| | Consolidated
      Statements of Operations for the years ended December 31, 2007, 2006 and
      2005                                          
| |                                                                                                                                                 
| | Consolidated
      Statement of Stockholders Equity from inception January 17, 1983 to
      December 31, 2007                                 
| |                                                                                                                                                 
| | Consolidated
      Statements of Cash Flows for the years ended December 31, 2007, 2006 and
      2005                                          
| |                                                                                                                                                 
| | Notes
      to Consolidated Financial Statements                                                                                                

Legal Proceedings

Other than as disclosed below, as of June 20, 2008, there are
no legal proceedings to which our company is a party and, to our knowledge, no
such proceedings are pending:

| | (1) | In October of 2003, the British Columbia Securities
      Commission (the BCSC) issued a Notice of Hearing against us and three
      individuals who were our directors at the time. The primary allegation by
      the BCSC was with respect to violation of National Instrument 43-101,
      Standards of Disclosure for Mineral Projects, and certain violations in
      securities issuances. We settled the allegations made by the BCSC in
      November of 2004. In the settlement, we agreed to comply with the
      British Columbia Securities Actand Regulations and to pay a fine
      of $20,000 representing a portion of the cost of the
  investigation.                                                                       
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | (2) | In February 2004, we filed an action in the Supreme Court
      of British Columbia against Mr. Wolf Wiese, a former consultant to our
      company. The action sought the transfer to our company of claims
      neighboring the Turnagain property, which were staked in the name of Mr.
      Wiese. We believe that these claims should have been staked in the name of
      the Company. On July 10, 2006 the Supreme Court of British Columbia
      ordered that the claims be transferred back to our company. The transfer
      of ownership was completed on October 11, 2006. Mr. Wiese has subsequently
      filed a Notice of Appeal of the Order. The appeal was heard and dismissed
      on April 30, 2007 in favor of the Company.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | (3) | In July of 2004, each of Quorum Capital Corp. and Stewart
      Jackson, a former President and director of our company, filed a
      countersuit against us with respect to our action against Mr. Wiese. We
      have filed our defense to the respective countersuits and asserted
      counterclaims against Quorum Capital Corp. and Stewart Jackson claiming
      they have improperly received monies and securities from our company and
      also claiming for damages. We are currently unable to determine the
      potential outcome of the action and the
countersuits.                                                                                                                                                              

---

- 43 -

Dividend Distributions

Our company has not paid our shareholders any dividends since
our inception to date. Any future payment of dividends or distributions will be
determined by the board of directors of our company on the basis of our
companys earnings, financial requirements and other relevant factors.
Successful operation of our business is subject to a number of risks and
uncertainties, including those described under the heading Risk Factors.

*B.*      
*Significant Changes*

The management of our company is not aware of any significant
changes since the date of our most recent interim financial statements.

Item 9The
  Offer and Listing

*A.*      
*Offer and Listing Details*

Our shares are registered shares, meaning the shareholders are
registered on the books of our company.

We have the authority to issue an unlimited number of common
shares with no par value per share and an unlimited number of preferred shares
with no par value.

As of June 20, 2008, we have 60,370,592 issued and outstanding
common shares and no issued and outstanding preferred shares. The 60,370,592
issued and outstanding common shares may be made available to the market through
this registration statement. We intend to issue additional common shares and
these also may be made available to the market through this registration
statement. To issue additional shares the directors will be required to
authorize, through a directors consent resolution, the sale and issuance of the
additional shares. We do not know how many additional shares we may issue in the
future.

After our shares of our common stock are made available to the
market, the selling prices may be the fixed prices prevailing at the time of
sale, prices related to the market prices or at negotiated prices. The shares of
common stock being made available to the market by this registration statement
may by one or more of the following methods, without limitation:

(a) block trades in which the broker or
dealer so engaged will attempt to sell the shares of common stock as agent but
may position and resell a portion of the block as principal to facilitate the
transaction; (b) purchases by broker or dealer as principal and resale by
the broker or dealer for its account pursuant to this prospectus; (c)
ordinary brokerage transactions and transactions in which the broker solicits
purchasers; (d) privately negotiated transactions; and (e) a combination
of any aforementioned methods of sale.

We will not receive any proceeds from the sale of our common
shares that are made available to the market through this registration
statement. Any commissions, discounts or other fees payable to brokers or
dealers in connection with any sale of the shares of common stock will be borne
by the shareholders selling the shares, the purchasers participating in such
transaction or both.

In effecting sales, brokers and dealers engaged by the selling
shareholders may arrange for other brokers or dealers to participate. Brokers or
dealers may receive commissions or discounts from the selling shareholders or,
if any of the brokers or dealers act as an agent for the purchaser of such
shares, from the purchaser in amounts to be negotiated which are not expected to
exceed those customary in the types of transactions involved. Brokers or dealers
may agree with the selling shareholders to sell a specified number of the shares
of common stock at a stipulated price per share. Such an agreement may also
require the broker or dealer to purchase as principal any unsold shares of
common stock at the price required to fulfill the broker or dealer commitment to
the selling shareholders if such broker or dealer is unable to sell the shares
on behalf of the selling shareholders. Brokers or dealers who acquire shares of
common stock as principal may thereafter resell the shares of common stock from
time

---

- 44 -

to time in transactions which may involve block transactions
and sales to and through other brokers or dealers, including transactions of the
nature described above. Such sales by a broker or dealer could be at prices and
on terms then prevailing at the time of sale, at prices related to the
then-current market price or in negotiated transactions. In connection with such
resales, the broker or dealer may pay to or receive from the purchasers of the
shares, commissions as described above.

Price History

Full Financial Years (five most recent financial years)

The annual high and low market prices for the five most recent
full financial years (years ended December 31, 2003 through to December 31,
2007) on the TSX Venture Exchange (formerly the Canadian Venture Exchange) were
as follows:

Year/Period
        Ended
      High
      LowDecember 31, 2003
    $0.51
    $0.31December 31, 2004
    $0.85
    $0.43December 31, 2005
    $0.58
    $0.36December 31, 2006
    $1.04
    $0.55December 31, 2007
    $3.00
    $0.76


Full Financial Quarters (two most recent financial years)

The high and low market prices for each full financial quarter
for the two most recent full fiscal years on the TSX Venture Exchange were as
follows:

Quarter Ended
      High
      LowMarch 31, 2006
    $0.98
    $0.55June 30, 2006
    $0.89
    $0.62September 30, 2006
    $0.79
    $0.68December 31, 2006
    $1.04
    $0.74March 31, 2007
    $2.80
    $0.76June 30, 2007
    $3.00
    $1.63September 30, 2007
    $2.20
    $1.16December 31, 2007
    $1.35
    $0.80


---

- 45 -

We have no principle trading market outside of our host market,
the TSX Venture Exchange. We have not had any significant trading suspensions in
the last three years.

The securities being offered herein are equity shares in our
common stock. These shares are registered shares not bearer shares. Each
shareholder is entitled, without charge, to one certificate representing the
share or shares of each class or series of shares held by the shareholder.

Our authorized capital consists of an unlimited number of
Common Shares without par value and an unlimited number of Class A Preference
Shares without par value. As of June 20, 2008, we had 60,370,592 Common Shares
and no Class A Preference Shares issued and outstanding.

Our directors may, subject to the rights of the holders of the
issued shares of the Company, issue, allot, sell, grant options on or otherwise
dispose of the unissued shares, and issued shares held by the Company, at the
times, to the persons, including directors, in the manner, on the terms and
conditions and for the issue prices that the directors, in their absolute
discretion, may determine.

A transfer of a share of the Company must not be recorded or
registered:

(a) unless a duly signed instrument of transfer in respect of
the share has been received by the Company and the certificate representing the
share to be transferred has been surrendered and cancelled, or

(b) if no certificate has been issued by the Company in respect
of the share, unless a duly signed instrument of transfer in respect of the
share has been received by the Company.

Subject to the rights, if any, of shareholders holding shares
with special rights as to dividends, the directors may from time to time declare
and authorize payment of any dividends the directors consider appropriate.

Subject to the rights, if any, of shareholders holding shares
with special rights as to dividends, the directors may from time to time declare
and authorize payment of any dividends the directors consider appropriate.

The Class A Preference shares may include one or more series
and, subject to the Business Corporations Act (British Columbia), the directors
may, by resolution, if none of the shares of any particular series are issued,
alter the Articles of the Company and authorize the alteration of the Notice of
Articles of the Company, as the case may be, to do one or more of the following:

(i) determine the maximum number of shares of that series that
the Company is authorized to issue, (ii) determine that there is no such maximum
number, or (iii) alter any such determination.

---

- 46 -

By resolution, the directors may also, if none of the shares of
any particular series are issued, alter the Articles of the Company and
authorize the alteration of the Notice of Articles of the Company, as the case
may be, to do one or more of the following:

(i) create an identifying name for the shares of that series,
or alter any such identifying name; and

(ii) attach special rights or restrictions to the shares of
that series, or alter any such special rights or restrictions.

*B.*      
*Markets*

Our common shares trade on the TSX Venture Exchange. Our symbol
is HNC and our CUSIP number is 411637.

Item 10Additional
  Information

*A.*      
*Share Capital*

As at June 20, 2008 we are authorized to issue an unlimited
number of Common Shares without par value and an unlimited number of Class A
Preference Shares without par value. As at June 20, 2008 we had 60,370,592
common shares issued and outstanding and no Class A Preference Shares issued and
outstanding.

On January 1, 2007 we had 49,322,614 common shares issued and
outstanding. During the year ended December 31, 2007 we issued a total of
10,897,978 common shares so that we had 60,220,592 common shares issued and
outstanding as at December 31, 2007.

We do not own any shares of our company.

As at December 31, 2007 we had 3,373,689 warrants outstanding
as follows:

Type
      Amount
      Exercise Price
      Expiration DateWarrants
    2,709,802
    $3.00
    November 22, 2008Warrants
    653,887
    $2.80
    November 22, 2008Warrants
    10,000
    $3.00
    November 29, 2008


As at December 31, 2007 we had 4,595,000 options, each for the
purchase of one share of our common stock, outstanding as follows:

Type
      Amount
      Exercise Price
      Expiration DateOptions
    50,000
    $0.35
    October 1, 2008Options
    90,000
    $0.35
    November 3, 2008Options
    64,000
    $0.40
    December 4, 2008Options
    36,000
    $0.40
    December 11, 2008Options
    30,000
    $0.40
    January 7, 2009Options
    600,000
    $0.60
    January 23, 2009Options
    505,000
    $1.00
    January 23, 2009Options
    162,500
    $0.60
    February 27, 2009Options
    25,000
    $1.00
    February 27, 2009Options
    75,000
    $0.60
    June
      11, 2009Options
    75,000
    $1.00
    June
      11, 2009


---

- 47 -

Options
    25,000
    $0.60
    August
      24, 2009Options
    75,000
    $0.60
    September 24, 2009Options
    260,000
    $1.00
    January 7, 2010Options
    10,000
    $0.60
    May
      10, 2010Options
    960,000
    $0.75
    January 16, 2011Options
    200,000
    $0.75
    June
      7, 2011Options
    150,000
    $0.80
    June
      16, 2011Options
    50,000
    $0.80
    September 13, 2011Options
    10,000
    $0.80
    September 21, 2011Options
    10,000
    $0.90
    January 16, 2012Options
    200,000
    $1.30
    February 16, 2009Options
    450,000
    $2.15
    March
      27, 2012Options
    15,000
    $2.70
    April
      23, 2012Options
    2,500
    $2.80
    May
      29, 2012Options
    45,000
    $2.80
    May
      29, 2012Options
    100,000
    $1.70
    July
      9, 2009Options
    150,000
    $2.00
    July
      9, 2009Options
    20,000
    $2.30
    July
      23, 2012Options
    50,000
    $2.20
    October 1, 2012Options
    50,000
    $2.20
    October 10, 2012Options
    50,000
    $2.20
    October 30, 2012


As at June 20, 2008 we had 2,719,802 warrants outstanding as
follows:

Type
      Amount
      Exercise Price
      Expiration DateWarrants
    2,709,802
    $1.00
    May
      22, 2009Warrants
    10,000
    $1.00
    May
      29, 2009


On April 3, 2008 the Company extended and re-priced the
warrants, as a result, 653,887 broker warrants were cancelled.

As at June 23, 2008, we had 5,180,000 options, each for the
purchase of one share of our common stock, outstanding as follows :

Type
      Amount
      Exercise Price
      Expiration DateOptions
    50,000
    $0.35
    October 1, 2008Options
    90,000
    $0.35
    November 3, 2008Options
    30,000
    $0.40
    January 7, 2009Options
    550,000
    $0.60
    January 23, 2009Options
    505,000
    $1.00
    January 23, 2009Options
    162,500
    $0.60
    February 27, 2009Options
    25,000
    $1.00
    February 27, 2009Options
    75,000
    $0.60
    June
      11, 2009Options
    75,000
    $1.00
    June
      11, 2009


---

- 48 -

Options
    25,000
    $0.60
    August
      24, 2009Options
    75,000
    $0.60
    September 24, 2009Options
    260,000
    $1.00
    January 7, 2010Options
    10,000
    $0.60
    May
      10, 2010Options
    960,000
    $0.75
    January 16, 2011Options
    200,000
    $0.75
    June
      7, 2011Options
    150,000
    $0.80
    June
      16, 2011Options
    50,000
    $0.80
    September 13, 2008Options
    10,000
    $0.80
    September 21, 2011Options
    10,000
    $0.90
    January 16, 2012Options
    200,000
    $1.30
    February 16, 2009Options
    450,000
    $2.15
    March
      27, 2012Options
    15,000
    $2.70
    April
      23, 2012Options
    47,500
    $2.80
    May
      29, 2012Options
    150,000
    $2.00
    July
      9, 2009Options
    20,000
    $2.30
    July
      23, 2012Options
    50,000
    $2.20
    October 1, 2012Options
    50,000
    $2.20
    October 10, 2012Options
    50,000
    $2.20
    October 30, 2012Options
    310,000
    $1.00
    April
      1, 2013Options
    100,000
    $1.00
    April
      1, 2010Options
    200,000
    $1.00
    May
      12, 2010Options
    225,000
    $1.00
    May
      20, 2013


The following table sets forth the history of share issuances
during the past three financial years.

Balance as at
      December 31, 2004
    28,310,394Common Shares
      issued for cash proceeds (i)
    6,949,947Warrants converted
      to Common Shares (ii)
    2,360,153Options converted
      to Common Shares (ii)
    55,000Balance as at
      December 31, 2005
    37,675,494Common Shares
      issued for cash proceeds (iii)
    4,726,836Warrants converted
      to Common Shares (iv)
    6,790,284Options converted
      to Common Shares (iv)
    130,000Balance as at
      December 31, 2006
    49,322,614Common Shares
      issued for cash proceeds (v)
    6,844,571Warrants converted
      to Common Shares (iv)
    3,760,907Options converted
      to Common Shares (iv)
    292,500Balance as at
      December 31, 2007
    60,220,592


---

- 49 -

|(i)   | During the year ended December 31, 2005, we issued by
      private placement, 6,949,947 Common Shares for cash proceeds of
      $2,744,627.                          
|----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      |                                                                                                                                                                        
|(ii)  | The Company issued 2,415,153 Common Shares for the
      exercise of 2,360,153 share purchase warrants and 55,000 stock options for
      cash proceeds of $1,057,385. 
|      |                                                                                                                                                                        
|(iii) | During the year ended December 31, 2006, we issued by
      private placement, 4,726,836 Common Shares for cash proceeds of
      $3,704,378.                          
|      |                                                                                                                                                                        
|(iv)  | The Company issued 6,920,284 Common Shares for the
      exercise of 6,790,284 share purchase warrants and 130,000 stock options
      for cash proceeds of $3,530,459.
|      |                                                                                                                                                                        
|(v)   | During the year ended December 31, 2007, we issued by
      private placement, 6,844,571 Common Shares for cash proceeds of
      $14,566,147.                         
|      |                                                                                                                                                                        
|(vi)  | The Company issued 4,053,407 Common Shares for the
      exercise of 3,760,907 share purchase warrants and 292,500 stock options
      for cash proceeds of $3,269,876.

*B.*      
*Articles of Incorporation and By-laws*

Incorporation

We were incorporated under the Company Act(British
Columbia) on January 17, 1983. The Company Act(British Columbia) was
repealed on March 29, 2004 when the Business Corporations Act (British
Columbia) came into force. Accordingly, on June 15, we filed a transition
application under the Business Corporations Act (British Columbia) and
received the incorporation number 259067. We filed our Notice of Articles, which
replaced our Memorandum of Incorporation, with the Registrar of Companies of
British Columbia together with our transition application. A copy of our Notice
of Articles may be obtained from the Registrar of Companies of British Columbia
or from our corporate solicitors, Clark Wilson LLP, Suite 800  885 West Georgia
Street, Vancouver, B.C. V6C 3H1. On June 25, 2004, we adopted our current
Articles of Incorporation and a copy of which may be obtained from our corporate
solicitors, Clark Wilson LLP, Suite 800  885 West Georgia Street, Vancouver,
B.C. V6C 3H1.

Objects and Purposes of the Company

Our Notice of Articles and Articles of Incorporation place no
restrictions upon our objects and purposes.

Directors Powers

Our Articles of Incorporation do not contain any special
provision with respect to a directors power to vote on a proposal, arrangement
or contract in which the director is materially interested. Such power of
directors will be exercised by our directors in accordance with Sections 147 to
153 of the Business Corporations Act (British Columbia), which provides
in part that a director who is a party to, or who is also a director or officer
of or has a material interest in any person who is a party to, a material
contract or proposed material contract with us shall disclose the nature and
extent of his interest at the time and in the manner provided by the Business
Corporations Act (British Columbia). The Business Corporations Act
(British Columbia) also provides that any such contract or proposed contract
shall be referred to the board or shareholders for approval and a director whose
interest in a contract is so referred to the board shall not vote on any
resolution to approve the same.

---

- 50 -

Section 10.6 of our Articles of Incorporation provides that the
directors shall be paid such remuneration for their services as the board may
from time to time determine. The directors shall also be entitled to be
reimbursed for traveling and other expenses properly incurred by them in
attending meetings of the board or any committee thereof. No independent quorum
is required when the board is making decisions on directors remuneration.

Section 6.1 of our Articles of Incorporation provides that our
directors may from time to time on behalf of the Company:

| | (a) | borrow money in the manner and amount, on the security,
      from the sources and on the terms and conditions that they consider
      appropriate,                                
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                     
| | (b) | issue bonds, debentures and other debt obligations either
      outright or as security for any liability or obligation of the Company or
      any other person,                   
| |     |                                                                                                                                                                                     
| | (c) | guarantee the repayment of money by any other person or
      the performance of any obligation of any other person, and                                                            
| |     |                                                                                                                                                                                     
| | (d) | mortgage or charge, whether by way of specific or
      floating charge, or give other security on the whole or any part of the
      present and future undertaking of the Company.

Qualifications of Directors

Section 10.4 of our Articles of Incorporation provides that a
director is not required to hold a share in the capital of our Company as
qualification for his or her office but must be qualified as required by the
Business Corporations Act(British Columbia)to become, act or
continue to act as a director.

There is no provision in our Notice of Articles or Articles of
Incorporation imposing a requirement for retirement or non-retirement of
directors under an age limit requirement.

Share Rights

Our authorized capital consists of an unlimited number of
Common Shares without par value and an unlimited number of Class A Preference
Shares without par value. Each of our Common Shares entitles the holder thereof
to notice and to attend and to cast 1 vote for each matter to be decided at a
general meeting of our company. Except for such rights relating to the election
of directors on a default in payment of dividends as may be attached to any
series of the Class A Preference Shares by the directors, holders of Class A
Preference Shares shall not be entitled, as such, to receive notice of, or to
attend or vote at, any general meeting of shareholders of our company. Subject
to any special rights as may be attached to any series of the Class A

Preference Shares by the directors, holders of our Common
Shares are entitled to dividends as the directors may from time to time declare
and authorize when the directors consider appropriate.

Our Class A Preference Shares may be issued in one or more
series and, subject to the Business Corporations Act (British Columbia),
the directors may, by resolution, if none of the shares of any particular series
are issued, alter the Articles of the Company and authorize the alteration of
the Notice of Articles of our Company, as the case may be, to do one or more of
the following:

| | (a) | determine the maximum number of shares of that series
      that the Company is authorized to issue, determine that there is no such
      maximum number, or alter any such determination;
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                            
| | (b) | create an identifying name for the shares of that series,
      or alter any such identifying name; and                                                                                    

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- 51 -

| | (c) | attach special rights or restrictions to the shares of
      that series, or alter any such special rights or
  restrictions.
| | --- | -----------------------------------------------------------------------------------------------------------------------------

The holders of our Class A Preference Shares will be entitled,
on the liquidation or dissolution of our company, whether voluntary or
involuntary, or on any other distribution of our assets among our shareholders
for the purpose of winding up our affairs, to receive, before any distribution
is made to the holders of Common Shares or any other shares ranking junior to
the Class A Preference Shares with respect to the repayment of capital on the
liquidation or dissolution of our company, whether voluntary or involuntary, or
on any other distribution of our assets among our shareholders for the purpose
of winding up our affairs, the amount paid up with respect to each Class A
Preference Share held by them, together with the fixed premium (if any) thereon,
all accrued and unpaid cumulative dividends (if any and if preferential)
thereon, whether or not earned or declared, and all declared and unpaid
non-cumulative dividends (if any and if preferential) thereon. After payment to
the holders of the Class A Preference Shares of the amounts so payable to them,
they will not, as such, be entitled to share in any further distribution of the
property or assets of our company, except as specifically provided in the
special rights and restrictions attached to any particular series.

Our issued shares are not subject to call or assessment rights.
There are no provisions for redemption, purchase for cancellation, surrender or
purchase funds.

Procedures to Change the Rights of Shareholders

Our Articles of Incorporation do not contain any special
provision with respect to actions necessary to change the rights of our
shareholders. The rights of our shareholders may be changed by altering our
Notice of Articles and Articles of Incorporation in accordance with procedures
set out in Sections 256 to 265 of the Business Corporations Act (British
Columbia).

Summary of Sections 256 to 265 of the Business Corporations
Act (British Columbia).

In British Columbia, the statute that used to apply to the
creation, amendment, maintenance and operations of corporations and their
corporate documents has been repealed and replaced by the Business
Corporations Act. Under the former act, a company could be created through
the signature of a memorandum or articles of incorporation. We were incorporated
under the former act, using articles of incorporation.

Section 256 sets out the sections of the Act that are available
to a company for a change in its memorandum or articles of incorporation.

Section 257 sets out the sections of the act that describe the
circumstances under which a company may alter its notice of articles and the
sections of the act that provide for the process.

Section 258 informs companies how and when they may withdraw
their notice of alteration of notice of articles before the alteration takes
effect.

Section 259 explains that a company may resolve to alter its
articles of incorporation by the type of resolution specified in the Act or, if
not specified, by the resolution described in the articles or, if not in the
articles, by a special resolution.

A special resolution is a resolution passed by being consented
to in writing by all of the shareholders holding shares that carry the right to
vote at general meetings or a resolution passed at a general meeting under the
following circumstances:

---

- 52 -

(i) notice of the meeting specifying
the intention to propose the resolution as a special resolution is sent to all
shareholders holding shares that carry the right to vote at general meetings at
least the prescribed number of days before the meeting;

(ii) the majority of the votes cast by
shareholders voting shares that carry the right to vote at general meetings is
cast in favor of the resolution; and

(iii) ) the majority of votes cast in
favor of the resolution constitutes at least a special majority.

According to our articles of incorporation, the majority of
votes required to pass a special resolution at a meeting of our shareholders is
two-thirds of the votes cast on the resolution.

Also under section 259, a company may alter its articles to
specify or change the majority of votes that is required to pass a special
resolution, which majority must be at least 2/3 and not more than 3/4 of the
votes cast on the resolution, if the shareholders resolve, by a special
resolution, to make the alteration. A company may also alter its articles to
specify or change the majority of votes that is required for shareholders
holding shares of a class or series of shares to pass a special separate
resolution, which majority must be at least 2/3 and not more than 3/4 of the
votes cast on the resolution, if the shareholders resolve, by a special
resolution, to make the alteration, and shareholders holding shares of that
class or series of shares consent by a special separate resolution of those
shareholders.

Section 259 also covers the transition period for changes to
the articles and how to create and file a resolution to ensure that any
information in the notice of articles or special rights or restrictions attached
to shares are not rendered false or altered by the change in articles. Section
259 also covers the effective dates of changes to the articles and that a court
order may be used by the Court to effect a change in the articles of
incorporation of a company.

Section 260 states that any shareholder of a company may send a
notice of dissent to the company in respect of any resolution to change the
articles of incorporation to alter any restrictions on the powers of the company
or on the business it is permitted to carry on.

Section 261 describes how changes may be made by amendment to a
regulation to a pre-written form of articles, known as Table 1 articles, that
companies may adopt. We do not have these Table 1 articles.

Section 262 states that after an alteration to the articles of
a company takes effect, the company must not issue a copy of the articles unless
the copy of the articles reflects the alteration, or there is attached, to the
copy of the articles, a copy of each resolution, court order or other record by
which the articles being issued were altered.

Section 263 provides the process for changing a companys
  name, which Section 264 covers exceptional resolutions and resolutions respecting
  unalterable provisions. It states that a company may specify, by a provision
  in its articles, that a provision of its notice of articles may not be altered
  unless:

1. the resolution to authorize the alteration to the notice of
articles is passed as an exceptional resolution;

2, a provision of its articles may not be altered unless the
resolution to alter the company's articles is passed as an exceptional
resolution, or,

3. an action may not be taken by the company or the directors
unless the resolution to authorize or effect the taking of the action is passed
as an exceptional resolution.

---

- 53 -

Furthermore, this section states that a company may not vary or
delete an exceptional resolution provision unless the variation or deletion is
authorized by an exceptional resolution.

If a company existed before the Business Corporations
Act (British Columbia) but it has made the transition to become a
Business Corporations Act (British Columbia) as described in the Act
and its articles include a provision that was not capable of alteration under
the old act that governed the company, that company must not alter that
provision unless the alteration is ordered by the court, or authorized by a
unanimous resolution by vote of every shareholder.

Under section 265, where under our articles or the Business
Corporations Act (British Columbia), we are allowed or required to pass a
shareholders resolution or a directors resolution, and there is a conflict
between our articles of incorporation and the Business Corporations Act
(British Columbia) regarding the majority of votes that is required to pass the
resolution, we must, in order to pass the resolution, obtain the greater of the
majority of votes required by our articles and the majority of votes required by
the Business Corporations Act (British Columbia).

Meetings

Section 7.1 of our Articles of Incorporation provides that,
unless an annual general meeting is deferred or waived in accordance with
section 182(2)(a) or (c) of the Business Corporations Act, we must hold
an annual general meeting at least once in each calendar year and not more than
15 months after the last annual general meeting. The percentage vote required to
pass an ordinary resolution at a shareholder meeting is a simple majority, which
is any amount greater than 50%.

According to Section 7.4 of our Articles of Incorporation,
notice of the time and place of each meeting of shareholders shall be given not
less than 21 days before the date of the meeting to each director, to the
auditor and to each shareholder who at the close of business on the record date
for notice is entered in the securities register as the holder of one or more
shares carrying the right to vote at the meeting. Notice of a meeting of the
shareholders called for any purpose other than consideration of the financial
statements and auditors report, election of directors and reappointment of
incumbent auditor shall state the nature of such business in sufficient detail
to permit the shareholder to form a reasoned judgment thereon and shall attach
to it a copy of the document to be considered, approved, ratified, adopted or
authorized at the meeting or state that a copy of the document will be available
for inspection by the shareholders at the companys records office or such other
reasonably accessible location in British Columbia. A shareholder may in any
manner waive notice of or otherwise consent to a meeting of shareholders.

The number of shareholders that must be present at a meeting to
constitute a quorum is 2 persons who are, or who represent by proxy,
shareholders who, in the aggregate, hold at least 1/20 of the issued shares
entitled to be voted at the meeting. If there is only one shareholder entitled
to vote at a meeting of shareholders, then the quorum is one person.

Limitations on Ownership of Securities

There are no limitations on the right to own securities of our
company by non-resident or foreign shareholders imposed either by the
Business Corporations Act (British Columbia), our Notice of Articles or
Articles of Incorporation.

There are no limitations on the rights of non-resident or
foreign shareholders to hold or exercise voting rights.

Except as provided in the Investment Canada Act
(Canada), there are no limitations under the applicable laws of Canada or by our
charter or our other constituent documents on the right of foreigners to hold or
vote common shares or other securities of our company.

---

- 54 -

The Investment Canada Act (Canada) will prohibit
implementation, or if necessary, require divestiture of an investment deemed
reviewable under the Investment Canada Act (Canada) by an investor that
is not a Canadian as defined in the Investment Canada Act (Canada) (a
non-Canadian), unless after review the Minister responsible for the
Investment Canada Act (Canada) (the Minister) is satisfied that the
reviewable investment is likely to be of net benefit to Canada. An investment
in our Common Shares by a non-Canadian, who is not a resident of a World Trade
Organization member, would be reviewable under the Investment Canada Act
(Canada) if it was an investment to acquire control of our company and the value
of the assets of our company was CAN$5 million or more. An investment in our
common shares by WTO Investors would be reviewable only if it was an investment
to acquire control of our company and the value of the assets of our company was
equal to or greater than a specified amount (the Review Threshold), which is
published by the Minister after its determination for any particular year. The
Review Threshold is currently CAN$237 million for the year 2004. It is expected
that in January of 2005, the Minister will determine the amount of the threshold
for review for WTO Investors to be CAN$250 million for the year 2005.

A non-Canadian would be deemed to acquire control of our
company for the purposes of the Investment Canada Act (Canada) if the
non-Canadian acquired a majority of our outstanding common shares (or less than
a majority but controlled our company in fact through the ownership of one-third
or more of our outstanding common shares) unless it could be established that,
on the acquisition, we were not controlled in fact by the acquirer through the
ownership of such common shares. Certain transactions in relation to our common
shares would be exempt from review under the Investment Canada Act
(Canada), including, among others, the following:

1. acquisition of common shares by a
person in the ordinary course of that persons business as a trader or dealer in
securities;

2. acquisition of control of our
company in connection with the realization of security granted for a loan or
other financial assistance and not for any purpose related to the provisions of
the Investment Canada Act (Canada); and

3. acquisition of control of our
company by reason of an amalgamation, merger, consolidation or corporate
reorganization following which the ultimate direct or indirect control of our
company, through the ownership of voting interests, remains unchanged.

Change in Control

There are no provisions in our articles or our bylaws that
would have the effect of delaying, deferring or preventing a change in control
of our company, and that would operate only with respect to a merger,
acquisition or corporate restructuring involving our company.

The Business Corporations Act (British Columbia) does
not contain any provisions that would have the effect of delaying, deferring or
preventing a change of control of our company. Generally, there are no
significant differences between Canadian and United States law in this regard,
as many state corporation statutes also do not contain such provisions and only
empower our board of directors to adopt such provisions.

Ownership Threshold

There are no provisions in our articles or our bylaws or in the
Business Corporations Act(British Columbia) governing the threshold
above which shareholder ownership must be disclosed. The Securities Act
(British Columbia) requires us to disclose, in our annual general meeting proxy
statement, holders who beneficially own more than 10% of our issued and
outstanding shares. Most state corporation statutes do not contain provisions
governing the threshold above which shareholder ownership must be disclosed.

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- 55 -

United States federal securities laws require us to disclose,
in our Registration Statement on Form 20-F, holders who own more than 5% of our
issued and outstanding shares.

Changes in the Capital of the Company

There are no conditions imposed by our articles or our bylaws
  which are more stringent than those required by the Business Corporations
  Act(British Columbia).

*C.*      
*Material Contracts*

With the exception of the contracts listed below, we have not
entered into any material contracts to which we are a party. Each contract is
between Hard Creek Nickel and the Contractor, there is no provision to pass any
of these contracts to Hard Creek Nickels wholly-owned subsidiary, Canadian
Metals Exploration Ltd.

|1. | Surface Drilling contract between Hard Creek Nickel
      Corporation and DJ Drilling (2004) Ltd dated April 4, 2007 for the 2007
      exploration program for a minimum of 30,000 feet;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|2. | Consulting Agreement between Hard Creek Nickel
      Corporation and JA Chapman Mining Services dated November 18, 2005 to
      provide mine design services for a minimum CDN$1,000 per month; plus
      50,000 options to purchase common stock at an exercise price of $0.60. The
      options vest immediately and expire in either five years or 30 days after
      the Company gives written notice of termination.;                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|3. | Investor Relations Agreement between Hard Creek Nickel
      Corporation and Martin E. Janis & Company, Inc. dated July 15, 2006
      for a term of 12 months at US$7,500 per month;. This contract may be
      terminated in writing on December 31, 2006 or the next business day. Hard
      Creek Nickel terminated this agreement in January 2007 as per the terms
      previously described.;                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|4. | Financial Advisory Services Agreement between Hard Creek
      Nickel Corporation and The Balloch Group dated May 29, 2006 for a term of
      one year at US$9,000 per month plus 200,000 options to purchase common
      stock at an exercise price of $0.75. The contract may be terminated for
      whatever reason by giving two months notice in writing. The 200,000
      options have vesting provisions as follows, 50,000 options vest
      immediately, 50,000 shares vest when any Chinese entity signs a Letter of
      Intent; and to invest in Hard Creek Nickel and 100,000 options vest when
      any Chinese entity invests in Hard Creek Nickel. The unvested options are
      in effect up to an extended term of 18 months after termination of this
      contract.; and
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|5. | Internet-based Public Relations Services Agreement
      between Hard Creek Nickel Corporation and T1 Solutions Corp. dated July
      14, 2006 for a term of three months for a contract fee in total of
      CDN$18,250. The Company paid CDN$6,250 on signing the agreement and
      CDN$4,000 per month from August 2006 to October 2006. This agreement
      expired on October 15, 2006.                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|6. | Investor Relations Agreement between Hard Creek Nickel
      Corporation and Marketsmart Communications Inc. dated September 13, 2006
      for a term of 3 months at CDN$6,000 per month plus 100,000 options to
      purchase common stock at an exercise price of $0.80. The stock options
      have vesting provisions as follow, 25,000 options vest immediately and the
      remaining 75,00 options vest in increments of 25,000 for each 3 month
      contract renewal. On December 13, 2006 the Company extended the contract
      for a further 3 month term, as a result of this renewal, 25,000 options
      became vested leaving 50,000 options unvested.                                                                                                                        
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|7. | Media Relations Agreement between Hard Creek Nickel
      Corporation and Jay Oness, dated effective March 1, 2007 for a term of
      three months at CDN$1,000 per month plus 100,000 options to purchase
      common stock at an exercise price to be determined between the company and
      Mr. Oness. The stock options have vesting provisions as follow, 25,000
      options vest immediately, 25,000 will vest if
and                                                                                                                                                                                                                                                                                                                                                                    

---

- 56 -

when the Agreement is renewed and the
remaining 50,000 will vest if and when the Agreement is further renewed for a
period commencing 6 months from its effective date. Should this Agreement not be
renewed by mutual agreement, the unvested options will immediately terminate and
will not be exercisable.

*D.*      
*Exchange Controls*

There are no government laws, decrees or regulations in Canada
which restrict the export or import of capital or which affect the remittance of
dividends, interest or other payments to non-resident holders of our common
shares. Any remittances of dividends to United States residents and to other
non-residents are, however, subject to withholding tax. See Taxation
below.

*E.*      
*Taxation*

Canadian Federal Income Taxation

We consider that the following summary fairly describes the
principal Canadian federal income tax consequences applicable to a holder of our
common shares who at all material times deals at arms length with our company,
who holds all common shares as capital property, who is resident in the United
States, who is not a resident of Canada and who does not use or hold, and is not
deemed to use or hold, his common shares of our company in connection with
carrying on a business in Canada (a non-resident holder). It is assumed that
the common shares will at all material times be listed on a stock exchange that
is prescribed for purposes of the Income Tax Act(Canada) (the
ITA) and regulations thereunder. Investors should be aware that the Canadian
federal income tax consequences applicable to holders of our common shares will
change if, for any reason, we cease to be listed on a prescribed stock exchange.
Accordingly, holders and prospective holders of our common shares should consult
with their own tax advisors with respect to the income tax consequences of them
purchasing, owing and disposing of our common shares should we cease to be
listed on a prescribed stock exchange.

This summary is based upon the current provisions of the ITA,
the regulations thereunder, the Canada-United States Tax Convention as amended
by the Protocols thereto (the Treaty) as at the date of the registration
statement and the currently publicly announced administrative and assessing
policies of the Canada Customs and Revenue Agency (the CCRA). This summary
does not take into account Canadian provincial income tax consequences. This
description is not exhaustive of all possible Canadian federal income tax
consequences and does not take into account or anticipate any changes in law,
whether by legislative, governmental or judicial action. This summary does,
however, take into account all specific proposals to amend the ITA and
regulations thereunder, publicly announced by the Government of Canada to the
date hereof.

This summary does not address potential tax effects
relevant to our company or those tax considerations that depend upon
circumstances specific to each investor. Accordingly, holders and prospective
holders of our common shares should consult with their own tax advisors with
respect to the income tax consequences to them of purchasing, owning and
disposing of common shares in our company.

Dividends

The ITA provides that dividends and other distributions deemed
to be dividends paid or deemed to be paid by a Canadian resident corporation
(such as our company) to a non-resident of Canada shall be subject to a
non-resident withholding tax equal to 25% of the gross amount of the dividend of
deemed dividend. Provisions in the ITA relating to dividend and deemed dividend
payments to and gains realized by nonresidents of Canada, who are residents of
the United States, are subject to the Treaty. The Treaty may reduce the
withholding tax rate on dividends as discussed below.

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- 57 -

Article X of the Treaty as amended by the US-Canada Protocol
ratified on November 9, 1995 provides a 5% withholding tax on gross dividends or
deemed dividends paid to a United States corporation which beneficially owns at
least 10% of the voting stock of the company paying the dividend. In cases where
dividends or deemed dividends are paid to a United States resident (other than a
corporation) or a United States corporation which beneficially owns less than
10% of the voting stock of a company, a withholding tax of 15% is imposed on the
gross amount of the dividend or deemed dividend paid. We would be required to
withhold any such tax from the dividend and remit the tax directly to CCRA for
the account of the investor.

The reduction in withholding tax from 25%, pursuant to the
Treaty, will not be available:

| | (a) | if the shares in respect of which the dividends are paid
      formed part of the business property or were otherwise effectively
      connected with a permanent establishment or fixed base that the holder has
      or had in Canada within the 12 months preceding the disposition,
  or
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                               
| | (b) | the holder is a U.S. LLC which is not subject to tax in
      the U.S.                                                                                                                                                                                                                        

The Treaty generally exempts from Canadian income tax dividends
paid to a religious, scientific, literary, educational or charitable
organization or to an organization exclusively administering a pension,
retirement or employee benefit fund or plan, if the organization is resident in
the U.S. and is exempt from income tax under the laws of the U.S.

Capital Gains

A non-resident holder is not subject to tax under the ITA in
respect of a capital gain realized upon the disposition of one of our shares
unless the share represents taxable Canadian property to the holder thereof.
Our common shares will be considered taxable Canadian property to a non-resident
holder only if-.

| | (a) | the non-resident holder;                                                            
| | --- | ------------------------------------------------------------------------------------
| |     |                                                                                     
| | (b) | persons with whom the non-resident holder did not deal at
      arms length- or    
| |     |                                                                                     
| | (c) | the non-resident holder and persons with whom he did not
      deal at arms length,

owned not less than 25% of the issued shares of any class or
series of our company at any time during the five year period preceding the
disposition. In the case of a non-resident holder to whom shares of our company
represent taxable Canadian property and who is resident in the United States, no
Canadian taxes will generally be payable on a capital gain realized on such
shares by reason of the Treaty unless:

| | (a) | the value of such shares is derived principally from real
      property (including resource property) situated in Canada,                                                                                                                                                    
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                               
| | (b) | the holder was resident in Canada for 120 months during
      any period of 20 consecutive years preceding, and at any time during the
      10 years immediately preceding, the disposition and the shares were owned
      by him when he ceased to be a resident of Canada,
| |     |                                                                                                                                                                                                                                                                               
| | (c) | they formed part of the business property or were
      otherwise effectively connected with a permanent establishment or fixed
      base that the holder has or bad in Canada within the 12 months preceding
      the disposition, or                                      
| |     |                                                                                                                                                                                                                                                                               
| | (d) | the holder is a U.S. LLC which is not subject to tax in
      the U.S.                                                                                                                                                                                                        

If subject to Canadian tax on such a disposition, the
taxpayers capital gain (or capital loss) from a disposition is the amount by
which the taxpayers proceeds of disposition exceed (or are exceeded by) the

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- 58 -

aggregate of the taxpayers adjusted cost base of the shares
and reasonable expenses of disposition. For Canadian income tax purposes, the
taxable capital gain is equal to one-half of the capital gain.

United States Federal Income Taxation

The following is a discussion of the material United States
Federal income tax consequences, under current law, applicable to a U.S. Holder
(as defined below) of our common shares who holds such shares as capital assets.
This discussion does not address all potentially relevant Federal income tax
matters and it does not address consequences peculiar to persons subject to
special provisions of Federal income tax law, such as those described below as
excluded from the definition of a U.S. Holder. In addition, this discussion does
not cover any state, local, or foreign tax consequences. (See Canadian Federal
Income Tax Consequences above.)

The following discussion is based on the Internal Revenue Code
of 1986, as amended (the Code), Treasury Regulations, published Internal
Revenue Service (IRS) rulings, published administrative positions of the IRS
and court decisions that are currently applicable, any or all of which could be
materially and adversely changed, possibly on a retroactive basis, at any time.
In addition, this discussion does not consider the potential effects, both
adverse and beneficial, of any recently proposed legislation which, if enacted,
could be applied, possibly on a retroactive basis, at any time.

The discussion below does not address potential tax effects
relevant to our company or those tax considerations that depend upon
circumstances specific to each investor. In addition, this discussion does not
address the tax consequences that may be relevant to particular investors
subject to special treatment under certain U.S. Federal income tax laws, such
as, dealers in securities, tax-exempt entities, banks, insurance companies and
non-U.S. Holders. We encourage purchasers of the common stock to satisfy
themselves as to the overall tax consequences of their ownership of the common
stock, including the State, local and foreign tax consequences thereof (which
are not reviewed herein), and to consult their own tax advisors with respect to
their particular circumstances.

U.S. Holders

As used herein, a U.S. Holder includes a beneficial holder of
common shares of our company who is a citizen or resident of the United States,
a corporation or partnership created or organized in or under the laws of the
United States or of any political subdivision thereof, any trust if a US court
is able to exercise primary supervision over the administration of the trust and
one or more US persons have the authority to control all substantial decisions
of the trust, any entity created or organized in the United States which is
taxable as a corporation for U.S. tax purposes and any other person or entity
whose ownership of common shares of our company is effectively connected with
the conduct of a trade or business in the United States. A U.S. Holder does not
include persons subject to special provisions of Federal income tax law, such as
tax-exempt organizations, qualified retirement plans, financial institutions,
insurance companies, real estate investment trusts, regulated investment
companies, broker-dealers, nonresident alien individuals or foreign corporations
whose ownership of our common shares is not effectively connected with the
conduct of a trade or business in the United States and shareholders who
acquired their shares through the exercise of employee stock options or
otherwise as compensation.

Dividend Distribution on Shares of our Company

U.S. Holders receiving dividend distributions (including
constructive dividends) with respect to the common shares of our company are
required to include in gross income for United States Federal income tax
purposes the gross amount of such distributions to the extent that we have
current or accumulated earnings and profits, without reduction for any Canadian
income tax withheld from such distributions. Such Canadian tax withheld may be
deducted or may be credited against actual tax payable, subject to certain
limitations and other complex rules, against the U.S. Holders United States
Federal taxable income. See Foreign Tax Credit below. To the extent that
distributions exceed our current or accumulated earnings

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- 59 -

and profits, they will be treated first as a return of capital
to the extent of the shareholders basis in the common shares of our company and
thereafter as gain from the sale or exchange of the common shares of our
company. Preferential tax rates for net long term capital gains may be
applicable to a U.S. Holder which is an individual, estate or trust.

In general, dividends paid on our common shares will not be
eligible for the dividends received deduction provided to corporations receiving
dividends from certain United States corporations.

Foreign Tax Credit

A U.S. Holder who pays (or who has had withheld from
distributions) Canadian income tax with respect to the ownership of our common
shares may be entitled, at the election of the U.S. Holder, to either a
deduction or a tax credit for such foreign tax paid or withheld. This election
is made on a year-by-year basis and generally applies to all foreign income
taxes paid by (or withheld from) the U.S. Holder during that year. There are
significant and complex limitations which apply to the credit, among which is
the general limitation that the credit cannot exceed the proportionate share of
the U.S. Holders United States income tax liability that the U.S. Holders
foreign source income bears to his or its world-wide taxable income. In
determining the application of this limitation, the various items of income and
deduction must be classified into foreign and domestic sources. Complex rules
govern income such as passive income, high withholding tax interest,
financial services income, shipping income and certain other classifications
of income. A U.S. Holder who is treated as a domestic U.S. corporation owning
10% or more of our voting stock is also entitled to a deemed paid foreign tax
credit in certain circumstances for the underlying foreign tax of our company
related to dividends received or Subpart F income received from us. (See the
discussion below of Controlled Foreign Corporations). The availability of the
foreign tax credit and the application of the limitations on the foreign tax
credit are fact specific and holders and prospective holders of our common
shares should consult their own tax advisors regarding their individual
circumstances.

Disposition of Common Shares

If a U.S. Holder is holding shares as a capital asset, a gain
or loss realized on a sale of our common shares will generally be a capital gain
or loss, and will be long-term if the shareholder has a holding period of more
than one year. However, gains realized upon sale of our common shares may, under
certain circumstances, be treated as ordinary income, if we were determined to
be a collapsible corporation within the meaning of Code Section 341 based on
the facts in existence on the date of the sale (See below for definition of
collapsible corporation). The amount of gain or loss recognized by a selling
U.S. Holder will be measured by the difference between (i) the amount realized
on the sale and (ii) his tax basis in our common shares. Capital losses are
deductible only to the extent of capital gains. However, in the case of
taxpayers other than corporations (U.S.)$3,000 ($1,500 for married individuals
filing separately) of capital losses are deductible against ordinary income
annually. In the case of individuals and other non-corporate taxpayers, capital
losses that are not currently deductible may be carried forward to other years.
In the case of corporations, capital losses that are not currently deductible
are carried back to each of the three years preceding the loss year and forward
to each of the five years succeeding the loss year.

A collapsible corporation is a corporation that is formed or
availed principally to manufacture, construct, produce, or purchase prescribed
types or property that the corporation holds for less than three years and that
generally would produce ordinary income on its disposition, with a view to the
shareholders selling or exchanging their stock and thus realizing gain before
the corporation realizes two thirds of the taxable income to be derived from
prescribed property. Prescribed property includes: stock in trade and inventory;
property held primarily for sale to customers in the ordinary course of
business; unrealized receivables or fees, consisting of rights to payment for
noncapital assets delivered or to be delivered, or services rendered or to be
rendered to the extent not previously included in income, but excluding
receivables from selling property that is not prescribed; and property gain on
the sale of which is subject to the capital gain/ordinary loss rule. Generally,
a shareholder who owns directly or indirectly 5 percent or less of the
outstanding stock of the corporation may treat gain on the sale of his shares as
capital gain.

---

- 60 -

Other Considerations for U.S. Holders

In the following circumstances, the above sections of this
discussion may not describe the United States Federal income tax consequences
resulting from the holding and disposition of common shares of the Registrant.
Our management is of the opinion that there is little, if not, any likelihood
that we will be deemed a Foreign Personal Holding Company, a Foreign
Investment Company or a Controlled Foreign Corporation (each as defined
below) under current and anticipated conditions.

Foreign Personal Holding Company

In our view, the company is not a foreign personal holding
company because there are not five or fewer individuals who are citizens or
residents of the United States who at any time in the year owned more than 50%
of the total combined voting power or the total value of our outstanding shares
either directly or constructively. Furthermore, the American Job Creations Act
of 2004 repealed the foreign personal holding company rules for taxation years
beginning after December 31, 2004.

Foreign Investment Company

In our view, the company is not a foreign investment company
(FIC) because 50% or more of the combined voting power or total value of the
companys outstanding shares are not held, directly or constructively, by
citizens or residents of the United States, by United States domestic
partnerships, corporations, estates or trusts. Furthermore, in our view, the
company is not engaged primarily in the business of investing, reinvesting, or
trading in securities, commodities or any other interest therein. Furthermore,
the foreign investment company rules were also repealed for taxation years
beginning after December 31, 2004.

Passive Foreign Investment Company

One of the conditions for the company to be considered to be a
passive foreign investment company is that the average percentage, by value of
its assets that produce or are held for the production of passive income (such
as interest, dividends and certain rents and royalties) is 50% or more. In our
view, the average percentage by value of the companys assets that produce or
are held for the production of passive income (i.e. such as the companys cash
and short-term investments) is significantly less than 50% of the value of all
of its assets. In fact, the majority of the value of the companys assets is
comprised of the companys interest in its mineral claims and mineral property
interests in Canada, the income from which would be considered to be from an
active trade or business.

Controlled Foreign Corporation Status

In our view, the corporation will not be considered to be a
controlled foreign corporation given that not more than 50% of the total voting
power of all classes of stock or the total value of the stock of the company is
owned directly or indirectly by US holders who each hold 10% or more of the
total combined voting power of all classes of stock of the company.

Elimination of Overlap Between Subpart F Rules and PFIC
Provisions

Under the Taxpayer Relief Act of 1997, a PFIC that is also a
CFC will not be treated as a PFIC with respect to certain 10% U.S. Holders. For
the exception to apply, (i) the corporation must be a CFC within the meaning of
section 957(a) of the Code and (ii) the U.S. Holder must be subject to the
current inclusion rules of Subpart F with respect to such corporation (i.e., the
U.S. Holder is a United States Shareholder, see Controlled Foreign
Corporation, above). The exception only applies to that portion of a U.S.
Holders holding period beginning after December 31, 1997. For that portion of a
United States Holder before January 1, 1998, the ordinary PFIC and QEF rules
continue to apply.

---

- 61 -

As a result of this new provision, if we were ever to become a
CFC, U.S. Holders who are currently taxed on their pro rata shares of Subpart F
income of a PFIC which is also a CFC will not be subject to the PFIC provisions
with respect to the same stock if they have previously made a Pedigreed QEF
Election. The PFIC provisions will however continue to apply to U.S Holders for
any periods in which Subpart F does not apply (for example he is no longer a 10%
Holder or we are no longer a CFC) and to U.S. Holders that did not make a
Pedigreed QEF Election unless the U.S. Holder elects to recognize gain on the
PFIC shares held in our company as if those shares had been sold.

ALL PROSPECTIVE INVESTORS ARE ADVISED TO CONSULT THEIR OWN
TAX ADVISORS WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF PURCHASING THE
COMMON SHARES OF OUR COMPANY.

*F.*      
*Dividends and Paying Agents*

There is no dividend restriction or any special procedure for
non-resident holders to claim dividends. However, we have not declared dividends
to our shareholders since our inception.

*G.*      
*Statements by Experts*

The financial statements of our company as of December 31, 2007
and 2006 included in this registration statement have been audited by Dale
Matheson Carr-Hilton LaBonte, Chartered Accountants, of Suite 1500  1140 West
Pender Street, Vancouver, British Columbia, V6E 4G1, Canada, as stated in their
reports appearing in this registration statement and have been so included in
reliance upon the reports of such firm given upon their authority as experts in
accounting and auditing.

The technical information regarding the Turnagain Property
included in this registration statement is based on the Technical Report
prepared by N.C. Carter, Ph.D., P. Eng., dated April 21, 2004, and a later
technical report prepared by R.G. Simpson, P. Eng. Both reports were prepared in
compliance with the requirements of National Instrument 43-101 and Form 43-101F1
as adopted by the British Columbia Securities Commission. These Technical
Reports were used as supporting documentation and were filed with the British
Columbia Securities Commission and the TSX Venture Exchange. Dr. N.C. Carter and
R.G. Simpson are qualified persons as the term is defined under National
Instrument 43-101. The information of the Technical Report appearing in this
registration statement has been included in reliance upon Dr. N.C. Carter and
R.G. Simpsons authority as experts in geology. Their consent forms are attached
to this document.

The 2006 exploration program on the Turnagain Property was
recommended and managed by Chris Baldys, P. Eng. Neil Froc, P. Eng and Tony
Hitchins, M.Sc. Chris Baldys and Neil Froc are qualified persons as the term
is defined under National Instrument 43-101. Mssrs. Baldys, Hitchins and Froc
have been involved with exploration of the Turnagain Property for the past three
to four years and are employees of Hard Creek Nickel Corporation. Their consent
forms are attached to this document.

*H.*      
*Documents on Display*

Upon the effectiveness of this filing, we will be subject to
the informational requirements of the Securities Exchange Act of 1934, as
amended, and we will thereafter file reports and other information with the SEC.
You may read and copy any of our reports and other information at, and obtain
copies upon payment of prescribed fees from, the Public Reference Room
maintained by the SEC at 100 F Street, N.E. Washington, D.C. 20549. In addition,
the SEC maintains a web site that contains reports and other information
regarding registrants that file electronically with the SEC at
HTTP://www.sec.gov. The public may obtain information on the operation of the
Public Reference Room by calling the SEC at 1-800-SEC-0330.

We will provide without charge to each person, including any
beneficial owner, on the written or oral request of such person, a copy of any
or all documents referred to above which have been or may be

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- 62 -

incorporated by reference in this report (not including
exhibits to such incorporated information that are not specifically incorporated
by reference into such information). Requests for such copies should be directed
to us at the following address: 1060  1090 West Georgia Street, Vancouver,
British Columbia, V6E 3V7, Canada.

The documents concerning our company may be viewed at the
offices of our corporate solicitor, Clark Wilson LLP, Suite 800 - 885 West
Georgia Street, Vancouver, British Columbia, V6C 3H1, during normal business
hours.

*I.*      
*Subsidiary Information*

As at the date of this registration statement, we have one
wholly-owned subsidiary, Canadian Metals Exploration Limited.

Item
11**Quantitative
and Qualitative Disclosures About Market Risk

Our Turnagain Property is currently at the exploration stage
and our operations are limited to exploring the Turnagain Property. Therefore,
our market risks are minimal. We may, however, have future property exploration
requirements due in currencies other than the Canadian dollars. As a Canadian
company, our cash balances are kept in Canadian funds. Therefore, we may become
exposed to some interest rate risks. We consider the amount of risk to be
manageable and do not currently, nor will we likely in the foreseeable future,
conduct hedging to reduce our market risks.

Item 12Description
  of Securities Other than Equity Securities

None

PART II

Item 13Defaults,
  Dividend Arrearages and Delinquencies.

None

Item 14Material
  Modifications to the Rights of Security Holders and Use of Proceeds.

Not Applicable

Item 15Controls
  and Procedures

Disclosure Controls and Procedures

Disclosure controls and procedures are controls and other
procedures that are designed to ensure that information required to be disclosed
by our Corporation is recorded, processed, summarized and reported, within the
time periods specified in the rules and forms of the Securities and Exchange
Commission. Our Chief Executive Officer and our Chief Financial Officer are
responsible for establishing and maintaining disclosure controls and procedures
for our Corporation.

Our Chief Executive Officer and our Chief Financial Officer
have evaluated the effectiveness of our disclosure controls and procedures as of
December 31, 2007, pursuant to Rule 13a-15(b) promulgated under the Securities
Exchange Act of 1934, as amended. As part of such evaluation, our Chief
Executive Officer and our Chief Financial Officer considered the matters
discussed below relating to internal control over financial reporting. Based on
this evaluation, our Corporations Chief Executive Officer and Chief Financial
Officer have concluded that, due to the material weaknesses in internal control
over financial reporting described below, our companys disclosure controls and
procedures were ineffective as of December 31, 2007.

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- 63 -

Management Report on Internal Control over Financial
Reporting

Our management is responsible for establishing and maintaining
adequate internal control over financial reporting as such term is defined in
Rule 13a-15(f) Securities Exchange Act of 1934, as amended. Management (under
the supervision and with the participation of the Chief Executive Officer and
the Chief Financial Officer) assessed the effectiveness of our internal control
over financial reporting as of December 31, 2007. In making this assessment,
management used the framework set forth in Internal Control - Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO). Management of the Corporation conducted an assessment of the
effectiveness of the Corporations internal controls over financial reporting as
of December 31, 2007. Based on its assessment as per the standards of the Public
Company Accounting Oversight Board, management identified material weaknesses in
our internal controls over financial reporting with respect to (1) a lack of a
majority of independent directors on the Companys board of directors, resulting
in ineffective oversight in the establishment and monitoring of required
internal controls and procedures and (2) inadequate segregation of duties
consistent with control objectives. As a result of these material weaknesses, we
concluded that the Corporations internal controls over financial reporting were
not effective as of December 31, 2007.

The aforementioned material weaknesses were identified by the
Companys Chief Executive Officer and Chief Financial Officer in connection with
the audit of our financial statements as of December 31, 2007 and these findings
were reported to our management and board of directors. Management of the
Company believes that the material weaknesses set forth in (1) and (2) above did
not affect the Companys financial results. However, management believes that
the lack of a majority of independent directors on the Companys board of
directors resulting in the ineffective oversight in the establishment and
monitoring of required internal controls and procedures can result in material
deficiencies in the Companys determination to its financial statements for
future years.

In order to remediate the material weakness identified in
Managements Report on Internal Control over Financial Reporting, we have
appointed one new independent director and may appoint others to improve the
oversight in the establishment and monitoring of required internal controls and
procedures. We also intend to train existing and, if necessary, new employees to
improve the segregation of duties consistent with control objectives. We believe
that these new procedures will enable us to comply with the requirements of
establishing and maintaining adequate internal control over financial reporting.

We will continue to monitor and evaluate the effectiveness of
our internal controls and procedures and our internal controls over financial
reporting on an ongoing basis and are committed to taking further action and
implementing additional enhancements or improvements, as necessary and as funds
allow.

This annual report does not include an attestation report of
our Corporations registered public accounting firm regarding internal control
over financial reporting. Our management's report was not subject to attestation
by our Corporations independent registered public accounting firm pursuant to
temporary rules of the Securities and Exchange Commission that permit the
Corporation to provide only the managements report in this annual report.

Changes in Internal Control over Financial Reporting

Other then the planned changes in internal control over
financial reporting related to appointing additional independent directors and
training employees to improve the segregation of duties described above, there
were no changes during the period covered by this Annual Report in the
Corporations internal controls over financial reporting that have materially
affected, or are reasonably likely to materially affect the Corporations
internal control over financial reporting.

Item 16[Reserved]

*A.*      
*Audit Committee Financial Expert*

Not Applicable

*B.*      
*Code of Ethics*

Not Applicable

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- 64 -

*C.*      
*Principal Accountant Fees and Services*

Not Applicable

*D.*       *Exemptions from the Listing Standards for Audit Committees.*

Not Applicable

*E.*      
*Purchases of Equity Securities by the Issuer and Affiliated Purchasers.*

Not Applicable

PART III

Item 17Financial
  StatementsRefer to Item 18 - Financial Statements.

Item
18**Financial
Statements

Financial Statements filed as part of the annual report:

| | Financial Statements of Hard Creek Nickel Corporation
      for the years ended December 31, 2007 and 2006 reported on by Dale
      Matheson Carr-Hilton LaBonte, Chartered Accountants.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |                                                                                                                                                                                          
| | Auditors
      Report of Dale Matheson Carr-Hilton LaBonte, Chartered Accountants dated
      April 8, 2008                                                                             
| |                                                                                                                                                                                          
| | Consolidated
      Balance Sheets as at December 31, 2007 and 2006                                                                                                                       
| |                                                                                                                                                                                          
| | Consolidated
      Statements of Operations for the years ended December 31, 2007, 2006 and
      2005                                                                                   
| |                                                                                                                                                                                          
| | Consolidated
      Statements of Stockholders Equity from January 17, 1983 to December 31,
      2007                                                                                   
| |                                                                                                                                                                                          
| | Consolidated
      Statements of Cash Flows for the years ended December 31, 2007, 2006 and
      2005                                                                                   
| |                                                                                                                                                                                          
| | Notes
      to Consolidated Financial Statements                                                                                                                                         

---

HARD CREEK NICKEL CORP.(An Exploration Stage Company)

CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2007

(IN CANADIAN DOLLARS)







|REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
|-------------------------------------------------------
|                                                       
|CONSOLIDATED BALANCE SHEETS                            
|                                                       
|CONSOLIDATED STATEMENTS OF OPERATIONS                  
|                                                       
|CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY         
|                                                       
|CONSOLIDATED STATEMENTS OF CASH FLOWS                  
|                                                       
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS             

F-1

---



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors of Hard Creek Nickel
  Corporation (An Exploration Stage Company)

We have audited the accompanying consolidated balance sheets
  of Hard Creek Nickel Corporation as of December 31, 2007 and 2006 and the consolidated
  statements of operations, stockholders’ equity and cash flows for the
  years ended December 31, 2007, 2006 and 2005 and for the period from January
  17, 1983 (inception) through December 31, 2007. These financial statements are
  the responsibility of the Company's management. Our responsibility is to express
  an opinion on these financial statements based on our audits.

The period from inception on January 17, 1983 to December 31,
  2002 were audited by other auditors. The financial statements for the period
  from January 17, 1983 (inception) to December 31, 2002 reflect a net loss of
  $5,671,652 of the related cumulative totals. Our opinion, insofar as it relates
  to amounts included for such periods, is based solely on the report of such
  auditors.

We conducted our audits in accordance with the standards of
  the Public Company Accounting Oversight Board (United States). Those standards
  require that we plan and perform an audit to obtain reasonable assurance whether
  the financial statements are free of material misstatement. The Company is not
  required to have, nor were we engaged to perform, an audit of its internal control
  over financial reporting. Our audit included consideration of internal control
  over financial reporting as a basis for designing audit procedures that are
  appropriate in the circumstances, but not for the purpose of expressing an opinion
  on the effectiveness of the Company’s internal control over financial
  reporting. Accordingly, we express no such opinion. An audit also includes examining,
  on a test basis, evidence supporting the amounts and disclosures in the financial
  statements. An audit also includes assessing the accounting principles used
  and significant estimates made by management, as well as evaluating the overall
  financial statement presentation. We believe that our audits provide a reasonable
  basis for our opinion.

In our opinion, based on our audits and the reports of auditors,
  these consolidated financial statements present fairly, in all material respects,
  the financial position of the Company, as of December 31, 2007 and 2006, and
  the results of its operations, cash flows and changes in stockholders’
  equity for the years ended December 31, 2007, 2006 and 2005 and for the period
  from inception on January 17, 1983 to December 31, 2007, in conformity with
  generally accepted accounting principles used in the United States of America.

DMCL

DALE MATHESON CARR-HILTON LABONTE LLP 
  CHARTERED ACCOUNTANTS

Vancouver, Canada 
  April 8, 2008



F-2

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HARD CREEK NICKEL CORP.(An Exploration Stage Company)

CONSOLIDATED BALANCE SHEETS

(IN CANADIAN DOLLARS)

|                                                             |   | December 31, |   |   | December 31, |  
|------------------------------------------------------------ | - | ------------ | - | - | ------------ | -
|                                                             |   | 2007         |   |   | 2006         |  
|                                                             |   |              |   |   |              |  
|ASSETS                                                       |  
|                                                             |   |              |   |   |              |  
|CURRENT                                                      |   |              |   |   |              |  
|Cash and cash equivalents                                    | $ | 9,707,914    |   | $ | 1,558,991    |  
|Recoverable taxes                                            |   | 486,721      |   |   | 228,349      |  
|Mining tax credits                                           |   | 1,238,700    |   |   | -            |  
|Prepaid expenses                                             |   | 95,866       |   |   | 47,102       |  
|                                                             |   | 11,529,201   |   |   | 1,834,442    |  
|                                                             |   |              |   |   |              |  
|RECLAMATION BOND                                             |   | 187,900      |   |   | 187,900      |  
|RESTRICTED CASH                                              |   | -            |   |   | 163,058      |  
|EQUIPMENT, net                                               |   | 50,355       |   |   | 35,298       |  
|                                                             |   |              |   |   |              |  
|                                                             | $ | 11,767,456   |   | $ | 2,220,698    |  
|                                                             |   |              |   |   |              |  
|                                                             |   |              |   |   |              |  
|LIABILITIES AND STOCKHOLDERS
      EQUITY                   |  
|                                                             |   |              |   |   |              |  
|CURRENT LIABILITIES                                          |   |              |   |   |              |  
|Accounts payable and accrued liabilities                     | $ | 740,832      |   | $ | 288,542      |  
|Due to related party                                         |   | 1,484        |   |   | -            |  
|                                                             |   |              |   |   |              |  
|                                                             |   | 742,316      |   |   | 288,542      |  
|                                                             |   |              |   |   |              |  
|                                                             |   |              |   |   |              |  
|STOCKHOLDERS EQUITY                                         |   |              |   |   |              |  
|Capital stock                                                |   |              |   |   |              |  
|Common stock no par
      value; unlimited shares authorized |   |              |   |   |              |  
|60,220,592
      (2006  49,322,614) issued and outstanding  |   | 40,847,875   |   |   | 23,800,546   |  
|Additional paid-in capital                                   |   | 4,984,550    |   |   | 3,416,197    |  
|Deficit accumulated during
      the exploration stage       |   | (34,807,285  | ) |   | (25,284,587  | )
|                                                             |   |              |   |   |              |  
|                                                             |   | 11,025,140   |   |   | 1,932,156    |  
|                                                             |   |              |   |   |              |  
|                                                             | $ | 11,767,456   |   | $ | 2,220,698    |  

The accompanying notes are an integral part of these consolidated
  financial statements.

F-3

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HARD CREEK NICKEL CORP.(An Exploration Stage Company)

CONSOLIDATED STATEMENTS OF OPERATIONS

(IN CANADIAN DOLLARS)

|                                            |   |                          |   |   |              |   |   |            |   |   | Results of       | 
|------------------------------------------- | - | ------------------------ | - | - | ------------ | - | - | ---------- | - | - | ---------------- | 
|                                            |   |                          |   |   |              |   |   |            |   |   | operations from  | 
|                                            |   |                          |   |   |              |   |   |            |   |   | January 17, 1983 | 
|                                            |   |                          |   |   |              |   |   |            |   |   | (inception) to   | 
|                                            |   | Years ended December 31, |   |   | December 31, |  
|                                            |   | 2007                     |   |   | 2006         |   |   | 2005       |   |   | 2007             | 
|                                            |   |                          |   |   |              |   |   |            |   |   |                  | 
|EXPENSES                                    |   |                          |   |   |              |   |   |            |   |   |                  | 
|Consulting fees                             | $ | 979,706                  |   | $ | 281,023      |   | $ | 218,528    |   | $ | 4,118,781        | 
|General and administrative                  |   | 1,654,437                |   |   | 1,049,305    |   |   | 570,745    |   |   | 7,106,074        | 
|Professional fees                           |   | 147,111                  |   |   | 204,250      |   |   | 101,417    |   |   | 1,381,625        | 
|Mineral property exploration costs          |   | 7,182,030                |   |   | 5,509,087    |   |   | 2,679,212  |   |   | 24,959,916       | 
|                                            |   |                          |   |   |              |   |   |            |   |   |                  | 
|LOSS BEFORE OTHER INCOME                    |   | 9,963,284                |   |   | 7,043,665    |   |   | 3,569,902  |   |   | 37,566,396       | 
|                                            |   |                          |   |   |              |   |   |            |   |   |                  | 
|OTHER INCOME                                |   |                          |   |   |              |   |   |            |   |   |                  | 
|Interest and other                          |   | 134,592                  |   |   | 33,697       |   |   | 8,537      |   |   | 201,032          | 
|Gain on write-off of accounts
      payable |   | -                        |   |   | -            |   |   | -          |   |   | 158,203          | 
|Deferred
      income tax recovery          |   | 305,994                  |   |   | 1,626,440    |   |   | 228,971    |   |   | 2,399,876        | 
|                                            |   |                          |   |   |              |   |   |            |   |   |                  | 
|                                            |   | 440,586                  |   |   | 1,660,137    |   |   | 237,508    |   |   | 2,759,111        | 
|                                            |   |                          |   |   |              |   |   |            |   |   |                  | 
|NET LOSS                                    | $ | 9,522,698                |   | $ | 5,383,528    |   | $ | 3,332,394  |   | $ | 34,807,285       | 
|                                            |   |                          |   |   |              |   |   |            |   |   |                  | 
|BASIC AND DILUTED
      NET LOSS PER SHARE  | $ | (0.17                    | ) | $ | (0.13        | ) | $ | (0.11      | ) |   |                  | 
|                                            |   |                          |   |   |              |   |   |            |   |   |                  | 
|WEIGHTED AVERAGE COMMON SHARES              |   |                          |   |   |              |   |   |            |   |   |                  | 
|OUTSTANDING
       BASIC AND DILUTED       |   | 55,031,402               |   |   | 42,206,318   |   |   | 30,698,463 |   |   |                  | 

The accompanying notes are an integral part of these consolidated
  financial statements.

F-4

---

HARD CREEK NICKEL CORP.(An Exploration Stage Company)

CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY

FOR THE PERIOD JANUARY 17, 1983 (INCEPTION) TO DECEMBER 31,
  2007

(IN CANADIAN DOLLARS)

|                                 |  |              |  |   |           |  |   |               |  |   |             |  |   | Deficit     |   |   |          |  
|-------------------------------- |  | ------------ |  | - | --------- |  | - | ------------- |  | - | ----------- |  | - | ----------- | - | - | -------- | -
|                                 |  |              |  |   |           |  |   |               |  |   |             |  |   | Accumulated |   |   |          |  
|                                 |  |              |  |   |           |  |   | Additional    |  |   | Share       |  |   | During the  |   |   |          |  
|                                 |  | Common stock |  |   | Paid-in   |  |   | Subscriptions |  |   | Development |  |   |             |  
|                                 |  | Shares       |  |   | Amount    |  |   | Capital       |  |   | Received    |  |   | Stage       |   |   | Total    |  
|                                 |  |              |  |   |           |  |   |               |  |   |             |  |   |             |   |   |          |  
|                                 |  |              |  |   |           |  |   |               |  |   |             |  |   |             |   |   |          |  
|Issued for cash                  |  | 2,122,661    |  | $ | 320,684   |  | $ | -             |  | $ | -           |  | $ | -           |   | $ | 320,684  |  
|Net loss, January 17, 1983       |  |              |  |   |           |  |   |               |  |   |             |  |   |             |   |   |          |  
|(inception) to December 31, 1987 |  | -            |  |   | -         |  |   | -             |  |   | -           |  |   | (266,599    | ) |   | (266,599 | )
|                                 |  |              |  |   |           |  |   |               |  |   |             |  |   |             |   |   |          |  
|Balance, December 31, 1987       |  | 2,122,661    |  |   | 320,684   |  |   | -             |  |   | -           |  |   | (266,599    | ) |   | 54,085   |  
|                                 |  |              |  |   |           |  |   |               |  |   |             |  |   |             |   |   |          |  
|Issued for cash                  |  | 650,000      |  |   | 350,044   |  |   | -             |  |   | -           |  |   | -           |   |   | 350,044  |  
|Net loss                         |  | -            |  |   | -         |  |   | -             |  |   | -           |  |   | (103,673    | ) |   | (103,673 | )
|                                 |  |              |  |   |           |  |   |               |  |   |             |  |   |             |   |   |          |  
|Balance, December 31, 1988       |  | 2,772,661    |  |   | 670,728   |  |   | -             |  |   | -           |  |   | (370,272    | ) |   | 300,456  |  
|                                 |  |              |  |   |           |  |   |               |  |   |             |  |   |             |   |   |          |  
|Issued for cash                  |  | 145,000      |  |   | 26,500    |  |   | -             |  |   | -           |  |   | -           |   |   | 26,500   |  
|Issued for services              |  | 66,000       |  |   | 12,678    |  |   | -             |  |   | -           |  |   | -           |   |   | 12,678   |  
|Issued for debt settlement       |  | 200,000      |  |   | 30,000    |  |   | -             |  |   | -           |  |   | -           |   |   | 30,000   |  
|Net loss                         |  | -            |  |   | -         |  |   | -             |  |   | -           |  |   | (329,490    | ) |   | (329,490 | )
|                                 |  |              |  |   |           |  |   |               |  |   |             |  |   |             |   |   |          |  
|Balance, December 31, 1989       |  | 3,183,661    |  |   | 739,906   |  |   | -             |  |   | -           |  |   | (699,762    | ) |   | 40,144   |  
|                                 |  |              |  |   |           |  |   |               |  |   |             |  |   |             |   |   |          |  
|Issued for cash                  |  | 185,000      |  |   | 27,751    |  |   | -             |  |   | -           |  |   | -           |   |   | 27,751   |  
|Net loss                         |  | -            |  |   | -         |  |   | -             |  |   | -           |  |   | (90,505     | ) |   | (90,505  | )
|                                 |  |              |  |   |           |  |   |               |  |   |             |  |   |             |   |   |          |  
|Balance, December 31, 1990       |  | 3,368,661    |  |   | 767,657   |  |   | -             |  |   | -           |  |   | (790,267    | ) |   | (22,610  | )
|                                 |  |              |  |   |           |  |   |               |  |   |             |  |   |             |   |   |          |  
|Net loss                         |  | -            |  |   | -         |  |   | -             |  |   | -           |  |   | (142,902    | ) |   | (142,902 | )
|                                 |  |              |  |   |           |  |   |               |  |   |             |  |   |             |   |   |          |  
|Balance, December 31, 1991       |  | 3,368,661    |  |   | 767,657   |  |   | -             |  |   | -           |  |   | (933,169    | ) |   | (165,512 | )
|                                 |  |              |  |   |           |  |   |               |  |   |             |  |   |             |   |   |          |  
|Issued for cash                  |  | 131,000      |  |   | 20,890    |  |   | -             |  |   | -           |  |   | -           |   |   | 20,890   |  
|Issued for debt settlement       |  | 789,267      |  |   | 118,392   |  |   | -             |  |   | -           |  |   | -           |   |   | 118,392  |  
|Net loss                         |  | -            |  |   | -         |  |   | -             |  |   | -           |  |   | (193,653    | ) |   | (193,653 | )
|                                 |  |              |  |   |           |  |   |               |  |   |             |  |   |             |   |   |          |  
|Balance, December 31, 1992       |  | 4,288,928    |  |   | 906,939   |  |   | -             |  |   | -           |  |   | (1,126,822  | ) |   | (219,883 | )
|                                 |  |              |  |   |           |  |   |               |  |   |             |  |   |             |   |   |          |  
|Issued for cash                  |  | 200,000      |  |   | 50,000    |  |   | -             |  |   | -           |  |   | -           |   |   | 50,000   |  
|Issued for debt settlement       |  | 600,200      |  |   | 105,470   |  |   | -             |  |   | -           |  |   | -           |   |   | 105,470  |  
|Net loss                         |  | -            |  |   | -         |  |   | -             |  |   | -           |  |   | (102,308    | ) |   | (102,308 | )
|                                 |  |              |  |   |           |  |   |               |  |   |             |  |   |             |   |   |          |  
|Balance, December 31, 1993       |  | 5,089,128    |  | $ | 1,062,409 |  | $ | -             |  | $ | -           |  | $ | (1,229,130  | ) | $ | (166,721 | )

The accompanying notes are an integral part of these consolidated
  financial statements.

F-5

---

HARD CREEK NICKEL CORP.(An Exploration Stage Company)

CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY (CONTINUED)

FOR THE PERIOD JANUARY 17, 1983 (INCEPTION) TO DECEMBER 31,
  2007

(IN CANADIAN DOLLARS)

|                                |  |              |  |   |           |  |   |               |  |   |             |  |   | Deficit     |   |   |            |  
|------------------------------- |  | ------------ |  | - | --------- |  | - | ------------- |  | - | ----------- |  | - | ----------- | - | - | ---------- | -
|                                |  |              |  |   |           |  |   |               |  |   |             |  |   | Accumulated |   |   |            |  
|                                |  |              |  |   |           |  |   | Additional    |  |   | Share       |  |   | During the  |   |   |            |  
|                                |  | Common stock |  |   | Paid-in   |  |   | Subscriptions |  |   | Development |  |   |             |  
|                                |  | Shares       |  |   | Amount    |  |   | Capital       |  |   | Received    |  |   | Stage       |   |   | Total      |  
|                                |  |              |  |   |           |  |   |               |  |   |             |  |   |             |   |   |            |  
|Balance, December 31, 1993      |  | 5,089,128    |  | $ | 1,062,409 |  | $ | -             |  | $ | -           |  | $ | (1,229,130  | ) | $ | (166,721   | )
|                                |  |              |  |   |           |  |   |               |  |   |             |  |   |             |   |   |            |  
|Issued for cash                 |  | 348,000      |  |   | 107,800   |  |   | -             |  |   | -           |  |   | -           |   |   | 107,800    |  
|Net loss                        |  | -            |  |   | -         |  |   | -             |  |   | -           |  |   | (171,903    | ) |   | (171,903   | )
|                                |  |              |  |   |           |  |   |               |  |   |             |  |   |             |   |   |            |  
|Balance, December 31, 1994      |  | 5,437,128    |  |   | 1,170,209 |  |   | -             |  |   | -           |  |   | (1,401,033  | ) |   | (230,824   | )
|                                |  |              |  |   |           |  |   |               |  |   |             |  |   |             |   |   |            |  
|Issued for cash                 |  | 2,575,000    |  |   | 1,327,260 |  |   | -             |  |   | -           |  |   | -           |   |   | 1,327,260  |  
|Net loss                        |  | -            |  |   | -         |  |   | -             |  |   | -           |  |   | (1,154,307  | ) |   | (1,154,307 | )
|                                |  |              |  |   |           |  |   |               |  |   |             |  |   |             |   |   |            |  
|Balance, December 31, 1995      |  | 8,012,128    |  |   | 2,497,469 |  |   | -             |  |   | -           |  |   | (2,555,340  | ) |   | (57,871    | )
|                                |  |              |  |   |           |  |   |               |  |   |             |  |   |             |   |   |            |  
|Shares released from escrow     |  | -            |  |   | -         |  |   | 495,750       |  |   | -           |  |   | -           |   |   | 495,750    |  
|Issued for cash                 |  | 3,129,500    |  |   | 2,021,760 |  |   | -             |  |   | -           |  |   | -           |   |   | 2,021,760  |  
|Issued for property acquisition |  | 50,000       |  |   | 67,500    |  |   | -             |  |   | -           |  |   | -           |   |   | 67,500     |  
|Net loss                        |  | -            |  |   | -         |  |   | -             |  |   | -           |  |   | (2,651,593  | ) |   | (2,651,593 | )
|                                |  |              |  |   |           |  |   |               |  |   |             |  |   |             |   |   |            |  
|Balance, December 31, 1996      |  | 11,191,628   |  |   | 4,586,729 |  |   | 495,750       |  |   | -           |  |   | (5,206,933  | ) |   | (124,454   | )
|                                |  |              |  |   |           |  |   |               |  |   |             |  |   |             |   |   |            |  
|Shares released from escrow     |  | -            |  |   | -         |  |   | 318,125       |  |   | -           |  |   | -           |   |   | 318,125    |  
|Stock-based compensation        |  | -            |  |   | -         |  |   | 181,646       |  |   | -           |  |   | -           |   |   | 181,646    |  
|Issued for cash                 |  | 600,000      |  |   | 432,000   |  |   | -             |  |   | -           |  |   | -           |   |   | 432,000    |  
|Issued for property acquisition |  | 50,000       |  |   | 42,500    |  |   | -             |  |   | -           |  |   | -           |   |   | 42,500     |  
|Net loss                        |  | -            |  |   | -         |  |   | -             |  |   | -           |  |   | (1,138,025  | ) |   | (1,138,025 | )
|                                |  |              |  |   |           |  |   |               |  |   |             |  |   |             |   |   |            |  
|Balance, December 31, 1997      |  | 11,841,628   |  |   | 5,061,229 |  |   | 995,521       |  |   | -           |  |   | (6,344,958  | ) |   | (288,208   | )
|                                |  |              |  |   |           |  |   |               |  |   |             |  |   |             |   |   |            |  
|Stock-based compensation        |  | -            |  |   | -         |  |   | 300,526       |  |   | -           |  |   | -           |   |   | 300,526    |  
|Issued for cash                 |  | 495,412      |  |   | 324,180   |  |   | -             |  |   | -           |  |   | -           |   |   | 324,180    |  
|Issued for property acquisition |  | 50,000       |  |   | 28,500    |  |   | -             |  |   | -           |  |   | -           |   |   | 28,500     |  
|Issued for debt settlement      |  | 168,401      |  |   | 61,533    |  |   | -             |  |   | -           |  |   | -           |   |   | 61,533     |  
|Net loss                        |  | -            |  |   | -         |  |   | -             |  |   | -           |  |   | (1,008,931  | ) |   | (1,008,931 | )
|                                |  |              |  |   |           |  |   |               |  |   |             |  |   |             |   |   |            |  
|Balance, December 31, 1998      |  | 12,555,441   |  |   | 5,475,442 |  |   | 1,296,047     |  |   | -           |  |   | (7,353,889  | ) |   | (582,400   | )
|                                |  |              |  |   |           |  |   |               |  |   |             |  |   |             |   |   |            |  
|Issued for cash                 |  | 1,150,000    |  |   | 462,500   |  |   | -             |  |   | -           |  |   | -           |   |   | 462,500    |  
|Issued for property acquisition |  | 50,000       |  |   | 15,000    |  |   | -             |  |   | -           |  |   | -           |   |   | 15,000     |  
|Net loss                        |  | -            |  |   | -         |  |   | -             |  |   | -           |  |   | (250,320    | ) |   | (250,320   | )
|                                |  |              |  |   |           |  |   |               |  |   |             |  |   |             |   |   |            |  
|Balance, December 31, 1999      |  | 13,755,441   |  | $ | 5,952,942 |  | $ | 1,296,047     |  | $ | -           |  | $ | (7,604,209  | ) | $ | (355,220   | )

The accompanying notes are an integral part of these consolidated
  financial statements.

F-6

---

HARD CREEK NICKEL CORP.(An Exploration Stage Company)

CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY (CONTINUED)

FOR THE PERIOD JANUARY 17, 1983 (INCEPTION) TO DECEMBER 31,
  2007

(IN CANADIAN DOLLARS)

|                                    |  |              |   |   |            |   |   |               |  |   |             |   |   | Deficit     |   |   |            |  
|----------------------------------- |  | ------------ | - | - | ---------- | - | - | ------------- |  | - | ----------- | - | - | ----------- | - | - | ---------- | -
|                                    |  |              |   |   |            |   |   |               |  |   |             |   |   | Accumulated |   |   |            |  
|                                    |  |              |   |   |            |   |   | Additional    |  |   | Share       |   |   | During the  |   |   |            |  
|                                    |  | Common stock |   |   | Paid-in    |   |   | Subscriptions |  |   | Development |   |   |             |  
|                                    |  | Shares       |   |   | Amount     |   |   | Capital       |  |   | Received    |   |   | Stage       |   |   | Total      |  
|                                    |  |              |   |   |            |   |   |               |  |   |             |   |   |             |   |   |            |  
|Balance, December 31, 1999          |  | 13,755,441   |   | $ | 5,952,942  |   | $ | 1,296,047     |  | $ | -           |   | $ | (7,604,209  | ) | $ | (355,220   | )
|                                    |  |              |   |   |            |   |   |               |  |   |             |   |   |             |   |   |            |  
|Consolidation 5:1                   |  | (11,004,353  | ) |   | -          |   |   | -             |  |   | -           |   |   | -           |   |   | -          |  
|Stock-based compensation            |  | -            |   |   | -          |   |   | 3,677         |  |   | -           |   |   | -           |   |   | 3,677      |  
|Issued for cash                     |  | 655,000      |   |   | 110,250    |   |   | -             |  |   | -           |   |   | -           |   |   | 110,250    |  
|Issued for debt settlement          |  | 380,000      |   |   | 121,000    |   |   | -             |  |   | -           |   |   | -           |   |   | 121,000    |  
|Net loss                            |  | -            |   |   | -          |   |   | -             |  |   | -           |   |   | (54,902     | ) |   | (54,902    | )
|                                    |  |              |   |   |            |   |   |               |  |   |             |   |   |             |   |   |            |  
|Balance, December 31, 2000          |  | 3,786,088    |   |   | 6,184,192  |   |   | 1,299,724     |  |   | -           |   |   | (7,659,111  | ) |   | (175,195   | )
|                                    |  |              |   |   |            |   |   |               |  |   |             |   |   |             |   |   |            |  
|Issued for cash                     |  | 1,266,902    |   |   | 364,800    |   |   | -             |  |   | -           |   |   | -           |   |   | 364,800    |  
|                                    |  |              |   |   |            |   |   | -             |  |   | -           |   |   | -           |   |   |            |  
|Net loss                            |  | -            |   |   | -          |   |   | -             |  |   | -           |   |   | (368,482    | ) |   | (368,482   | )
|                                    |  |              |   |   |            |   |   |               |  |   |             |   |   |             |   |   |            |  
|Balance, December 31, 2001          |  | 5,052,990    |   |   | 6,548,992  |   |   | 1,299,724     |  |   | -           |   |   | (8,027,593  | ) |   | (178,877   | )
|                                    |  |              |   |   |            |   |   |               |  |   |             |   |   |             |   |   |            |  
|Issued for cash                     |  | 2,950,108    |   |   | 625,305    |   |   | -             |  |   | -           |   |   | -           |   |   | 625,305    |  
|Issued for property acquisition     |  | 100,000      |   |   | 26,000     |   |   | -             |  |   | -           |   |   | -           |   |   | 26,000     |  
|Stock-based compensation            |  | -            |   |   | -          |   |   | 22,860        |  |   | -           |   |   | -           |   |   | 22,860     |  
|Subscriptions received              |  | -            |   |   | -          |   |   | -             |  |   | 196,300     |   |   | -           |   |   | 196,300    |  
|Net loss                            |  | -            |   |   | -          |   |   | -             |  |   | -           |   |   | (676,492    | ) |   | (676,492   | )
|                                    |  |              |   |   |            |   |   |               |  |   |             |   |   |             |   |   |            |  
|Balance, December 31, 2002          |  | 8,103,098    |   |   | 7,200,297  |   |   | 1,322,584     |  |   | 196,300     |   |   | (8,704,085  | ) |   | 15,096     |  
|                                    |  |              |   |   |            |   |   |               |  |   |             |   |   |             |   |   |            |  
|Issued for cash                     |  | 9,287,091    |   |   | 3,163,125  |   |   | -             |  |   | (196,300    | ) |   | -           |   |   | 2,966,825  |  
|Stock-based compensation            |  | -            |   |   | -          |   |   | 386,632       |  |   | -           |   |   | -           |   |   | 386,632    |  
|                                    |  |              |   |   |            |   |   |               |  |   |             |   |   |             |   |   |            |  
|Net loss                            |  | -            |   |   | -          |   |   | -             |  |   | -           |   |   | (3,215,856  | ) |   | (3,215,856 | )
|                                    |  |              |   |   |            |   |   |               |  |   |             |   |   |             |   |   |            |  
|Balance, December 31, 2003          |  | 17,390,189   |   |   | 10,363,422 |   |   | 1,709,216     |  |   | -           |   |   | (11,919,941 | ) |   | 152,697    |  
|                                    |  |              |   |   |            |   |   |               |  |   |             |   |   |             |   |   |            |  
|Issued for cash                     |  | 10,920,205   |   |   | 4,934,335  |   |   | -             |  |   | -           |   |   | -           |   |   | 4,934,335  |  
|Reduction from sale of tax benefits |  |              |   |   |            |   |   |               |  |   |             |   |   |             |   |   |            |  
|relating to flow-through shares     |  | -            |   |   | (238,471   | ) |   | -             |  |   | -           |   |   | -           |   |   | (238,471   | )
|Stock-based compensation            |  | -            |   |   | -          |   |   | 1,002,553     |  |   | -           |   |   | -           |   |   | 1,002,553  |  
|Net loss                            |  | -            |   |   | -          |   |   | -             |  |   | -           |   |   | (4,648,724  | ) |   | (4,648,724 | )
|                                    |  |              |   |   |            |   |   |               |  |   |             |   |   |             |   |   |            |  
|Balance, December 31, 2004          |  | 28,310,394   |   | $ | 15,059,286 |   | $ | 2,711,769     |  | $ | -           |   | $ | (16,568,665 | ) | $ | 1,202,390  |  

The accompanying notes are an integral part of these consolidated
  financial statements.

F-7

---

HARD CREEK NICKEL CORP.(An Exploration Stage Company)

CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY (CONTINUED)

FOR THE PERIOD JANUARY 17, 1983 (INCEPTION) TO DECEMBER 31,
  2007

(IN CANADIAN DOLLARS)

|                                      |  |              |  |   |            |   |   |               |  |   |             |  |   | Deficit     |   |   |            |  
|------------------------------------- |  | ------------ |  | - | ---------- | - | - | ------------- |  | - | ----------- |  | - | ----------- | - | - | ---------- | -
|                                      |  |              |  |   |            |   |   |               |  |   |             |  |   | Accumulated |   |   |            |  
|                                      |  |              |  |   |            |   |   | Additional    |  |   | Share       |  |   | During the  |   |   |            |  
|                                      |  | Common stock |  |   | Paid-in    |   |   | Subscriptions |  |   | Development |  |   |             |  
|                                      |  | Shares       |  |   | Amount     |   |   | Capital       |  |   | Received    |  |   | Stage       |   |   | Total      |  
|                                      |  |              |  |   |            |   |   |               |  |   |             |  |   |             |   |   |            |  
|Balance, December 31, 2004            |  | 28,310,394   |  | $ | 15,059,286 |   | $ | 2,711,769     |  | $ | -           |  | $ | (16,568,665 | ) | $ | 1,202,390  |  
|                                      |  |              |  |   |            |   |   |               |  |   |             |  |   |             |   |   |            |  
|Issued for cash                       |  | 9,365,100    |  |   | 3,802,012  |   |   | -             |  |   | -           |  |   | -           |   |   | 3,802,012  |  
|Reduction from sale of tax benefits   |  |              |  |   |            |   |   |               |  |   |             |  |   |             |   |   |            |  
|relating to flow-through
      shares |  | -            |  |   | (228,971   | ) |   | -             |  |   | -           |  |   | -           |   |   | (228,971   | )
|Stock-based compensation              |  | -            |  |   | -          |   |   | 139,799       |  |   | -           |  |   | -           |   |   | 139,799    |  
|Fair value of broker warrants         |  | -            |  |   | -          |   |   | 25,974        |  |   | -           |  |   | -           |   |   | 25,974     |  
|Net loss                              |  | -            |  |   | -          |   |   | -             |  |   | -           |  |   | (3,332,394  | ) |   | (3,332,394 | )
|                                      |  |              |  |   |            |   |   |               |  |   |             |  |   |             |   |   |            |  
|Balance, December 31, 2005            |  | 37,675,494   |  |   | 18,632,327 |   |   | 2,877,542     |  |   | -           |  |   | (19,901,059 | ) |   | 1,608,810  |  
|                                      |  |              |  |   |            |   |   |               |  |   |             |  |   |             |   |   |            |  
|Issued for cash                       |  | 11,647,120   |  |   | 6,794,659  |   |   | -             |  |   | -           |  |   | -           |   |   | 6,794,659  |  
|Reduction from sale of tax benefits   |  |              |  |   |            |   |   |               |  |   |             |  |   |             |   |   |            |  
|relating to flow-through shares       |  | -            |  |   | (1,626,440 | ) |   | -             |  |   | -           |  |   | -           |   |   | (1,626,440 | )
|Stock-based compensation              |  | -            |  |   | -          |   |   | 424,518       |  |   | -           |  |   | -           |   |   | 424,518    |  
|Fair value of broker warrants         |  | -            |  |   | -          |   |   | 114,137       |  |   | -           |  |   | -           |   |   | 114,137    |  
|Net loss                              |  | -            |  |   | -          |   |   | -             |  |   | -           |  |   | (5,383,528  | ) |   | (5,383,528 | )
|                                      |  |              |  |   |            |   |   |               |  |   |             |  |   |             |   |   |            |  
|Balance, December 31, 2006            |  | 49,322,614   |  |   | 23,800,546 |   |   | 3,416,197     |  |   | -           |  |   | (25,284,587 | ) |   | 1,932,156  |  
|                                      |  |              |  |   |            |   |   |               |  |   |             |  |   |             |   |   |            |  
|Issued for cash                       |  | 10,897,978   |  |   | 17,353,323 |   |   | -             |  |   | -           |  |   | -           |   |   | 17,353,323 |  
|Reduction from sale of tax benefits   |  |              |  |   |            |   |   |               |  |   |             |  |   |             |   |   |            |  
|relating to flow-through
      shares |  | -            |  |   | (305,994   | ) |   | -             |  |   | -           |  |   | -           |   |   | (305,994   | )
|Stock-based compensation              |  | -            |  |   | -          |   |   | 1,085,653     |  |   | -           |  |   | -           |   |   | 1,085,653  |  
|Fair value of broker warrants         |  | -            |  |   | -          |   |   | 482,700       |  |   | -           |  |   | -           |   |   | 482,700    |  
|Net loss                              |  | -            |  |   | -          |   |   | -             |  |   | -           |  |   | (9,522,698  | ) |   | (9,522,698 | )
|                                      |  |              |  |   |            |   |   |               |  |   |             |  |   |             |   |   |            |  
|                                      |  |              |  |   |            |   |   |               |  |   |             |  |   |             |   |   |            |  
|Balance, December 31, 2007            |  | 60,220,592   |  | $ | 40,847,875 |   | $ | 4,984,550     |  | $ | -           |  | $ | (34,807,285 | ) | $ | 11,025,140 |  

The accompanying notes are an integral part of these consolidated
  financial statements.

F-8

---

HARD CREEK NICKEL CORP.(An Exploration Stage Company)

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN CANADIAN DOLLARS)

|                                                          |   |                          |   |   |              |   |   |            |   |   | Results of       |  
|--------------------------------------------------------- | - | ------------------------ | - | - | ------------ | - | - | ---------- | - | - | ---------------- | -
|                                                          |   |                          |   |   |              |   |   |            |   |   | operations from  |  
|                                                          |   |                          |   |   |              |   |   |            |   |   | January 17, 1983 |  
|                                                          |   |                          |   |   |              |   |   |            |   |   | (inception) to   |  
|                                                          |   | Years ended December 31, |   |   | December 31, |  
|                                                          |   | 2007                     |   |   | 2006         |   |   | 2005       |   |   | 2007             |  
|                                                          |   |                          |   |   |              |   |   |            |   |   |                  |  
|CASH FLOWS FROM OPERATING ACTIVITIES                      |   |                          |   |   |              |   |   |            |   |   |                  |  
|Net loss                                                  | $ | (9,522,698               | ) | $ | (5,383,528   | ) | $ | (3,332,394 | ) | $ | (34,807,285      | )
|Non cash items                                            |   |                          |   |   |              |   |   |            |   |   |                  |  
|Depreciation                                              |   | 14,528                   |   |   | 7,493        |   |   | 6,780      |   |   | 38,196           |  
|Non-cash
      expenses                                   |   | -                        |   |   | -            |   |   | -          |   |   | 1,442,448        |  
|Stock-based
      compensation                            |   | 1,085,653                |   |   | 424,518      |   |   | 139,799    |   |   | 3,547,864        |  
|Deferred
      income tax recovery                        |   | (305,994                 | ) |   | (1,626,440   | ) |   | (228,971   | ) |   | (2,399,876       | )
|Changes in operating assets and liabilities:              |   |                          |   |   |              |   |   |            |   |   |                  |  
|Recoverable
      taxes                                   |   | (258,372                 | ) |   | (167,671     | ) |   | 4,178      |   |   | (486,721         | )
|Mining tax
      credits                                  |   | (1,238,700               | ) |   | -            |   |   | -          |   |   | (1,238,700       | )
|Prepaid
      expenses                                    |   | (48,764                  | ) |   | (2,586       | ) |   | 11,258     |   |   | (95,866          | )
|Accounts payable
      and accrued liabilities            |   | 452,290                  |   |   | 199,401      |   |   | (12,023    | ) |   | 740,832          |  
|Due to related
      party                                |   | 1,484                    |   |   | -            |   |   | -          |   |   | 1,484            |  
|                                                          |   |                          |   |   |              |   |   |            |   |   |                  |  
|NET CASH FLOWS USED IN OPERATING                          |   |                          |   |   |              |   |   |            |   |   |                  |  
|ACTIVITIES                                                |   | (9,820,573               | ) |   | (6,548,813   | ) |   | (3,411,373 | ) |   | (33,257,624      | )
|                                                          |   |                          |   |   |              |   |   |            |   |   |                  |  
|CASH FLOWS FROM INVESTING                                 |   |                          |   |   |              |   |   |            |   |   |                  |  
|ACTIVITIES                                                |   |                          |   |   |              |   |   |            |   |   |                  |  
|Reclamation bond                                          |   | -                        |   |   | (60,000      | ) |   | (50,700    | ) |   | (187,900         | )
|Purchases of equipment                                    |   | (29,585                  | ) |   | (22,013      | ) |   | (9,054     | ) |   | (88,551          | )
|                                                          |   |                          |   |   |              |   |   |            |   |   |                  |  
|NET CASH FLOWS USED IN INVESTING                          |   |                          |   |   |              |   |   |            |   |   |                  |  
|ACTIVITIES                                                |   | (29,585                  | ) |   | (82,013      | ) |   | (59,754    | ) |   | (276,451         | )
|                                                          |   |                          |   |   |              |   |   |            |   |   |                  |  
|                                                          |   |                          |   |   |              |   |   |            |   |   |                  |  
|CASH FLOWS FROM FINANCING                                 |   |                          |   |   |              |   |   |            |   |   |                  |  
|ACTIVITIES                                                |   |                          |   |   |              |   |   |            |   |   |                  |  
|Proceeds from share issuance,
      net of issuance costs |   | 17,836,023               |   |   | 6,908,796    |   |   | 3,827,986  |   |   | 43,241,989       |  
|Net increase
      (decrease) in restricted cash          |   | 163,058                  |   |   | 539,750      |   |   | (102,542   | ) |   | -                |  
|                                                          |   |                          |   |   |              |   |   |            |   |   |                  |  
|NET CASH FLOWS PROVIDED BY                                |   |                          |   |   |              |   |   |            |   |   |                  |  
|FINANCING ACTIVITIES                                      |   | 17,999,081               |   |   | 7,448,546    |   |   | 3,725,444  |   |   | 43,241,989       |  
|                                                          |   |                          |   |   |              |   |   |            |   |   |                  |  
|NET INCREASE IN CASH                                      |   | 8,148,923                |   |   | 817,720      |   |   | 254,317    |   |   | 9,707,914        |  
|                                                          |   |                          |   |   |              |   |   |            |   |   |                  |  
|CASH, BEGINNING                                           |   | 1,558,991                |   |   | 741,271      |   |   | 486,954    |   |   | -                |  
|                                                          |   |                          |   |   |              |   |   |            |   |   |                  |  
|CASH, ENDING                                              | $ | 9,707,914                |   | $ | 1,558,991    |   | $ | 741,271    |   | $ | 9,707,914        |  

The Company did not make any cash payments for interest or tax
  expenses during the current and prior years.

The accompanying notes are an integral part of these consolidated
  financial statements.

F-9

---

HARD CREEK NICKEL CORP.(An Exploration Stage Company)

NOTES TO THE CONSOLIDATED FINANCIAL STATMENTS

|NOTE 1 - BASIS
      OF PRESENTATION
|------------------------------------

Hard Creek Nickel Corp. (the Company) (formerly Canadian
  Metals Exploration Ltd.), is an exploration company focusing on its Turnagain
  Nickel property in the Liard Mining Division in Northern British Columbia, Canada.
  The Company is a reporting issuer in British Columbia and Alberta, and trades
  on the TSX Venture Exchange under the symbol HNC. Funding for operations is
  raised primarily through share offerings.

These consolidated financial statements have been prepared under
  a going concern assumption which contemplates the Company will continue operations
  and realize the carrying value of assets and discharge its liabilities in the
  normal course of business. Should the going concern assumption not continue
  to be appropriate, further adjustments to carrying values may be required. The
  ability of the Company to continue as a going concern is dependent upon raising
  additional capital and ultimately on generating future profitable operations.

As at December 31, 2007, the Company had stockholders equity
  of $11,025,140 but has incurred significant losses since inception and further
  losses are anticipated in its continual exploration of mineral properties raising
  substantial doubt as to the Companys ability to continue as a going concern.
  The Company will require significant additional financial resources and will
  be dependent on future financings to fund its ongoing exploration activities.
  Management expects to raise capital through private placements as required to
  meet operating budgets.

|NOTE 2 - SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES
|---------------------------------------------------------

Basis of Presentation
  These consolidated financial statements of the Company have been prepared in
  accordance with generally accepted accounting principles (“GAAP”)
  in the United States of America and are presented in Canadian dollars. All intercompany
  balances and transactions have been eliminated.

Development Stage Company
  The Company is considered to be in the development stage, pursuant to Statement
  of Financial Accounting Standards (“SFAS”) No. 7, “Accounting
  and Reporting by Development Stage Enterprises.”

Use of estimates
  The preparation of financial statements in conformity with GAAP requires management
  to make estimates and assumptions that affect the reported amounts of assets
  and liabilities and disclosure of contingent assets and liabilities at the date
  of the financial statements and the reported amounts of revenues and expenses
  during the reporting period. The Company regularly evaluates estimates and assumptions.
  The Company bases its estimates and assumptions on current facts, historical
  experience and various other factors that it believes to be reasonable under
  the circumstances, the results of which form the basis for making judgments
  about the carrying values of assets and liabilities and the accrual of costs
  and expenses that are not readily apparent from other sources. The actual results
  experienced by the Company may differ materially and adversely from the Company's
  estimates. To the extent there are material differences between the estimates
  and the actual results, future results of operations will be affected. The most
  significant estimates with regard to these financial statements relate to the
  determination of fair value for stock-based compensation and useful lives of
  assets and deferred income tax rates and timing of the reversal of income tax
  differences.

Cash and cash equivalents
  Cash and cash equivalents include cash and short term investments with a maturity
  of 90 days or less from the date of investment.

F-10

---

Equipment
  Equipment is recorded at cost and amortized over its estimated useful life on
  a 20%-30% declining balance method. In the year of acquisition, only one-half
  of the amortization is recorded.

Mineral Property Costs
  The Company has adopted recommendations from the Emerging Issues Task Force
  (“EITF”) – EITF Abstract 04-2: “Whether Mineral Rights
  Are Tangible or Intangible Assets”. In accordance with the EITF, acquisition
  costs for mineral rights are accounted for as tangible assets and shown as a
  separate component of property, plant, and equipment. Since the adoption of
  EITF 04-2, the Company did not incur any mineral property acquisition costs.
  Costs relating to exploration and development are expensed as incurred until
  such time as economic reserves are quantified. To date, the Company has not
  established any proven reserves on any of its mineral properties.

Financial Instruments
  The fair value of the Company's financial instruments, consisting of cash, reclamation
  band, recoverable taxes, mining tax credits, restricted cash, accounts payable
  and amount due to related party, is estimated to be equal to their carrying
  value. It is management's opinion that the Company is not exposed to significant
  interest, currency or credit risks arising from these financial instruments.

Foreign Currency TranslationThe financial statements are presented in Canadian dollars. In accordance
  with Statement of Financial Accounting Standards (SFAS) No. 52,
  Foreign Currency Translation, foreign denominated monetary assets
  and liabilities are translated to their Canadian dollar equivalents using foreign
  exchange rates that prevailed at the balance sheet date. Non-monetary assets
  and liabilities are translated at exchange rates prevailing at the transaction
  date. The resulting gains and losses from these foreign currency translation
  adjustments are included as a component of stockholders equity. Revenue
  and expenses are translated at average rates of exchange during the year. Gains
  or losses resulting from these foreign currency transactions are included in
  results of operations.

Asset Retirement Obligations
  The Company recognizes a liability for asset retirement obligations in the period
  in which they are incurred and in which a reasonable estimate of such costs
  can be made. Asset retirement obligations include obligations where the Company
  will be required to retire tangible long-lived assets such as mineral exploration
  sites. The asset retirement obligation is measured at fair value and recorded
  as a liability and capitalized as part of the cost of the related long-lived
  asset as an asset retirement cost. The asset retirement obligation accretes
  until the time the asset retirement obligation is expected to settle while the
  asset retirement costs included in oil and gas properties are amortized using
  the unit-of-production method.

Amortization of asset retirement costs and accretion of the
  asset retirement obligation are included in depletion, depreciation, and accretion.
  Actual asset retirement costs are recorded against the obligation when incurred.
  Any difference between the recorded asset retirement obligations and the actual
  retirement costs incurred is recorded in depletion, depreciation, and accretion.

Impairment of long-lived assets
  The carrying values of long-lived assets with fixed or determinable lives are
  reviewed for impairment whenever events or changes in circumstances indicate
  the recoverable value may be less than the carrying amount. Impairment determinations
  are based on management's estimates of undiscounted and discounted future net
  cash flows expected to be recovered from specific assets or groups of assets
  through use or future disposition. Impairment charges are recorded in the period
  in which determination of impairment is made by management.

Assets with indefinite or indeterminable lives are not amortized and are reviewed
  for impairment on a reporting period basis using management’s fair value
  determinations of estimated recoverable value.

Environmental
  Environmental expenditures are expensed or capitalized depending on their future
  economic benefit. Expenditures that relate to an existing condition caused by
  past operations and that have no future economic benefits areexpensed. Liabilities
  for expenditures of a non-capital nature are recorded when an environmental
  assessment and/or remediation is probable, and the costs can be reasonably estimated.

Mining tax credits
  Mining tax credits are recorded as either a reduction of the cost of applicable
  assets or credited in the statement of operations depending on the nature of
  the expenditures giving rise to the credits. Claims for tax credits are accrued
  upon the Company attaining reasonable assurance of acceptance and payment entitlement
  from the appropriate government agency.

Stock-Based Compensation
  On January 1, 2006, the Company adopted SFAS No. 123 (revised 2004) (SFAS No.
  123R), Share-Based Payment, which addresses the accounting for stock-based payment
  transactions in which an enterprise receives employee services in exchange for
  (a) equity instruments of the enterprise or (b) liabilities that are based on
  the fair value of the enterprise’s equity instruments or that may be settled
  by the issuance of such equity instruments. In January 2005, the Securities
  and Exchange Commission (SEC) issued Staff Accounting Bulletin (SAB) No. 107,
  which provides supplemental implementation guidance for SFAS No. 123R. SFAS
  No. 123R eliminates the ability to account for stock-based compensation transactions
  using the intrinsic value method under Accounting Principles Board (APB) Opinion
  No. 25, Accounting for Stock Issued to Employees, and instead requires that
  such transactions be accounted for using a fair-value-based method. The Company
  uses the Black-Scholes-Merton (“BSM”) option-pricing model to determine
  the fair-value of stock-based awards under SFAS No. 123R.

F-11

---

Income Taxes
  The Company has adopted SFAS No. 109 - "Accounting for Income Taxes".
  SFAS No. 109 requires the use of the asset and liability method of accounting
  of income taxes. Under the asset and liability method of SFAS No. 109, deferred
  tax assets and liabilities are recognized for the future tax consequences attributable
  to temporary differences between the financial statements carrying amounts of
  assets and liabilities and their respective tax bases. Deferred tax assets and
  liabilities are measured using enacted tax rates expected to apply to taxable
  income in the years in which those temporary differences are expected to be
  recovered or settled.

In June 2006, the Financial Accounting Standards Board (“FASB”)
  issued Interpretation No. 48, "Accounting for Uncertainty in Income Taxes,
  an interpretation of FASB Statement No. 109" ("FIN 48"). FIN
  48 clarifies the accounting for uncertainty in income taxes by prescribing a
  two-step method of first evaluating whether a tax position has met a more likely
  than not recognition threshold and, second, measuring that tax position to determine
  the amount of benefit to be recognized in the financial statements. FIN 48 provides
  guidance on the presentation of such positions within a classified balance sheet
  as well as on de-recognition, interest and penalties, accounting in interim
  periods, disclosure and transition. FIN 48 was adopted by the Company on January
  1, 2007.

Other Comprehensive Income (Loss)
  SFAS No. 130, "Reporting Comprehensive Income", establishes standards
  for the reporting and display of comprehensive loss and its components in the
  financial statements. For the years ended December 31, 2007 and 2006, the only
  components of comprehensive loss were foreign currency translation adjustments.

Flow-Through SharesUnder United States GAAP when flow-through shares are issued, the proceeds
  are allocated between the issue of shares and the sale of tax benefits. The
  value assigned to the sale of tax benefits is determined as the difference between
  the market price of a non-flow-through common share and the issue price of a
  flow-through common share. This value is recorded as a liability when the flow-through
  shares are issued and stockholders equity is reduced accordingly. Upon
  the Company renouncing the related tax benefits in favour of the subscribers,
  the liability is reversed and a deferred tax liability is recognized with the
  difference between the liability and the deferred tax liability recorded as
  deferred tax expense. The deferred tax liability recorded can be offset by any
  previously unrecognized non-capital losses carried forward and a deferred tax
  expense recovery is recorded if available.

Loss Per ShareThe Company computes loss per share in accordance with Statement SFAS No.
  128, Earnings per Share which requires presentation of both basic
  and diluted earnings per share on the face of the statement of operations. Basic
  loss per share is computed by dividing net loss available to common stockholders
  by the weighted average number of outstanding common shares during the period.
  Diluted loss per share gives effect to all dilutive potential common shares
  outstanding during the period including stock options and warrants, using the
  treasury method, and preferred stock, using the if-converted method. Dilutive
  loss per share excludes all potential common shares if their effect is anti-dilutive.

Recent Accounting Pronouncements
  In December 2007, the FASB issued SFAS No. 160, “Non-controlling Interests
  in Consolidated Financial Statements” (“SFAS No. 160”). This
  Statement amends Accounting Research Bulletin (ARB) No. 51 to establish accounting
  and reporting standards for the non-controlling (minority) interest in a subsidiary
  and for the deconsolidation of a subsidiary. It clarifies that a non-controlling
  interest in a subsidiary is an ownership interest in the consolidated entity
  that should be reported as equity in the consolidated financial statements will
  have no impact. SFAS No. 160 is effective for the Company’s fiscal year
  beginning January 1, 2009. Management has determined that the adoption of this
  standard will not have an impact on the Company’s financial statements.

In December 2007, the FASB issued SFAS 141R, Business Combinations,
  SFAS 141R replaces SFAS 141. The statement retains the purchase method of accounting
  for acquisitions, but requires a number of changes, including changes in the
  way assets and liabilities are recognized. Management has determined that the
  accounting standard will have no effect on the Company.

In March 2008, the FASB issued SFAS No. 161, Disclosures about
  Derivative Instruments and Hedging Activities. SFAS 161 is intended to improve
  financial reporting about derivative instruments and hedging activities by requiring
  enhanced disclosures to enable investors to better understand their effects
  on an entity's financial position, financial performance, and cash flows. SFAS
  161 achieves these improvements by requiring disclosure of the fair values of
  derivative instruments and their gains and losses in a tabular format. It also
  provides more information about an entity’s liquidity by requiring disclosure
  of derivative features that are credit risk-related. Finally, it requires cross-referencing
  within footnotes to enable financial statement users to locate important information
  about derivative instruments. SFAS 161 will be effective for financial statements
  issued for fiscal years and interim periods beginning on january 1, 2009, will
  be adopted by the Company beginning in the first quarter of 2009. The Company
  does not expect there to be any significant impact of adopting SFAS 161 on its
  financial position, cash flows and results of operations.

On December 21, 2007, the Securities and Exchange Commission
  issued Staff Accounting Bulletin (“SAB”) No. 110. SAB 110 provides
  guidance to issuers on the method allowed in developing estimates of expected
  term of "plain vanilla" share options in accordance with SFAS No.
  123(R), "Share-Based Payment". The staff will continue to accept,
  under certain circumstances, the use of a simplified method beyond December
  31, 2007 which amends question 6 of Section D.2 as included in SAB 107, "Valuation
  of Share-Based Payment Arrangements for Public Companies", which stated
  that the simplified method could not be used beyond December 31, 2007. SAB 110
  is effective January 1, 2008 for the Company. The Company is currently evaluating
  the potential impact, if any, that the adoption of SAB 110 will have on its
  financial statements.

F-12

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|NOTE 3  MINERAL
      PROPERTY
|-------------------------------

Turnagain Nickel Property

The Company has a 100% interest in 81 mineral claims, located
  along the Turnagain River in northern British Columbia and totalling 30,544
  hectares. One of the claims is subject to a 4% net smelter return (NSR).
  The Company has the option to purchase all or part of the NSR at any time within
  four years of commencement of commercial production for a price of $1,000,000
  per 1% NSR.

During the year ended December 31, 2007, the Company incurred
  costs totalling $7,182,030 (2006 - $5,509,087), net of mining tax credits of
  $1,566,304, for exploration and development on the Turnagain property.

The company also has 100% interest in four other mineral properties
  in the vicinity of the Turnagain property including the Green, Cot, Lunar and
  the Lime.

Two of the properties, Green and Cot, were acquired in 2004,
  by staking, and have been mapped and sampled by exploration crews. There was
  no work undertaken on these properties in 2007.

In March 2006, the Company acquired, by staking, the Lunar property
  located approximately 130km southeast of the Turnagain property, the size of
  this claim block is approximately 2,410 hectares. No work on the claims was
  undertaken in 2007.

F-13

---

In July 2006, the Company acquired, by map staking, the Conuma
  claim block on Vancouver Island, the size of this claim block is approximately
  8,495 hectares. During the year ending December 31, 2007 the Company incurred
  costs totalling $25,305 on the Conuma claim (2006 - $Nil).

In April 2007, the Company acquired The Nootka claims, located 28km south of
  the Conuma claims by map staking. The claims cover an area of approximately
  1,970 hectares. No work on the claims was completed in 2007.

During the first quarter of 2007, the company abandoned the
  Frog, Serp, Weedon, Lexa, Cry Lake and Pitman claim blocks.

|NOTE 4 
      CAPITAL STOCK
|----------------------------

In March 2007, the Company completed a non-brokered private
  placement for 250,000 flow-through common shares at $2.00 per share for
  total proceeds of $500,000.

In May 2007, the Company completed a brokered private placement
  of 1,119,268 flow-through common shares at a price of $2.80 per share for
  gross proceeds of $3,133,950 and 5,419,603 non flow-through units at a price
  of $2.20 per unit for gross proceeds of $11,923,127.

Each unit consists of one common share and one half of a share
  purchase warrant. One full warrant is exercisable into one common share at $3.00
  per share on or before November 22, 2008. The fair value of the warrant included
  in the unit was determined to be $0.46.

As consideration for their services under the brokered private
  placement, the Agents received a cash commission of $1,053,994 and 653,887
  share purchase warrants valued at $482,700. These costs were offset against
  the gross proceeds. The Agent Warrants are exercisable into one common share
  at $2.80 for a period of 18 months.

The Company also completed a non brokered private placement
  of 35,700 flow-through common shares at a price of $2.80 per share for gross
  proceeds of $99,960 and 20,000 non flow-through units at a price of $2.20
  per unit for gross proceeds of $44,000.

Each unit consists of one common share and one half of a share
  purchase warrant. One full warrant is exercisable into one common share at $3.00
  per share with an expiry of 18 months or November 29, 2008. The fair value of
  the warrant included in the unit was determined to be $0.56.

During the year, the Company incurred other share issue costs
  of $80,897 for legal and filings fees.

During the year, 292,500 share purchase options were exercised
  for total cash proceeds of $192,250.

During the year, 3,760,907 share purchase warrants, with exercise
  prices ranging from $0.50 to $1.40 per share, were exercised for total
  cash proceeds of $3,077,626.

Stock Options

The Company has a formal rolling stock option plan whereby
  options may be granted to directors, employees and/or consultants by the board
  of directors. The number of options that may be granted is limited to 10% of
  the total shares issued and outstanding, The exercise price of the options granted
  will be no less than the discounted market price of the Companys shares
  and the maximum term of the options will be 5 years or such longer term as permitted
  by the TSX Venture Exchange. A summary of the Companys stock option activity
  is as follows:

Stock Options

F-14

---

| |                             |  | December 31, 2007 |   |   | December 31, 2006 | 
| | --------------------------- |  | ----------------- | - | - | ----------------- | 
| |                             |  |                   |   |   | Weighted          | 
| |                             |  |                   |   |   | Average           | 
| |                             |  |                   |   |   | Exercise          | 
| |                             |  | Shares            |   |   | Price             | 
| | Balance, beginning of year  |  | 3,745,000         |   | $ | 0.74              | 
| | Granted                     |  | 1,142,500         |   |   | 1.97              | 
| | Exercised                   |  | (292,500          | ) |   | 0.66              | 
| | Cancelled                   |  | -                 |   |   | -                 | 
| | Balance, end of year        |  | 4,595,000         |   | $ | 1.05              | 
| | Exercisable, at end of year |  | 4,107,500         |   | $ | 0.99              | 

During the year ended December 31, 2007, the Company granted
  a total of 1,142,500 stock options to consultants and employees. The stock options
  were determined to have a fair value of $1,213,319 or $1.06 per option. Management
  determined the fair value using the Black-Scholes option pricing model with
  the assumptions as noted below. The fair values of the option grants are expected
  to be recognized over the vesting periods of the options. The fair value is
  to be recognized in the statement of operations at $1,074,596 and $138,723 for
  the 2007 and 2008 fiscal periods, respectively.

During the year ended December 31, 2006, the Company granted
  a total of 1,515,000 stock options to consultants and employees. The stock options
  were determined to have a fair value of $479,446 or $0.32 per option. Management
  determined the fair value using the Black-Scholes option pricing model with
  the assumptions as noted below. The fair values of the option grants are expected
  to be recognized over the vesting periods of the options. The fair value of
  the grants was recognized in the statement of operations at $424,518 and $11,059
  for the 2006 and 2007 fiscal periods, respectively.

Management determined the fair value of the stock options using
  the Black-Scholes option pricing model with the following assumptions:

| |                         | 2007     | 2006    
| | ----------------------- | -------- | --------
| |                         |          |         
| | Risk-free interest rate | 4.87     | 4.00    
| |                         |          |         
| | Dividend yield          | 0%       | 0%      
| |                         |          |         
| | Volatility factor       | 63-67%   | 57%     
| |                         |          |         
| | Expected option life    | 2-5 Yrs. | 2-5 Yrs.

F-15

---

As of December 31, 2007, 4,107,500 stock options have vested
  and 487,500 stock options remain unvested. The weighted average remaining lives
  of the vested and unvested stock options are 2.19 years and 2.54 years, respectively.

Share purchase warrants

The Company issues whole share purchase warrants, half share
  purchase warrants and / or agents warrants in connection with its ongoing brokered
  and non-brokered private placements. A summary of the Companys share purchase
  warrant activity is as follows:

| |                            |  | 2007       |   |   | 2006 | 
| | -------------------------- |  | ---------- | - | - | ---- | 
| | Balance, beginning of year |  | 4,001,920  |   | $ | 0.88 | 
| | Issued                     |  | 3,373,689  |   |   | 2.96 | 
| | Exercised                  |  | (3,760,907 | ) |   | 0.82 | 
| | Expired                    |  | (241,013   | ) |   | 1.40 | 
| | Balance, end of year       |  | 3,373,689  |   | $ | 2.96 | 

The weighted average remaining life of all outstanding share
  purchase warrants is 0.90 years.

|NOTE 5 - RELATED
      PARTY TRANSACTIONS
|-----------------------------------------

The Company incurred the following expenditures with directors
  and officers and/or companies controlled by directors and/or officers for the
  years ended December 31:

| |                                            |   | 2007    |  |   | 2006    | 
| | ------------------------------------------ | - | ------- |  | - | ------- | 
| |                                            |   |         |  |   |         | 
| | Geological and project management services | $ | 456,978 |  | $ | 416,282 | 
| | Management fees                            |   | 109,000 |  |   | 88,750  | 
| | Consulting fees                            |   | -       |  |   | 6,479   | 
| | Stock-based compensation                   |   | -       |  |   | 295,773 | 
| |                                            |   |         |  |   |         | 
| |                                            | $ | 565,978 |  | $ | 807,284 | 

Related party transactions have been recorded at their exchange
  amount, which is the amount agreed to by the related parties. At December 31,
  2007 there was one director who was owed $1,484 for unpaid fees.

|NOTE 6 - CONTINGENCIES
|----------------------

In February 2004, the Company filed an action in the Supreme
  Court of British Columbia against a former consultant to the Company, seeking
  the transfer to the Company of claims contiguous to the Turnagain property which
  were staked for the benefit of the former consultant. The suit commenced in
  the B.C. Supreme Court in May 2006, and judgment in favour of the Company was
  rendered in July 2006. Title to the disputed claims was transferred to the Company
  in July 2006. The Court further ordered the former consultant to pay the Company
  a portion of its legal costs. The former consultant subsequently filed a Notice
  of Appeal of the order. This appeal was heard and dismissed by the British Columbia
  Court of Appeal on April 30, 2007 and $19,399 in previously expensed legal costs
  was recovered.

In July 2004, Quorum Capital Corp. (believed to be controlled
  by the former consultant) filed a counter suit against the Company, claiming,
  among other things, loss of economic opportunity with respect to the above mentioned
  claims.

F-16

---

In August 2004, Stewart Jackson, a former director, issued a
  writ of summons in which he claimed the sum of $17,500 pursuant to an alleged
  consulting contract. The Company denies any liability and has defended the claims
  on the basis that it had tendered all monies owing to Mr. Jackson. In December
  2004, the Company issued a counterclaim against Mr. Jackson wherein the Company
  claimed damages for actions of Mr. Jackson which resulted in the issuance of
  a cease trade order against the Company and the damages suffered by the Company
  from the resulting investigation by the B.C. Securities Commission. Further
  damages were claimed in the counterclaim in respect of payments made to Mr.
  Jackson which the Company alleges he was not entitled to. The Company further
  claims the recovery of 113,636 shares and 113,636 share purchase warrants issued
  by the Company to Mr. Jackson with the funds that the Company maintains were
  not payable to Mr. Jackson.

In December 2004, the Company filed a counter claim against Quorum
  Capital Corp. and Mr. Wolf Wiese, alleging that Quorum and Mr. Wiese engaged
  in a series of transactions through which Quorum improperly received $327,249
  and 1,418,711 securities issued by the Company. The Company also claimed for
  damages in relation to a B.C. Securities Commission proceeding in which the
  Company was penalized $20,000 for disclosure infractions under NI 43-101.

In January 2005, Quorum Capital Corp. and Mr. Wolf Wiese commenced
  an action against the Company and Mr. Mark Jarvis, the Company President, for
  libel, contending that the December 17, 2004 news release issued by the Company
  with respect to the Companys counterclaims was libellous and untrue.

Other than the February 2004 dispute which rendered a judgment
  in favour of the Company, none of the other claims and/or counterclaims of the
  Company, Mr. Jackson, Quorum, or Mr. Wiese have been proven in court. The outcome
  of these legal proceedings and the potential for loss, if any, is presently
  not determinable nor can the amount of the claims and unspecified damages be
  quantified. The Company has not made any provision in these financial statements
  with respect to these matters.

|NOTE 7 - COMMITMENTS
|--------------------

The Company entered into a rental lease agreement for its premise
  requiring minimum payments of $3,521 per month from October 1, 2006 to April
  30, 2008 and $4,073 per month from May 1, 2008 up to the lease expiration date
  of September 30, 2011.

Future aggregate minimum lease payments under the agreement are
  as follows:

| | Years ending December 31, |   |         | 
| | ------------------------- | - | ------- | 
| | 2008                      | $ | 46,672  | 
| | 2009                      |   | 48,880  | 
| | 2010                      |   | 48,880  | 
| | 2011                      |   | 40,733  | 
| |                           |   |         | 
| |                           | $ | 185,165 | 

|NOTE 8  INCOME
      TAXES
|---------------------------

As of December 31, 2007, the Company had net operating losses
  carried forward of approximately $5,900,000 that may be available to reduce
  future years' taxable income and will expire between the years 2008 and 2027.
  Deferred tax benefits which may arise as a result of these losses have not been
  recognized in these financial statements, as their realization is determined
  not likely to occur and accordingly, the Company has recorded a valuation allowance
  for the deferred tax asset relating to these tax losses carried forward.

The significant components of the Company’s deferred
  income taxes are as follows:

F-17

---

| |                                                                   |   | 2007       |   |   | 2006       |  
| | ----------------------------------------------------------------- | - | ---------- | - | - | ---------- | -
| |                                                                   |   |            |   |   |            |  
| | Tax value of mineral properties in excess of
      carrying value | $ | 10,869,576 |   | $ | 5,149,160  |  
| | Tax value of equipment in excess of carrying value                |   | 38,198     |   |   | 35,298     |  
| | Non-capital loss carry forwards                                   |   | 5,932,576  |   |   | 3,694,115  |  
| |                                                                   |   |            |   |   |            |  
| |                                                                   |   | 16,840,350 |   |   | 8,878,573  |  
| | Estimated corporate income tax rate                               |   | 29.7%      |   |   | 34.1%      |  
| |                                                                   |   |            |   |   |            |  
| | Potential deferred income tax asset                               |   | 5,001,584  |   |   | 3,027,593  |  
| | Less: recognized as deferred tax expense recovery                 |   | (305,994   | ) |   | (1,626,440 | )
| | Less: valuation allowance                                         |   | (4,695,590 | ) |   | (1,401,153 | )
| |                                                                   |   |            |   |   |            |  
| | Net deferred income tax asset                                     | $ | -          |   | $ | -          |  

As the criteria for recognizing future
  income tax assets have not been met due to the uncertainty of realization, a
  full valuation allowance was recorded for the current and prior year.

|NOTE 9  SUBSEQUENT
      EVENTS
|--------------------------------

On April 3, 2008, the Company granted an extension and repriced
  2,719,802 share purchase warrants issued in connection with the May 2007 private
  placements. The warrants exercise price was amended to $1.00 per common share
  from $3.00 per share. The warrants were also granted an additional six month
  extension from their original expiry dates of November 22, 2008 and November
  29, 2008. The amended warrants are subject to a forced exercise provision, whereby,
  if the Company’s shares trade at a price greater than $1.20 for 10 consecutive
  days, then the warrants may be exercised for a 30 day period or expire.

F-18

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- 65 -

Item 19Exhibits

Exhibits Required by Form 20-F

|Exhibit |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Number  | Description                                                                              
|        |                                                                                          
|1.      | Articles of Incorporation
      and By-laws:                                             
|        |                                                                                          
|1.1     | Certificate of Incorporation under
      The Business Companies Act(British Columbia) (1)

|1.2     | Articles of
        Canadian Metals Exploration Limited (the name has now been changed to
        Hard Creek Nickel Corporation) (1)              
|------- | --------------------------------------------------------------------------------------------------------------------------------------------------
|        |                                                                                                                                                   
|4.      | Material
        Contracts                                                                                                                        
|        |                                                                                                                                                   
|4.1     | Surface Drilling
        contract between Hard Creek Nickel Corporation and DJ Drilling (2004)
        Ltd. Dated April 4, 2007 (1)               
|        |                                                                                                                                                   
|4.2     | Consulting Agreement
        between Hard Creek Nickel Corporation and JA Chapman Mining Services dated
        November 18, 2005 (1)             
|        |                                                                                                                                                   
|4.3     | Investor Relations
        Agreement between Hard Creek Nickel Corporation and Martin E. Janis &
        Company, Inc. dated July 15, 2006 (1)    
|        |                                                                                                                                                   
|4.4     | Financial Advisory
        Services Agreement between Hard Creek Nickel Corporation and The Balloch
        Group dated May 29, 2006 (1)          
|        |                                                                                                                                                   
|4.5     | Services Agreement
        between Hard Creek Nickel Corporation and T1 Solutions Corp. dated July
        14, 2006 (1)                           
|        |                                                                                                                                                   
|4.6     | Investor Relations
        Agreement between Hard Creek Nickel Corporation and Marketsmart Communications
        Inc. dated September 13, 2006(2)
|        |                                                                                                                                                   
|4.7     | Media Consulting
        Agreement between Hard Creek Nickel Corporation and Jay Oness dated March
        1, 2007(3)                             
|        |                                                                                                                                                   
|**12.** | **Section 302 Certifications**                                                                                                                    
|        |                                                                                                                                                   
|12.1    | Section 302 Certification
      under Sarbanes-Oxley Act of 2002 for Mark Jarvis*                                                                 
|        |                                                                                                                                                   
|12.2    | Section 302 Certification
      under Sarbanes-Oxley Act of 2002 for Brian Fiddler*                                                               
|        |                                                                                                                                                   
|**13.** | **Section 906 Certifications**                                                                                                                    
|        |                                                                                                                                                   
|13.1    | Section 906 Certification
      under Sarbanes-Oxley Act of 2002 for Mark Jarvis*                                                                 
|        |                                                                                                                                                   
|13.2    | Section 906 Certification under
      Sarbanes-Oxley Act of 2002 for Brian Fiddler*                                                               
|        |                                                                                                                                                   
|15.     | Additional
        Exhibits                                                                                                                       
|        |                                                                                                                                                   
|15.1    | Consent
        of Ronald G. Simpson*                                                                                                             
|        |                                                                                                                                                   
|15.2    | Consent
        of N.C. Carter*                                                                                                                   
|        |                                                                                                                                                   
|15.3    | Consent
        of Neil Froc*                                                                                                                     
|        |                                                                                                                                                   
|15.4    | Consent
      of Tony Hitchins*                                                                                                                   

*Filed herewith.

(1)Previously submitted with our Registration
Statement on Form 20-F filed on November 17, 2006.

(2)Previously submitted with our Registration Statement
  on Form 20-F/A filed on January 26, 2007 .

(3)Previously submitted with our Registration
Statement on Form 20-F/A filed on April 6, 2007.

---

- 66 -

SIGNATURE

The registrant hereby certifies that it meets all of the
requirements for filing on Form 20-F and that it has duly caused and authorized
the undersigned to sign this annual report on its behalf.

HARD CREEK NICKEL CORPORATION

/s/ Brian
Fiddler
Brian Fiddler Chief Financial Officer

Date: June 30, 2008

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